<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 14, 1998
REGISTRATION NUMBER 333-53533
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
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>
TITLE OF EACH CLASS OF SECURITIES PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Common Stock, $.01 par value per
share............................ $575,000,000 $169,625(2)
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Senior Notes...................... $400,000,000 $118,000
</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.
(2) $147,500 of which has been paid previously.
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 NOTES
This Registration Statement contains two forms of prospectus, one to be used
in connection with the offering of % Senior Notes due 2005, % Senior
Notes due 2010 and % Senior Notes due 2018 (the "Debt Prospectus") and the
other to be used in connection with a concurrent offering of Common Stock (the
"Equity Prospectus"). The closing of the offering being made pursuant to the
Debt Prospectus and the closing of the offering being made pursuant to the
Equity Prospectus are conditioned upon the simultaneous closing of the other.
The Equity 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 Equity Prospectus to be used in a
concurrent international offering of the Common Stock (the "International
Prospectus") will consist of the alternate page set forth following the U.S.
Prospectus (and before the alternate pages to the Debt 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
33,333,333 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 THE UNITED 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
$400.0 MILLION IN AGGREGATE PRINCIPAL AMOUNT OF % SENIOR NOTES
DUE 2005, % SENIOR NOTES DUE 2010 AND % SENIOR NOTES
DUE 2018 (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 IS CONDITIONED
UPON THE CLOSING
OF THE OTHER.
--------
THE COMPANY HAS APPLIED TO LIST THE COMMON STOCK
ON THE NEW YORK STOCK EXCHANGE UNDER THE SYMBOL "CGT".
--------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN RISKS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
FOR INFORMATION ABOUT THE RECENT FORMATION OF THE COMPANY AND ITS SUBSTANTIAL
STOCKHOLDERS, SEE "CERTAIN TRANSACTIONS" AND "PRINCIPAL AND SELLING
STOCKHOLDERS".
--------
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.
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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 5,000,000 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....................... 13
Debt Offering...................... 24
Dividend Policy.................... 24
Capitalization..................... 25
Unaudited Pro Forma Condensed Fi-
nancial Statements................ 27
Selected Historical Combined Finan-
cial Data......................... 35
Management's Discussion and
Analysis of Financial Condition
and Results of Operations......... 37
Business........................... 50
Existing Venture and Plant Descrip-
tions............................. 51
Government Regulation.............. 74
Management......................... 82
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Transactions............... 87
Principal and Selling
Stockholders...................... 90
Description of Capital Stock....... 92
Description of Senior Notes
and Certain Other Indebtedness.... 97
Shares Eligible for Future Sale.... 102
Underwriters....................... 103
Certain United States Federal
Income Tax Consequences........... 106
Legal Matters...................... 109
Experts............................ 109
Available Information.............. 109
Glossary........................... 110
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--Formation 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 identified
entities shall have the following meanings:
. ""Cogen'' and the "Company" shall mean Cogen Technologies, Inc. and, unless
the context otherwise requires, 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.
. ""subsidiaries'' or the "Company's subsidiaries" shall mean the entities in
which Cogen will acquire equity interests pursuant to the Formation
Transactions.
. ""ventures'' shall mean the ventures or entities in which the subsidiaries
have equity interests and which in turn directly own the Company's
independent power plants.
. The "Company's plants" and the "Company's independent power plants" shall
mean the independent power plants in which the Company has an interest and
that form the core of the Company's business; the same may be referred to
singularly, as a "plant".
. 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 owns
and operates the Selkirk Plant. CT Global insures certain interests of the
Group and the NJ Partnerships.
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.
4
<PAGE>
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 8,662,000 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"), which is not
economically material to the Company.
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 $200.0 billion of electricity sales
and annual net generation of approximately 3.5 million gigawatt hours. 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
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 14,000 megawatts of New York generating capacity has been
announced 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 30 or more years old.
5
<PAGE>
STRATEGY
The Company's strategy is to maximize cash flow 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 cash flow. 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 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.
6
<PAGE>
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 Cash Flow. The utility power purchase
contracts relating to the Company's 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 environmental regulations.
. 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 could 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 and has
particular experience in developing financial structures for the acquisition
and development of power plants. 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.
. 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.
7
<PAGE>
FORMATION
Cogen was incorporated in May 1998 at the instance of Robert C. McNair 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 Mr.
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". The
following chart sets forth, 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.
[Chart appears here]
- --------
(1) See "Existing Venture and Plant Descriptions" for information as to the
partnership distributions relating to each of the ventures.
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.
8
<PAGE>
THE OFFERING
Common Stock offered(1) by
the Selling Shareholders... 33,333,333 shares(2)
Common Stock to be
outstanding after the
Common Stock Offering...... 55,000,000 shares(3)
Debt Offering............... Concurrently with the Common Stock Offering,
the Company is offering (by a separate
prospectus) $400.0 million aggregate principal
amount of its % Senior Notes due 2005, %
Senior Notes due 2010 and % Senior Notes due
2018 (collectively, 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 has applied 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) Estimated number of shares assuming a Common Stock Offering price of $15.00
per share.
(3) 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 options 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 13 as well as
the other information set forth in this Prospectus.
9
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
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".
10
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA(1)
THE COMPANY THE GROUP
---------------------- -----------------------------------------------------
THREE THREE MONTHS
MONTHS ENDED
ENDED YEAR ENDED MARCH 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............ $ 39.8 $113.8 $ 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 -- --
------ ------ ------ ----- ------ ------ ------ ------ ------
40.3 116.0 38.0 27.3 108.9 113.9 100.3 93.4 104.6
------ ------ ------ ----- ------ ------ ------ ------ ------
Costs and Expenses:
Operating overhead..... 9.3 8.7 10.0 3.5 13.4 14.4 10.8 7.2 -- (2)
General and
administrative........ 3.4 11.2 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
------ ------ ------ ----- ------ ------ ------ ------ ------
12.8 20.1 15.0 8.7 33.4 25.5 21.4 19.6 21.6
------ ------ ------ ----- ------ ------ ------ ------ ------
Income from Operations:. 27.5 95.9 23.0 18.6 75.5 88.4 78.9 73.8 83.0
Other Income (Expense)
Interest and other
income................ 3.4 16.0 3.4 4.1 16.0 17.0 17.8 14.1 10.7
Interest expense....... (12.0) (50.2) (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:................. 18.9 72.0 21.5 15.2 80.1 71.9 76.9 55.6 67.6
Income taxes(4)........ (7.2) (28.0) (4.8) (1.0) (5.1) (4.0) (7.6) (2.9) (4.1)
------ ------ ------ ----- ------ ------ ------ ------ ------
Net Income.............. $ 11.7 $ 44.0 $ 16.7 $14.2 $ 75.0 $ 67.9 $ 69.3 $ 52.7 $ 63.5
====== ====== ====== ===== ====== ====== ====== ====== ======
Pro forma net income per
share (in dollars)..... $ 0.21 $ 0.80 N/A N/A N/A N/A N/A N/A N/A
Pro forma weighted
average shares
outstanding (in
millions).............. 55.0 55.0 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 94.1 102.3
BALANCE SHEET DATA AT
END OF PERIOD:
Investment in
Affiliates............. $148.8 N/A $ 98.5 $96.0 $ 99.8 $ 98.4 $108.4 $123.5 $ 74.2
Total Assets............ 643.1 N/A 282.6 287.4 284.8 284.4 319.8 334.1 305.5
Long-Term Debt.......... 614.5 N/A 214.5 227.9 218.0 230.9 247.0 262.1 276.2
Owner's Equity
(Deficit).............. 1.7 N/A 26.9 9.5 20.4 3.6 21.8 15.7 (31.4)
OTHER FINANCIAL DATA:
Funds from
operations(5).......... 15.8 53.7 $ 18.1 $14.1 $ 76.4 $ 68.8 $ 71.9 $ 54.9 $ 67.8
Ratio of earnings to
fixed charges.......... 1.9 2.1 3.1 2.8 3.2 3.3 3.2 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
($/thousands)................ 118.5 118.4 456.5 458.0 407.6 407.6 403.8
Megawatt hours generated
(thousands).................. 1,584 1,534 6,429 6,347 6,507 6,342 5,952
Average price per generated
kilowatt hour (cents)........ 7.043 6.813 6.722 6.611 5.914 6.056 5.620
Average heat rate
(Btu/Kilowatt hour).......... 9,481 9,808 9,503 9,551 9,446 9,529 9,605
Average availability.......... 92% 93% 94% 93% 94% 92% 93%
Average capacity factor....... 93% 95% 95% 93% 95% 93% 88%
Steam revenues ($/millions)... 4.5 5.9 19.2 20.0 12.0 13.9 14.8
Steam produced (millions 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>
11
<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. FFO data is presented because
the Company believes that FFO is a measure of operating performance that
is used by credit rating agencies, analysts and investors because it
provides useful supplemental information to GAAP information as to the
Company's ability to service its indebtedness.
12
<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
Cogen was incorporated in Delaware in May 1998 at the instance of Robert C.
McNair 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 the Company. Cogen currently has no business
other than its ownership interests in the subsidiaries and its planned
development and acquisition business.
RISKS RELATED TO HOLDING COMPANY STRUCTURE
Risks on Ventures' Ability to Make Distributions to the Company
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.
13
<PAGE>
Rights of the Company to Assets or Cash Flow of Subsidiaries or Ventures
Subordinate to Creditors of Such Subsidiaries or Ventures
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 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 Senior Notes and Certain Other Indebtedness--Plant Project
Financing". The indenture, as initially supplemented by a first supplemental
indenture thereto, relating to the Senior Notes (the "Indenture") will impose
limitations on the ability of the Company, its subsidiaries and the ventures
to incur additional indebtedness. See "--Substantial Leverage" and
"Description of Senior Notes and Certain Other Indebtedness--Description of
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
14
<PAGE>
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.
SUBSTANTIAL 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 had total indebtedness of approximately
$627.8 million or a ratio of debt to total capitalization of approximately one
to one. Such amount excludes indebtedness at the venture level of
approximately $159.9 million. See "--Risks Related to Holding Company
Structure--Rights of Company to Assets or Cash Flow of Subsidiaries or
Ventures Subordinate to Creditors of Such Subsidiaries or Ventures",
"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 Company's 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 (w) the Senior Notes, (x) up to $300.0 million at
any one time outstanding in senior secured bank indebtedness, (y) certain
other parity indebtedness (provided that the issuance of such parity
indebtedness would either be incurred in compliance with a coverage ratio
requirement or not result in a rating downgrade of the Senior Notes) and (z)
subordinated debt, (ii) additional indebtedness of the ventures (except
Selkirk Venture) in which the Company currently has an interest, other than up
to $100.0 million at any one time outstanding for plant improvements and
expansion and amounts required to satisfy any fiduciary responsibilities of
the partner or venturers of each of the ventures, and (iii) distributions to
stockholders or on account of subordinated indebtedness owed to affiliates
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 $50.0 million. Each of
such restrictive covenants (together with mandatory redemption provisions,
certain events of default and, subject to a further condition, the security
interest below described) will be eliminated in the event (i) the Company owns
and is expected to continue to own equity interests in at least eight power
project 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 [ ] 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 covenant-elimination
provisions. If the Company is unable to satisfy such conditions precedent, the
restrictive covenants in the Indenture may continue indefinitely. See
"Description of Senior Notes and Certain Other Indebtedness--Description of
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 Senior Notes and Certain Other
Indebtedness--Plant Project Financings". In addition, the Senior Notes will be
secured, on a pari passu basis, by a security interest granted by Cogen in a
portion of the equity interests of Cogen in certain of its direct, wholly-
owned subsidiaries, which subsidiaries own the equity interests of Cogen in
each of Linden Venture, Camden Cogen and NJ Venture. In no event will such
security encumber any such venture or the general partner of any such venture,
or any of their respective rights or properties. If the Company were unable to
meet its obligations under the Indenture, the trustee under the Indenture
would have the right to foreclose on such equity interests.
The Company expects to secure a $300.0 million revolving credit facility
(the "Revolving Credit Facility") prior to the consummation of the Common
Stock Offering 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.
15
<PAGE>
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 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,
including with respect to the liens on a portion of the Company's equity
interests in Linden Venture, Camden Cogen and NJ Venture. See "--Risks Related
to Holding Company Structure" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
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 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. Because the Company is unable to predict the exact nature of any
future possible breakdown or failure, it is unable to predict the impact
thereof.
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
16
<PAGE>
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
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. Because the Company is unable to predict the exact nature of any
possible revision to existing or enactment of new laws, it is unable to
predict the impact thereof. 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
Agreement for the Sale of Steam and Electricity to IMTT-Bayonne" and "Existing
Venture and
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Plant Descriptions--Bayonne Agreement for the Sale of Steam to IMTT-BX
(formerly Exxon)", 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 Agreement". 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.
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.
To date, no states have avoided QF contracts, but it is possible that as part
of the restructuring, QF contracts could be voided. 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 "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.
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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 NJ Partnerships 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 have a material adverse effect on the Company's
revenues and results of operations. Because the Company is unable to predict
the nature of any possible future curtailments, it is unable to predict the
impact thereof.
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 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
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, renewal 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.
MERCHANT SALES
As an alternative to entering into long-term contracts with power
purchasers, a plant may become a merchant plant, selling electricity at market
prices dependent on the existence and decisions of merchant buyers, subject to
restrictions hereinafter noted. In addition, expanded capacity at existing
plants or new or acquired capacity may be sold as merchant power. If a plant
is not a QF, for it to operate as a merchant plant and to sell
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power at market-based rates, it 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 (except for the Bayonne Plant, which has two electrical power
and two steam customers, and the Linden Plant, which has two steam customers)
generally 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. Because the Company is
unable to predict the nature of any possible future failure of a gas supplier
or transporter to fulfill its contractual obligations, it cannot predict the
impact thereof.
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 the 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
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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), governmental permits and approvals, fuel supply and
transportation agreements, sufficient equity and debt financing, electrical
transmission service (if necessary), site agreements and construction
contracts and, in the case of cogeneration QFs, steam sales agreements. 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
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
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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.
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.
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".
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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 32.3% of the outstanding Common Stock (24.9% if the
underwriters' over-allotment option is exercised in full). Accordingly, Mr.
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. The effect of Mr. McNair's control and influence on
the Company could be to reduce the ability of other stockholders to influence
the direction 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 Mr. 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 has applied 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.
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, 55,000,000 shares of Common
Stock will be outstanding. The 33,333,333 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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DEBT OFFERING
Concurrently with the Common Stock Offering, the Company is offering an
aggregate of $400.0 million of secured Senior Notes to the public. The Senior
Notes will be secured, on a pari passu basis with the senior secured bank
indebtedness, by a security interest granted by the Company on certain direct
wholly-owned subsidiaries of the Company, which subsidiaries own all of the
Company's equity interests in the ventures. 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 at any one time outstanding in senior
secured bank indebtedness, certain other parity indebtedness the issuance of
which either is incurred in compliance with a coverage ratio requirement or
will not result in a rating downgrade of the Senior Notes and subordinated
indebtedness, (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 at any one time outstanding for plant improvements and
expansion and amounts required to satisfy any fiduciary responsibilities of
the partners or venturers of each of the ventures, and (iii) prohibit
distributions to stockholders and on account of subordinated indebtedness owed
to affiliates 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 Indenture
will further contain provisions that upon achieving a prescribed level of
diversification of interests owned by the Company in at least eight power
project ventures, the foregoing mandatory redemption provisions, covenants
and, subject to a further condition, security interest, and certain events of
default, will be terminated. 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") $276.4 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 Senior Notes and Certain Other Indebtedness--Description of
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. Any such excess would not be
eligible for the dividends-received deduction with respect to dividends paid
to corporate holders of the Common Stock. (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 Senior Notes and Certain Other Indebtedness--Plant
Project Financings".
24
<PAGE>
CAPITALIZATION
Cogen 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.
The Common Stock Offering relates to the sale by the McNair Interests and
the Minority Interests of 33,333,333 shares of Common Stock which they
received in the Formation Transactions. The Company has agreed to pay certain
costs and expenses related to the Common Stock Offering, which are expected to
total $6.2 million. The Company will not receive any proceeds from the Common
Stock Offering.
Concurrently with the Common Stock Offering the Company is offering an
aggregate of $400.0 million of Senior Notes comprising $ million of %
Senior Notes due 2005 (the "2005 Notes"), $ million of % Senior Notes
due 2010 (the "2010 Notes") and $ million of % Senior Notes due 2018
(the "2018 Notes"). The Senior Notes have no sinking fund requirements, and no
principal payments are due prior to maturity. See "Description of Senior Notes
and Certain Other Indebtedness--Description of Senior Notes" for a description
of certain covenants with respect to the Senior Notes. The proceeds from the
Debt Offering will be used to loan an amount to Linden Ltd. for repayment of
the Bridge Loan, to retire amounts payable to affiliates, to pay expenses
relating to the Formation Transactions and the Offerings and for working
capital purposes.
The Formation Transactions consist of: (i) the acquisition by the Company of
49.9% of the general and limited partnership interests of Linden Ltd. from the
McNair Interests and the Minority Interests for an aggregate of 28.9 million
shares of Common Stock with an estimated market value of $434.0 million; (ii)
the acquisition by the Company of 100% of the outstanding common stock of
Camden, Inc. from the McNair Interests and the limited partnership interests
in Camden GPLP held by the Minority Interests for an aggregate of $1.0 million
in cash and an aggregate of 9.7 million shares of Common Stock with an
estimated market value of $145.8 million; (iii) the acquisition by the Company
of MESC pursuant to the terms of a merger agreement under which the McNair
Interests and the Minority Interests, the holders of the common stock of MESC,
will receive an aggregate of 14.3 million shares of Common Stock with an
estimated market value of $214.3 million; (iv) the acquisition by the Company
of the common stock of Selkirk GP Inc. held by the McNair Interests and the
general and limited partnership interests in Selkirk LP held by the McNair
Interests and the Minority Interests for an aggregate of 1.7 million shares of
Common Stock with an estimated market value of $26.1 million; (v) the
acquisition by the Company of 100% of the general and limited partnership
interests of CT Global from the McNair Interests and the Minority Interests
for an aggregate of 0.4 million shares of Common Stock with an estimated
market value of $4.8 million; and (vi) the redemption by Linden Ltd. of the
50.1% of its general and limited partnership interests not acquired by the
Company for a $159.4 million account receivable from Cogen Technologies
Financial Services, L.P., a limited partnership owned by the McNair Interests
and the Minority Interests ("Financial Services"), and $276.4 million in cash.
The dollar and share amounts described in the immediately preceding sentence
are estimates based on an assumed Common Stock Offering Price of $15.00 per
share.
Immediately prior to the consummation of the Formation Transactions and
Common Stock Offering, Morgan Stanley & Co. Incorporated ("Morgan Stanley")
will loan $276.4 million to Linden Ltd. pursuant to the Bridge Loan, which
Linden Ltd. will use to redeem the 50.1% of its general and limited
partnership interests, as previously discussed. The Bridge Loan will be
evidenced by a subordinated promissory note in favor of Morgan Stanley, which
note will bear interest at the rate of 24% per annum. Immediately following
the consummation of the Debt Offering, the Company will loan $276.4 million of
the proceeds of the Debt Offering to Linden Ltd. for repayment of the Bridge
Loan.
25
<PAGE>
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........................................ $110.2
======
Current portion of long-term debt(1)
Camden GPLP Term Loan.......................................... 0.5
Linden Ltd. Term Loan.......................................... 12.8
------
13.3
------
Long-term debt, less current portion(1)
Camden GPLP Term Loan.......................................... 12.2
Linden Ltd. Term Loan.......................................... 202.3
Senior Notes................................................... 400.0
------
614.5
------
Stockholders' equity............................................. 1.7
------
Total capitalization......................................... $629.5
======
</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.
26
<PAGE>
UNAUDITED PRO FORMA CONDENSED
FINANCIAL STATEMENTS
Cogen 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 acquisition of an additional, indirect 5.25% limited partnership
interest in NJ Venture, (ii) the Formation Transactions, (iii) the Common
Stock Offering, (iv) the Bridge Loan and (v) the issuance of the Senior Notes
and the application of a portion of the proceeds thereof to loan an amount to
Linden Ltd. for repayment of the Bridge Loan, to retire amounts payable to
affiliates and to pay expenses relating to the Formation Transactions and the
Offerings, 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.
The amounts shown in the column entitled "Group Historical" reflect the
combined financial statements of MESC and its wholly owned subsidiary NJ Inc.,
Camden Inc., Linden Ltd., Selkirk GP Inc., Selkirk LP, CT Global and the
limited partnership interests in Camden GPLP not held by Camden Inc., the
entities acquired in the Formation Transactions.
The Formation Transactions consist of: (i) the acquisition by the Company of
49.9% of the general and limited partnership interests of Linden Ltd. from the
McNair Interests and the Minority Interests for an aggregate of 28.9 million
shares of Common Stock with an estimated market value of $434.0 million; (ii)
the acquisition by the Company of 100% of the outstanding common stock of
Camden, Inc. from the McNair Interests and the limited partnership interests
in Camden GPLP held by the Minority Interests for $1.0 million in cash and an
aggregate of 9.7 million shares of Common Stock with an estimated market value
of $145.8 million; (iii) the acquisition by the Company of MESC pursuant to
the terms of a merger agreement under which the McNair Interests and the
Minority Interests, the holders of the common stock of MESC, will receive an
aggregate of 14.3 million shares of Common Stock with an estimated market
value of $214.3 million; (iv) the acquisition by the Company of the common
stock of Selkirk GP Inc. held by the McNair Interests and the general and
limited partnership interests in Selkirk LP held by the McNair Interests and
the Minority Interests for an aggregate of 1.7 million shares of Common Stock
with an estimated market value of $26.1 million; (v) the acquisition by the
Company of 100% of the general and limited partnership interests of CT Global
from the McNair Interests and the Minority Interests for an aggregate of 0.4
million shares of Common Stock with an estimated market value of $4.8 million;
and (vi) the redemption by Linden Ltd. of the 50.1% of its general and limited
partnership interests not acquired by the Company for a $159.4 million account
receivable from Financial Services and $276.4 million in cash. The dollar and
share amounts described in the immediately preceding sentence are estimates
based on an assumed Common Stock Offering price of $15.00 per share. Prior to
the consummation of the Formation Transactions, the Company had no ownership
interest in such entities.
The Common Stock Offering relates to the sale by the McNair Interests and
the Minority Interests of 33,333,333 shares of Common Stock which they
received in the Formation Transactions. The Company has agreed to pay certain
costs and expenses related to the Common Stock Offering which are expected to
total
27
<PAGE>
approximately $1.8 million. The Company will not receive any proceeds from the
Common Stock Offering. The unaudited pro forma condensed financial statements
assume a Common Stock Offering price of $15.00 per share.
Immediately prior to the consummation of the Formation Transactions and
Common Stock Offering, Morgan Stanley will loan $276.4 million to Linden Ltd.
pursuant to the Bridge Loan, which Linden Ltd. will use to redeem the 50.1% of
its general and limited partnership interests, as previously discussed. The
Bridge Loan will be evidenced by a subordinated promissory note in favor of
Morgan Stanley, which note will bear interest at the rate of 24% per annum.
Immediately following the consummation of the Debt Offering, the Company will
loan $276.4 million of the proceeds of the Debt Offering to Linden Ltd. for
repayment of the Bridge Loan.
Concurrently with the Common Stock Offering the Company is offering an
aggregate of $400.0 million of Senior Notes comprising $100.0 million of 2005
Notes, $150.0 million of 2010 Notes and $150.0 million of 2018 Notes. The
Senior Notes have no sinking fund requirements and no principal payments are
due prior to maturity. See "Description of Senior Notes and Certain Other
Indebtedness--Description of Senior Notes" for a description of certain
covenants with respect to the Senior Notes. The proceeds from the Senior Notes
will be used to loan an amount to Linden Ltd. for repayment of the Bridge
Loan, to retire amounts payable to affiliates, to pay expenses relating to the
Formation Transactions and the Offerings and for working capital purposes.
28
<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
---------- ----------- ---------
<S> <C> <C> <C>
Revenues
Equity in earnings of affiliates
Linden Venture........................... $17.4 $ 1.2 (1) $18.6
Camden Cogen............................. 4.7 0.3 (1) 5.0
0.9 (2)
NJ Venture............................... 15.2 (0.5)(3) 15.6
Selkirk Cogen............................ 0.2 0.4 (1) 0.6
Other...................................... 0.5 -- 0.5
----- ----- -----
38.0 2.3 40.3
----- ----- -----
Costs and Expenses;
Operating overhead......................... 10.0 (0.7)(4) 9.3
General and administrative................. 4.9 (1.5)(5) 3.4
Depreciation and amortization.............. 0.1 -- 0.1
----- ----- -----
15.0 (2.2) 12.8
----- ----- -----
Income from Operations....................... 23.0 4.5 27.5
Other Income (Expense)
Interest and other income.................. 3.4 -- 3.4
(7.0)(6)
Interest expense........................... (4.9) (0.1)(7) (12.0)
----- ----- -----
Income Before Income Taxes................... 21.5 (2.6) 18.9
(3.4)(8)
Income Taxes................................. (4.8) 1.0 (9) (7.2)
----- ----- -----
Net Income................................... $16.7 $(5.0) $11.7
===== ===== =====
Earnings per Share (in dollars).............. $0.21
=====
Average Shares Outstanding (millions)........ 55.0 (10) 55.0
===== =====
</TABLE>
- --------
(1) Reflects the reversal of certain management and gas management fees paid
to affiliates of the Group. Prior to the Formation Transactions Linden
Venture, Camden Cogen, Selkirk GP Inc. and Selkirk LP will make one-time
payments totaling $83.9 million to terminate such arrangements. "See
Certain Transactions--Formation Transactions". Such management and gas
management fees were paid based on a percentage of gross revenues and gas
purchases, respectively. The management and gas management services
provided under the agreements will be assumed by the Company.
(2) Reflects the equity in the earnings of NJ Venture attributable to a 5.25%
limited partnership interest acquired from an unaffiliated entity in July
1998. See "--Management's Discussion and Analysis of Financial Condition
and Results of Operations--General".
(3) Reflects the amortization of excess cost related to the purchase of 10.5%
of the outstanding common stock of MESC. Such excess cost has been
allocated to MESC's investment in NJ Venture and is being amortized over
the estimated useful life of NJ Venture's assets and power purchase
agreement.
(4) Reflects the reversal of the expense related to development bonuses which
were granted to certain employees and earned over subsequent periods. The
historical and pro forma amounts for the first quarter of 1998 include
$7.4 million of one-time payments to "buy out" certain of such bonuses
and the Group will make additional one-time payments totaling $20.8
million prior to the Formation Transactions to buy out all of the
remaining bonuses.
29
<PAGE>
(5) Reflects the reversal of the amounts associated with corporate aircraft.
Such aircraft is owned by an affiliate of the Group and will not be
acquired by the Company in the Formation Transactions.
(6) Reflects interest expense associated with the Senior Notes assuming
interest rates as follows: $100.0 million at 6.72%, $150.0 million at
6.89% and $150.0 million at 7.33%.
(7) Reflects the amortization of deferred costs and expenses related to the
issuance of the Senior Notes. The Company will incur an estimated $5.7
million in costs in connection with the issuance of the Senior Notes and
such costs are being deferred and amortized over the life 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. 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 historical financial statements. Following the
Formation Transactions the Company will be the partner or shareholder of
such entities and such income taxes will be recognized in its financial
statements.
(9) Reflects the income tax effects of the pro forma adjustments. Such
adjustments assume the Company is subject to federal income taxes at
corporate rates and to New Jersey state income taxes at rates which are
currently in effect in that state.
(10)Reflects the issuance of 55,000,000 shares in the Formation Transactions.
30
<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 $ 5.3 (2) $79.1
Camden Cogen............................. 14.5 1.4 (2) 15.9
0.9 (3)
NJ Venture............................... 17.6 (1.9)(4) 16.6
Selkirk Cogen............................ 0.8 1.4 (2) 2.2
Other...................................... 2.2 -- 2.2
------ ------ -----
108.9 7.1 116.0
------ ------ -----
Costs and Expenses:
Operating overhead......................... 13.4 (4.7)(5) 8.7
General and administrative................. 19.8 (8.6)(6) 11.2
Depreciation and amortization.............. 0.2 -- 0.2
------ ------ -----
33.4 (13.3) 20.1
------ ------ -----
Income from Operations....................... 75.5 20.4 95.9
Other Income (Expense)
Interest and other income.................. 16.0 -- 16.0
(28.0)(7)
Interest expense........................... (21.7) (0.5)(8) (50.2)
Allowance for long-term receivable......... 10.3 -- 10.3
------ ------ -----
Income Before Income Taxes................... 80.1 (8.1) 72.0
(25.9)(9)
Income Taxes................................. (5.1) 3.0 (10) 28.0
------ ------ -----
Net Income................................... $ 75.0 $(30.9) $44.0
====== ====== =====
Earnings per Share (in dollars).............. $0.80
=====
Average Shares Outstanding (millions)........ 55.0 (11) 55.0
====== =====
</TABLE>
- --------
(1) Does not reflect approximately $1.8 million in nonrecurring costs which
will be borne by the Company on behalf of the Selling Stockholders in
association with the Common Stock Offering and $1.9 million (net of
related tax benefit of $1.0 million) in nonrecurring costs associated
with the Formation Transactions, as such costs will be included in the
results of operations of the Company within the twelve-month period
following the consummation of such transactions. Such costs principally
consist of legal, accounting, printing and other related costs. Since
such costs have no future benefit to the Company, they are being charged
to expense as incurred.
(2) Reflects the reversal of certain management and gas management fees paid
to affiliates of the Group. Prior to the Formation Transactions Linden
Venture, Camden Cogen, Selkirk GP Inc. and Selkirk LP will make one-time
payments totaling $83.9 million to terminate such arrangements. See
"Certain Transactions--Formation Transactions". Such management and gas
management fees were paid based on a percentage of gross revenues and gas
purchases, respectively. The management and gas management services
provided under the agreements will be assumed by the Company.
(3) Reflects the equity in the earnings of NJ Venture attributable to a 5.25%
limited partnership interest acquired from an unaffiliated entity in July
1998. See "--Management's Discussion and Analysis of Financial Condition
and Results of Operations--General".
31
<PAGE>
(4) Reflects the amortization of excess cost related to the purchase of 10.5%
of the outstanding common stock of MESC. Such excess cost has been
allocated to MESC's investment in NJ Venture and is being amortized over
the estimated useful life of NJ Venture's assets and power purchase
agreement.
(5) Reflects the reversal of the expense related to development bonuses which
were granted to certain employees and earned over subsequent periods. In
the first quarter of 1998, the Group made one-time payments of $7.4
million to "buy out" certain of such bonuses and will make additional
one-time payments totaling $20.8 million prior to the Formation
Transactions to buy out all of the remaining bonuses.
(6) Reflects the reversal of the amounts associated with corporate aircraft.
Such aircraft is owned by an affiliate of the Group and will not be
acquired by the Company in the Formation Transactions.
(7) Reflects interest expense associated with the Senior Notes assuming
interest rates as follows: $100.0 million at 6.72%, $150.0 million at
6.89% and $150.0 million at 7.33%.
(8) Reflects the amortization of deferred costs and expenses related to the
issuance of the Senior Notes. The Company will incur an estimated $5.7
million in costs in connection with the issuance of the Senior Notes and
such costs are being deferred and amortized over the life 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. 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
stockholders (with the exception of New Jersey state income taxes which
are recognized by Camden Inc.). Accordingly, such income taxes are not
recognized in the historical financial statements. Following the
Formation Transactions the Company will be the partner or shareholder of
such entities and such income taxes will be recognized in its financial
statements.
(10) Reflects the income tax effects of the pro forma adjustments. Such
adjustments assume the Company is subject to federal income taxes at
corporate rates and to New Jersey state income taxes at rates which are
currently in effect in that state.
(11) Reflects the issuance of 55,000,000 shares in the Formation Transactions.
32
<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)(2)
276.4 (3)
(276.4)(4)
400.0 (6)
Cash and cash equivalents................... $ 18.8 (307.6)(7) $110.2
Other current assets........................ 4.2 -- 4.2
------ ------ ------
23.0 91.4 114.4
------ ------ ------
Investments in Affiliates
Linden Venture.............................. 59.2 -- 59.2
Selkirk Cogen............................... 24.3 -- 24.3
Camden Cogen................................ 12.6 -- 12.6
12.5 (1)
37.8 (5)
NJ Venture.................................. 2.4 -- 52.7
------ ------ ------
98.5 50.3 148.8
------ ------ ------
Other Assets
Accounts receivable, affiliates............. 159.4 (159.4)(4) --
221.8 (2)
169.2 (4)
(13.5)(5)
1.0 (7)
Deferred income taxes....................... -- (6.0)(8) 372.5
Other....................................... 1.7 5.7 (7) 7.4
------ ------ ------
161.1 218.8 379.9
------ ------ ------
$282.6 $360.5 $643.1
====== ====== ======
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
Current Liabilities $ 12.5 (1)
Accounts payable, affiliates................ $ 8.3 (20.8)(7) $ --
276.4 (3)
Note payable................................ -- (276.4)(7) --
Current maturities on long-term debt........ 13.3 -- 13.3
Other current liabilities................... 5.3 -- 5.3
------ ------ ------
26.9 (8.3) 18.6
------ ------ ------
Long-Term Debt................................ 214.5 400.0 (6) 614.5
------ ------ ------
Other Long-Term Liabilities................... 8.3 -- 8.3
------ ------ ------
Deferred Income Taxes......................... 6.0 (6.0)(8) --
------ ------ ------
(22.5)(2)
(6.2)(4)
Owner's Equity................................ 26.9 1.8 (5) --
------ ------ ------
243.3 (2)
(260.4)(4)
22.5 (5)
Shareholders' Equity.......................... -- (3.7)(7) 1.7
------ ------ ------
$282.6 $360.5 $643.1
====== ====== ======
</TABLE>
33
<PAGE>
- -------
(1) To reflect the acquisition of an additional, indirect 5.25% limited
partnership interest in NJ Venture from an unaffiliated entity in July
1998 for $12.5 million.
(2) To reflect acquisitions from the McNair Interests and the Minority
Interests as follows: (i) 49.9% of the limited and general partnership
interests in Linden Ltd. for an aggregate of 28.9 million shares of Common
Stock with an estimated market value of $434.0 million; (ii) 100% of the
outstanding common stock of Camden Inc. from the McNair Interests and the
limited partnership interests in Camden GPLP held by the Minority
Interests for $1.0 million in cash and an aggregate of 9.7 million shares
of Common Stock with an estimated market value of $145.8 million; (iii)
89.5% of the outstanding common stock of MESC for an aggregate of 12.8
million shares of Common Stock with an estimated market value of 191.8
million; (iv) 100% of the outstanding common stock of Selkirk GP Inc. and
100.0% of the limited and general partnership interests in Selkirk LP for
an aggregate of 1.7 million shares of Common Stock with an estimated
market value of $26.1 million; and (v) 100% of the outstanding common
stock of CT Global for an aggregate of 0.4 million shares of Common Stock
with an estimated market value of $4.8 million. The dollar and share
amounts described in the immediately preceding sentence are estimates
based on an assumed Common Stock Offering price of $15.00 per share. Prior
to the consummation of the Formation Transactions, the Company had no
ownership interest in such entities.
Prior to the Formation Transactions the ownership interests of the McNair
Interests and the Minority Interests in each of the entities being
acquired by the Company are identical (except for a 10.5% interest held by
the Minority Interests in MESC). Following the Formation Transactions the
ownership interest of the McNair Interests and certain of the Minority
Interests in the Company will be identical to their prior interests in the
entities acquired. Accordingly, such transactions are being accounted for
at historical cost as a reorganization of entities under common control.
The valuations were agreed to in arms-length negotiations. The price per
share is equal to the Common Stock Offering price.
The effect of such transactions on the historical balance sheet is as
follows (in millions of dollars):
<TABLE>
<CAPTION>
SELKIRK GP
LINDEN INC. AND CT
LTD. CAMDEN MESC SELKIRK LP GLOBAL TOTAL
------ ------ ----- ---------- ------ ------
(INCREASE (DECREASE))
<S> <C> <C> <C> <C> <C> <C>
Cash..................... $ -- $(1.0) $ -- $ -- $ -- $ (1.0)
Deferred Income Taxes.... 168.6 53.2 -- -- -- 221.8
------ ----- ----- ------ ----- ------
Total Assets............ $168.6 $52.2 $ -- $ -- $ -- $220.8
====== ===== ===== ====== ===== ======
Owner's Equity........... $ (6.1) $(1.1) $15.6 $(26.1) $(4.8) $(22.5)
Shareholder's Equity..... 174.7 53.3 (15.6) 26.1 4.8 243.3
------ ----- ----- ------ ----- ------
Total Liabilities and
Shareholders' Equity... $168.6 $52.2 $ -- $ -- $ -- $220.8
====== ===== ===== ====== ===== ======
</TABLE>
The transactions to acquire the interests in Linden Ltd. and Camden Inc.
are taxable transactions and, accordingly, deferred federal and New Jersey
state income taxes have been provided based on the excess of the new tax
bases over the net book value of the interest acquired.
(3) To reflect $276.4 million in borrowings by Linden Ltd. under the terms of
the Bridge Loan.
(4) To reflect 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 $276.4 million in cash. The valuation of such
interests is based on the appraisal discussed in Note 1.
(5) To reflect the issuance of 1.5 million shares of common stock, valued at
$22.5 million, in exchange for 10.5% of the outstanding shares of 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.
The valuation of such interests was agreed to in arms-length negotiations.
The purchase price has been allocated to MESC's assets and liabilities in
amounts equal to their book value and the cost in excess of such book
value, $37.8 million, has been allocated to MESC's property, plant and
equipment and its power purchase agreement and will be amortized over the
estimated useful life of the assets and the agreement.
(6) To reflect the issuance of $400.0 million of Senior Notes.
(7) To reflect the use of a portion of the proceeds from the Debt Offering
for: (i) the loan to Linden Ltd. of $276.4 million for the repayment of
the Bridge Loan; (ii) the payment of costs and expenses related to the
Common Stock Offering; (iii) the payment of costs and expenses related to
the Debt Offering; (iv) the payment of costs and expenses related to the
Formation Transactions; and (v) the retirement of accounts payable to
affiliates. The effect of such transactions on the historical balance
sheet is as follows (in millions of dollars):
<TABLE>
<CAPTION>
PAY COSTS OF PAY COSTS OF PAY COSTS OF RETIRE
LOAN TO COMMON ISSUING FORMATION PAYABLES
LINDEN LTD. STOCK OFFERING SENIOR NOTES TRANSACTIONS TO AFFILIATES TOTAL
----------- -------------- ------------ ------------ ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Cash.................... $(276.4) $(1.8) $(5.7) $(2.9) $(20.8) $(307.6)
Deferred income taxes... -- -- -- 1.0 -- 1.0
Other assets............ -- -- 5.7 -- -- 5.7
------- ----- ----- ----- ------ -------
Total Assets........... $(276.4) $(1.8) $ -- $(1.9) $(20.8) $(300.9)
======= ===== ===== ===== ====== =======
Accounts payable,
affiliates............. $ -- $ -- $ -- $ -- $(20.8) $ (20.8)
Note payable............ (276.4) -- -- -- -- (276.4)
Shareholders' equity.... -- (1.8) -- (1.9) -- (3.7)
------- ----- ----- ----- ------ -------
Total Liabilities and
Shareholders' Equity.. $(276.4) $(1.8) $ -- $(1.9) $(20.8) $(300.9)
======= ===== ===== ===== ====== =======
</TABLE>
The Company has agreed to bear certain costs and expenses of the Common
Stock Offering on behalf of the Selling Stockholders; since such
expenditures have no future benefit to the Company, they are being charged
to earnings as incurred. The costs and expenses related to the Debt
Offering will be amortized over the life of the Senior Notes. The costs
and expenses related to the Formation Transactions are being charged to
earnings as incurred.
(8) To reclassify historical deferred income tax liabilities to reflect a net
presentation in the balance sheet.
34
<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............ $ 39.8 $113.8 $ 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 -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
40.3 116.0 38.0 27.3 108.9 113.9 100.3 93.4 104.6
------ ------ ------ ------ ------ ------ ------ ------ ------
Costs and Expenses:
Operating overhead..... 9.3 8.7 10.0 3.5 13.4 14.4 10.8 7.2 --(2)
General and
administrative........ 3.4 11.2 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
------ ------ ------ ------ ------ ------ ------ ------ ------
12.8 20.1 15.0 8.7 33.4 25.5 21.4 19.6 21.6
------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Operations: 27.5 95.9 23.0 18.6 75.5 88.4 78.9 73.8 83.0
Other Income (Expense)
Interest and other
income................ 3.4 16.0 3.4 4.1 16.0 17.0 17.8 14.1 10.7
Interest expense....... (12.0) (50.2) (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: 18.9 72.0 21.5 15.2 80.1 71.9 76.9 55.6 67.6
Income taxes(4)........ (7.2) (28.0) (4.8) (1.0) (5.1) (4.0) (7.6) (2.9) (4.1)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net Income.............. $ 11.7 $ 44.0 $ 16.7 $ 14.2 $ 75.0 $ 67.9 $ 69.3 $ 52.7 $ 63.5
====== ====== ====== ====== ====== ====== ====== ====== ======
Pro forma net income per
share (in dollars)..... $ 0.21 $ 0.80 N/A N/A N/A N/A N/A N/A N/A
Pro forma weighted
average shares
outstanding
(in millions).......... 55.0 55.0 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 94.1 102.3
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
THE COMPANY(1) THE GROUP
---------------------------- ------------------------------------------------
THREE MONTHS
ENDED
THREE MONTHS YEAR ENDED MARCH 31, YEAR 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............. $148.8 N/A $ 98.5 $ 96.0 $ 99.8 $ 98.4 $108.4 $123.5 $ 74.2
Total Assets............ 643.1 N/A 282.6 287.4 284.8 284.4 319.8 334.1 305.5
Long-Term Debt.......... 614.5 N/A 214.5 227.9 218.0 230.9 247.0 262.1 276.2
Owner's Equity
(Deficit).............. 1.7 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.......... 1.9 2.1 3.1 2.8 3.2 3.3 3.2 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 $ 156.8 $ 152.0
Net cash used in
investing activities... 0.1 0.7 4.8 2.4 2.4 5.4 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....... 501.4 509.5 498.6 516.7 545.8 574.4 595.8
</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.
36
<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 at the instance of Robert C. McNair and to date
has conducted no operations. Upon consummation of the Formation Transactions
Cogen will acquire control of a group of affiliated entities engaged in the
ownership and operation of power generation plants in the Northeastern United
States. The Company will have 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 $200.0 billion of electricity sales
and annual net generation of approximately 3.5 million gigawatt hours. 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 14,000 megawatts of New York generating capacity has been
announced 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 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
37
<PAGE>
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.
To benefit the future results of operations of the Company by eliminating
the expense related to certain existing management services and gas management
services agreements and development bonuses, the McNair Interests and the
Minority Interests will provide the funding to terminate such agreements and
to "buy out" the development bonuses. In connection with the Formation
Transactions, 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.
To terminate such agreements, the McNair Interests and the Minority
Interests will make capital contributions, and Linden Venture, Camden Cogen,
Selkirk GP Inc. and Selkirk LP will make one-time payments totaling $83.9
million. Such payments will be reflected in earnings in the period in which
the payments are made. Such payments will have no effect on the Group's
liquidity or financial condition since the amounts necessary to make such
payments are being provided by the shareholders and/or general and limited
partners. The services currently performed under such agreements will be
assumed by existing Company personnel.
In addition, one-time payments have been or will be made to "buy out"
development bonuses, which certain employees are eligible to receive in
subsequent periods. Such payments totaled $7.4 million in the first quarter of
1998 and additional payments to be made prior to or in connection with the
consummation of the Formation Transactions are expected to total $20.8
million. Such payments will be reflected in earnings in the period in which
the settlement amounts were determined, $5.9 million in the second quarter of
1998 and $14.9 million in the third quarter of 1998.
In July 1998, NJ Inc. acquired an additional indirect 5.25% partnership
interest in NJ Venture for $12.5 million in cash from an unaffiliated party.
On a pro forma basis, assuming the transaction took place on January 1, 1997,
such transaction would have increased the Group's equity in the earnings of NJ
Venture for the three months ended March 31, 1998 and the year ended December
31, 1997 by $0.9 million and $0.9 million, respectively, and the Group's net
income for such periods by $0.6 million and $0.6 million, respectively.
38
<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 $ 17.4 $ 18.6 $ 37.3 $ 26.5
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 $ 1.4 $ 18.7 $ 24.8 $ 32.7 $ 28.5
Percent of cash
distributions......... 86.5% 86.5% 88.8% 71.6% 59.0% 65.4% 68.5% 67.0%
</TABLE>
39
<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 -- -- --
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% 73.5% 82.8% 83.9%
</TABLE>
<TABLE>
<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............ -- (0.1) (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% 74.5% 75.7% 73.7%
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>
40
<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. The fuel component
adjustment reflects an adjustment agreed to by the power purchaser in the
first quarter of 1998 based on an audit of the power purchaser's calculation
of the weighted average cost of gas for prior periods. 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 down $2.0 million but such decrease
was offset by a corresponding $2.0 million decrease 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 2 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.
41
<PAGE>
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 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 ($8.6 million) and
an increased allocation of corporate overhead from an affiliate (see Note 4 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
42
<PAGE>
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.
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 $1.7 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 1.7% 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.
43
<PAGE>
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.
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.
44
<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 16.6 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 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 Con Ed 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.
Selkirk Venture sells approximately 20% of its electrical capacity to
Niagara Mohawk Power Corporation ("Niagara Mohawk") under the terms of a
Master Restructuring Agreement ("NMMRA"). See "Existing Venture and Plant
Descriptions--Selkirk". Selkirk Venture has stated in its Report on Form 10-Q
for the period ended March 31, 1998, as filed with the Securities and Exchange
Commission (the "Commission"), that if Selkirk Venture and Niagara Mohawk
proceed to complete the transaction provided under the NMMRA, which completion
remains subject to a number of significant contingencies, management of
Selkirk Venture believes that, based on the facts and circumstances currently
known, and certain assumptions which such management believes to be
reasonable, an amended agreement is not expected to have a material adverse
effect on Selkirk Venture's future operating results and cash flows from
operations.
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
45
<PAGE>
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.
If Bayway were to cease purchasing steam from Linden Venture, the QF status
of the Linden Plant would be in jeopardy. See "Risk Factors--Risks Arising
from Utility Regulation and Deregulation". 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.
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
46
<PAGE>
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.
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 PSE&G 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. NJ Venture 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. Financial Services
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
47
<PAGE>
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.
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 expired in June 1998. 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, Cogen 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
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<PAGE>
a holder's basis in such holder's shares of Common Stock and as capital gain
thereafter. Any such excess would not be eligible for the dividends-received
deduction generally available with respect to dividends paid to corporate
holders of the Common Stock. To the extent a holder receives dividends that
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 Senior Notes and Certain Other 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. 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.
49
<PAGE>
BUSINESS
For an overview description of the Company, its industry and its strategy,
see "Prospectus Summary".
FORMATION
For a description of the formation of the Company, see "Certain
Transactions--Formation Transactions".
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 August 1, 1998, Cogen had no employees and the Group had 52 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
For a description of competitive factors affecting the Company, see "Risk
Factors--Competition".
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. For
information regarding two pending proceedings, see Note 6 to the Group's
Audited Combined Financial Statements and Note 3 to NJ Partnerships' Unaudited
Combined Financial Statements. While the outcome of any of these proceedings
cannot be predicted with certainty, the Company does not expect these matters
to have a material adverse effect on the financial condition or results of
operations of the Company.
50
<PAGE>
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 ("Camden Paperboard") 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) 91.75% 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 as of 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) GECC and Dana Capital Corporation ("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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<PAGE>
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 in which GECC and Dana have equity interests (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. For a chart
showing, in a simplified manner, the Linden ownership structure, see
"Prospectus Summary--Formation".
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
Senior Notes and Certain Other 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 "Certain Transactions--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 Senior Notes and Certain Other 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 8.4%
return thereon (including the allocation of venture tax benefits).
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<PAGE>
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 the 8.4% return on
its initial equity investment (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........................ $ 51.1 $ 50.8 $ 50.7 $ 50.6 $ 52.1
--Tranche 2........................ 0.8 0.8 0.6 0.7 0.7
--Tranche 3........................ 0.1 -- -- -- --
------ ------ ------ ------ ------
52.0 51.6 51.3 51.3 52.8
------ ------ ------ ------ ------
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
------ ------ ------ ------ ------
75.6 77.7 59.4 71.6 68.7
------ ------ ------ ------ ------
Total Distributions.................. $127.6 $129.3 $110.7 $122.9 $121.5
====== ====== ====== ====== ======
</TABLE>
For information describing how cash flows will move through Linden Venture
to the Company and ultimately to its stockholders, see "Description of Senior
Notes and Certain Other Indebtedness--Plant Project Financings--Linden
Venture".
LINDEN PLANT DESCRIPTION
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,
53
<PAGE>
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.
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.
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<PAGE>
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
declined to zero in July 1998 pursuant to the terms 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.
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.
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<PAGE>
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 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 the Bayway Steam
Sale Agreement with Linden Venture covering the sale of steam to Bayway by
Linden Venture, and that Exxon would enter into the Amended Exxon Steam Sale
Agreement to reflect the reduction in steam purchases by Exxon. 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.
If Bayway were to cease purchasing steam from Linden Venture, the QF status
of the Linden Plant would be in jeopardy. See "Risk Factors--Risks Arising
from Utility Regulation and Deregulation". 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.
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.
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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 certain quantities (specified in the contract) of butane storage and
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 a certain specified period of time.
This 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 a certain
specified period of time.
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 negotiated with GE and set forth in the terms
of the Linden O&M Agreement. In 1997, Linden Venture paid performance bonuses
of $0.1 million, but no operator's fees were required to be paid in the first
partial year of the Linden O&M Agreement under the terms thereof. 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 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.
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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, 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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LINDEN 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.
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, directly or indirectly, 91.75% 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 Senior
Notes and Certain Other Indebtedness--Plant Project Financings--NJ Venture".
In addition, under the terms of the Equipment Loan Agreement with the
Bayonne Industries, Inc., and as of March 31, 1998, 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 earlier of May 22,
1999 and the execution of a new 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. NJ Venture 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. Financial Services 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 Senior Notes and Certain Other
Indebtedness--Plant Project Financings--NJ Venture".
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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>
BAYONNE PLANT
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, 2018.
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.
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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.
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.
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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.
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-Atlantic 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
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in the tracking account exceeds the liquidated damages due NJ Venture 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.
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 KV 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 PJM
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.
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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.
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.
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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 negotiated with GE and set forth in the Bayonne O&M Agreement. In
1997, Bayonne paid performance bonuses to GE of $0.1 million, but no
operator's fees were required to be paid in the first partial year of the
Bayonne O&M Agreement under the terms thereof. 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.
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.
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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.
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 $132.0
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 Senior Notes and
Certain Other 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 Senior Notes and Certain Other Indebtedness--Plant Project
Financings--Camden Cogen".
CAMDEN GENERAL PARTNER TERM LOAN
Pursuant to the Camden GP Term Loan Agreement, GECC has made available a
$36.5 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 revenues 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
Senior Notes and Certain Other Indebtedness--Plant Project Financings--Camden
Cogen".
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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 6.8% return thereon through
its share of Camden Tranche 1 distributions and the allocation of all venture
tax benefits.
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 the
6.8% return on its initial equity investment, 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....................... $16.0 $15.7 $15.5 $15.5 $10.0
--Camden Tranche 2....................... 0.1 0.1 0.1 -- 0.3
----- ----- ----- ----- -----
16.1 15.8 15.6 15.5 10.3
----- ----- ----- ----- -----
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 8.0
----- ----- ----- ----- -----
8.6 14.5 15.0 4.4 8.1
----- ----- ----- ----- -----
Total...................................... $24.7 $30.3 $30.6 $19.9 $18.4
===== ===== ===== ===== =====
</TABLE>
CAMDEN PLANT DESCRIPTION
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 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
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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 AGREEMENT
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.
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.
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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.
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.
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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 if the U.S. Weather Bureau has
forecasted certain average temperatures at Newark Airport, Newark, New Jersey.
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 certain minimum percentages of the original contract quantity.
Upon curtailment, the Camden Plant may substitute alternative fuels in lieu of
the resale service for a limited number of 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 a certain
specified period of time. Camden Cogen may terminate the Gas Service Agreement
if the supplier experiences a force majeure event for a certain specified
period of time.
CAMDEN OPERATION AND MAINTENANCE AGREEMENT
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
negotiated with GE and set forth in the Camden O&M Agreement. In 1997, Camden
Cogen paid performance bonuses of $0.1 million to GE, but no operator's fees
were required to be paid in the first partial year of the Camden O&M Agreement
under the terms thereof. 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, is
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.
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 and Con Ed and steam produced
by such Plant is sold to GE Plastics, a division of GE. Selkirk Venture filed
with 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 the 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 New York Public Service Commission ("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 noted that approximately 19.3% of its
revenues in 1997 were attributable to electric sales to Niagara Mohawk.
Selkirk Venture stated in its Report on Form 10-Q for the period ended March
31, 1998, as filed with the Commission, that if Selkirk Venture and Niagara
Mohawk proceed to complete the transaction
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provided under the NMMRA, which completion remains subject to a number of
significant contingencies, management of Selkirk Venture believes that, based
on the facts and circumstances currently known, and certain assumptions that
management believes to be reasonable, an amended agreement is not expected to
have a material adverse effect on Selkirk Venture's future operating results
and cash flow from operations.
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 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 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, the FPA and state law 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 Agreement".
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
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
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utility operations to a single integrated utility system and to divest any
other operations not functionally related 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. On July 1, 1998, NJBPU
released a revised version of its prior draft of proposed legislation to
restructure New Jersey's electric power industry (see NJ Stranded Costs),
which revisions included provisions requiring that each electric utility
"shall fully implement retail choice in 100% of its franchise area within the
State of New Jersey by July 1, 1999".
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 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
OFFICERS AND DIRECTORS
The following table sets forth certain information about the officers and
directors of the Company following the consummation of the Formation
Transactions and the Common Stock Offering. 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)
---- --- -----------
<C> <C> <S>
Robert C. McNair................. 61 Chairman of the Board and Chief
Executive Officer and Director
Philip J. Burguieres*............ 54 Director and Chairman of the Executive
Committee
Ernest H. Cockrell*.............. 52 Director and Chairman of the Audit
Committee
Malcolm Gillis**................. 57 Director
Charles Berdon Lawrence**........ 55 Director and Chairman of the
Compensation Committee
Constantine S. Nicandros**....... 65 Director
L.J. Gelber...................... 42 President
Ross D. Ain...................... 51 Vice Chairman--Business Development,
Cogen Technologies Generating Company
Joseph M. Bollinger.............. 51 President, Cogen Technologies
Generating Company
Richard A. Lydecker, Jr. ........ 54 Senior Vice President, Chief Financial
Officer and Secretary
C.L. Sowell...................... 68 Vice Chairman--Government Relations,
Cogen Technologies Generating Company
Jacob Feinstein.................. 55 Vice President, Cogen Technologies
Generating Company
Colin Harper..................... 38 Vice President--Fuel Operations, Cogen
Technologies Generating Company
Sharleen L. Walkoviak............ 44 Vice President and Treasurer
Jimmy McDonald................... 34 Controller
</TABLE>
- --------
* Member of the Audit Committee
** Member of the Compensation Committee
Although Mr. McNair currently has other significant business interests,
priority will be given to his responsibility as Chief Executive Officer of
Cogen.
Mr. Lydecker also serves as director or executive officer 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
Mr. Lydecker 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.
INDIVIDUAL BACKGROUND INFORMATION
Set forth below is a description of the backgrounds of the directors and
officers of the Company.
Directors
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.
Philip J. Burguieres has been a director of the Company since July 1998. Mr.
Burguieres served as chairman of the board of Weatherford Enterra, Inc., an
energy services company, from December 1992 until its merger with EVI, Inc. in
June 1998 and president and chief executive officer and director of
Weatherford Enterra, Inc. from April 1991. From January 1990 to November 1990,
he was chairman of the board, president and chief executive officer of
Panhandle Eastern Corporation, a company that operated interstate natural gas
transmission systems. Prior to that, from 1971 through November 1989 he held
various positions with Cameron Iron Works, an oilfield manufacturer. He served
as chairman of the board of Cameron Iron Works from January 1987 to November
1989, chief executive officer from April 1981 to November 1989. Mr. Burguieres
also is a director of EVI Weatherford, Inc., McDermott International, Inc.,
Chase Bank of Texas, N.A., Newfield Exploration Company and Denali
Incorporated.
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Ernest H. Cockrell has been a director of the Company since July 1998. Mr.
Cockrell has been chairman of the board and chief executive officer of
Cockrell Interests, Inc., an oil and gas exploration and production company,
since April 1996. Prior to that he served as president and chief executive
officer of Cockrell Interests, Inc. for more than ten years. Mr. Cockrell is a
director of Pennzoil Company and Southwest Bank of Texas.
Malcolm Gillis has been a director of the Company since July 1998. Mr.
Gillis has been President of William Marsh Rice University since July 1993.
From July 1991 to June 1993 he was Dean of the Faculty of Arts and Sciences of
Duke University and from July 1986 through June 1991 he was Dean of the
Graduate School and Vice Provost for Academic Affairs of Duke University.
Charles Berdon Lawrence has been a director of the Company since July 1998.
Mr. Lawrence has been president of Hollywood Marine, Inc., a Gulf Coast
operator of tank barges and tow boats handling petrochemical and petroleum
products, for more than the past five years. He also is a director of Pennzoil
Company.
Constantine S. Nicandros has been a director of the Company since July 1998.
Mr. Nicandros has been chairman of CSN and Company, a private consulting and
investment firm since March 1996. From 1957 until his retirement in March
1996, Mr. Nicandros held various positions with Conoco Inc., a petroleum
products company, where he was president and chief executive officer from
March 1987 through 1995. He also served as chairman of the board of Conoco,
Inc. and vice chairman of E.I. du Pont de Nemours and Company (the parent of
Conoco, Inc. and a chemical, specialty products and energy company) from 1991
until his retirement. Mr. Nicandros is a director of Chase Bank of Texas,
Cooper Industries, Inc. and Mitchell Energy and Development Corp.
Officers
L.J. Gelber has been President of the Company since August 1998. From June
1993 through July 1998, Mr. Gelber was president and chief executive officer
of ESI Energy, Inc., a wholly owned subsidiary of FPL Group, a public utility
company. From 1985 to June 1993, he served as director of corporate
development of FPL Group and from 1978 to 1985 he was the manager of finance
of Florida Power & Light.
Ross D. Ain has served as an executive officer of companies within the Group
since 1994. He currently serves as Vice Chairman of Cogen Technologies
Generating Company, a wholly owned subsidiary of the Company. 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. He currently serves
as President of Cogen Technologies Generating Company.
Richard A. Lydecker, Jr. has been Senior Vice President, Chief Financial
Officer and Secretary of the Company since May 1998. Mr. Lydecker served as an
executive officer of companies within the Group for more than five years after
prior positions in finance and accounting with several energy companies.
C.L. Sowell has been Vice Chairman--Government Relations of Cogen
Technologies Generating Company since August 1998. Mr. Sowell has served as an
officer of companies within the Group for more than five years.
Jacob Feinstein has been Vice President of Cogen Technologies Generating
Company since August 1998. Since May 1998 Mr. Feinstein served as an officer
of companies within the Group. Mr. Feinstein was a vice president of systems
and transmission operations of Con Ed, a public utility company, for more than
five years prior to May 1998.
Colin Harper has been Vice President--Fuel Operations of Cogen Technologies
Generating Company since August 1998. Mr. Harper has served as an officer of
companies within the Group for more than five years.
Sharleen L. Walkoviak has been Vice President and Treasurer of the Company
since August 1998. Ms. Walkoviak served as treasurer of companies within the
Group since January 1997 and served as controller from August 1994 until
January 1997. Ms. Walkoviak was director of administration for Woodard Hall &
Primm P.C., a law firm, from September 1990 until August 1994.
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Jimmy McDonald has been Controller of the Company since August 1998. Mr.
McDonald has served as controller of companies within the Group since January
1997 and prior to that time served as assistant controller.
CLASSIFIED BOARD
Prior to the consummation of the Common Stock Offering, the Company plans to
adopt a Restated Certificate of Incorporation which will provide for the
classification of the Board of Directors of the Company into three classes
(Class I, Class II and Class III), with the term of each class expiring at
successive annual meetings of stockholders. At and after the 1999 annual
meeting of stockholders, all nominees standing for election will be elected
for three-year terms. The terms of office of Messrs. Cockrell and Nicandros
will expire at the 1999 annual meeting of stockholders, the terms of office of
Messrs. Burguieres and Gillis will expire at the 2000 annual meeting of
stockholders and the terms of office of Messrs. Lawrence and McNair will
expire at the 2001 annual meeting of stockholders.
BOARD COMMITTEES
Cogen's Board of Directors has established an Audit Committee and a
Compensation Committee.
The duties of the Audit Committee are 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 are 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 approves the
Chief Executive Officer's compensation and reviews 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 also
administers the Company's 1998 Employee Stock Compensation Plan (the "Employee
Plan").
BOARD COMPENSATION
Non-employee directors of the Company will be paid a quarterly director's
fee of $6,000 plus $2,000 for each board meeting attended. The Chairman of
each of the Audit and Compensation Committees will be paid an annual fee of
$2,000, and each director who is a member of a committee of the Board of
Directors will receive $1,000 for each committee meeting attended. In
addition, the Chairman of the Executive Committee will receive an annual fee
of $200,000 and an option to purchase 250,000 shares of Common Stock at an
exercise price equal to the Common Stock Offering price per share.
Each of the non-employee directors is entitled to receive options under the
Company's 1998 Non-Employee Director Stock Option Plan (the "Director Plan").
The Director Plan was adopted for the benefit of directors of the Company who,
at the time of their service, were not employees of the Company or its
subsidiaries. The Director Plan is designed to advance the interests of the
Company by providing such non-employee directors with additional incentive to
promote the success of the Company's business and to enhance the Company's
ability to attract, retain and motivate non-employee directors with
compensatory arrangements that provide for or increase the proprietary
interests of such persons in the Company. The Director Plan was approved and
adopted by the Board of Directors and the Company's stockholders in August
1998 and is administered by the full Board of Directors. Subject to certain
anti-dilution provisions in the Director Plan, an aggregate of 300,000 shares
of Common Stock has been reserved for issuance under the Director Plan upon
the exercise of options granted under such plan. Immediately prior to the
consummation of the Common Stock Offering, options to purchase an aggregate of
50,000 shares of Common Stock will be outstanding under the Director Plan at
an exercise price equal to the per share Common Stock Offering price. The
Board of Directors of the Company, in its sole discretion, may amend or
terminate the Director Plan, except that no amendment may decrease the
exercise price below the fair market value of the Common Stock at the date of
grant.
Pursuant to the terms of the Director Plan, each person serving as a
director of the Company immediately prior to the consummation of the Common
Stock Offering and who is not an employee of the Company or any of its
subsidiaries was will be granted options to purchase 10,000 shares of Common
Stock (the "Initial Director
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Options") at an exercise price equal to the Common Stock Offering price per
share. Under the Director Plan, upon election to the Company's Board of
Directors each non-employee director who was not a director immediately prior
to the consummation of the Common Stock Offering shall be granted options to
purchase 10,000 shares of Common Stock (the "New Director Options"). In
addition, the Director Plan provides for the automatic grant of options to
purchase 5,000 shares of Common Stock at an exercise price equal to the fair
market value of the Common Stock on the date of grant to each person who is a
non-employee director of the Company on any December 31 while the Director
Plan is in effect (the "Vested Options").
All options granted under the Director Plan will have an exercise price per
share of Common Stock equal to the fair market value of the Common Stock on
the date of grant. Each of the Initial Director Options and the New Director
Options is exercisable only in one-third increments over a three-year period
commencing on the first anniversary of the date of the grant of such options.
The Vested Options are immediately exercisable in full when granted. In the
event of certain corporate transactions, the Board of Directors has discretion
to (i) accelerate the time at which options granted under the Director Plan
may be exercised, (ii) require the mandatory surrender of such options in
exchange for cash or (iii) make certain adjustments to such options. All
options granted under the Director Plan will be nonqualified stock options
that will not qualify as incentive stock options under section 422 of the
Code.
Options granted under the Director Plan have a term equal to the earlier of
(i) three years from the date the non-employee director ceases to be a
director of the Company for any reason other than death, disability or
retirement, and (ii) ten years from the date of grant of such option. In the
event of the death, disability or retirement of the non-employee director,
such non-employee director's options shall continue to vest until such options
expire ten years after the date of grant of such option and, in the event of
death, such non-employee director's options may be exercised by his executors,
administrators or any person or persons to whom his options may be transferred
by will or the laws of descent and distribution, as the case may be. Options
granted under the Director Plan are not transferable by the non-employee
director except upon death of the non-employee director as noted above and for
certain limited transfers within a family or for estate planning purposes.
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, no cash compensation; L.J. Gelber--$525,000; Ross D. Ain--
$400,000; Joseph M. Bollinger--$400,000; and Richard A Lydecker, Jr.--
$300,000. In lieu of cash compensation for the remainder of 1998 and 1999, Mr.
McNair will receive an option to purchase 700,000 shares of Common Stock at an
exercise price equal to the Common Stock Offering price per share.
EMPLOYMENT AGREEMENTS
The Company expects to enter into change-in-control agreements with certain
members of senior management, but the terms thereof have not been established
at the present time.
EMPLOYEE PLANS
1998 Employee Stock Compensation Plan
The Employee Plan is designed to advance the interests of the Company and
its stockholders by providing key employees of the Company or any of its
subsidiaries and consultants and advisors to the Company additional incentive
to promote the success of the Company's business and to enhance the Company's
ability to attract, retain and motivate key employees, consultants and
advisors through the use of compensatory arrangements that provide for or
increase the proprietary interests of such persons in the Company. The
Employee Plan was approved and adopted by the Board of Directors and the
Company's stockholders in August 1998 and is administered by the Compensation
Committee. Subject to certain anti-dilution provisions in the Employee Plan,
an aggregate of 6,575,000 shares of Common Stock has been reserved for
issuance under the Employee Plan upon the exercise of options granted under
the Employee Plan or pursuant to the grant of restricted stock awards under
the Employee Plan. Options granted under the Employee Plan may be either
incentive stock options as
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defined in section 422 of the Code ("ISOs"), or nonqualified stock options.
Immediately prior to the consummation of the Common Stock Offering, the
Company will grant options to purchase an aggregate of approximately 2,500,000
shares of Common Stock at an exercise price equal to the per share Common
Stock Offering price. No options may be granted under the Employee Plan after
August , 2008. The Board of Directors has the power to amend, terminate or
suspend the Employee Plan in its sole discretion except that certain
amendments require the approval of the Company's stockholders to maintain the
status of ISOs under the Code.
Under the Employee Plan, ISOs may be granted to those key employees of the
Company or its subsidiaries as the Compensation Committee may determine from
time to time. Nonqualified stock options and restricted stock awards (ISOs,
nonqualified stock options and restricted stock awards collectively referred
to herein as "Awards") may be granted to those employees, consultants,
advisors and directors who have substantial responsibility for the management
and growth of the Company or its affiliates as the Compensation Committee
shall determine from time to time. Pursuant to the terms of the Employee Plan,
the Compensation Committee may only grant (i) ISOs to purchase an aggregate of
shares of Common Stock and (ii) restricted stock awards of an
aggregate of shares of Common Stock and may only grant options to
purchase shares of Common Stock to any person in a calendar
year. All ISOs under the Employee Plan are nontransferable except by will or
under the laws of descent and distribution. Nonqualified stock options and
restricted stock awards are generally nontransferable except by will or under
the laws of descent and distribution, unless otherwise provided for by the
Compensation Committee in its sole discretion. In the event of certain
corporate transactions, the Compensation Committee has discretion to (i)
accelerate the time at which Awards granted under the Employee Plan may be
exercised, (ii) require the mandatory surrender of such Awards in exchange for
cash or (iii) make certain adjustments to such Awards.
The Employee Plan provides that the Compensation Committee shall specify
whether options granted under the Employee Plan are ISOs or nonqualified stock
options, provided that notwithstanding such designation, ISOs shall be treated
as nonqualified stock options under certain circumstances as may be required
by law. The exercise price for options granted under the Employee Plan will
generally be equal to the fair market value of the Common Stock on the date of
grant, but the Compensation Committee in its discretion may determine a higher
exercise price. In the case of a 10% stockholder, the exercise price for ISOs
granted under the Employee Plan may not be less than 110% of the fair market
value of the Common Stock on the date of grant. Options granted under the
Employee Plan generally terminate on the earlier of (i) ten years from the
date of grant (five years from the date of grant for ISOs in the case of a 10%
stockholder) and (ii) one day less than three months after the severance of
the employment or affiliation relationship between the option holder and the
Company and all of its subsidiaries for any reason except for death,
retirement or disability. Options may be exercised at the time, in the manner
and subject to the conditions the Compensation Committee specifies in its sole
discretion. Immediately prior to the consummation of the Common Stock
Offering, the Company plans to grant options to purchase an aggregate of
approximately 2,250,000 shares of Common Stock, at an exercise price equal to
the Common Stock Offering price per share, to certain employees, of which
options to purchase an aggregate of 1,341,000 shares of Common Stock will be
granted to the Chief Executive Officer and other executive officers.
Under the Employee Plan, the Compensation Committee may also issue shares of
restricted stock to eligible persons selected by it. The amount of, and
vesting and transferability restrictions applicable to, restricted stock
awards are determined by the Compensation Committee in its sole discretion.
Immediately prior to the consummation of the Common Stock Offering, the
Company plans to grant an aggregate of 225,000 shares of restricted stock
(valued at the Common Stock Offering price per share) to certain executive
officers.
The Company also intends to adopt a 401(k) plan.
MANAGEMENT SERVICES AGREEMENTS
The Company 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 at the instance of Robert C. McNair to
acquire operating control of, and a substantial equity interest in (or, in the
case of Selkirk Venture, only a passive 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. Mr.
McNair and the McNair Interests may constitute "promoters" or "founders" under
Rule 405 of the Securities Act. 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 (dollar and share
amounts are estimates based on an assumed Common Stock Offering Price of
$15.00 per share):
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, respectively, to Cogen or a subsidiary thereof in consideration
for the issuance to the McNair Interests of 23.7 million shares of Common
Stock and to the Minority Interests of 5.2 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 $820,000 in cash and 8.0 million shares of Common Stock and to
the Minority Interests of an aggregate of $180,000 in cash and 1.7 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 14.3 million shares of Common Stock
in proportion to their ownership. MESC owns NJ Inc., which is the operating
and 91.75% 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 1.7
million shares of Common Stock.
Fifth, Financial Services, a limited partnership owned by the McNair
Interests and the Minority Interests, 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
400,000 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 and the
proportionate payment to the McNair Interests and the Minority Interests of
$276.4 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.
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After the consummation of all the foregoing transactions (the "Formation
Transactions") and the Common Stock Offering, Cogen will have outstanding 55.0
million shares of Common Stock, of which 17.8 million shares (32.3%) will be
owned by the McNair Interests, 3.9 million shares (7.1%) will be owned by the
Minority Interests, and 33.3 million shares (60.6%) will be owned by the
public. See "Principal and Selling Stockholders". Further, Cogen will own,
directly or indirectly, 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 $227.4 million in cash, 82% of a receivable from
Financial Services, an entity not owned by Cogen, having a face value of
$130.7 million and 45.1 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 an aggregate of $74.2 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 $9.7 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 $276.4 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 $83.9 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.
For a chart showing, in a simplified manner, the organizational structure of
the Company with respect to its interests in the ventures immediately
following the consummation of the Formation Transactions, see "Prospectus
Summary--Formation".
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
The Company 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.
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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 August 1, 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. Share amounts assume a Common Stock Offering price of
$15.00 per share. 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(2)
NAME AND ADDRESS OF -------------------------- BEING -------------------
BENEFICIAL OWNER(1) NUMBER % OFFERED NUMBER %
------------------- ------------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C>
Robert C. McNair(3)..... 39,871,000(4) 72.5%
Cogen Technologies
Limited Partners Joint
Venture................ 7,329,000(5) 13.3%
2 Memorial City Plaza
820 Gessner, Suite 1320
Houston, Texas 77024
RCM Holdings, Inc....... 1,220,000 2.2%
711 Louisiana, 33rd
Floor
Houston, Texas 77002
Robert Cary McNair,
Jr.(5)................. 1,481,000(5)(6) 2.7%
Daniel Calhoun McNair... 1,431,000(6) 2.6%
McNair Children Trusts.. 4,624,000(6) 8.4%
Philip J. Burguieres(3). - - -
Ernest H. Cockrell(3)... - - -
Malcolm Gillis(3)....... - - -
C. Berdon Lawrence(3)... - - -
Constantine S.
Nicandros(3)........... - - -
L.J. Gelber(3).......... - - -
Ross D. Ain(3).......... - - -
Joseph M. Bollinger(3).. - - -
Richard A. Lydecker,
Jr.(3)................. - - -
Directors and officers
as a group (10
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.
(2) Assumes no exercise of the Underwriters' over-allotment option.
(3) The address for Messrs. McNair, Burguieres, Cockrell, Gillis, Lawrence,
Nicandros, Gelber, Ain, Bollinger and Lydecker, is 711 Louisiana, 33rd
Floor, Houston, Texas 77002.
(4) Includes 20,974,000 shares of Common Stock that will be held by RCM
Holdings, Inc., 1,220,000 shares that will be held by Cogen Technologies
Selkirk LP, Inc. and 231,000 shares that will be held by Old Cogen
Technologies Financial Services, L.P. upon consummation of the Formation
Transactions, each of which entities are directly or indirectly controlled
by Mr. McNair.
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(5) Cogen Technologies Limited Partners Joint Venture ("CTLPJV") is a Texas
general partnership comprising the following general partners: (i) Pauline
E. Buck, as Trustee of the Charles N. Buck Family Trust-A and the Charles
N. Buck Family Trust-B under the will of Charles N. Buck, (the "Buck
Family Trusts"); (ii) Evergreen Partnership Energy, Ltd. ("Evergreen");
(iii) Robert Cary McNair, Jr., as Trustee of The 1989 Energy Trust (the
"Energy Trust"); (iv) John P. Hansen, as Trustee of Hansfam Three, a Trust
(the "Hansfam Trust"); (v) Robert A. Hansen; and (vi) C. Donald Van Wart.
Pauline E. Buck is the sole trustee and beneficiary of the Buck Family
Trusts and as such may be deemed to be the beneficial owner of the
7,329,000 shares of Common Stock held by CTLPJV. Evergreen is a Texas
limited partnership and as a general partner of CTLPJV may be deemed to be
the beneficial owner of the 7,329,000 shares of the Common Stock held by
CTLPJV. H. Fred Levine and Velva G. Levine are the general partners of
Evergreen and have sole voting and dispositive power with respect to the
CTLPJV partnership interest beneficially owned by Evergreen. Because of
these relationships, Mr. Levine and Ms. Levine each may be deemed to be
the beneficial owners of the 7,329,000 shares of Common Stock held by
CTLPJV. Robert Cary McNair, Jr. and David C. Holland are co-trustees of
the Energy Trust and have voting and dispositive power with respect to the
CTLPJV partnership interest beneficially owned by the Energy Trust and
because of such positions each may be deemed to be the beneficial owners
of the 7,329,000 shares of Common Stock held by CTLPJV. As sole trustee of
the Hansfam Trust, John P. Hansen has voting and dispositive power with
respect to the CTLPJV partnership interest beneficially owned by the
Hansfam Trust and because of such position may be deemed to be the
beneficial owner of the 7,329,000 shares of Common Stock held by CTLPJV.
As general partners of CTLPJV, each of Robert A. Hansen and C. Donald Van
Wart may be deemed to be the beneficial owners of the 10,741,000 shares of
Common Stock held by CTLPJV. In addition to the relationships with CTLPJV
noted above, Pauline E. Buck, as Trustee of the Buck Family Trusts,
Evergreen, Robert A. Hansen and C. Donald Van Wart are shareholders of
MESC and will receive 114,000, 743,000, 1,429,000 and 214,000 shares of
Common Stock, respectively, in connection with the merger of MESC and
Cogen Technologies Bayonne, Inc. See "Certain Transactions--Formation
Transactions". As the sole trustee and beneficiary of the Buck Family
Trusts, Pauline E. Buck may be deemed to be the beneficial owner of the
114,000 shares of Common Stock to be received in connection with such
merger. As the general partners of Evergreen with sole voting and
dispositive power, H. Fred Levine and Velva G. Levine may be deemed to be
the beneficial owners of the 743,000 shares of Common Stock to be received
by Evergreen in connection with such merger.
(6) The McNair Children Trusts are the (i) Robert Cary McNair, Jr. Trust UTA
dated November 14, 1988, as amended (the "Robert Cary McNair Trust"); (ii)
Daniel Calhoun McNair Trust UTA dated November 14, 1988, as amended (the
"Daniel Calhoun McNair Trust"); (iii) Ruth McNair Smith Trust UTA dated
November 14, 1988, as amended (the "Ruth McNair Smith Trust"); and (iv)
Melissa Eileen McNair Walter Trust UTA dated November 14, 1988, as amended
(the "Melissa Eileen McNair Walter Trust"). Robert Cary McNair, Jr. is the
sole trustee and beneficiary of the Robert Cary McNair Trust and as such
may be deemed to be the beneficial owner of 1,156,000 shares of Common
Stock held by such trust. Daniel Calhoun McNair is the sole trustee and
beneficiary of the Daniel Calhoun McNair Trust and as such may be deemed
to be the beneficial owner of 1,156,000 shares of Common Stock held by
such trust. Ruth McNair Walter is the sole beneficiary and a co-trustee of
the Ruth McNair Smith Trust and as such may be deemed to be the beneficial
owner of 1,156,000 shares of Common Stock held by such trust. Melissa
Eileen McNair Walter is the sole beneficiary and a co-trustee of the
Melissa Eileen McNair Walter Trust and as such may be deemed to be the
beneficial owner of 1,156,000 shares of Common Stock held by such trust.
M. Robert Dussler is the co-trustee of the Ruth McNair Smith Trust and the
Melissa Eileen McNair Walter Trust and as such may be deemed to be the
beneficial owner of 2,312,000 shares of Common stock held by such trust.
The address for each of the McNair Children Trusts, Robert Cary McNair,
Jr. and Daniel Calhoun McNair is 5847 San Felipe, Suite 320, Houston,
Texas 77057, c/o Andrew Linbeck.
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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 300,000,000 shares of Common Stock, par value $.01 per share
("Common Stock"), and 50,000,000 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.
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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).
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).
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
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(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.
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
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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
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 SENIOR NOTES AND CERTAIN OTHER INDEBTEDNESS
DESCRIPTION OF SENIOR NOTES
Concurrently with the Common Stock Offering, the Company is offering up to
$400.0 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 senior secured obligations of the Company and will
rank pari passu in right of payment with all existing and future senior
indebtedness of Cogen, including Cogen's obligations under the Revolving
Credit Facility, and senior in right of payment to all existing and future
subordinated debt of the Company. The Senior Notes will mature in three
tranches and will bear interest from the date of issuance at the rates of
%, % and %, respectively, per annum payable semi-annually.
The Senior Notes will be secured, on a pari passu basis, by a security
interest granted by Cogen in a portion of the equity interests of Cogen in
certain of its direct, wholly-owned subsidiaries, which subsidiaries own the
equity interests of Cogen in each of Linden Venture, Camden Cogen and NJ
Venture, which, in turn, own, indirectly, interests in the partnership
interests in each of the Linden, Camden and Bayonne Ventures, respectively. In
no event will such security interest encumber any such venture or the general
partner of any such venture, or any of their respective rights or properties.
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 Redemption Price (as defined in
the First Supplemental Indenture). Prior to the Covenant Modification Date (as
defined below), the Senior Notes will be subject to mandatory redemption (at
the Redemption Price in the case of clauses (ii) and (iii) below) in each of
the following instances, after giving effect to the required repayment of
indebtedness of such NJ Partnership and of its Managing General Partner, in
each case, outstanding on the Issue Date, and to fund accounts or otherwise be
subject to restrictions on distributions by the lenders of such indebtedness,
and the required distributions to other partners and venturers of such NJ
Partnership: (i) if an NJ Partnership or Cogen (on behalf of such NJ
Partnership) receives net proceeds, cash or non-cash, in excess of $50.0
million with respect to one or more events of loss or condemnation with
respect to the property of such NJ Partnership and, after reduction of such
amount by the aggregate amount of all of such proceeds used toward the
restoration, repair, re-construction or replacement of such property, the
remaining aggregate amount of the cash or non-cash proceeds exceeds $50.0
million; (ii) if an NJ Partnership or Cogen (on behalf of such NJ Partnership)
receives at any time following the date of the issuance of the Senior Notes an
aggregate amount of net proceeds in excess of $100.0 million from one or more
payments by an electricity purchaser or steam purchaser in connection with the
buyout of a power purchase agreement or steam sales agreement; and (iii) if
Cogen sells, transfers, assigns or otherwise disposes of any NJ Partnership,
or any interest therein, or any NJ Partnership sells, transfers, assigns or
otherwise disposes of assets owned by such NJ Partnership, in one or more
transactions, whose net proceeds, cash and non-cash, exceed $100.0 million
(exclusive of certain dispositions set forth in the Indenture); unless, in
each instance, after giving effect to such occurrence and the use or
contemplated use of the proceeds therefrom as announced by Cogen, the Rating
Agencies (as defined in the First Supplemental Indenture) confirm the then
current ratings on the Senior Notes. On and after the Covenant Modification
Date, the Senior Notes will not be subject to mandatory redemption.
The First Supplemental Indenture will contain certain restrictive covenants
of Cogen and the NJ Partnerships that limit the ability of Cogen and the NJ
Partnerships to: (i) as to Cogen, incur certain additional indebtedness (as
defined herein) other than (a) the Senior Notes and other indebtedness under
the Indenture (excluding debt securities subsequently issued thereunder), (b)
Indebtedness incurred pursuant to the Revolving Credit Facility in an
aggregate amount not to exceed $300.0 million at any one time outstanding, (c)
Indebtedness incurred pursuant to the Linden Guarantee (as defined herein),
(d) Indebtedness ranking pari passu in right of payment with the Senior Notes
and the Revolving Credit Facility, the incurrence of which either is incurred
in compliance with a debt coverage ratio or will not result in a downgrading
of the then current ratings of the Senior Notes, (e) Subordinated Indebtedness
(as defined herein) and (f) Indebtedness incurred to refinance, renew,
replace, defease or refund, in whole or in part, any Indebtedness specified in
the preceding clauses (a) through
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(e); and (ii) as to the NJ Partnerships, incur certain Indebtedness other than
(a) $[ ] of Indebtedness outstanding on the Issue Date, (b) Indebtedness in
an aggregate amount not to exceed $100 million at any one time outstanding for
improvements and expansions to any or all of the NJ Plants and (c) other
Indebtedness required to satisfy any fiduciary responsibilities of the
partners or venturers, as applicable, of each of the NJ Partnerships. In
addition, the First Supplemental Indenture will permit Cogen to make dividend
payments or other distributions equal to the sum of 100% of Funds From
Operations (as defined herein) (from the Issue Date) plus $50 million, unless
a Default or Event of Default has occurred and is continuing. Upon the
Covenant Modification Date, and without any further action or step taken by
any Person or requirement of any nature being satisfied, the foregoing
covenants will immediately and forever terminate and cease to be operative.
The Covenant Modification Date shall mean the day that (i) Cogen has a
portfolio comprised of interests in at least eight power projects with no
single project contributing more than 25% or less than 5% of aggregate Cash
Distributions (as defined in the Indenture) for each of the four quarters
preceding such date of determination and the four quarters succeeding such
date of determination (as projected by Cogen), as certified by both the
Independent Engineer (as defined in the First Supplemental Indenture) and
Cogen's Chief Financial Officer (with forecasts relating to merchant capacity
reflecting cash flows for such capacity over the previous four quarters) and
(ii) the Senior Notes are rated at least [ ] by the Rating Agencies.
The Indenture and First Supplemental Indenture governing the Senior Notes
also will contain certain covenants of Cogen that, among other things, limit
the ability of Cogen and its subsidiaries to create liens or enter into sale
and leaseback transactions and limit the ability of Cogen to engage in mergers
and consolidations or transfer all or substantially all of its assets.
BRIDGE LOAN
Immediately prior to the consummation of the Formation Transactions and
Common Stock Offering, Morgan Stanley & Co. Incorporated ("Morgan Stanley")
will loan $276.4 million to Linden Ltd. pursuant to the Bridge Loan, which
Linden Ltd. will use to redeem the 50.1% of the equity interests in Linden
Ltd. owned by the McNair Interests and the Minority Interests. See "Certain
Transactions--Formation Transactions". The Bridge Loan will be evidenced by a
subordinated promissory note in favor of Morgan Stanley, which note will bear
interest at the rate of 24% per annum. Immediately following the consummation
of the Debt Offering, Cogen will loan $276.4 million of the proceeds of the
Debt Offering to Linden Ltd. for repayment of the Bridge Loan.
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 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, 1999.
The Con Ed L/C is in the face amount of $47.2 million and expired in June
1998. 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.
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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 comprises 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
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 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 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
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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 (which has a margin of 0.5%) 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 $1.1 million, and the final
principal payment being $2.5 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, the Camden Cogen Term 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 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
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 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 Camden GP Term Loan Agreement pursuant to
which this term indebtedness was incurred.
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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, the Prudential 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 1.50x, 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 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--PSE&G". The letter of credit was procured
for NJ Venture by Financial Services. NJ Venture 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. Financial Services 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.
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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 55,000,000 shares of Common Stock. Of such shares, 21,666,667
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 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
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States or Canada, or any corporation, pension, profit-sharing or other trust
or other entity organized under the 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 has applied 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
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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.
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.
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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 Common
Stockholders' share of the current and accumulated earnings and profits of the
Company, 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. Any such
excess would not be eligible for the dividends-received deduction generally
available with respect to dividends paid to corporate holders of the Common
Stock. During the initial years of the Company's operations, the Company
expects that dividends distributed with respect to the Common Stock will
exceed the Company's current and accumulated earnings and profits. No
assurance can be given, however, that distributions 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
valuations, 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.
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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 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 IRS.
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.
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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.
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 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.
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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.
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"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.
"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 Btu.
"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 Btu.
"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.
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"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.
"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.
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FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
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<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-8
Combined Statements of Income of Cogen Technologies Group for the years
ended December 31, 1997, 1996 and 1995................................. F-9
Combined Balance Sheets of Cogen Technologies Group as of December 31,
1997 and 1996.......................................................... F-10
Combined Statements of Cash Flows of Cogen Technologies Group for the
years ended
December 31, 1997, 1996 and 1995....................................... F-11
Combined Statements of Owners' Equity of Cogen Technologies Group for
the years ended December 31, 1997, 1996 and 1995....................... F-12
Notes to Combined Financial Statements of Cogen Technologies Group...... F-13
Unaudited Financial Statements
Combined Statements of Income of Cogen Technologies Group for the three
months ended
March 31, 1998 and 1997................................................ F-24
Combined Balance Sheets of Cogen Technologies Group as of March 31, 1998
and December 31, 1997.................................................. F-25
Combined Statements of Cash Flows of Cogen Technologies Group for the
three months ended March 31, 1998 and 1997............................. F-26
Combined Statements of Owners' Equity of Cogen Technologies Group for
the three months ended March 31, 1998 and 1997......................... F-27
Notes to Combined Financial Statements of Cogen Technologies Group...... F-28
FINANCIAL STATEMENTS OF COGEN TECHNOLOGIES NEW JERSEY OPERATING
PARTNERSHIPS
Audited Financial Statements
Report of Independent Public Accountants................................ F-33
Combined Statements of Income of Cogen Technologies New Jersey Operating
Partnerships for the years ended December 31, 1997, 1996 and 1995...... F-34
Combined Balance Sheets of Cogen Technologies New Jersey Operating
Partnerships at
December 31, 1997 and 1996............................................. F-35
Combined Statements of Cash Flows of Cogen Technologies New Jersey
Operating Partnerships for the years ended December 31, 1997, 1996 and
1995................................................................... F-36
Combined Statements of Partners' Capital of Cogen Technologies New
Jersey Operating Partnerships for the years ended December 31, 1997,
1996 and 1995.......................................................... F-37
Notes to Combined Financial Statements of Cogen Technologies New Jersey
Operating Partnerships................................................. F-38
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-46
</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-47
Combined Statements of Cash Flows of Cogen Technologies New Jersey
Operating Partnerships for the three months ended March 31, 1998 and
1997................................................................... F-48
Combined Statements of Partners' Capital of Cogen Technologies New
Jersey Operating Partnerships at March 31, 1998 and 1997............... F-49
Notes to Combined Financial Statements of Cogen Technologies New Jersey
Operating Partnerships................................................. F-50
</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.
(2) INFORMATION (UNAUDITED) AVAILABLE SUBSEQUENT TO THE DATE OF THE
INDEPENDENT AUDITORS' REPORT
Through the following series of transactions (the "Formation Transactions"),
the Company intends to acquire certain interests from the McNair Interests and
the Minority Interests (dollar and share amounts are based on a Common Stock
Offering [as defined herein] price of $15.00 per share):
(i) The Company will issue 28.9 million shares of common stock with an
estimated market value of $434.0 million 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 9.7 million shares of common stock with an
estimated market value of $145.8 million 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 14.3 million
shares of the Company's common stock with an estimated market value of
$214.3 million. 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 1.7 million shares of common stock with an
estimated market value of $26.1 million 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, respectively, in Selkirk Cogen
Partners, L.P. ("Selkirk Cogen") which owns and operates a 345-megawatt
cogeneration facility in Bethlehem, New York;
(v) The Company will issue 0.4 million shares of common stock with an
estimated market value of $4.8 million 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 borrow $276.4 million under the terms of a loan
agreement with Morgan Stanley & Co. Incorporated (the "Bridge Loan") and
redeem its remaining general and limited partnership interests
F-5
<PAGE>
COGEN TECHNOLOGIES, INC.
NOTES TO BALANCE SHEET--(CONTINUED)
in consideration for the distribution of a $159.4 million account
receivable and a $276.4 million in cash. The Bridge Loan will be evidenced
by a subordinated promissory note in favor of Morgan Stanley, which note
will bear interest at the rate of 24% per annum. Immediately following the
issuance of the Senior Notes (as discussed hereinafter), the Company will
loan $276.4 million of the proceeds to Linden Ltd. for repayment of the
Bridge Loan.
Prior to the Formation Transactions, the ownership interests of the McNair
Interests and the Minority Interests in each of the entities being acquired
are identical (except for a 10.5% interest held by the Minority Interests in
MESC). Following the Formation Transactions the ownership interests of the
McNair Interests and the Minority Interests in the Company will be identical
to their prior interests in the entities acquired. Accordingly, 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. The acquisition of the 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
purchase price for such 10.5% interest in MESC is $22.5 million. 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. The
Company's investments in Linden Venture, Camden Cogen, NJ Venture and Selkirk
Cogen will be accounted for using the equity method.
The valuation of the interests acquired by the Company and the general and
limited partnership interests redeemed by Linden Ltd. were agreed to in arms-
length negotiations. The price per share is equal to the Common Stock Offering
price.
Following the Formation Transactions, the McNair Interests and the Minority
Interests intend to sell shares of the Company's common stock in a public
offering (the "Common Stock Offering"). The Company will issue no shares and
will receive no proceeds from the Common Stock Offering. In connection with
the Common Stock Offering, the Company will pay certain costs which are
estimated to total $1.8 million.
Following the Formation Transactions, the Company intends to issue $400.0
million of Senior Notes, the proceeds from which will be used to loan an
amount to Linden Ltd. for repayment of the Bridge Loan, to retire amounts
payable to affiliates, to pay certain expenses related to the Formation
Transactions, the Common Stock Offering and the issuance of the Senior Notes
and for working capital purposes. The Senior Notes mature $100.0 million in
2005, $150.0 million in 2010 and $150.0 million in 2018 and are expected to
bear interest at approximately 6.72%, 6.89% and 7.33% per annum, respectively.
The Senior Notes have no sinking fund requirements and no principal payments
are required prior to maturity.
The Senior Notes will be secured, on an equal basis with the senior secured
bank indebtedness, by a security interest granted by the Company on certain
direct wholly-owned subsidiaries of the Company, which subsidiaries own all of
the Company's equity interests in the ventures. 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 at any one time outstanding
in senior secured bank indebtedness, certain other parity indebtedness the
issuance of which either is incurred in compliance with a coverage ratio
requirement or will not result in a rating downgrade of the Senior Notes and
subordinated indebtedness, (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 at any one time outstanding for plant improvements
and expansion and amounts required to satisfy any fiduciary responsibilities
of the partners or venturers of each of the ventures, and (iii) prohibit
distributions to stockholders and on account of subordinated indebtedness owed
to affiliates 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 Indenture
will further contain provisions that upon achieving a prescribed level of
diversification of interests owned by the
F-6
<PAGE>
COGEN TECHNOLOGIES, INC.
NOTES TO BALANCE SHEET--(CONTINUED)
Company in at least eight power project ventures, the foregoing security
interests, mandatory redemption provisions and covenants and, subject to a
further condition, security interest, and certain events of default, will be
permanently terminated. The closings of each of the Common Stock Offering and
the Debt Offering are conditioned upon the consummation of the other.
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.
The Company will receive cash distributions from its affiliates as follows:
(i) Under the terms of NJ Venture's joint venture agreement, NJ Inc.
receives 86.5% of all cash distributions.
(ii) 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.
(iii) 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.
(iv) Under the terms of Selkirk Cogen's 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 combined interests of Selkirk GP
Inc. and Selkirk LP).
Certain executive officers of the Company will also serve as directors or
executive officers, or both, of certain other entities controlled by Mr.
McNair. In addition, the Company expects to provide certain management,
financial and administrative support services to such other entities
controlled by Mr. McNair. For such services the Company will receive a fee
equal to the Company's estimated cost plus an appropriate markup. The
Company's estimated cost, including office space and facilities, will be
determined on a full allocation basis, including employee salaries and
benefits and direct charges.
F-7
<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
F-8
<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) (23.6) (22.0)
------ ------ ------
Net Income After Pro Forma Income Taxes................ $ 49.1 $ 44.3 $ 47.3
====== ====== ======
Pro Forma Primary and Fully Diluted Earnings Per Share
(in dollars).......................................... $ 0.89 $ 0.81 $ 0.86
====== ====== ======
Pro Forma Weighted Average Number of Shares Outstanding
(millions)............................................ 55.0 55.0 55.0
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<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 6)........................... -- --
Owners' Equity................................................... 20.4 3.6
------ ------
$284.8 $284.4
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<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:
Increase in long-term receivable, affiliate......... (67.3) (75.3) (46.9)
Decrease in long-term receivable, affiliate......... 75.1 92.5 59.5
------ ------- ------
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)
Contributions....................................... 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-11
<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-12
<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. The financial statements of the Group
are presented on a combined basis since all such entities were under the
common control and management of the McNair Interests for all periods
presented. All material transactions between the combined entities have been
eliminated.
MESC is a Texas corporation that is owned approximately 82% by Robert C.
McNair, members of his immediate family and related trusts (the "McNair
Interests") 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. The allocation of NJ Venture's earnings and cash
distributions to NJ Inc. is discussed in Note 2.
Camden Inc. is a Texas corporation that is owned 100% by the McNair
Interests 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 82% of Camden GPLP's profits and losses and receives 82% 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. The allocation of Camden
Cogen's earnings and cash distributions to Camden GPLP is discussed in Note 2.
Linden Ltd. is a Texas limited partnership whose general partner, Cogen
Technologies, Inc. ("Cogen"), is owned 100% by the McNair Interests. Under the
terms of Linden Ltd.'s partnership agreement, Cogen is allocated 82% of Linden
Ltd.'s profits and losses and receives 82% 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. The allocation of Linden
Venture's income and cash distributions to Linden Ltd. is discussed in Note 2.
Selkirk GP Inc. is a Texas corporation owned 100% by the McNair interests
and Selkirk LP is a Delaware limited partnership in which the McNair Interests
hold a 1% general partner interest and an approximate 81% limited partner
interest. 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 allocation of
Selkirk Cogen's income and cash distributions to Selkirk GP Inc. and Selkirk
LP is discussed in Note 2.
The Group's investments in NJ Venture, Camden Cogen, Linden Venture and
Selkirk Cogen are accounted for using the equity method of accounting since
the limited partners have substantive participating rights with respect to the
partnerships' operations.
CT Global is a Bermuda corporation owned approximately 82% by the McNair
Interests whose primary business is underwriting a portion of the insurance
carried by NJ Venture, Camden Cogen and Linden Venture.
F-13
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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.
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.
Following the Formation Transactions discussed in Note 9, Cogen
Technologies, Inc. will be the partner or shareholder of the entities which
comprise the Group, and federal and state income taxes will be recognized in
its consolidated financial statements. Pro Forma income taxes have been
presented in the Group's combined Statement of Income to reflect income taxes
assuming the Group were a taxable entity.
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 9.
F-14
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(2) 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 affiliates at December 31, 1997 and 1996 (in millions of dollars):
<TABLE>
<CAPTION>
NJ CAMDEN LINDEN SELKIRK
VENTURE COGEN VENTURE COGEN
--------- ----------- ----------- ------------
1997 1996 1997 1996 1997 1996 1997 1996
---- ---- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets................. 25.0 18.9 19.0 19.5 64.2 64.7 30.9 33.7
Property, plant and equipment,
net........................... 73.8 80.6 106.3 108.9 428.2 450.1 321.5 334.2
Other assets................... 0.2 0.3 -- -- -- -- 33.5 33.6
---- ---- ----- ----- ----- ----- ----- -----
99.0 99.8 125.3 128.4 492.4 514.8 385.9 401.5
==== ==== ===== ===== ===== ===== ===== =====
LIABILITIES AND PARTNERS'
CAPITAL
Current liabilities............ 18.9 15.5 11.8 13.7 31.8 31.5 20.5 20.3
Long-term debt................. 67.9 71.8 84.7 90.2 -- -- 386.0 389.3
Other long-term liabilities -- -- 0.8 0.7 2.2 2.9 11.7 10.7
Partners' capital.............. 12.2 12.5 28.0 23.8 458.4 480.4 (32.3) (18.8)
---- ---- ----- ----- ----- ----- ----- -----
99.0 99.8 125.3 128.4 492.4 514.8 385.9 401.5
==== ==== ===== ===== ===== ===== ===== =====
</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 SELKIRK COGEN
------------------- ------------------- ---------------------- ----------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995 1997 1996 1995
----- ----- ----- ----- ----- ----- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ 96.5 95.3 96.5 80.2 77.2 67.5 299.0 305.5 255.6 171.6 174.4 155.8
Costs and expenses...... (67.9) (65.6) (54.8) (57.0) (54.8) (45.7) (194.5) (195.8) (166.4) (127.9) (126.4) (121.7)
----- ----- ----- ----- ----- ----- ------ ------ ------ ------ ------ ------
Income from operations.. 28.6 29.7 41.7 23.2 22.4 21.8 104.5 109.7 89.2 43.7 48.0 34.1
Other income (expense).. (8.0) (8.4) (8.7) (7.3) (7.8) (8.0) 1.1 0.5 0.7 (32.2) (32.8) (32.4)
----- ----- ----- ----- ----- ----- ------ ------ ------ ------ ------ ------
Net income.............. 20.6 21.3 33.0 15.9 14.6 13.8 105.6 110.2 89.9 11.5 15.2 1.7
===== ===== ===== ===== ===== ===== ====== ====== ====== ====== ====== ======
</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 Selkirk Cogen's 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 combined interests of Selkirk GP Inc. and Selkirk LP). Under the terms of
the amended partnership
F-16
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
agreement, Selkirk GP Inc. and Selkirk LP are being allocated a total of
approximately 6% of the earnings of Selkirk Cogen.
(3) 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.
(4) 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
F-17
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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"), in which McNair
has a 1% general partner and an approximate 81% limited partner interest,
charges Camden GPLP, Linden Ltd., NJ Inc., Selkirk GP Inc. and Selkirk LP for
certain management, financial and administrative support services. 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. The costs of such services
are accumulated primarily based on employee time allocations and are charged
to specific entities based on electricity generation capacity. NJ Inc. charged
Cogen Capital $2.2 million in 1997, $2.0 million in 1996 and $1.7 million in
1995 for certain management, financial and administrative support services.
The costs of such services are accumulated primarily based on employee time
allocations.
Selkirk GP Inc. and Selkirk LP pay a natural gas management fee of $0.02 per
thousand cubic feet of natural gas purchased to a limited partner in certain
of the entities which comprise the Group. 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 (net of a $10.3
million allowance at December 31, 1996). 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. In those instances when
the market value of Financial Services' marketable securities is below the
amount of Linden Ltd.'s receivable, creating doubt about the collectibility of
the receivable, Linden Ltd. provides a valuation allowance to reflect the
shortfall. To the extent the market value of the underlying marketable
securities recovers, the provision is reversed. Linden Ltd. recorded
provisions (reversal of provisions) 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.
F-18
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
From time to time advances are made between Management Services and Camden
Inc. At December 31, 1997 and 1996, $1.0 million and $1.0 million,
respectively, was payable by Management Services to Camden Inc. Advances bear
interest at 9.3% and during 1997, 1996 and 1995 Camden Inc. recorded interest
income totaling $0.1 million, $0.1 million and zero, respectively.
From time to time advances are made between Financial Services and Camden
GPLP. At December 31, 1997 $1.9 million was payable to Financial Services by
Camden GPLP and at December 31, 1996 $5.2 million was payable by Financial
Services to Camden GPLP. Advances bear interest at 9.3% and during 1997, 1996
and 1995 Camden GPLP recorded interest income totaling $0.6 million, $0.9
million and $1.0 million, respectively.
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, respectively, was payable to Selkirk GP Inc. and Selkirk LP by
Financial Services.
(5) 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>
F-19
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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.
(6) COMMITMENTS AND CONTINGENCIES
Six plaintiffs, individually on behalf of themselves and as representatives
of a class of persons similarly situated, filed an environmental lawsuit in
Louisiana state court against 92 defendants, including McNair Transport, Inc.
(predecessor to MESC). In the lawsuit, plaintiffs allege that defendants
caused environmental contamination at two sites in Iberville Parish,
Louisiana. Plaintiffs, who are alleged to have worked at the sites or resided
near the sites, claim personal injuries, increased risk and fear of future
disease, and property damage. Plaintiffs seek actual and exemplary damages of
an unspecified amount.
Defendants removed the case to federal court, and the lawsuit is currently
pending in the United States District Court for the Middle District of
Louisiana. Defendants' motion to deny class certification is pending before
the court, and discovery on the merits of the case has, therefore, not
formally begun. MESC, the successor by merger to McNair Transport, Inc., is
unable at this time to evaluate the merits of the plaintiffs' claims, if any,
or to estimate potential costs or 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.
(7) 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>
F-20
<PAGE>
COGEN TECHNOLOGIES GROUP
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 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.
(8) 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 of Linden
Ltd. as follows (see Note 4): 1 Qtr--($8.2 million); 2 Qtr--($1.8
million); 3 Qtr--($0.6 million); 4 Qtr--$0.3 million; Year--($10.3
million).
(9) EVENT (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITORS'
REPORT
Cogen Technologies, Inc. (the "Company") was incorporated in May 1998 to
acquire control of certain entities and interests owned by 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 (dollar and share amounts are based on a Common Stock
Offering [as defined herein] price of $15.00 per share):
(i) The Company will issue 28.9 million shares of common stock with an
estimated market value of $434.0 million in exchange for 49.9% of the
general and limited partnership interests in Linden Ltd.;
(ii) The Company will issue 9.7 million shares of common stock with an
estimated market value of $145.8 million 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.
F-21
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(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 14.3 million
shares of the Company's common stock with an estimated market value of
$214.3 million.
(iv) The Company will issue 1.7 million shares of common stock with an
estimated market value of $26.1 million in exchange for 100% of the limited
and general partnership interests in Selkirk LP and 100% of the common
stock of Selkirk GP, Inc.
(v) The Company will issue 0.4 million shares of common stock with an
estimated market value of $4.8 million in exchange for 100% of the common
stock of CT Global;
(vi) Linden Ltd. will borrow $276.4 million under the terms of a loan
agreement with Morgan Stanley & Co. Incorporated (the "Bridge Loan") and
redeem its remaining general and limited partnership interests in
consideration for the distribution of a $159.4 million account receivable
and a $276.4 million in cash. The Bridge Loan will be evidenced by a
subordinated promissory note in favor of Morgan Stanley, which note will
bear interest at the rate of 24% per annum. Immediately following the
issuance of the Senior Notes (as discussed hereinafter), the Company will
loan $276.4 million of the proceeds to Linden Ltd. for repayment of the
Bridge Loan.
Prior to the Formation Transactions, the ownership interests of the McNair
Interests and the Minority Interests in each of the entities being acquired
are identical (except for a 10.5% interest held by the Minority Interests in
MESC). Following the Formation Transactions the ownership interests of the
McNair Interests and the Minority Interests in the Company will be identical
to their prior interests in the entities acquired. Accordingly, 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. The acquisition of the 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
purchase price for such 10.5% interest in MESC is $22.5 million. 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. The
Company's investments in Linden Venture, Camden Cogen, NJ Venture and Selkirk
Cogen will be accounted for using the equity method.
The valuation of the interests acquired by the Company and the general and
limited partnership interests redeemed by Linden Ltd. were agreed to in arms-
length negotiations. The price per share is equal to the Common Stock Offering
price.
Following the Formation Transactions, the McNair Interests and the Minority
Interests intend to sell shares of the Company's common stock in a public
offering (the "Common Stock Offering") at an estimated price of $15.00 per
share. The Company will issue no shares and will receive no proceeds from the
Common Stock Offering. In connection with the Common Stock Offering, the
Company will pay certain costs which are estimated to total $1.8 million.
Following the Formation Transactions, the Company intends to issue $400.0
million of Senior Notes, the proceeds from which will be used to loan an
amount to Linden Ltd. for repayment of the Bridge Loan, to retire amounts
payable to affiliates, to pay certain expenses related to the Formation
Transactions, the Common Stock Offering and the issuance of the Senior Notes
and for working capital purposes. The Senior Notes mature $100.0 million in
2005, $150.0 million in 2010 and $150.0 million in 2018 and are expected to
bear interest at approximately 6.72%, 6.89% and 7.33% per annum, respectively.
The Senior Notes have no sinking fund requirements and no principal payments
are required prior to maturity.
F-22
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The Senior Notes will be secured, on an equal basis with the senior secured
bank indebtedness, by a security interest granted by the Company on certain
direct wholly-owned subsidiaries of the Company, which subsidiaries own all of
the Company's equity interests in the ventures. 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 at any one time outstanding
in senior secured bank indebtedness, certain other parity indebtedness the
issuance of which either is incurred in compliance with a coverage ratio
requirement or will not result in a rating downgrade of the Senior Notes and
subordinated indebtedness, (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 at any one time outstanding for plant improvements
and expansion and amounts required to satisfy any fiduciary responsibilities
of the partners or venturers of each of the ventures, and (iii) prohibit
distributions to stockholders and on account of subordinated indebtedness owed
to affiliates 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 Indenture
will further contain provisions that upon achieving a prescribed level of
diversification of interests owned by the Company in at least eight power
project ventures, the foregoing security interests, mandatory redemption
provisions and covenants and, subject to a further condition, security
interest, and certain events of default, will be permanently terminated. The
closings of each of the Common Stock Offering and the Debt Offering are
conditioned upon the consummation of the other.
Certain executive officers of the Company will also serve as directors or
executive officers, or both, of certain other entities controlled by Mr.
McNair. In addition, the Company expects to provide certain management,
financial and administrative support services to such other entities
controlled by Mr. McNair. For such services the Company will receive a fee
equal to the Company's estimated cost plus an appropriate markup. The
Company's estimated cost, including office space and facilities, will be
determined on a full allocation basis, including employee salaries and
benefits and direct charges.
F-23
<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) (4.9)
--------- ---------
Net Income After Pro Forma Income Taxes.................. $13.3 $ 9.3
========= =========
Pro Forma Primary and Fully Diluted Earnings Per Share
(in dollars)............................................ $0.24 $ 0.17
========= =========
Pro Forma Weighted Average Number of Shares Outstanding
(millions).............................................. 55.0 55.0
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<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-25
<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:
Increase in long-term receivable, affiliate.................. (17.2) (21.4)
Decrease in long-term receivable, affiliate.................. 18.6 13.6
------ ------
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-26
<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-27
<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 owned approximately 82% by Robert C.
McNair, members of his immediate family and related trusts (the "McNair
Interests") 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. 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 Inc. is a Texas corporation that is owned 100% by the McNair
Interests 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 82% of Camden GPLP's profits and losses and receives 82% 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.
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.
Linden Ltd. is a Texas limited partnership whose general partner, Cogen
Technologies, Inc. ("Cogen"), is owned 100% by the McNair Interests. Under the
terms of Linden Ltd.'s partnership agreement, Cogen is allocated 82% of Linden
Ltd.'s profits and losses and receives 82% 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.
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
F-28
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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.
Selkirk GP Inc. is a Texas corporation that is owned 100% by the McNair
Interests and Selkirk LP is a Delaware limited partnership in which the McNair
Interests hold a 1% general partner interest and an approximate 81% limited
partner interest. 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.
Under the terms of Selkirk Cogen's 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 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.
The Group's investments in NJ Venture, Camden Cogen, Linden Venture and
Selkirk Cogen are accounted for using the equity method of accounting since
the limited partners have substantive participating rights with respect to the
partnerships' operations.
CT Global is a Bermuda corporation owned approximately 82% by the McNair
Interests 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.
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) 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 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.
F-29
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Through the following series of transactions (the "Formation Transactions"),
the Company intends to acquire certain interests from the McNair Interests and
the Minority Interests (dollar and share amounts are based on a Common Stock
Offering [as defined herein] price of $15.00 per share):
(i) The Company will issue 28.9 million shares of common stock with an
estimated market value of $434.0 million in exchange for 49.9% of the
general and limited partnership interests in Linden Ltd.;
(ii) The Company will issue 9.7 million shares of common stock with an
estimated market value of $145.8 million 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 14.3 million
shares of the Company's common stock with an estimated market value of
$214.3 million;
(iv) The Company will issue 1.7 million shares of common stock with an
estimated market value of $26.1 million in exchange for 100% of the limited
and general partnership interests in Selkirk LP and 100% of the common
stock of Selkirk GP Inc;
(v) The Company will issue 0.4 million shares of common stock with an
estimated market value of $4.8 million in exchange for 100% of the common
stock of CT Global;
(vi) Linden Ltd. will borrow $276.4 million under the terms of a loan
agreement with Morgan Stanley & Co. Incorporated (the "Bridge Loan") and
redeem its remaining general and limited partnership interests in
consideration for the distribution of a $159.4 million account receivable
and a $276.4 million in cash. The Bridge Loan will be evidenced by a
subordinated promissory note in favor of Morgan Stanley, which note will
bear interest at the rate of 24% per annum. Immediately following the
issuance of the Senior Notes (as discussed hereinafter), the Company will
loan $276.4 million of the proceeds to Linden Ltd. for repayment of the
Bridge Loan.
Prior to the Formation Transactions, the ownership interests of the McNair
Interests and the Minority Interests in each of the entities being acquired
are identical (except for a 10.5% interest held by the Minority Interests in
MESC). Following the Formation Transactions the ownership interests of the
McNair Interests and the Minority Interests in the Company will be identical
to their prior interests in the entities acquired. Accordingly, 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. The acquisition of the 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
purchase price for such 10.5% interest in MESC is $22.5 million. 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. The
Company's investments in Linden Venture, Camden Cogen, NJ Venture and Selkirk
Cogen will be accounted for using the equity method.
The valuation of the interests acquired by the Company and the general and
limited partnership interests redeemed by Linden Ltd. were agreed to in arms-
length negotiations. The price per share is equal to the Common Stock Offering
price.
Following the Formation Transactions, the McNair Interests and the Minority
Interests intend to sell shares of the Company's common stock in a public
offering (the "Common Stock Offering") at an estimated price of $15.00 per
share. The Company will issue no shares and will receive no proceeds from the
Common Stock Offering. In connection with the Common Stock Offering, the
Company will pay certain costs which are estimated to total $1.8 million.
F-30
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Following the Formation Transactions, the Company intends to issue $400.0
million of Senior Notes, the proceeds from which will be used to loan an
amount to Linden Ltd. for repayment of the Bridge Loan, to retire amounts
payable to affiliates, to pay certain expenses related to the Formation
Transactions, the Common Stock Offering and the issuance of the Senior Notes
and for working capital purposes. The Senior Notes mature $100.0 million in
2005, $150.0 million in 2010 and $150.0 million in 2018 and are expected to
bear interest at approximately 6.72%, 6.89% and 7.33% per annum, respectively.
The Senior Notes have no sinking fund requirements and no principal payments
are required prior to maturity.
The Senior Notes will be secured, on an equal basis with the senior secured
bank indebtedness, by a security interest granted by the Company on certain
direct wholly-owned subsidiaries of the Company, which subsidiaries own all of
the Company's equity interests in the ventures. 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 at any one time outstanding
in senior secured bank indebtedness, certain other parity indebtedness the
issuance of which either is incurred in compliance with a coverage ratio
requirement or will not result in a rating downgrade of the Senior Notes and
subordinated indebtedness, (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 at any one time outstanding for plant improvements
and expansion and amounts required to satisfy any fiduciary responsibilities
of the partners or venturers of each of the ventures, and (iii) prohibit
distributions to stockholders and on account of subordinated indebtedness owed
to affiliates 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 Indenture
will further contain provisions that upon achieving a prescribed level of
diversification of interests owned by the Company in at least eight power
project ventures, the foregoing security interests, mandatory redemption
provisions and covenants and, subject to a further condition, security
interest, and certain events of default, will be permanently terminated. The
closings of each of the Common Stock Offering and the Debt Offering are
conditioned upon the consummation of the other.
Certain executive officers of the Company will also serve as directors or
executive officers, or both, of certain other entities controlled by Mr.
McNair. In addition, the Company expects to provide certain management,
financial and administrative support services to such other entities
controlled by Mr. McNair. For such services the Company will receive a fee
equal to the Company's estimated cost plus an appropriate markup. The
Company's estimated cost, including office space and facilities, will be
determined on a full allocation basis, including employee salaries and
benefits and direct charges.
(3) COMMITMENTS AND CONTINGENCIES
Six plaintiffs, individually on behalf of themselves and as representatives
of a class of persons similarly situated, filed an environmental lawsuit in
Louisiana state court against 92 defendants, including McNair Transport, Inc.
(predecessor to MESC). In the lawsuit, plaintiffs allege that defendants
caused environmental contamination at two sites in Iberville Parish,
Louisiana. Plaintiffs, who are alleged to have worked at the sites or resided
near the sites, claim personal injuries, increased risk and fear of future
disease, and property damage. Plaintiffs seek actual and exemplary damages of
an unspecified amount.
Defendants removed the case to federal court, and the lawsuit is currently
pending in the United States District Court for the Middle District of
Louisiana. Defendants' motion to deny class certification is pending before
the court, and discovery on the merits of the case has, therefore, not
formally begun. MESC, the successor by merger to McNair Transport, Inc., is
unable at this time to evaluate the merits of the plaintiffs' claims, if any,
or to estimate potential costs or 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.
F-31
<PAGE>
COGEN TECHNOLOGIES GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(4) SUBSEQUENT EVENTS
To benefit the future results of operations of the Company by eliminating
the expense related to certain existing management services and gas management
services agreements and development bonuses, the McNair Interests and the
Minority Interests will provide the funding to terminate such agreements and
to "buy out" the development bonuses. In connection with the Formation
Transactions 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.
To terminate such agreements, the McNair Interests and the Minority
Interests will make capital contributions and Linden Venture, Camden Cogen,
Selkirk GP Inc. and Selkirk LP will make one-time payments totaling $83.9
million. Such payments will be reflected in earnings in the period in which
the payments are made. Such payments will have no effect on the Group's
liquidity or financial condition since the amounts necessary to make such
payments is being provided by the shareholders and/or general and limited
partners. The services currently performed under such agreements will be
assumed by existing Company personnel.
In addition, one-time payments have been or will be made to "buy out"
development bonuses, which certain employees are eligible to receive in
subsequent periods. Such payments totaled $7.4 million in the first quarter of
1998 and additional payments to be made prior to or in connection with the
consummation of the Formation Transactions are expected to total $20.8
million. Such payments will be reflected in earnings in the period in which
the settlement amounts were determined, $5.9 million in the second quarter of
1998 and $14.9 million in the third quarter of 1998.
In July 1998 NJ Inc. purchased an additional 5.25% limited partnership
interest in NJ Venture for $12.5 million in cash from an unaffiliated party.
On a pro forma basis, assuming the transaction took place on January 1, 1997,
such transaction would have increased the Group's equity in the earnings of NJ
Venture for the three months ended March 31, 1998 and the year ended December
31, 1997 by $0.9 million and $0.9 million, respectively, and the Group's net
income for such periods by $0.6 million and $0.6 million, respectively.
F-32
<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-33
<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-34
<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-35
<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-36
<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-37
<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. The financial statements of the NJ Partnerships are
presented on a combined basis since all such entities were under common equity
ownership and management by general partners that are under the common control
of the McNair Interests (as defined herein). 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 which is owned 100% by McNair Energy
Services Corp. (a Texas corporation that is owned approximately 82% by Robert
C McNair, members of his immediate family and related trusts [the "McNair
Interests"]), 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"), whose 82% general partner is
owned 100% by the McNair Interests, is the managing partner of Camden Cogen
and provides planning, operational and financial management services. Under
the terms of Camden Cogen's 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
$8.6 million, $14.5 million and $15.0 million, respectively, which represented
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."), whose 82% general partner is owned 100% by the
McNair Interests, 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 partner. During 1997, 1996 and 1995 Linden Ltd. received $75.6
million, $77.7 million and $59.4 million, respectively, which represented 59%,
60% and 54%, respectively, of Linden Venture's cash distributions. Linden
Venture's income before depreciation
F-38
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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.
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.
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 outages for major maintenance that
benefit more than one period are accrued in advance on a straight-line basis.
Routine and unplanned maintenance and repairs are expensed as incurred. For
the years ended December 31, 1997, 1996 and 1995, $13.7 million, $11.6 million
and $18.3 million, respectively, was charged to expense with respect to major
maintenance and routine maintenance and repairs.
Revenue Recognition
The NJ Partnerships operate under long-term power purchase agreements with
major utilities. Pursuant to the terms of such agreements, the utilities pay a
price per kilowatt hour for the entire term of the agreement that generally
includes: (i) a constant capacity rate per kilowatt hour; (ii) an inflation
component; and (iii) a fuel cost component. Accordingly, the NJ Partnerships
recognize electricity revenues at the above rates in the periods the
electricity is delivered.
Steam revenues are recognized as they are earned pursuant to the underlying
sales agreements.
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
F-39
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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.
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.
F-40
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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 short-term
working capital requirements. Outstanding principal amounts bear interest at
0.5% per annum below the bank's prime rate and NJ Venture must pay a
commitment fee of 0.25% 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
1999.
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 one of the Minority Interests.
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-41
<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.
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 kilovolt 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 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.
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.
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 interest 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 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.
F-42
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NJ Venture currently purchases its natural gas requirements from PSE&G
pursuant to the provisions of an agreement with a base term of one year with
automatic renewals subject to termination upon five days notice. NJ Venture
will purchase up to a maximum of 3,000 decatherms per hour and up to a maximum
of 17,600,000 decatherms per year. Interruptible service shall be provided
under certain conditions that include PSE&G's continuing ability to provide
service and the Bayonne Plant's continuing status as a Qualifying Facility.
The Bayonne Plant's supply is subject to 100% interruption on eight hours
notice. NJ Venture is required to pay a monthly charge per MMBtu of gas equal
to the sum of (i) PSE&G's estimated average commodity cost of gas; (ii)
PSE&G's interstate pipeline commodity charges, (iii) 50% of PSE&G's interstate
pipeline demand charges; and (iv) PSE&G's local distribution charge.
NJ Venture, IMTT-Bayonne and Bayonne Industries, Inc. ("Bayonne Industries")
entered into a ground lease agreement dated as of May 22, 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.
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.
F-43
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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.
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 AND CONCENTRATION OF CREDIT RISK
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>
Concentration of Credit Risk
Financial instruments which potentially subject the NJ Partnerships to
credit risk consist of cash and accounts receivable. Cash accounts are held by
major financial institutions. Accounts receivable are primarily concentrated
with the three major utilities which purchase the NJ Partnerships' electricity
under long-term agreements. The NJ Partnerships do not require collateral or
other security to support accounts receivable. 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. The NJ Partnerships have no other financial instruments
which subject them to credit risk.
F-44
<PAGE>
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(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>
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-45
<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-46
<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-47
<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-48
<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-49
<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. The financial statements of the NJ Partnerships are
presented on a combined basis since all such entities were under common equity
ownership and management by general partners that were under common control.
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. To terminate such agreements, general
and limited partners will make capital contributions and Linden Venture and
Camden Cogen will make one-time payments totaling $83.9 million. Such payments
will be reflected in earnings in the period in which the payments are made.
Such payments will have no effect on the NJ Partnerships' liquidity or
financial condition since the amounts necessary to make such payments is being
provided by the general and limited partners.
In July 1998, in connection with an arbitration proceeding brought by Linden
Venture at the American Arbitration Association, which proceeding began in
1997, against Ebasco Constructors, Inc. and ENSERCH ("Respondents"),
Respondents filed a revised counterclaim against Linden Venture in the amount
of $16.0 million. Prior to the filing of such revised counterclaim, the
arbitration panel had reduced Linden Venture's claim against the Respondents
to $9.0 million and had reduced Respondents' initial counterclaim to $3.9
million. The initial claims brought by Linden Venture against Respondents were
for alleged design deficiencies and warranty claims with respect to the
construction of the Linden plant. The Respondents' counterclaim alleged delay
and disruption to the performance of the construction contract. While the
outcome of this proceeding cannot be predicted with certainty, management does
not expect this matter to have a material adverse effect on the financial
condition or results of operations of the NJ Partnerships.
F-50
<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
33,333,333 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 $400.0
MILLION IN AGGREGATE PRINCIPAL AMOUNT OF % SENIOR NOTES DUE 2005, %
SENIOR NOTES DUE 2010 AND % SENIOR NOTES DUE 2018 (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 IS CONDITIONED UPON THE
CLOSING OF THE OTHER.
--------
THE COMPANY HAS APPLIED 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.
FOR INFORMATION ABOUT THE RECENT FORMATION OF THE COMPANY AND ITS
SUBSTANTIAL STOCKHOLDERS, SEE "CERTAIN TRANSACTIONS" AND
"PRINCIPAL AND SELLING STOCKHOLDERS".
--------
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 5,000,000 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>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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
$400,000,000
Cogen Technologies, Inc.
% Senior Notes Due 2005
% Senior Notes Due 2010
% Senior Notes Due 2018
--------
INTEREST PAYABLE AND
--------
INTEREST ON THE % SENIOR NOTES DUE 2005 (THE "2005" NOTES"), THE % SENIOR
NOTES DUE 2010 (THE "2010 NOTES") AND THE % SENIOR NOTES DUE 2018 (THE
"2018 NOTES" AND, TOGETHER WITH THE 2005 NOTES AND 2010 NOTES, THE
"SENIOR NOTES") OF COGEN TECHNOLOGIES, INC. WILL BE PAYABLE SEMI-
ANNUALLY ON AND OF EACH YEAR, COMMENCING , 1999.
THE SENIOR NOTES ARE REDEEMABLE AT THE OPTION OF THE COMPANY IN
WHOLE OR IN PART AT THE REDEMPTION PRICES SET FORTH HEREIN,
TOGETHER WITH ACCRUED AND UNPAID INTEREST, IF ANY, TO THE
DATE OF REDEMPTION (PLUS A MAKE WHOLE PREMIUM). SEE
"DESCRIPTION OF THE SENIOR NOTES AND CERTAIN OTHER
INDEBTEDNESS--DESCRIPTION OF SENIOR NOTES".
CONCURRENTLY WITH THE OFFERING MADE HEREBY (THE "DEBT OFFERING"), CERTAIN
SELLING STOCKHOLDERS ARE OFFERING 33,333,333 SHARES OF THE
COMPANY'S COMMON STOCK (THE "COMMON STOCK OFFERING" AND,
TOGETHER WITH THE DEBT OFFERING, THE "OFFERINGS").
THE CLOSING OF EACH OF THE DEBT OFFERING AND
THE COMMON STOCK OFFERING IS CONDITIONED
UPON THE CLOSING OF THE OTHER.
THE SENIOR NOTES WILL BE SENIOR SECURED OBLIGATIONS OF THE COMPANY AND
WILL RANK PARI PASSU IN RIGHT OF PAYMENT TO ALL EXISTING AND FUTURE
SENIOR INDEBTEDNESS OF THE COMPANY AND SENIOR IN RIGHT OF
PAYMENT TO ALL EXISTING AND FUTURE SUBORDINATED
INDEBTEDNESS OF THE COMPANY. AS OF JUNE 30, 1998,
THE COMPANY AND ITS SUBSIDIARIES WOULD HAVE
HAD $ MILLION OF SENIOR INDEBTEDNESS
OUTSTANDING.
--------
SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF CERTAIN
RISKS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS
OF THE NOTES OFFERED HEREBY.
FOR INFORMATION ABOUT THE RECENT FORMATION OF THE COMPANY AND ITS
SUBSTANTIAL STOCKHOLDERS, SEE "CERTAIN TRANSACTIONS" AND
"PRINCIPAL AND SELLING STOCKHOLDERS".
--------
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 % AND ACCRUED INTEREST, IF ANY
--------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND THE
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
------------- -------------- -------------
<S> <C> <C> <C>
Per 2005 Note........................ % % %
Per 2010 Note........................ % % %
Per 2018 Note........................ % % %
Total(3)............................. $ $ $
</TABLE>
- -----
(1) Plus accrued interest from , 1998, if any.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deducting expenses of this Offering, estimated at $ .
--------
The Senior Notes 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 Milbank, Tweed, Hadley & McCloy and Skadden, Arps, Slate, Meagher &
Flom LLP, counsel for the Underwriters. It is expected that delivery of the
Senior Notes 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
, 1998.
<PAGE>
[PLANT PICTURES TO COME]
2
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY 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 SENIOR NOTES OFFERED HEREBY NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES 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 OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THIS
OFFERING, AND MAY BID FOR, AND PURCHASE THE SENIOR NOTES IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS".
----------------
UNTIL (90 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL DEALERS
EFFECTING TRANSACTIONS IN THE SENIOR NOTES, 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.
----------------
FOR INVESTORS OUTSIDE THE UNITED STATES: NO ACTION HAS BEEN OR WILL BE TAKEN
IN ANY JURISDICTION BY THE COMPANY OR BY ANY UNDERWRITER THAT WOULD PERMIT A
PUBLIC OFFERING OF THE SENIOR NOTES OR POSSESSION OR DISTRIBUTION OF THIS
PROSPECTUS IN ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED,
OTHER THAN IN THE UNITED STATES. PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS
COMES ARE REQUIRED BY THE COMPANY AND THE UNDERWRITERS TO INFORM THEMSELVES
ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THE OFFERING OF THE SENIOR NOTES
AND THE DISTRIBUTION OF THIS PROSPECTUS.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................
Risk Factors.......................
The Company........................
Formation Transactions.............
Use of Proceeds....................
Dividend Policy....................
Capitalization.....................
Selected Historical Combined Finan-
cial Data.........................
Management's Discussion and
Analysis of Financial Condition
and Results of Operations.........
Business...........................
Existing Venture and Plant Descrip-
tions.............................
Government Regulation..............
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management............................................................
Certain Transactions..................................................
Principal Stockholders................................................
Description of Senior Notes and Certain Other Indebtedness............
Certain United States Federal Income Tax Consequences.................
Underwriters..........................................................
Legal Matters.........................................................
Experts...............................................................
Available Information.................................................
Glossary..............................................................
Index to Combined Financial Statements................................ F-1
</TABLE>
----------------
The Company intends to furnish the holders of the Notes annual reports
containing consolidated financial statements audited by an independent public
accounting firm.
----------------
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 in the Common Stock Offering is not
exercised. This Prospectus assumes, unless otherwise indicated, the
consummation of the Formation Transactions (as defined in "Certain
Transactions--Formation 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 identified entities shall
have the following meanings:
. "Cogen" and the "Company" shall mean Cogen Technologies, Inc. and, unless
the context otherwise requires, 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.
. "subsidiaries" or the "Company's subsidiaries" shall mean the entities in
which Cogen will acquire equity interests pursuant to the Formation
Transactions.
. "ventures" shall mean the ventures or entities in which the subsidiaries
have equity interests and which in turn directly own the Company's
independent power plants.
. The "Company's plants", and the "Company's independent power plants" shall
mean independent power plants in which the Company has an interest and that
form the core of the Company's business; the same may be referred to
singularly, as a "plant".
. 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 owns
and operates the Selkirk Plant. CT Global insures certain interests of the
Group and the NJ Partnerships.
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.
4
<PAGE>
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 8,662 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"), which is not
economically material to the Company.
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
3,400 gigawatt hours of production. 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 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 14,000 megawatts of New York generating capacity have 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 30 or more years old.
5
<PAGE>
STRATEGY
The Company's strategy is to maximize cash flow 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 cash flow. 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 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.
6
<PAGE>
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 Cash Flow. The utility power purchase
contracts relating to the Company's 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 environmental regulations.
. 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 could 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 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.
7
<PAGE>
FORMATION
Cogen was incorporated in May 1998 at the instance of Robert C. McNair 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 Mr.
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". The
following chart sets forth, 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.
[Chart appears here]
- --------
(1) See "Existing Venture and Plant Descriptions" for information as to the
partnership distributions relating to each of the ventures.
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.
8
<PAGE>
THE OFFERING
Issuer................. Cogen Technologies, Inc.
Securities Offered..... $ million principal amount of % 2005 Notes
$ million principal amount of % 2010 Notes
$ million principal amount of % 2018 Notes
Maturity Dates......... 2005 Notes-- , 2005
2010 Notes-- , 2010
2018 Notes-- , 2018
Interest Payment Dates...... and of each year, commencing
, 1999
Ranking/Security............ Until the Covenant Modification Date (as
defined herein), and then and thereafter so
long as any other pari passu Indebtedness (as
defined herein) of Cogen is and continues to be
secured by a security interest in a portion of
Cogen's equity interests in certain of its
direct, wholly-owned Subsidiaries (as defined
herein) herein described as security for the
Senior Notes, the Senior Notes will be secured,
on a pari passu basis with Indebtedness under
the Revolving Credit Facility (as defined
herein), by a security interest granted by
Cogen in a portion of the equity interests in
certain direct, wholly-owned Subsidiaries of
Cogen, which Subsidiaries own Cogen's equity
interests in the NJ Partnerships (as defined
herein), and as such security is further
described and defined as the Pledged Interests
in the Indenture, governing the Senior Notes.
In no event will such security interest
encumber any NJ Partnership or any Managing
General Partner (as defined herein), or any of
their respective rights or properties. On the
Covenant Modification Date, and if no other
pari passu Indebtedness of Cogen is then
secured by a security interest on the Pledged
Interests, the Senior Notes will become
unsecured general obligations of Cogen and will
rank on a parity with other unsecured senior
Indebtedness of Cogen and senior in right of
payment of all existing and future subordinated
Indebtedness of Cogen. See "Description of
Notes--Security".
On the Covenant Modification Date, and without
further action or step taken by any Person or
requirement of any nature satisfied, all such
security interest will immediately and forever
terminate and cease to be operative, provided
that, if on the Covenant Modification Date, any
other pari passu Indebtedness of Cogen is
secured by any security interest on the Pledged
Interests, the Senior Notes will continue to be
secured by the security interest in the Pledged
Interests until such time as no other pari
passu Indebtedness has a security interest on
the Pledged Interests, in which case, the
security interest in the Pledged Interests will
immediately and forever terminate (subject to
any subsequent operation of the provisions
specified in "Description of Notes--Limitations
on Liens").
9
<PAGE>
Optional Redemption......... Each series of the Senior Notes will be
redeemable, at the option of Cogen, at any time
in whole or from time to time in whole or in
part, on any day prior to the stated maturity
for such series, at a redemption price (the
"Redemption Price") equal to (i) 100% of the
principal amount thereof plus (ii) accrued
interest thereon to the Redemption Date plus
(iii) a Make Whole Premium (as defined herein),
if any, but not less than 100% of the principal
amount of the Senior Notes (or portion thereof)
being redeemed plus accrued interest thereon to
the Redemption Date. The Senior Notes have no
sinking fund provisions.
Mandatory Redemption........ From the Issue Date (as defined herein) and
until the Covenant Modification Date, the
Senior Notes will be subject to mandatory
redemption (at the Redemption Price in the case
of clauses (ii) and (iii) below) in each of the
following instances (each, a "Redemption
Event") (after the required repayment of any
indebtedness of the NJ Partnerships and the
Managing General Partners (as defined herein),
and required account funding and distribution
restrictions, imposed by the lenders of such
indebtedness, required distributions to other
partners and venturers of such NJ Partnership):
(i) if an NJ Partnership or Cogen (on behalf of
an NJ Partnership) receives Net Loss Proceeds
(as defined herein) in excess of $50.0 million
with respect to one or more Events of Loss (as
defined herein) affecting its NJ Plant (as
defined herein) and, after reduction of such
amount by the aggregate amount of all of such
proceeds used toward the restoration, repair,
re-construction or replacement of its affected
NJ Plant, the remaining aggregate amount of Net
Loss Proceeds (the "Remaining Net Loss
Proceeds") exceeds $50.0 million; (ii) if an NJ
Partnership receives at any time following the
Issue Date an aggregate amount of Net Buyout
Proceeds (as defined herein) in excess of
$100.0 million from one or more Power Contract
Buyouts (as defined herein) related to its NJ
Plant; and (iii) if Cogen sells, transfers,
assigns or otherwise disposes of any NJ
Partnership, or any interest therein, or any NJ
Partnership sells, transfers, assigns or
otherwise disposes of assets owned by such NJ
Partnership, in one or more transactions, whose
Net Proceeds exceed $100.0 million (exclusive
of Excluded Dispositions (as defined herein));
unless, in the case of each of clauses (i),
(ii) and (iii) above, after giving effect to
the event described therein and the use or
contemplated use of the proceeds therefrom as
announced by Cogen, the Rating Agencies (as
defined herein) confirm the then current
ratings on the Senior Notes.
If a Redemption Event has occurred, the Senior
Notes will be redeemed in an aggregate
principal amount set forth in "Description of
Senior Notes and Certain Other Indebtedness--
Description of Senior Notes--Mandatory
Redemption".
10
<PAGE>
If the Senior Notes are redeemed pursuant to
any of the foregoing provisions, the Remaining
Net Loss Proceeds, the Net Buyout Proceeds or
the Net Proceeds will be applied (i) pari passu
with any other senior secured debt of Cogen
which requires redemption or repayment and (ii)
pro rata among each of the series of the Senior
Notes.
On and after the Covenant Modification Date,
the Senior Notes will not be subject to
mandatory redemption.
Certain Covenants of Cogen
and the NJ Partnerships.... The First Supplemental Indenture will contain
certain restrictive covenants of Cogen and the
NJ Partnerships that limit the ability of Cogen
and the NJ Partnerships to: (i) as to Cogen,
incur certain additional Indebtedness other
than (a) the Senior Notes and other
indebtedness under the Indenture (excluding
debt securities subsequently issued
thereunder), (b) Indebtedness incurred pursuant
to the Revolving Credit Facility in an
aggregate amount not to exceed $300 million at
any one time outstanding, (c) Indebtedness
incurred pursuant to the Linden Guarantee (as
defined herein), (d) Indebtedness ranking pari
passu in right of payment with the Senior Notes
and the Revolving Credit Facility, the
incurrence of which either is incurred in
compliance with a debt coverage ratio or will
not result in a downgrading of the Senior
Notes, (e) Subordinated Indebtedness (as
defined herein) and (f) Indebtedness incurred
to refinance, renew, replace, defease or
refund, in whole or in part, any Indebtedness
specified in the preceding clauses (a) through
(e), and (ii) as to the NJ Partnerships, incur
certain Indebtedness other than (a) $[ ] of
Indebtedness outstanding on the Issue Date, (b)
Indebtedness in an aggregate amount not to
exceed $100 million at any one time outstanding
for improvements and expansions to any or all
of the NJ Plants and (c) other Indebtedness
required to satisfy any fiduciary
responsibilities of the partners or venturers,
as applicable, of each of the NJ Partnerships.
In addition, the First Supplemental Indenture
will permit Cogen to make dividend payments or
other distributions equal to the sum of 100% of
Funds From Operations (as defined herein) (from
the Issue Date) plus $50 million, unless a
Default or Event of Default has occurred and is
continuing.
Upon the Covenant Modification Date, these
covenants will forever terminate and cease to
be in effect.
Covenant Modification Date.. The Covenant Modification Date shall mean the
day upon which (i) Cogen has a portfolio
comprising interests in at least eight power
projects with no single project contributing
more than 25% or less than 5% of aggregate Cash
Distributions (as defined herein) for each of
the four quarters preceding such date of
determination and the four quarters succeeding
such date of determination (as projected by
Cogen), as certified by both the Independent
Engineer (as defined herein) and Cogen's Chief
11
<PAGE>
Financial Officer (with forecasts relating to
merchant capacity reflecting cash flows for
such capacity over the previous four quarters)
and (ii) the then current ratings on the Senior
Notes are at least [ ] by the Rating Agencies.
In addition to the mandatory redemption
provisions, certain restrictive covenants and,
subject to a further condition, the security
interest ceasing to be effective from and after
the Covenant Modification Date (as each is
described above), on and after the Covenant
Modification Date certain events of default
that, from the Issue Date, were provided for by
the governing Indenture will terminate and
cease to be in effect. The terminated events of
default are based on (i) the failure to restore
a permit to an NJ Plant, which failed
restoration would have a Material Adverse
Effect (as defined herein) and (ii) a material
breach or misrepresentation by Cogen or certain
of its Subsidiaries under a material Project
Document (as herein defined) which would have a
Material Adverse Effect.
Cogen Covenants............. The Indenture and the First Supplemental
Indenture also will contain certain covenants
of Cogen that, among other things, limit the
ability of Cogen and its Subsidiaries to create
liens or enter into sale and leaseback
transactions and limit the ability of Cogen to
engage in mergers and consolidations or
transfer all or substantially all of its
assets. The foregoing restrictions are subject
to a number of significant exceptions. See
"Description of the Senior Notes and Certain
Other Indebtedness--Description of Senior
Notes".
Use of Proceeds............. The net proceeds from the issuance of the
Senior Notes will be used by Cogen to loan an
amount to Linden Ltd. for repayment of the
Bridge Loan (as defined herein), to retire
amounts payable to affiliates of Cogen, to pay
expenses related to the Formation Transactions
and the Offerings and for working capital
purposes. See "Use of Proceeds".
Concurrent Common Stock Concurrently with the Debt Offering, certain
Offering.................... stockholders of Cogen (the "Selling
Stockholders") are offering 33,333,333 shares
of the Common Stock, $.01 par value, of Cogen
(the "Common Stock"). Cogen will not receive
any proceeds from the sale of shares of Common
Stock by the Selling Stockholders in the Common
Stock Offering. The closing of each of the Debt
Offering and the Common Stock Offering is
conditioned on the closing of the other.
Certain Other Indebtedness.. Concurrently with the Offerings, Cogen intends
to enter into one or more loan agreements with
certain bank lenders providing for a revolving
credit facility (the "Revolving Credit
Facility") not to exceed, at any one time
outstanding, an aggregate principal amount of
$300.0 million, which will be secured, on a
pari passu basis with the Senior Notes, by a
security interest granted by Cogen on the
Pledged Interest. The Revolving Credit Facility
will
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consist of two $150.0 million tranches, each
scheduled to fund on or about the Issue Date,
with one scheduled to mature 364 days after its
funding and the other scheduled to mature 5
years after its funding. See "Description of
Senior Notes and Certain Other Indebtedness--
Revolving Credit Facility".
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RISK FACTORS
See "Risk Factors" beginning on page for a discussion of certain factors
that should be considered by prospective purchasers of the Senior Notes offered
hereby.
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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The "Summary Historical and Pro Forma Financial Information" to be included
in this Prospectus appears in this Registration Statement as part of the
prospectus for the Equity Offering that also is part of this Registration
Statement.
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RISK FACTORS
The "Risk Factors" section to be included in this Prospectus appears in this
Registration Statement as part of the prospectus for the Equity Offering that
also is part of this Registration Statement.
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DIVIDEND POLICY
The "Dividend Policy" section to be included in this Prospectus appears in
this Registration Statement as part of the prospectus for the Equity Offering
that also is part of this Registration Statement.
USE OF PROCEEDS
The net proceeds to be received by the Company from this Offering are
estimated to be $ million after deducting underwriting discounts and
commissions and other estimated offering expenses. The Company intends to use
the total net proceeds of this Offering to loan an amount to Linden Ltd. for
repayment of the Bridge Loan, to retire amounts payable to affiliates of
Cogen, to pay expenses related to the Formation Transactions and the Offerings
and for working capital purposes.
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CAPITALIZATION
The "Capitalization" section to be included in this Prospectus appears in
this Registration Statement as part of the prospectus for the Equity Offering
that also is part of this Registration Statement.
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EXPLANATORY NOTE
The "Selected Historical Combined Financial Data", "Management's Discussion
and Analysis of Financial Condition and Results of Operations", "Business",
"Existing Venture and Plant Descriptions", "Government Regulation",
"Management", and "Principal Stockholders" to be included in this Prospectus
appear in this Registration Statement as part of the prospectus for the Equity
Offering that is also part of this Registration Statement.
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DESCRIPTION OF SENIOR NOTES AND CERTAIN OTHER INDEBTEDNESS
DESCRIPTION OF THE SENIOR NOTES
General
The Senior Notes will be issued under an Indenture, dated as of ,
1998 (as supplemented by the First Supplemental Indenture of even date
therewith and entered into by Cogen and the Trustee in connection therewith,
the "Indenture"), between Cogen and Chase Bank of Texas, National Association
(the "Trustee"). The Senior Notes offered hereby constitute three separate
series of senior secured notes limited to (i) $[ ] million aggregate
principal amount with respect to the 2005 Notes, (ii) $[ ] million aggregate
principal amount with respect to the 2010 Notes and (iii) $[ ] million
aggregate principal amount with respect to the 2018 Notes. The following
summary of certain provisions of the Indenture does not purport to be
complete, makes use of defined terms (some but not all of which are defined
herein) and is subject to, and qualified in its entirety by, all of the
provisions of the Indenture, which is incorporated herein by this reference
and which is available upon request to the Trustee.
The Indenture does not limit the aggregate principal amount of debt
securities that can be issued thereunder and provides that debt securities may
be issued from time to time thereunder in one or more series, each in an
aggregate principal amount authorized by Cogen prior to issuance. There is no
requirement under the Indenture that future issues of debt securities of Cogen
be issued exclusively under the Indenture, and Cogen will be free to employ
other indentures or documentation, containing provisions different from those
included in the Indenture or applicable to one or more issues of debt
securities (including the Senior Notes), in connection with future issues of
such other debt securities; provided that no future issuance of debt
securities will have a lien senior to the Senior Notes on the Pledged NJ
Interests.
The 2005 Notes will mature on , 2005 and will bear interest at % per
annum, the 2010 Notes will mature on , 2010 and will bear interest at %
per annum, and the 2018 Notes will mature on , 2018 and will bear interest
at % per annum. Interest on each series of the Senior Notes will accrue from
, 1998, and will be payable semi-annually on and (each
an "Interest Payment Date"), beginning , 1999. Subject to certain
exceptions, the Indenture will provide for the payment of interest on the
Interest Payment Date only to Persons in whose names the Senior Notes are
registered on the Regular Record Date, which will be the [DATE] or [DATE]
(whether or not a Business Day), as the case may be, immediately preceding the
applicable Interest Payment Date. Interest will be computed on the basis of a
360-day year comprising twelve 30-day months.
Redemption Provisions
Optional Redemption. Each series of the Senior Notes will be redeemable, at
the option of Cogen, at any time in whole or from time to time in part, upon
not less than 30 and not more than 60 days notice as provided in the
Indenture, on any date prior to its maturity (a "Redemption Date"), at a
redemption price (the "Redemption Price") equal to (i) 100% of the principal
amount of thereof plus (ii) accrued interest thereon to the Redemption Date
(subject to the right of holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date that is on or prior to the
Redemption Date) plus (iii) a Make Whole Premium, if any. In no event will the
Redemption Price ever be less than 100% of the principal amount of the Senior
Notes (or portion thereof) being redeemed plus accrued interest thereon to the
Redemption Date.
The amount of the Make Whole Premium with respect to any Senior Note (or
portion thereof) to be redeemed will be equal to the excess, if any, of:
(i) the sum of the present values, calculated as of the Redemption Date, of
each remaining scheduled payment of principal and interest thereon
(exclusive of interest accrued to such Redemption Date) discounted from the
date such payment would have been payable, but for redemption, to such
Redemption Date on a semiannual basis (assuming a 360-day year consisting
of twelve 30-day months) at a discount
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rate equal to the Treasury Rate plus [ ] basis points with respect to the
2005 Notes, [ ] basis points with respect to the 2010 Notes and [ ] basis
points with respect to the 2018 Notes;
over
(ii) the principal amount of the Senior Notes (or portion thereof) being
redeemed.
The applicable Treasury Rate will be determined as of the third Business Day
immediately preceding the applicable Redemption Date.
Mandatory Redemption. Prior to the Covenant Modification Date (as defined
below), the Senior Notes are subject to mandatory redemption (at the
Redemption Price in the case of clauses (ii) and (iii) below) in the following
instances (each, a "Redemption Event"): (i) if an NJ Partnership or Cogen (on
behalf of an NJ Partnership) receives Net Loss Proceeds in excess of $50
million with respect to one or more Events of Loss affecting its NJ Plant and,
after reduction of that amount by the aggregate amount of all of such proceeds
used toward the restoration, repair, re-construction or replacement of its
affected NJ Plant, the remaining aggregate amount of Net Loss Proceeds (the
"Remaining Net Loss Proceeds") exceeds $50 million, unless after giving effect
to such Event of Loss and the use or contemplated use of the proceeds
therefrom as announced by Cogen, the Rating Agencies confirm the then current
ratings of the Senior Notes; (ii) if an NJ Partnership receives at any time
following the Issue Date an aggregate amount of Net Buyout Proceeds in excess
of $100 million from one or more Power Contract Buyouts related to its NJ
Plant, unless after giving effect to such buyout and the use or contemplated
use of the proceeds therefrom as announced by Cogen, the Rating Agencies
confirm the then current ratings on the Senior Notes; and (iii) if Cogen
sells, transfers, assigns or otherwise disposes of any NJ Partnership, or any
interest therein, or any NJ Partnership sells, transfers, assigns or otherwise
disposes of assets owned by such NJ Partnership, in one or more transactions,
whose Net Proceeds exceed $100 million (exclusive of Excluded Dispositions),
unless, after giving effect to such sale, transfer, assignment or other
disposition, the Rating Agencies confirm the then current ratings on the
Senior Notes.
If a Redemption Event has occurred, the aggregate principal amount of the
Senior Notes to be redeemed will be equal to:
(i) if the aggregate amount of such proceeds required (A) to repay
indebtedness of an NJ Partnership and of its Managing General Partners, in
each case, outstanding on the date hereof, and to fund accounts or
otherwise be subject to restrictions on distributions by the lenders of
such indebtedness, and (B) to be paid to partners or ventures, as
applicable, of such NJ Partnership other than Cogen and its Subsidiaries
(collectively, the "Required Payments") are less than or equal to, (1) $50
million, in the case of Remaining Net Loss Proceeds, the Remaining Net Loss
Proceeds minus $50 million and (2) $100 million, in the case of Net Buyout
Proceeds or Net Proceeds, the Net Buyout Proceeds or Net Proceeds, as
applicable, minus $100 million; or
(ii) if the Required Payments are greater than $50 million in the case of
Remaining Net Loss Proceeds or $100 million in the case of Net Buyout
Proceeds or Net Proceeds, the Remaining Net Loss Proceeds, Net Buyout
Proceeds or Net Proceeds, as applicable, minus the Required Payments, in
each case if such amount is a positive number.
If the Senior Notes are redeemed pursuant to any of the foregoing provisions,
the Remaining Net Loss Proceeds, the Net Buyout Proceeds or Net Proceeds will
be applied (i) pari passu with any other senior secured debt of Cogen which
require redemption or repayment and (ii) pro rata among each of the series of
the Senior Notes.
On and after the Covenant Modification Date, the Senior Notes will not be
subject to mandatory redemption.
General Redemption Procedures. If less than all of the Senior Notes of a
series are to be redeemed, the Trustee shall select, in such manner as it
shall deem appropriate and fair, the particular Senior Notes of such
series or portions thereof to be redeemed, although no Senior Note of $1,000
in original principal amount or less shall be redeemed in part. Notice of
redemption shall be given by mail not less than 30 nor more than 60 days
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prior to the date fixed for redemption to the holders of the Senior Notes (the
"Noteholders") of such series to be redeemed (which, as long as the Senior
Notes of such series are held in the book-entry only system, will be The
Depositary Trust Company ("DTC") (or its nominee) or a successor depositary
(the "Depositary")); provided, however, that the failure to duly give such
notice by mail, or any defect therein, shall not affect the validity of any
proceedings for the redemption of the Senior Notes of such series as to which
there shall have been no such failure or defect. On and after the date fixed
for redemption (unless Cogen shall default in the payment of the Senior Notes
of such series or portions thereof to be redeemed at the applicable Redemption
Price) interest on the Senior Notes of such series or the portions thereof so
called for redemption shall cease to accrue.
No notice of redemption of the Senior Notes will be mailed during the
continuance of any Event of Default under the Indenture, except that (i) when
notice of redemption of any Senior Notes of any series has been mailed, Cogen
shall redeem such Senior Notes but only if funds sufficient for that purpose
have prior to the occurrence of such Event of Default been deposited with the
Trustee or a paying agent for such purpose, and (ii) notices of redemption of
all outstanding Senior Notes of all series may be given during the continuance
of an Event of Default under the Indenture.
Any notice of redemption at the option of Cogen may state that such
redemption will be conditional upon receipt by the Trustee, on or prior to the
date fixed for such redemption, of money sufficient to pay the principal of,
and premium, if any, and interest, if any, on, such Senior Notes, and that if
such money has not been so received, such notice will be of no force and
effect and Cogen will not be required to redeem such Senior Notes.
None of the 2005 Notes, the 2010 Notes, or the 2018 Notes have sinking fund
provisions, and the Senior Notes are not subject to redemption or repurchase
by Cogen at the option of the Holders.
Security
The Senior Notes and the Revolving Credit Facility will be secured, on a
pari passu basis, by a security interest granted by Cogen in a portion of the
equity interests in certain direct, wholly-owned Subsidiaries of Cogen, which
Subsidiaries own all of Cogen's equity interests in the NJ Partnerships;
provided however, at no time will such security interest extend to or cover
(directly or indirectly), and there shall be excluded from such security
interest, equity interests in such Subsidiaries which would result in any of
the following occurrences: (i) Robert McNair or his wife or children failing
to own and control, directly or indirectly, an unencumbered beneficial
interest of at least 8.2% in Linden Ltd. until September 15, 1999 and in each
of Camden GPLP and Cogen Camden until April 1, 2000, (ii) after September 15,
1999 in the case of Linden Ltd. and April 1, 2000 in the case of each of
Camden GPLP and Cogen Camden, Robert McNair or his wife or children or an
entity with a net worth equal to at least $100.0 million failing to own and
control, directly or indirectly, an unencumbered beneficial interest of at
least 8.2% in Linden Ltd. and in each of Camden GPLP and Cogen Camden, or
(iii) the unencumbered beneficial equity interests owned in NJ Inc. being less
than at 50.1%. In no event, however, will such security interest, directly or
indirectly, encumber any of the NJ Partnerships or any of the Managing General
Partners, or any of the assets, rights or properties of any of such Persons.
Upon the satisfaction of the conditions described in "--Conditions for
Covenant Modifications", and without further action or step taken by any
Person or requirement of any nature satisfied, such security interest will
immediately and forever terminate and cease to be operative; provided that, if
on the Covenant Modification Date, any other pari passu Indebtedness of Cogen
is secured by any security interest on the Pledged Interests, the Senior Notes
will continue to be secured by the security interest in the Pledged Interests
(as described above) until such time as no other pari passu Indebtedness has a
security interest on the Pledged Interests, in which case, the security
interest in the Pledged Interests will immediately and forever terminate
(subject to any subsequent operation of the provisions specified in "--
Limitations on Liens").
Ranking
The Senior Notes will be senior secured obligations of Cogen and will rank
pari passu in right of payment with all other senior secured obligations of
Cogen, including Cogen's obligations under the Revolving Credit
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Facility and senior in right of payment to all existing and future
subordinated debt of Cogen. A significant portion of Cogen's operations are
conducted through its directly and indirectly owned Subsidiaries, and
therefore, Cogen
is dependent on the cash flow of its Subsidiaries to meet its debt
obligations, including its obligations under the Senior Notes. Although
earnings from Cogen's Subsidiaries may be provided to Cogen through dividends
and payments on intercompany indebtedness, certain outstanding indebtedness of
Linden Ltd., Camden GPLP, Camden Cogen and NJ Venture may restrict, and
certain agreements in the partnership agreements of Camden Cogen and Linden
Venture providing for preferential distributions to Persons other than Cogen
or any of its Subsidiaries may limit, the payment of distributions to Cogen.
The claims of the Noteholders effectively will be subordinated to the prior
claims of secured creditors of Cogen which hold liens in assets of Cogen other
than the Pledged Interests and creditors, including trade creditors, of the
Subsidiaries of Cogen. At , 1998, after giving pro forma effect
to the Debt Offering, the total current and other liabilities and long-term
debt of the Subsidiaries included in Cogen's consolidated liabilities would
have been approximately $[ ] million.
Registration, Transfer and Exchange
The Senior Notes of each series will initially be issued in the form of one
or more Global Notes, in registered form, without coupons in denominations of
$1,000 or an integral multiple thereof as described under "--Book-Entry
System". The Global Notes will be registered in the name of a nominee of DTC.
Except as set forth herein under "--Book-Entry, Delivery and Form", owners of
beneficial interests in a Global Note will not be entitled to have the Senior
Notes registered in their names, will not receive or be entitled to receive
physical delivery of any such Senior Note and will not be considered the
registered holder thereof under the Indenture.
The Senior Notes of any series will be exchangeable for other Senior Notes
of the same series of any authorized denominations and of a like aggregate
principal amount and tenor.
The Senior Notes may be presented for exchange or registration of transfer
(duly endorsed or accompanied by a duly executed written instrument of
transfer), at the office of the Trustee maintained in the Borough of
Manhattan, The City of New York, for such purpose with respect to any series
of the Senior Notes without service charge but upon payment of any taxes and
other governmental charges as described in the Indenture. Such transfer or
exchange will be effected upon Cogen and the Trustee being satisfied with the
documents of title and indemnity of the Person making the request.
In the event of any redemption of the Senior Notes of any series, the
Trustee will not be required to exchange or register a transfer of any Senior
Notes of such series selected, called or being called for redemption except,
in the case of any Senior Note to be redeemed in part, the portion thereof not
to be so redeemed.
Book-Entry, Delivery and Form
The Senior Notes of each series to be sold as set forth herein will be
issued in the form of a fully registered Global Note (the "Global Note"). The
Global Note for each series will be deposited on the date of the closing of
the sale of the Senior Notes offered hereby with, or on behalf of DTC and
registered in the name of its nominee (such nominee being referred to herein
as the "Global Note Holder") or will remain in the custody of the Trustee
pursuant to a FAST Balance Certificate Agreement or similar agreement between
the Depositary and the Trustee.
Except as set forth below, each Global Note may be transferred, in whole and
not in part, only to another nominee of the Depositary or to a successor of
the Depositary or its nominee.
DTC has advised Cogen and the Underwriters as follows: DTC is a limited
purpose trust company created to hold securities that its participating
organizations ("Participants") deposit with DTC and to facilitate the
clearance and settlement of securities transactions between Participants
through electronic book-entry changes to accounts of its Participants, thereby
eliminating the need for physical movement of certificates. "Participants"
include securities brokers and dealers (including the Underwriters), banks,
trust companies, clearing corporations
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and certain other organizations. Access to DTC's book-entry system is also
available to others, such as securities brokers and dealers, banks and trust
companies that clear through or maintain custodial relationships with
Participants, either directly or indirectly ("Indirect Participants"). Persons
who are not Participants may beneficially own securities held by DTC only
through Participants or Indirect Participants.
DTC has also advised that pursuant to procedures established by it (i) upon
the issuance by Cogen of the Senior Notes, DTC will credit the accounts of
Participants designated by the Underwriters with the principal amount of the
Senior Notes of each series purchased by the Underwriters and (ii) ownership
of beneficial interests in the Global Note of each series will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by DTC (with respect to Participants' interests), the Participants
and the Indirect Participants. The laws of some states require that certain
Persons take physical delivery in definitive form of securities which they
own. Consequently, the ability to transfer beneficial interests in the Global
Note is limited to such extent.
All payments on the Global Note of each series registered in the name of
DTC's nominee will be made by Cogen through the Paying Agent to DTC's nominee
as the registered owner of the Global Note of each series. Under the terms of
the Indenture, Cogen and the Trustee will treat the Persons in whose names the
Senior Notes of each series are registered as the owners of such Senior Notes
for the purpose of receiving payment of principal of, and premium, if any, and
interest on, such Senior Notes and for all other purposes whatsoever.
Therefore, neither Cogen, the Trustee nor the Paying Agent has any direct
responsibility or liability for the payment of principal of, or premium, if
any, interest on, the Senior Notes to owners of beneficial interests in the
Global Note of each series. DTC has advised Cogen and the Trustee that its
current practice is, upon receipt of any payment of principal, premium, if
any, or interest, to credit immediately the accounts of the Participants with
payments in amounts proportionate to their respective holdings in principal
amount of beneficial interests in the Global Note as shown in the records of
DTC. Payments by Participants and Indirect Participants to owners of
beneficial interests in the Global Note of each series will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name" and will be the responsibility of such Participants or Indirect
Participants.
Cogen will issue the Senior Notes of a series in definitive form in exchange
for the Global Note for such series if, and only if, either (i) DTC is at any
time unwilling or unable to continue as depositary and a successor depositary
is not appointed by Cogen within 90 days, (ii) an Event of Default has
occurred and is continuing and the Trustee has received a request from the
Depositary to issue the Senior Notes for such series in definitive form in
lieu of all or a portion of the Global Note of such series (in which case
Cogen shall execute within 30 days of such request, and the Trustee, upon
receipt of an Officers' Certificate, shall promptly authenticate and make
available for delivery the Senior Notes of such series in definitive form), or
(iii) Cogen determines not to have the Senior Notes represented by Global
Note. In any such instance, an owner of a beneficial interest in the Global
Note of each series will be entitled to have the Senior Notes of such series
equal in principal amount to such beneficial interest registered in its name
and will be entitled to physical delivery of such Senior Notes in physical
form. The Senior Notes so issued in definitive form will be issued in
denominations of $1,000 and whole multiples thereof and will be issued in
registered form only, without coupons.
So long as the Global Note Holder is the registered owner of the Global
Notes, the Global Note Holder will be considered the sole Holder under the
Indenture of any Senior Notes evidenced by the Global Note. Beneficial owners
of the Senior Notes evidenced by the Global Note will not be considered the
owners or Holders thereof under the Indenture for any purpose, including with
respect to the giving of any directions, instructions or approvals to the
Trustee thereunder. Neither Cogen nor the Trustee will have any responsibility
or liability for any aspect of the records of DTC or any successor or for
maintaining, supervising or reviewing any records of DTC of any successor
relating to the Senior Notes.
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Payment and Paying Agents
Payments of principal of, and interest and premium, if any, on, the Senior
Notes issued in the form of Global Notes shall be made by wire transfer of
immediately available funds to the account specified by the registered holder
of such Global Note, which shall initially be a nominee of DTC. Interest on
the Senior Notes (other than interest at maturity) that are in the form of
certificated notes ("Certificated Notes") will be paid by check mailed to the
Person entitled thereto at such Person's address as it appears in the register
for the Senior Notes maintained
by the Trustee; however, a Noteholder of one or more series under the
Indenture in the aggregate principal amount of $2 million or more will be
entitled to receive payments of interest on such series by wire transfer of
immediately available funds to a bank within the continental United States if
appropriate wire transfer instructions have been received by the Trustee on or
prior to the applicable Regular Record Date. The principal of, and interest at
maturity and premium, if any, on, the Senior Notes in the form of Certificated
Notes will be payable in immediately available funds at the office of the
Trustee or at the authorized office of any paying agent.
If and to the extent that Cogen fails to make timely payment of interest on
any Senior Note, that interest shall cease to be payable to the Persons who
were the holders of such Senior Notes at the applicable Regular Record Date,
and shall instead become payable to the holder of such Senior Note at the
close of business on a special record date established by the Trustee which
special record date shall be not more than 15 or fewer than 10 days prior to
the date of the proposed payment.
All monies paid by Cogen to the Trustee for the payment of principal of,
interest or premium, if any, on, any Senior Note which remain unclaimed at the
end of two years after such principal, interest or premium shall have become
due and payable will be repaid to Cogen, subject to applicable abandoned
property laws, and the holder of such Senior Note will thereafter look only to
Cogen for payment thereof, subject to applicable limitations law.
In any case where the date of maturity of the principal of, or any premium
or interest on, any Senior Note or the date fixed for redemption of any Senior
Note is not a Business Day, then payment of such principal or any premium or
interest need not be made on such date but may be made on the next succeeding
Business Day with the same force and effect as if made on the date of maturity
or the date fixed for redemption, and, in the case of timely payment thereof,
no interest shall accrue for the period from and after such interest payment
date or the date on which the principal or premium of the Senior Note is
stated to be payable to such next succeeding Business Day.
Certain Covenants of Cogen and the NJ Partnerships
The First Supplemental Indenture will contain various covenants, including
the following:
Permitted Indebtedness. Cogen will not create, incur, or suffer to exist any
Indebtedness, other than (i) the Senior Notes and other indebtedness under the
Indenture (excluding debt securities subsequently issued thereunder); (ii)
Indebtedness incurred pursuant to the Revolving Credit Facility in an
aggregate amount not to exceed $300 million at any one time outstanding; (iii)
Indebtedness incurred pursuant to the Linden Guarantee; (iv) Indebtedness
ranking pari passu in right of payment with the Senior Notes and the Revolving
Credit Facility, provided that at the time of the incurrence of such
Indebtedness either (A) Cogen certifies that, after giving effect to the
incurrence of such Indebtedness, the Coverage Ratio for (y) the four fiscal
quarters preceding the date of such incurrence and (z) the Projected Debt
Service Coverage Ratio for the four fiscal quarters succeeding such
incurrence, in each case is not less than 2.25:1.00 or (B) each of the Rating
Agencies confirm the then current ratings of the Senior Notes (after giving
effect to the incurrence of such Indebtedness); (v) Subordinated Indebtedness;
and (vi) Indebtedness incurred to refinance, renew, replace, defease or
refund, in whole or part, any Indebtedness specified in clauses (i) through
(v) (inclusive) above and any Indebtedness incurred pursuant to this clause
(vi).
Notwithstanding clauses (i) through (vii) of the definition of the term
"Indebtedness" or any provision of this covenant, the covenant under the
caption "--Certain Covenants of Cogen and the NJ Partnerships--
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Limitation on NJ Partnership Debt" or the Indenture, any Indebtedness will be
deemed to have been satisfied and discharged, and at all relevant times deemed
to be neither existing nor outstanding, for all purposes of such covenants and
the Indenture if there has been irrevocably deposited in trust for the benefit
of the holders of such Indebtedness, any combination of money or obligations
issued by or guaranteed by the full faith and credit of the United States of
America sufficient to pay all interest and principal, including applicable
premium if any, when due on such Indebtedness for the sole purpose of payment
of such Indebtedness.
Limitation on NJ Partnerships Debt. The NJ Partnerships will not create,
incur or suffer to exist any Indebtedness other than (i) $[ ] of Indebtedness
outstanding on the Issue Date, (ii) Indebtedness in an aggregate amount not to
exceed $100 million, at any one time outstanding, for improvements and
expansions to any or all of the NJ Plants and (iii) other Indebtedness
required to satisfy any fiduciary responsibilities of the partners or
venturers, as applicable, of each of the NJ Partnerships (provided no such
fiduciary responsibilities shall be deemed to exist if all of the partnership
or venture interests of an NJ Partnership are owned directly or indirectly by
Cogen).
Restricted Payments. Cogen may declare and pay dividends or pay or make any
other distributions on account of its Capital Stock or Subordinated
Indebtedness to Affiliates on a quarterly basis provided that (a) no Default
or Event of Default has occurred and is then continuing and (b) the amount of
such dividends or other distributions paid or made, as applicable, do not
exceed the sum of (i) 100% of Funds From Operations for the period commencing
on the Issue Date plus (ii) $50 million. Distributions of assets, other than
cash, in excess of $5 million with respect to any asset or group of related
assets, shall be valued by an Independent Investment Banker, or if less than
$5 million, at the fair market value of such assets as determined in good
faith by the Board of Directors of Cogen.
Conditions for Covenant Modifications. On the day that (i) Cogen has a
portfolio comprising interests in at least eight power projects with no single
project contributing more than 25% or less than 5% of aggregate Cash
Distributions for each of the four quarters preceding such date of
determination and the four quarters succeeding such date of determination (as
projected by Cogen), as certified by both the Independent Engineer and Cogen's
Chief Financial Officer (with forecasts relating to merchant capacity
reflecting cash flows for such capacity over the previous four quarters) and
(ii) the then current ratings on the Senior Notes are at least [ ] by the
Rating Agencies (such day, the "Covenant Modification Date"), then, without
further action or step taken by any Person or requirement of any nature being
satisfied, (1) the covenants entitled "Permitted Indebtedness", "Restricted
Payments" and "Limitation on NJ Partnership Debt" (the "Additional Covenants")
will immediately and forever terminate and cease to be operative, (2) if no
other Indebtedness of Cogen is then secured by a security interest in the
Pledged Interests as described under the caption "--Security", then the
security interest in the Pledged Interests will immediately and forever
terminate and be deemed released (subject to any subsequent operation of the
provisions specified in "--Limitations on Liens"), (3) the Events of Default
and Defaults provided for in, and based upon, any occurrence provided for in
clause (vii) or (viii) under the caption "--Events of Default" will
immediately and forever terminate and cease to be operative and (4) the
mandatory redemptions provided for under the caption "--Mandatory Redemption"
will immediately and forever terminate and cease to be operative, and in each
case of the preceding clauses (1), (2), (3) and (4), such termination and
release and the inoperativeness of such covenants and provisions shall remain
and continue in effect for all times thereafter even if, among other things,
at a date subsequent to the Covenant Modification Date the conditions
specified in the preceding clauses (i) and (ii) cease to be in effect.
Cogen Covenants
The Indenture contains various additional covenants, including the
following:
Limitation on Liens. So long as any Senior Notes are outstanding, Cogen may
not, and may not permit any Subsidiary to, create, incur, assume, or suffer to
exist any Indebtedness that is secured by any mortgage, security interest,
pledge or lien ("Lien") of or upon any Principal Operating Property, whether
owned on the Issue Date or thereafter acquired, without in any such case
effectively securing the Senior Notes (together with, if Cogen
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shall so determine, any other Indebtedness of Cogen ranking equally with the
Senior Notes) equally and ratably with such Indebtedness (but only so long as
such Indebtedness is so secured).
The foregoing restriction will not apply to: (i) the Pledged Interests; (ii)
any Liens existing on the Issue Date, including any Lien which would extend to
property acquired after the Issue Date pursuant to any agreement entered into
prior to the Issue Date, or any Lien created pursuant to an "after-acquired
property" clause or similar terms in existence on the Issue Date; (iii) Liens
on any property existing at the time of its acquisition (which Liens may also
extend to subsequent repairs, alterations, replacements and improvements to
such property); (iv) Liens on any property of a Person existing at the time
such Person is merged into, consolidated with, or otherwise acquired by, or
such Person disposes of its properties (or those of a division) as or
substantially as an entirety to, Cogen or any of its Subsidiaries, or the
assumption by Cogen or any of its Subsidiaries of obligations secured by any
Lien existing at the time of acquisition by Cogen or any of its Subsidiaries
of the property subject to such Lien and not incurred in connection with, or
in contemplation of, such merger, consolidation or acquisition; (v) Liens on
property to secure all or part of the cost of acquisition, construction,
development or repair, alteration, replacement or improvement of property of a
Person or to secure Indebtedness incurred then or thereafter to provide funds
for any such purpose or for reimbursement of funds previously expended for any
such purpose, provided such Liens are created or assumed contemporaneously
with, or within 12 months after, such acquisition or the completion of
substantial repair, replacement or alteration, construction, development or
substantial improvement, or the commencement of full operations thereof,
whichever shall be the later and such Liens are limited to the property which
is the subject of such acquisition, construction, development or repair,
alteration or improvement, or other property or rights of any Subsidiary of
Cogen or of Cogen related thereto or derivative therefrom as required by the
lender or lenders of such financing persons, including with respect to any
Subsidiary of Cogen, (A) Liens which extend to any subsequently acquired
property of such Subsidiary, or (B) any Lien created pursuant to an "after-
acquired property" clause or similar terms pursuant to financing documentation
governing the indebtedness secured by such Lien; (vi) Liens in favor of any
federal or State government or any department, agency or instrumentality or
political subdivision thereof, or for the benefit of holders of securities
issued by any such entity (or providers of credit enhancement with respect to
such securities), to secure any Indebtedness (including, without limitation,
obligations of Cogen with respect to industrial development, pollution control
or similar revenue bonds) incurred for the purpose of financing all or any
part of the purchase price or the cost of substantially repairing or altering,
constructing, developing or substantially improving any property of Cogen or
any of its Subsidiaries; (vii) any Lien arising by reason of any attachment,
judgment, decree or order of any governmental or court authority, so long as
(A) a performance bond in the amount of such Lien has been posted and (B) any
proceeding initiated to review such attachment, judgment, decree or order
shall not have been terminated or the period within which such proceeding may
be initiated shall not expire, or such attachment, judgment, decree or order
shall otherwise be effectively stayed; (viii) any statutory or governmental
Lien or Lien arising by operation of law, or any mechanics', repairmen's,
materialmen's, suppliers', carriers', landlords', warehousemen's or similar
Lien incurred in the ordinary course of business for which the underlying
obligation is not yet due, or if due, which is being contested in good faith
by appropriate proceedings and for which a bond in the amount of such Lien has
been posted; (ix) Liens of taxes and assessments which are (A) for the then
current year and not at the time delinquent, or (B) delinquent but the
validity of which is being contested at the time by Cogen or any of its
Subsidiaries in good faith and for which appropriate reserves have been
established in accordance with GAAP; (x) any Lien upon, or deposits of, cash
or cash equivalents in favor of any surety company, clerk of court or
otherwise for the purpose of obtaining indemnity or stay of judicial
proceedings; (xi) any Lien incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance, temporary
disability, social security, retiree health or similar laws or regulations or
to secure obligations imposed by statute or governmental regulations and for
which appropriate reserves have been established; (xii) any Lien securing
Indebtedness of Cogen or any of its Subsidiaries, all or a portion of the net
proceeds of which are used, substantially concurrent with the funding thereof
(and for purposes of determining such "substantial concurrence", taking into
consideration, among other things, required notices to be given to holders of
outstanding securities under the Indenture (including the Senior Notes) in
connection with such refunding, refinancing or repurchase, and the required
corresponding durations thereof), to refinance, refund or repurchase all
outstanding securities under the Indenture (including the Senior
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Notes), including the amount of all accrued interest thereon and reasonable
fees and expenses and premium, if any, incurred by Cogen or any such
Subsidiaries in connection therewith; and (xiii) any extension, renewal,
refinancing, refunding or replacement (or successive extensions, renewals,
refinancing, refundings or replacements), in whole or in part, of any Lien
referred to in clauses (ii) through (xii), provided, however, that the
principal amount of Indebtedness secured thereby and not otherwise authorized
by said clauses (ii) to (xii), inclusive, shall not exceed the principal
amount of Indebtedness, plus any premium, fee and related costs and
expenses incurred or payable to third parties in connection with any such
extension, renewal, refinancing, refunding or replacement, so secured at the
time of such extension, renewal, refinancing, refunding or replacement.
Notwithstanding the foregoing, under the Indenture, Cogen may, and may
permit any of its Subsidiaries to, create, incur, assume or suffer to exist,
any Lien upon any Principal Operating Property to secure any Indebtedness of
Cogen or any Person (other than the Senior Notes) that is not excepted by
clauses (i) through (xiii) (inclusive) above without securing the Senior
Notes, provided that, after giving effect to the creation, incurrence or
assumption of such Lien and Indebtedness, and the application of proceeds of
such Indebtedness, if any, received by Cogen or any of its Subsidiaries as a
result thereof, the aggregate principal amount of all Indebtedness then
outstanding secured by such Lien and all similar Liens would not exceed the
greater of (A) $25 million and (B) 10% of Cogen's Tangible Net Worth.
Limitation on Consolidation, Merger and Sale or Disposition of Assets. Cogen
will not consolidate with or merge with or into any other Person or sell,
transfer or otherwise dispose of its properties as or substantially as an
entirety unless (i) the successor or transferee Person shall be a Person
organized and existing under the laws of the United States of America, any
State thereof, or the District of Columbia, (ii) the successor or transferee
Person assumes by supplemental indenture the due and punctual payment of the
principal of, and premium and interest on, all the Senior Notes and the
performance of every covenant of the Indenture to be performed or observed by
Cogen, (iii) immediately after giving effect to such transaction, no Event of
Default or Default shall have occurred and be continuing and (iv) Cogen shall
deliver to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that the transaction and any such supplemental indenture comply
with the Indenture. Upon any such consolidation, merger, sale, transfer or
other disposition of the properties of Cogen as or substantially as an
entirety, the successor Person formed by such consolidation or with whom or
into which Cogen is merged or to which such sale, transfer or other
disposition is made shall succeed to, and be substituted for, and may exercise
every right and power of, Cogen under the Indenture with the same effect as if
such successor Person had been named as Cogen therein, and Cogen will be
released from all obligations under the Indenture.
Limitation on Sale and Leaseback Transactions. So long as the Senior Notes
are outstanding, neither Cogen nor any of its Subsidiaries will enter into any
arrangement with any Person (other than Cogen or any of its wholly-owned
Subsidiaries), or to which any such Person is a party, providing for the
leasing to Cogen or any of its Subsidiaries for a period of more than three
years of any property or assets which has been or is to be sold or transferred
by Cogen or such Subsidiary to such Person or to any other Person (other than
Cogen or any of its wholly-owned Subsidiaries) to which funds in an aggregate
amount in excess of $5 million with respect to such leased property or assets,
or any series of related transactions including such leased property or
assets, have been or are to be advanced by such Person on the security of such
leased property or assets (a "Sale and Leaseback Transaction"), unless:
(i) if the Covenant Modification Date has yet to occur, Cogen or, to the
extent any of the following covenants are applicable to it, such Subsidiary
would be entitled, pursuant to the provisions specified in "--Certain
Covenants of Cogen and the NJ Partnerships--Permitted Indebtedness" and "
Certain Covenants of Cogen and the NJ Partnerships--Limitation of NJ
Partnerships Debt", to incur Indebtedness in a principal amount equal to or
exceeding the Value of such Sale and Leaseback Transaction, secured by a
Lien on the property to be leased pursuant to the provisions specified in
"--Cogen Covenants--Limitation on Liens", without equally and ratably
securing the Senior Notes;
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(ii) on and after the Covenant Modification Date, Cogen or such Subsidiary
would be entitled to incur Indebtedness in a principal amount equal to or
exceeding the Value of such Sale and Leaseback Transaction
secured by a Lien on such property subject thereto pursuant to the
provisions specified in "--Cogen Covenants--Limitation on Liens", without
equally and ratably securing the Senior Notes; or
(iii) Cogen, during or immediately after the expiration of six months
following the effective date of such Sale and Leaseback Transaction
(whether made by Cogen or any of its Subsidiaries), (i) applies to the
voluntary prepayment, repayment, reduction, defeasance or retirement of
Indebtedness of Cogen (including the Senior Notes) or of any of its
Subsidiaries, in each case maturing by the terms thereof more than one year
after the original incurrence thereof (hereinafter called "Funded Debt") an
amount equal to the Value of such Sale and Leaseback Transaction, less an
amount equal to the sum of (A) the principal amount of the Senior Notes
delivered, within six months after the effective date of such arrangement,
to the Trustee for retirement and cancellation and (B) the principal amount
of other Funded Debt voluntarily prepaid, repaid, reduced, defeased or
retired by Cogen or any of its Subsidiaries within such six month period,
in each case excluding retirements of the Senior Notes and other Funded
Debt as a result of conversions or pursuant to mandatory prepayment
provisions or by payment at maturity;
provided that the foregoing restriction shall not apply to any portion of the
proceeds received from any Sale and Leaseback Transaction by a Subsidiary of
Cogen or Cogen and such proceeds are used by such Subsidiary or Cogen, as
applicable, to purchase additional assets for use by such Subsidiary; provided
that the obligations resulting from such Sale and Leaseback Transaction by a
Subsidiary of Cogen if Cogen shall have any obligations with respect thereto,
are non-recourse to Cogen other than Cogen's equity interest in such
Subsidiary as of the date of the transaction.
Maintenance of Existence. Subject to the covenant above under "--Limitation
on Consolidation, Merger and Sale or Disposition of Assets", Cogen shall do or
cause to be done all things necessary to preserve and keep in full forces and
effect its corporate existence and so long as it has a controlling equity
interest in an NJ Partnership, the corporate or partnership existence (as the
case may be) of each NJ Partnership, in accordance with the respective
organizational documents (as the same may be amended and in effect from time
to time), and all rights and franchises of Cogen and so long as it has a
controlling equity interest in an NJ Partnership, each NJ Partnership;
provided, however, Cogen shall not be required to preserve such existence of
any NJ Partnership or keep in full force and effect any such right or
franchise of any such NJ Partnership if either (i) the maintenance thereof is
not consistent with its or any of its Subsidiaries' fiduciary obligations with
respect thereto (provided that no such fiduciary obligation shall be deemed to
exist if all of the partnership interests of an NJ Partnership are owned
directly or indirectly by Cogen) or (ii) the Board of Directors of Cogen shall
determine that (y) the preservation or maintenance thereof is no longer
desirable in the conduct of the business of Cogen and it Subsidiaries taken as
a whole, and (z) the loss thereof would not have a Material Adverse Effect.
Nature of the Business. Cogen and its Subsidiaries shall engage only in a
Line of Business as well as any other activities or businesses that are a
reasonable extension, development or expansion of, or reasonably related to,
any Line of Business.
Operation and Maintenance. Cogen shall, and shall cause each of its
Subsidiaries, if applicable, to, in all material respects, operate and
maintain each Facility in accordance with prudent industry operating and
maintenance practices generally accepted in the Line of Business and the
failure of which to operate and maintain, or cause to be operated and
maintained, would result in a Material Adverse Effect.
Maintenance of Insurance. Cogen shall cause each of the NJ Partnerships to
maintain insurance policies covering such risks, in such amounts and with such
terms as are normally carried by similarly situated companies engaged in the
Line of Business in the United States.
Taxes and Claims. Cogen will, and will cause each of its Subsidiaries to,
pay and discharge when due all taxes or claims imposed on it or on its income
or profits or on any of its properties, except such taxes as are
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being contested in good faith in appropriate proceedings and for which
appropriate reserves have been established in accordance with GAAP or the
failure of which to pay and discharge would not have a Material Adverse
Effect.
Compliance with Law. Cogen will, and will cause each of its Subsidiaries to,
comply with all applicable laws, rules, regulations and orders of, and all
applicable restrictions imposed by, any Governmental Authority in respect of
the conduct of its business and the ownership of its properties, except to the
extent that any non-compliance therewith would not have a Material Adverse
Effect.
Maintenance of Licenses and Approvals. Cogen will, and will cause each of
its Subsidiaries to seek and maintain such governmental licenses, permits and
approvals as are reasonably required to conduct the business engaged in by
Cogen or such Subsidiary and the failure of which to seek or maintain would
not have a Material Adverse Effect.
Events of Default
Each of the following shall constitute an Event of Default under the
Indenture: (i) default in the payment of principal of, and premium, if any,
on, any Senior Note when due and payable; (ii) default in the payment of
interest on any Senior Note when due which continues for 30 days; (iii)
default in the performance or breach of any other covenant or agreement of
Cogen in the Senior Notes or in the Indenture and the continuation thereof for
30 days after receipt of notice from the Trustee or the Noteholders of at
least 25% of the outstanding Senior Notes; (iv) bankruptcy, insolvency,
reorganization, assignment or receivership of any Project Owner; (v)
acceleration of any Indebtedness of Cogen in an amount in excess of $20
million; (vi) any final judgments(s) or decree(s) for the payment of money
(which are non-appealable or which remain unpaid or unstayed for a period of
90 or more consecutive days or as to which all rights to appeal have expired
or been exhausted) in excess of $20 million, excluding amounts covered by in-
force insurance for which the insurer has admitted liability, shall be entered
against Cogen; (vii) the revocation or withdrawal of a governmental license,
permit or other approval for the operation of an NJ Plant, if such revocation
or withdrawal would have a Material Adverse Effect and such license, permit or
approval is not restored within 45 days; and (viii) any Project Owner fails to
perform its material obligations under a material Project Document (within any
applicable grace or other extension period or without having received a waiver
or forbearance in respect thereto) or makes any material misrepresentations
thereunder and either such event results in a Material Adverse Effect.
Notwithstanding any provision herein to the contrary, on the Covenant
Modification Date each of clauses (vii) and (viii) will forever terminate and
cease to be operative as an Event of Default or a Default, or in any respect
as a basis for an Event of Default or a Default. See "--Conditions for
Covenant Modifications".
If an Event of Default occurs and is continuing, the Trustee, upon the
written direction of holders of no less than 25% (for an Event of Default
specified in clauses (i) and (ii) above) or 51% (for any other Event of
Default) in aggregate principal amount of the Senior Notes, may accelerate the
Senior Notes of such series so the entire outstanding principal amount
thereof, accrued interest thereon, Make-Whole Premium (if any) and other
amounts payable with respect thereto shall become due and payable immediately,
provided that in the case of an Event of Default with respect to Cogen
described in clause (iv) above, the entire outstanding principal amount of,
the accrued interest on, and any other amounts payable with respect to, such
Senior Notes shall automatically become due and payable without direction from
any holders of the Senior Notes. At any time after an acceleration of the
Senior Notes has been declared but before a judgment or decree for the payment
of the principal amount of the Senior Notes has been obtained, if Cogen pays
or deposits with the Trustee a sum sufficient to pay all matured installments
of interest and the principal and any premium which has become due otherwise
than by acceleration and all Defaults shall have been cured or waived, then
such payment or deposit will cause an automatic rescission and annulment of
the acceleration of the Senior Notes.
The Indenture will provide that the Trustee generally will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Noteholders unless such holders have
offered to the Trustee reasonable security or indemnity. Subject to such
provisions for indemnity and certain
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other limitations contained in the Indenture, the holders of a majority in
principal amount of the outstanding Senior Notes generally will have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or of exercising any trust or power conferred
on the Trustee. The holders of a majority in principal amount of the
outstanding Senior Notes generally will have the right to waive any past
Default or Event of Default (other than a payment default) on behalf of all
Noteholders. The Indenture will provide that no Noteholder may institute any
action against Cogen under the Indenture unless such holder previously shall
have given to the Trustee written notice of Default and continuance thereof
and unless the holders of not less than a majority in aggregate principal
amount of the Senior Notes then outstanding affected by such Event of Default
shall have requested the Trustee to institute such action and shall have
offered the Trustee reasonable indemnity, and the Trustee shall not have
instituted such action within 60 days of such request. Furthermore, no
Noteholder will be entitled to institute any such action if and to the extent
that such action would disturb or prejudice the rights of other Noteholders.
Notwithstanding that the right of a Noteholder to institute a proceeding with
respect to the Indenture is subject to certain conditions precedent, each
holder of a Senior Note has the right, which is absolute and unconditional, to
receive payment of the principal of and premium, if any, and interest, if any,
on such Senior Note when due and to institute suit for the enforcement of any
such payment, and such rights may not be impaired without the consent of such
Noteholder. The Indenture will provide that the Trustee, within 90 days after
the occurrence of a Default with respect to the Senior Notes, is required to
give the holders of the Senior Notes notice of any such Default known to the
Trustee, unless cured or waived, but, except in the case of default in the
payment of principal of, or premium, if any, or interest on, any Senior Notes,
the Trustee may withhold such notice if it determines in good faith that it is
in the interest of such holders to do so. Cogen is required to deliver to the
Trustee following each calendar quarter a certificate as to whether or not, to
the knowledge of the officers signing such certificate, Cogen is in compliance
with the conditions and covenants under the Indenture.
Modification
Modification and amendment of the Indenture may be effected by Cogen and the
Trustee with the consent of the holders of a majority in principal amount of
the outstanding Senior Notes affected thereby, provided that no such
modification or amendment may, without the consent of the holder of each
outstanding Senior Note affected thereby, (i) change the maturity date of any
Note; (ii) reduce the rate (or change the method of calculation thereof) or
extend the time of payment of interest on any Note; (iii) reduce the principal
amount of, or premium payable on, any Note; (iv) change the coin or currency
of any payment of principal of, or any premium or interest on, any Note; (v)
change the date on which any Senior Note may be redeemed or repaid at the
option of the holder thereof or adversely affect the rights of a holder to
institute suit for the enforcement of any payment on or with respect to any
Note; or (vi) modify the foregoing requirements or reduce the percentage of
outstanding Senior Notes necessary to modify or amend the Indenture or to
waive any past Default to less than a majority. Modification and amendment of
the Indenture may be effected by Cogen and the Trustee without the consent of
the holders in certain cases, including (i) to add to the covenants of Cogen
for the benefit of the holders or to surrender a right conferred on Cogen in
the Indenture; (ii) to add security for the Senior Notes; (iii) to execute and
deliver such instruments and take such action and steps with respect to the
Covenant Modification Date, and the effects thereof, as referred to under the
caption "Conditions for Covenant Modifications"; (iv) to cure or otherwise
correct any ambiguities, omissions, defects or inconsistencies, which actions,
in each case, do not adversely affect the interests of the holders in any
material respect; (v) to provide for the assumption of the obligations of
Cogen under the Indenture upon the merger, consolidation or sale, transfer or
other disposition of all or substantially all of the properties of Cogen
permitted pursuant to the Indenture; (vi) to comply with any requirement in
order to effect or maintain the qualification of the Indenture under the Trust
Indenture Act of 1939; (vii) to make any other change that does not adversely
affect the holders of any outstanding Senior Notes in any material respect; or
(viii) issue additional series of securities under the Indenture.
A supplemental indenture which changes or eliminates any covenant or other
provision of the Indenture (or any supplemental indenture) which has expressly
been included solely for the benefit of one or more series of
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the Senior Notes, or which modifies the rights of the Noteholders of such
series with respect to such covenant or provision, will be deemed not to
affect the rights under the Indenture of the Noteholders of any other series.
Defeasance and Discharge; Covenant Defeasance
The Indenture will provide that Cogen may satisfy and discharge, and will be
discharged from, any and all obligations in respect to the Senior Notes of any
series and the Indenture (except for certain obligations such as obligations
to register the transfer or exchange of the Senior Notes, replace stolen, lost
or mutilated Senior Notes, maintain paying agencies and hold moneys for
payment in trust) if, among other things, Cogen irrevocably deposits with the
Trustee, in trust for the benefit of holders of the Senior Notes, money or
certain United States government obligations, or any combination thereof,
which through the payment of interest thereon and principal thereof in
accordance with their terms will provide money in an amount sufficient,
without reinvestment, to make all payments of principal of, and any premium
and interest on, the Senior Notes on the dates such payments are due in
accordance with the terms of the Indenture and the Senior Notes; provided
that, unless all of such Senior Notes are to be due within one year of such
deposit by redemption or otherwise, Cogen shall also have delivered to the
Trustee an Opinion of Counsel to the effect that the Noteholders will not
recognize income, gain or loss for federal income tax purposes as a result of
such defeasance or discharge of the Indenture and that will be subject to
federal income tax on the same amount, in the same manner and at the same
times, as would have been the case if such defeasance or discharge had not
occurred. Thereafter, the Noteholders must look only to such deposit for
payment of the principal of, and interest and any premium on, the Senior
Notes.
In addition, the Indenture will provide that Cogen may, with respect to the
Senior Notes of any series, terminate its obligations with respect to certain
restrictive covenants of the Indenture ("covenant defeasance"), in which event
certain Events of Default will no longer constitute Events of Default with
respect to any such Senior Notes, upon the deposit of sums in amount,
character and quality, and receipt by the Trustee of an Opinion of Counsel of
the scope, referred to in the immediately preceding paragraph; provided that
such Opinions of Counsel shall not be required to be based upon a ruling
(private or otherwise) from the Internal Revenue Service or a change in law or
regulation to that effect.
Resignation or Removal of Trustee
The Trustee may resign at any time upon written notice to Cogen specifying
the day upon which the resignation is to take effect, and such resignation
will take effect immediately upon the later of the appointment of a successor
Trustee and such specified day.
The Trustee may be removed at any time by an instrument or concurrent
instruments in writing filed with the Trustee and signed by the holders, or
their attorneys-in-fact, of at least a majority in principal amount of the
then outstanding Senior Notes of all series. In addition, so long as no Event
of Default or event which, with the giving of notice or lapse of time or both,
would become an Event of Default has occurred and is continuing, Cogen may
remove the Trustee upon notice to the holder of each Senior Note outstanding
and the Trustee and appointment of a successor Trustee.
Concerning the Trustee
Chase Bank of Texas, National Association, will be the Trustee under the
Indenture. Cogen and one or more of its Affiliates maintain depository and
other normal banking relationships with Chase Bank of Texas, National
Association. The Chase Manhattan Bank, an affiliate of Chase Bank of Texas,
National Association, is also a lender to Cogen. The Indenture will provide
that Cogen's obligations to compensate and indemnify the Trustee and reimburse
the Trustee for expenses, disbursements and advances will constitute
indebtedness which will be secured by a Lien generally prior to that of the
Senior Notes upon all property and funds held or collected by the Trustee as
such.
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Governing Law
The Indenture and each Senior Note will be governed by New York law.
Certain Definitions
"Affiliate" means, as to any Person, any Subsidiary of such Person and any
other Person which, directly or indirectly, controls or is controlled by or
under direct or indirect common control with such specified Person. For the
purposes of this definition, "control," when used with respect to any Person,
means the possession of the power to direct or cause the direction of
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing. Notwithstanding the foregoing, no individual shall be an Affiliate
of any Person solely by reason of his or her being a director, manager,
officer or employee of such Person.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banks or trust companies in the Borough of
Manhattan, The City of New York, or in any other city where the corporate
trust office of the Trustee may be located, are obligated or authorized by law
or executive order to close.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any
preferred stock, but excluding any debt securities convertible into such
equity.
"Cash Distribution" means all cash distributions received by Cogen which are
made in respect and attributable to, and based upon Cogen's direct or indirect
equity interests or ownership in the NJ Partnerships, other power projects and
other investments.
"Collateral Agency and Intercreditor Agreement" means the Collateral Agency
and Intercreditor Agreement dated as of , 1998, among the Collateral
Trustee, the Administrative Agent under the Revolving Credit Facility and the
Trustee, as the same may be amended, supplemented or otherwise modified and in
effect from time to time.
"Collateral Trustee" means , a , as collateral trustee under the
Collateral Agency and Intercreditor Agreement, and any successor Person acting
in such capacity and duly appointed thereunder.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a constant maturity
corresponding to the remaining term of the series of the Senior Notes
(calculated to the nearest 1/12th of a year) that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the Senior Notes to be redeemed.
"Comparable Treasury Price" means, with respect to any Redemption Date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal
Reserve Bank of New York and designated "composite 3:30 p.m. Quotations for
U.S. Government Securities" or (ii) if such release (or any successor release)
is not published or does not contain such prices on such business day, (A) the
average of the Reference Treasury Dealer Quotations for such Redemption Date,
after excluding the highest and lowest such Reference Treasury Dealer
Quotations for such Redemption Date, or (B) if the Trustee obtains fewer than
four such Reference Treasury Dealer Quotations, the average of all such
Quotations.
"Consolidated Net Income" means, with reference to any period, the net
income (or loss) of Cogen and its Subsidiaries for such period (taken as a
cumulative whole), as determined in accordance with GAAP, after
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eliminating all offsetting debits and credits between Cogen and its
Subsidiaries and all other items required to be eliminated in the course of
the preparation of consolidated financial statements of Cogen and its
Subsidiaries in accordance with GAAP.
"Covenant Modification Date" means the date as of which the conditions
specified in "Certain Covenants of Cogen and the NJ Projects--Conditional
Covenant Modifications" have been satisfied.
"Coverage Ratio" for any period means the ratio of (i) Consolidated Net
Income increased by the sum of Interest Expense, taxes, depreciation,
amortization and, to the extent deducted from Consolidated Net Income, any
other non-cash charges ("EBITDA"), in each case for such period to (ii)
Interest Expense for such period.
"Default" means an event or condition that, with giving of notice, lapse of
time or failure to satisfy certain specified conditions, or any combination
thereof, would become an Event of Default.
"Duff & Phelps" means Duff & Phelps Credit Rating Co. and its successors.
"Event of Loss" means any compulsory transfer or taking or taking or
transfer under threat of compulsory transfer or taking of all or any material
part of any NJ Plant by any Governmental Authority, or any event which causes
all or any material portion of any NJ Plant to be damaged, destroyed or
rendered unfit for normal use for any reason whatsoever.
"Excluded Dispositions" means sales, transfers, assignments and other
dispositions as follows: (i) assets that in a single transaction or a series
of related transactions do not have such fair market value in excess of $5
million in any calendar year; (ii) assets resulting from, included in, covered
by, or related to, an Event of Loss or a Power Contract Buyout; (iii) any
transfer, sale, assignment or other disposition of assets securing the
Revolving Credit Facility or other Senior Debt in connection with the
enforcement of the Liens therein; (iv) any sale, exchange of assets (including
cash equivalents) or lease by Cogen or any of its Subsidiaries (as lessor)
made in the ordinary course of any Line of Business (excluding any forward
sale, sale of receivables or similar transactions); (v) any disposition of
assets in trade or exchange for assets of comparable fair market value used or
usable in any Line of Business (including, without limitation, the trade or
exchange for an interest in another business or all or substantially all of
the assets of a business, in each case engaged in any Line of Business or for
other non-current assets to be used in any Line of Business); (vi) a transfer
or lease by Cogen or a wholly-owned Subsidiary (as lessor) of assets by Cogen
to a wholly-owned Subsidiary of Cogen or by a wholly-owned Subsidiary of Cogen
to Cogen or to another wholly-owned Subsidiary of Cogen; (vii) an issuance or
sale of equity interests by a wholly-owned Subsidiary of Cogen to Cogen or to
another wholly-owned Subsidiary of Cogen; (viii) a dividend or other
distribution permitted under the caption "Certain Covenants of Cogen and the
NJ Partnerships Restricted Payments"; (ix) the sale, exchange, lease by Cogen
or any of its Subsidiaries (as lessor) or other disposition of obsolete assets
not integral to any Line of Business; (x) the abandonment or relinquishment of
assets in the ordinary course of business; and (xi) Sale and Leaseback
Transactions permitted under the caption "Cogen Covenants Sale and Leaseback
Transactions".
"Facility" means any power or steam generation facility (including any NJ
Plant) or energy producing facility and related assets, in each case, taken as
a whole.
"Funds From Operations" means Consolidated Net Income plus depreciation and
deferred taxes.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants (the "AICPA"), (ii)
statements and pronouncements of the Financial Accounting Standards Board of
the AICPA, (iii) such other statements by such other entity as approved by a
significant segment of the accounting profession and (iv) the rules and
regulations of the Securities and Exchange Commission governing the inclusion
of financial statements (including pro forma financial statements) in periodic
reports required to be filed pursuant to Section 13 of the Exchange Act,
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including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the Securities and
Exchange Commission.
"Governmental Authority" means any United States federal, state, municipal,
local, territorial or other governmental subdivision, department, commission,
board, bureau, agency, regulatory authority, instrumentality or judicial or
administrative body.
"Indebtedness" with respect to any Person means, at any time, without
duplication: (i) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable preferred stock; (ii) its
liabilities for the deferred purchase price of property acquired by such
Person and all liabilities created or arising under any conditional sale or
other title retention agreement with respect to any such property, excluding,
in each of the foregoing cases, accounts payable arising in the ordinary
course of business); (iii) all liabilities appearing on its balance sheet in
accordance with GAAP in respect of capital leases; (iv) all liabilities for
borrowed money secured by any Lien with respect to any property owned by such
Person (whether or not it has assumed or otherwise become liable for such
liabilities); (v) all its reimbursement obligations in respect of letters of
credit or instruments serving a similar function issued or accepted for its
account by banks and other financial institutions (whether or not representing
obligations for borrowed money); (vi) net obligations under interest rate
swaps of such Person; and (vi) any guaranty of such Person with respect to
liabilities of a type described in any of clauses (a) through (f) of this
definition.
"Independent Investment Banker" means Morgan Stanley & Co. Incorporated or,
if such firm is unwilling or unable to select the Comparable Treasury Issue,
an independent investment banking institution of national standing appointed
by Cogen; provided that if neither such Person is appointed and willing to
serve at least 15 Business Days prior to the Redemption Date, then by an
independent investment banking institution of a national standing appointed by
the Trustee.
"Interest Expense" means for any period the sum (without duplication) of (i)
all interest in respect of Indebtedness of Cogen and its Subsidiaries
(including imputed interest on capital lease obligations constituting
Indebtedness) deducted in determining Consolidated Net Income for such period
and (ii) all debt discount and expense amortized or required to be amortized
in the determination of Consolidated Net Income for such period.
"Issue Date" means the date on which the Senior Notes are originally issued
under the Indenture.
"Linden Guarantee" means the Guarantee dated as of , 1998, made by
Cogen in favor of State Street Bank Trust Company of Connecticut, National
Association, in its respective capacities stated therein, and Linden Ltd., as
the same may be amended, supplemented and otherwise modified and in effect
from time to time.
"Line of Business" means, with respect to Cogen and its Subsidiaries, the
(i) the business of construction, development, acquisition, servicing,
ownership, improvement, operation and management of Facilities, (ii) the
business of consulting, insurance or advisory activities related to any
business referred to in this definition and (iii) any activity or business
that is reasonably related thereto.
"Managing General Partners" means Cogen Technologies Linden, Ltd., Cogen
Technologies Camden GP Limited Partnership and Cogen Technologies NJ, Inc.
"Material Adverse Effect" means a material adverse effect on (i) the
financial position or results of operation of Cogen and its consolidated
Subsidiaries, taken as a whole, (ii) the ability of Cogen to perform its
obligations under the Senior Notes or (iii) the ability of the Project Owners
taken as a whole to perform any of their material obligations under the
Project Documents to which they are a party.
"Material Subsidiary" means each of the NJ Partnerships and any other Cogen
Subsidiary with an investment by Cogen of at least $50 million.
"Moody's" means Moody's Investors Service, Inc. and its successors.
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"Net Buyout Proceeds" means all cash proceeds and the fair market value of
all non-cash proceeds received by an NJ Partnership or Cogen (without
duplication) from a Power Contract Buyout related to its NJ Plant, in each
case, net of all expenses, costs and other amounts expended or incurred by or
on behalf of the recipient or recipients (as applicable) of such cash proceeds
in connection with the collection, enforcement, negotiation, settlement,
proceedings, administration or other activity related to the receipt and final
collection of such proceeds.
"Net Loss Proceeds" means all cash proceeds of insurance paid on account of
the loss of, or damage to, an NJ Plant, all cash awards of compensation and
the fair market value of all non-cash proceeds for the taking by condemnation,
eminent domain or similar proceeding contemplated by an Event of Loss of an NJ
Plant or any material portion thereof, in each of the preceding cases, net of
all expenses, costs and other amounts expended or incurred by or on behalf of
the recipient or recipients (as applicable) of such cash proceeds, cash award
or non-cash proceeds in connection with the collection, enforcement,
negotiation, settlement, proceedings, administration or other activity related
to the receipt and final collection of such proceeds; provided however, in all
cases, excluding the receipt of proceeds of business interruption insurance,
environmental damage insurance (to the extent applied by Cogen or the
applicable NJ Partnership to the remediation or the reimbursement of Cogen for
the cost of remediation of the environmental damage giving rise to such
insurance claim) or similar types of policies.
"Net Proceeds" means all cash proceeds and the fair market value of all non-
cash proceeds received by Cogen from the sale, transfer or assignment of
assets by Cogen (as such fair market value for each such asset is determined
as of the date of its disposition by the good faith determination of the Board
of Directors of Cogen which is made within a reasonable period following each
such disposition), in each case, net of all expenses, costs and other amounts
expended or incurred by or on behalf of Cogen in connection with the
collection, enforcement, negotiation, settlement, proceedings, administration
or other activity related to the receipt and final collection of such
proceeds.
"NJ Partnerships" means collectively, Linden Venture, Camden Cogen and NJ
Venture.
"NJ Plant" means any of the Bayonne Plant, the Camden Plant and the Linden
Plant, as the context may require.
"Officers' Certificate" means a certificate signed by [two] officers or
managers, as the case may be, of Cogen or any of its Subsidiaries, or any
authorized partner or member of any of them, as the case may be.
"Operating Property" means (i) any interest in real property owned by Cogen
or its Subsidiaries and (ii) any asset owned by Cogen or its Subsidiaries that
is depreciable in accordance with GAAP, excluding, in either case, (y) any
interest of Cogen or its Subsidiaries as lessee under any lease which has been
or would be capitalized on the books of the lessee in accordance with GAAP,
and (z) any interest, asset or property which has a fair market value at the
time of determination of less than $5 million.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee; such counsel may be an employee of, or
counsel to, Cogen, any of its Subsidiaries or the Trustee.
"Person" means any individual, corporation, company partnership, joint
venture, association, joint stock company, limited liability company, trust,
unincorporated organization or Governmental Authority.
"Pledged Interests" means the security interest as described under the
caption "--Security" in certain direct, wholly-owned Subsidiaries of Cogen,
which security interest is granted in favor of the Collateral Trustee for the
benefit of the Noteholders and the lenders under the Revolving Credit Facility
prior to the Covenant Modification Date.
"Power Contract Buyout" means any payment by an electricity purchaser or
steam purchaser with respect to any of the NJ Plants the effect of which is to
reduce future payments under, or shorten the term of, a contract
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for the purchase of capacity, energy, electricity or steam from any NJ Plant
to which any NJ Partnership is a party (during the outstanding term of any
series of the Senior Notes).
"Principal Operating Property" means any Operating Property that consists of
any of the following: (i) a real estate site on which any NJ Plant is located,
(ii) any NJ Plant or any turbine located at any NJ Plant, and (iii) any
Facility, other than any NJ Plant, in which Cogen or any of its Subsidiaries
has a direct or indirect equity interest, the fair market value of which
exceeds $25 million, any turbine located on any such Facility, any
other property or assets material to the operation of such Facility and any
real estate site on which any such Facility is located, excluding, however,
from each of the preceding clauses (i) through (iii) (inclusive), any such
assets or properties consisting of inventories, fuel, furniture, office
fixtures and equipment (including computer and data processing equipment),
vehicles and equipment used in, or useful with, vehicles.
"Project Documents" includes all power contracts, steam contracts, operating
and maintenance agreements, administrative services contracts, construction
contracts (other than purchase orders), transmission agreements, fuel supply
contracts and partnership agreements.
"Project Owner" means, collectively, Cogen, the Material Subsidiaries, the
NJ Partnerships and the Managing General Partners.
"Projected Coverage Ratio" for any period means, on any date of
determination, a projection of the Coverage Ratio for the applicable time
period.
"Rating Agencies" means Moody's, S&P and Duff & Phelps to the extent that at
each relevant time of determination, each of them has an active and current
rating in effect on the Senior Notes, or any fewer than all of them to the
extent that less than all of them have a current rating in effect on the
Senior Notes; provided that if none of them has a current rating on the Senior
Notes at any relevant time of determination, at least 2 other internationally
recognized rating institutions selected in good faith by Cogen.
"Reference Treasury Dealer" means (i) Morgan Stanley & Co. Incorporated,
provided, however, that if it shall cease to be a primary U.S. Government
securities dealer in New York City (a "Primary Treasury Dealer"), Cogen shall
substitute therefore another Primary Treasury Dealer; and (ii) any other
Primary Treasury Dealer selected by Cogen .
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any Redemption Date, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third business day preceding such Redemption Date.
"Revolving Credit Facility" means (i) each of the Credit Agreements dated as
of , 1998, among Cogen, the Lenders party thereto and The Chase Manhattan
Bank, as administrative agent, including any related notes, guarantees,
collateral documents, instruments and agreements from time to time executed in
connection therewith, and in each case as the same may be amended, modified,
supplemented, extended, renewed, restated, refunded, replaced or refinanced,
in whole or in part, and in effect from time to time, and (ii) any renewal,
restatement, extension, refunding, restructuring, replacement or refinancing
thereof (whether the original administrative agent and lenders or another
administrative agent or agent or other lenders and whether provided under the
original credit agreement or any other agreement).
"S&P means Standard & Poor's Rating Services and its successors.
"Senior Notes" means, collectively, Cogen's % Senior Notes due 2005,
Cogen's % Senior Notes due 2010 and Cogen's % Senior Notes due 2018.
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"Subordinated Indebtedness" means any Indebtedness of Cogen (whether
outstanding on the date hereof or thereafter incurred) which is subordinate or
junior in right of payment to the Senior Notes pursuant to a written agreement
to that effect.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total
voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by (i)
such Person, (ii) such Person and one or more Subsidiaries of such Person or
(iii) one or more Subsidiaries of such Person.
"Tangible Net Worth" means, as at any date for any Person, the sum for such
Person and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following:
(i) the amount of capital stock; plus
(ii) the amount of surplus and retained earnings (or, in the case of a
surplus or retained earnings deficit, minus the amount of such deficit);
minus
(iii) the sum of the following: cost of treasury shares and the book value
of all assets that should be classified as intangibles (without duplication
of deductions in respect of items already deducted in arriving at surplus
and retained earnings) but in any event including goodwill, minority
interests, research and development costs, trademarks, trade names,
copyrights, patents and franchises, unamortized debt discount and expense,
all reserves and any write-up in the book value of assets resulting from a
revaluation thereof subsequent to the Issue Date.
"Treasury Rate" means, with respect to any Redemption Date for any series of
the Senior Notes, a rate of interest per annum equal to (i) the yield, under
the heading which represents the average for the immediately preceding week,
appearing in the most recently published statistical release designated
"H.15(519) Selected Interest Rates" or any successor release which is
published weekly by the Board of Governors of the Federal Reserve System and
which establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant
Maturities," for the maturity corresponding to the Comparable Treasury Issue
(if such maturity is not within three months before or after the Maturity
Date, yields for the two published maturities most closely corresponding to
the Comparable Treasury Issue shall be determined and the Treasury Rate shall
be interpolated or extrapolated from such yields on a straight line basis,
rounding to the nearest basis point) or (ii) if such release (or any successor
release) is not published during the week preceding the calculation date or
does not contain such yields, the rate per annum equal to the semi-annual
equivalent yield to maturity of the Comparable Treasury Issue, calculated
using a price for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) equal to the Comparable Treasury Price for such
Redemption Date.
"Value" means, with respect to a Sale and Leaseback Transaction, as of any
particular time, the amount equal to the greater of (i) the net proceeds of
the sale or transfer of the property leased pursuant to such Sale and
Leaseback Transaction or (ii) the fair market value in the opinion of the
Board of Directors of Cogen of such property at the time of entering into such
Sale and Leaseback Transaction, in either case divided first by the number of
full years of the term of the lease and then multiplied by the number of full
years of such term remaining at the time of determination, without regard to
any renewal or extension options contained in the lease.
BRIDGE LOAN
Immediately prior to the consummation of the Formation Transactions and
Common Stock Offering, Morgan Stanley & Co. Incorporated ("Morgan Stanley")
will loan $276.4 million to Linden Ltd. pursuant to the Bridge Loan, which
Linden Ltd. will use to redeem the 51.1% of the equity interests in Linden
Ltd. owned by the McNair Interests and the Minority Interests. See "Certain
Transactions--Formation Transactions". The
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Bridge Loan will be evidenced by a subordinated promissory note in favor of
Morgan Stanley, which note will bear interest at the rate of 24% per annum.
Immediately following the consummation of the Debt Offering, Cogen will loan
$276.4 million of the proceeds of the Debt Offering to Linden Ltd. for
repayment of the Bridge Loan.
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 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 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 comprises 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
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.
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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 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 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 $1.1 million, and the final
principal payment being $2.5 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
Cash Distributions".
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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
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 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 Camden GP 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, the Prudential 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
41
<PAGE>
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 1.50x, 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 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--PSE&G". 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.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the principal United States federal
income tax consequences of the purchase, ownership and disposition of the
Senior Notes to initial purchasers thereof who are United States Holders (as
defined below) and the principal United States federal income and estate tax
consequences of the purchase, ownership and disposition of the Senior Notes to
initial purchasers who are Foreign Holders (as described below). This
discussion is based on currently existing provisions of the Code, Treasury
regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect on the date hereof and all of which
are subject to change possibly with retroactive effect, or different
interpretations. This discussion does not address the tax consequences to
subsequent purchasers of Senior Notes and is limited to purchasers who hold
the Senior Notes as capital assets, within the meaning of section 1221 of the
Code. This discussion also does not address the tax consequences to Foreign
Holders that are subject to United States federal income tax on a net basis on
income realized with respect to a Senior Note because such income is
effectively connected with the conduct of a United States trade or business.
Such Foreign Holders are generally taxed in a similar manner to United States
Holders, but certain special rules do apply. Moreover, this discussion is for
general information only and does not address all of the tax consequences that
may be relevant to particular initial purchasers in light of their personal
circumstances or to certain types of initial purchasers (such as certain
financial institutions, insurance companies, tax-exempt entities, dealers in
securities or persons who have hedged the risk of owning a Senior Note) or the
effect of any applicable state, local or foriegn tax law.
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
42
<PAGE>
DISPOSITION OF THE SENIOR NOTES, INCLUDING THE APPLICABILITY OF ANY FEDERAL
TAX LAWS OR ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND ANY CHANGES (OR PROPOSED
CHANGES) IN APPLICABLE TAX LAWS OR INTERPRETATIONS THEREOF.
As used herein, the term "United States Holder" means a holder of a Senior
Note that is, for United States federal income tax purposes, (a) a citizen or
resident of the United States (including certain former citizens and former
long-term residents), (b) a corporation, partnership or other entity created
or organized in or under the laws of the United States or any political
subdivision thereof, (c) an estate, the income of which is subject to United
States federal income taxation regardless of source, or (iv) a trust subject
to the primary supervision of a court within the United States and the control
of one or more United States persons, as described in Section 7701(a)(30) of
the Code. A "Foreign Holder" is a holder who is not a United States Holder.
UNITED STATES FEDERAL INCOME TAXATION OF UNITED STATES HOLDERS
Payment of Interest on the Senior Notes. Interest paid or payable on a
Senior Note will be taxable to a United States Holder as ordinary interest
income, generally at the time it is received or accrued, in accordance with
such holder's regular method of accounting for United States federal income
tax purposes.
Sale, Exchange or Retirement of the Senior Notes. Upon the sale, exchange,
redemption, retirement at maturity or other disposition of a Senior Note, a
United States Holder generally will recognize taxable gain or loss equal to
the difference between the sum of cash plus the fair market value of all other
property received on such disposition (except to the extent such cash or
property is attributable to accrued but unpaid interest, which will be taxable
as ordinary income) and such United States Holder's adjusted tax basis in the
Senior Note. A United States Holder's adjusted tax basis in a Senior Note
generally will equal the cost of the Senior Note to such United States Holder,
less any principal payments received by such United States Holder.
Gain or loss recognized on the disposition of a Senior Note generally will
be capital gain or loss and will be long-term capital gain or loss if, at the
time of such disposition, the United States Holder's holding period for the
Senior Note is more than one year. The deduction of capital losses is subject
to certain limitations. United States Holders of Senior Notes should consult
their tax advisors regarding the treatment of capital gains and losses.
Backup Withholding and Information Reporting. Backup withholding and
information reporting requirements may apply to certain payments of principal,
premium, if any, and interest on a Senior Note, and to proceeds of the sale or
redemption of a Senior Note before maturity. The Company, its agent, a broker,
the Trustee or any paying agent, as the case may be, will be required to
withhold from any payment that is subject to backup withholding a tax equal to
31% of such payment if a United States Holder fails to furnish his, her or its
taxpayer identification number (social security or employer identification
number), certify that such number is correct, certify that such holder is not
subject to backup withholding or otherwise comply with the applicable
requirements of the backup withholding rules. Certain United States Holders,
including all corporations, are not subject to backup withholding and
information reporting requirements. Any amounts withheld under the backup
withholding rules from a payment to a United States Holder will be allowed as
a credit against such United States Holder's United States federal income tax
liability and may entitle the holder to a refund, provided that the required
information is furnished to the United States Internal Revenue Service
("IRS").
UNITED STATES FEDERAL INCOME TAXATION OF FOREIGN HOLDERS
Payment of Interest on the Senior Notes. In general, payments of interest
received by a Foreign Holder will not be subject to a United States federal
withholding tax, provided that (i)(a) the Foreign Holder does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote, (b) the Foreign Holder is
not a controlled foreign corporation that is related to the Company actually
or constructively through stock ownership, and (c) either (I) the beneficial
owner of the Senior Note, under penalties of perjury, provides the Company or
its agent with such beneficial owner's name and address and certifies on IRS
Form W-8 (or a suitable substitute form) that it is not a United States person
or (II) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary
43
<PAGE>
course of its trade or business (a "financial institution") holds the Senior
Note and provides a statement to the Company or its agent under penalties of
perjury in which it certifies that such an IRS Form W-8 (or a suitable
substitute) has been received by it from the beneficial owner of the Senior
Notes or qualifying intermediary and furnishes the Company or its agent a copy
thereof or (ii) the Foreign Holder is entitled to the benefits of an income
tax treaty under which interest on the Senior Notes is exempt from United
States withholding tax and the Foreign Holder or such Foreign Holder's agent
provides a properly executed IRS Form 1001 claiming the exemption. Payments of
interest not exempt from United States federal withholding tax as described
above will be subject to such withholding tax at the rate of 30% (subject to
reduction under an applicable income tax treaty).
Sale, Exchange or Retirement of the Senior Notes. A Foreign Holder generally
will not be subject to United States federal income tax (and generally no tax
will be withheld) with respect to gain realized on the sale, exchange,
redemption, retirement at maturity or other disposition of a Senior Note
unless the Foreign Holder is an individual who is present in the United States
for a period or periods aggregating 183 or more days in the taxable year of
the disposition and, generally, either has a "tax home" or an "office or other
fixed place of business" in the United States.
Backup Withholding and Information Reporting. Backup withholding and
information reporting requirements do not apply to payments of interest made
by the Company or a paying agent to Foreign Holders if the certification
described above under "--United States Federal Income Taxation of Foreign
Holders--Payment of Interest on the Senior Notes" is received, provided that
the payor does not have actual knowledge that the holder is a United States
Holder. If any payments of principal and interest are made to the beneficial
owner of a Senior Note by or through the foreign office of a foreign
custodian, foreign nominee or other foreign agent of such beneficial owner, or
if the foreign office of a foreign "broker" (as defined in applicable Treasury
regulations) pays the proceeds of the sale of a Senior Note to the seller
thereof, backup withholding and information reporting will not apply.
Information reporting requirements (but not backup withholding) will apply,
however, to a payment by a foreign office of a broker that is (i) a United
States person, (ii) a foreign person that derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the
United States, or (iii) a "controlled foreign corporation" (generally, a
foreign corporation controlled by certain United States shareholders) with
respect to the United States unless the broker has documentary evidence in its
records that the holder is a Foreign Holder and certain other conditions are
met or the holder otherwise establishes an exemption. Payment by a United
States office of broker is subject to both backup withholding at a rate of 31%
and information reporting unless the holder certifies under penalties of
perjury that it is a Foreign Holder or otherwise establishes an exemption.
Recently issued Treasury regulations modify certain of the certification
requirements described above. These modifications will become generally
effective for interest payments made after December 31, 1999. The Company or
its paying agent may request new withholding exemption forms from holders in
order to qualify for continued exemption from withholding under the Treasury
regulations when they become effective. For example, a Foreign Holder will be
required to provide a Form W-8 (or substitute form) to the withholding agent
on which such holder provides its name, address and taxpayer identification
number and states, under penalty of perjury, that the interest paid on a Note
and the gain on the sale, exchange or other disposition of a Note is not
effectively connected with such holder's United States trade or business in
order to obtain an exemption from withholding tax on payments made after
December 31, 1999.
FEDERAL ESTATE TAX
Subject to applicable estate tax treaty provisions, Senior Notes held at the
time of death (or Senior Notes transferred before death but subject to certain
retained rights or powers) by an individual who at the time of death is a
Foreign Holder will not be included in such Foreign Holders' gross estate for
United State federal estate tax purposes provided that the individual does not
actually or constructively own 10% or more of the total combined voting power
of all classes of stock of the Company entitled to vote or hold the Senior
Notes in connection with a United States trade or business.
44
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions of the Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), the Underwriters named
below (collectively, the "Underwriters"), have severally agreed to purchase,
and the Company has agreed to sell to them, severally, the aggregate principal
amount of Senior Notes set forth opposite the names of such Underwriters
below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER NOTES
----------- ------------
<S> <C>
Morgan Stanley & Co. Incorporated..................................
------------
Total............................................................ $400,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Senior Notes 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 Senior Notes offered hereby if any are taken.
The Underwriters propose to offer part of the Senior Notes directly to the
public at the price to public set forth on the cover page hereof and part to
certain dealers at a price that represents a concession not in excess of . %
of the principal amount of the Senior Notes. Each Underwriter may allow, and
such dealers may re-allow, a concession to certain other dealers not in excess
of . % of the principal amount of the Senior Notes. After the initial
offering of the Senior Notes, the offering price and other selling terms may
from time to time be varied by the Underwriters.
The Senior Notes are a new issue of securities with no established trading
market. The Company has been advised by the Underwriters that they presently
intend to make a market in the Senior Notes, as permitted by applicable laws
and regulations. The Underwriters are not obligated, however, to make a market
in the Senior Notes and any such market making may be discontinued at any time
without notice at the sole discretion of the Underwriters. Accordingly, no
assurance can be given as to the liquidity of, or the existence of trading
markets for, the Senior Notes.
In order to facilitate this Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Senior Notes. Specifically, the Underwriters may overallot in connection with
this Offering, creating a short position in the Senior Notes for their own
account. In addition, to cover overallotments or to stabilize the price of the
Senior Notes, the Underwriters may bid for, and purchase, Senior Notes in the
open market. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an underwriter or a dealer for distributing the Senior
Notes in this Offering, if the syndicate repurchases previously distributed
Senior Notes 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 Senior Notes above independent market
levels. The Underwriters are not required to engage in these activities, and
may end any of these activities at any time.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
From time to time, Morgan Stanley & Co. Incorporated has provided and
continues to provide investment banking services to the Company.
45
<PAGE>
LEGAL MATTERS
The validity of the Notes offered hereby and certain legal matters will be
passed upon for the Company by Fulbright & Jaworski L.L.P., Houston, Texas.
Certain legal matters will be passed upon for the Underwriters by Milbank,
Tweed, Hadley & McCloy and Skadden Arps, Slate, Meagher & Flom LLP, New York,
New York.
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.
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 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 Senior Notes 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 Senior Notes 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.
46
<PAGE>
EXPLANATORY NOTE
The "Glossary" and the financial statements to be included in this
Prospectus appear in this Registration Statement as part of the prospectus for
the Equity Offering that is also part of this Registration Statement.
47
<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................ $265,000
NASD Filing Fee.................................................... 30,500
New York Stock Exchange Listing for Common Stock................... *
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 (Confidential Treatment for certain
provisions of this agreement has been requested pursuant to Rule
406 under the Securities Act).
*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 and
Assignment and Conveyance dated December 22, 1993.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
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, as amended by Amendment dated
April 30, 1993.
10.18 Promissory note dated May 22, 1986 by Cogen Technologies N.J., Inc.
in favor of Bayonne Industries, Inc.
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 Firm Gas Purchase and Sale Agreement and Performance Guarantee
between Cogen Technologies Linden Venture, L.P. and Anadarko Energy
Services Company dated July 1, 1997.
10.22 Firm Gas Purchase and Sale Agreement between Cogen Technologies
Linden Venture, L.P. and Engage Energy US, L.P. and Guaranty
Agreement between Cogen Technologies Linden Venture, L.P. and The
Coastal Corporation dated July 1, 1997.
10.23 Firm Gas Purchase and Sale Agreement between Cogen Technologies
Linden Venture, L.P. and Columbia Energy Services Corporation and
Guaranty Agreement between Cogen Technologies Linden Venture, L.P.
and Columbia Gas Systems Corporation dated July 1, 1997.
10.24 Firm Gas Purchase and Sale Agreement between Cogen Technologies
Linden Venture, L.P. and Sonat Marketing Company L.P. and Guaranty
Agreement between Cogen Technologies Linden Venture, L.P. Sonat,
Inc. dated July 1, 1997.
10.25 Amended and Restated Firm Gas Purchase and Sale Agreement between
Cogen Technologies Linden Venture, L.P. and Texaco Natural Gas Inc.
and Guaranty Agreement between Cogen Technologies Linden Venture,
L.P. and Texaco Exploration and Production Inc. dated July 1, 1997.
10.26 Firm Gas Purchase and Sale Agreement between Cogen Technologies
Linden Venture, L.P. and Vastar Gas Marketing, Inc. and Guaranty
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 Firm Gas Purchase and Sale Agreement between Camden Cogen, L.P. and
Columbia Energy Services Corporation and Guaranty Agreement between
Camden Cogen, L.P. and Columbia Gas Systems Corporation dated July
1, 1997.
10.29 Firm Gas Purchase and Sale Agreement between Camden Cogen, L.P. and
Texaco Natural Gas Inc. and Guaranty 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 (Confidential
Treatment for certain provisions of this agreement has been
requested pursuant to Rule 406 under the Securities Act).
*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.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
*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., as amended by First Amendment
to Mortgage dated April 19, 1993 and Assignment of Mortgage dated
December 22, 1993.
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 and Successor Security Deposit Agreement dated December
22, 1993.
10.48 Security Agreement dated as of the Conformed Agreement Date between
General Electric Capital Corporation and Camden Cogen, L.P.,
Amendment No. 1 dated April 1, 1993 and Amendment No. 2 dated
December 22, 1993.
10.49 Pledge and Security Agreement dated as of the Conformed Agreement
Date between General Electric Capital Corporation and Cogen
Technologies Camden Inc., Amendment No. 1 dated April 1, 1993 and
Amendment No. 2 dated December 22, 1993.
10.50 Mortgage from Camden Cogen L.P., Mortgagor, to General Electric
Power Funding Corporation, Mortgagee, Dated as of February 4, 1992.
10.51 Second Mortgage from Camden Cogen L.P., Mortgagor, to Public
Service Electric and Gas Company, Mortgagee, Dated as of February
4, 1992.
10.52 Interest Rate and Currency Exchange Agreement dated April 1, 1993
General Electric Capital Corporation and Camden Cogen, L.P.,
Confirmation Letter dated April 1, 1993 and Amendment No. 1 dated
December 22, 1993.
10.53 Firm Gas Purchase and Sale Agreement and Performance Guarantee
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., as amended by
Amendment dated May 26, 1986 and Consent to Assignment dated
December 15, 1988.
10.55 Agreement for the Sale of Steam between Cogen Technologies NJ
Venture and Exxon Company U.S.A., as amended by Amendment dated
August 21, 1988.
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
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, as amended by
Amendment dated December 15, 1988.
*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 $5,000,000 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 and
Consent to Assignment 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, as amended by Amendment dated April 22, 1995 and Waiver
dated July 28, 1995.
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, as amended by
Amendment dated February 9, 1989.
10.78 Kerosene Fuel Storage Agreement dated May 5, 1994 between IMTT-
Bayonne and Cogen Technologies NJ Venture.
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <S>
12.1 Computation of Ratio of Earnings to Fixed Charges.
+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).
24.1 Power-of-attorney (contained on page II-7).
</TABLE>
- --------
* Previously filed
+ 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 of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Houston, State of Texas on the 13th day of August, 1998.
Cogen Technologies, Inc.
(Registrant)
By:
/s/ Robert C. McNair
----------------------------------
ROBERT C. MCNAIR
Chairman of the Board
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Robert C. McNair and Richard A. Lydecker, Jr.,
and each of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to (i) this Registration Statement and (ii) a
second Registration Statement on Form S-1 with respect to additional Senior
Notes or shares of Common Stock pursuant to Rule 462 under the Securities Act,
and to file the same and all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting said
attorney-in-fact and agent, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorney-in-
fact and agent or either of them, or their or his substitutes, may lawfully do
or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<S> <C>
SIGNATURE TITLE
DATE
/s/ Robert C. McNair Chairman of the August 13, 1998
- ----------------------------------- Board, Chief
ROBERT C. MCNAIR Executive Officer
and Director
(Principal Executive
Officer)
/s/ Richard A. Lydecker, Jr. Senior Vice President August 13, 1998
- ----------------------------------- and Chief Financial
RICHARD A. LYDECKER, JR. Officer (Principal
Financial and
Accounting Officer)
/s/ Philip J. Burguieres Director August 13, 1998
- -----------------------------------
PHILIP J. BURGUIERES
/s/ Ernest H. Cockrell Director August 13, 1998
- -----------------------------------
ERNEST H. COCKRELL
/s/ Malcolm Gillis Director August 13, 1998
- -----------------------------------
MALCOLM GILLIS
Director
- -----------------------------------
CHARLES BERDON LAWRENCE
/s/ Constantine S. Nicandros Director August 13, 1998
- -----------------------------------
CONSTANTINE S. NICANDROS
</TABLE>
II-7
<PAGE>
INDEX TO EXHIBITS
<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 (Confidential Treatment for certain
provisions of this agreement has been requested pursuant to Rule
406 under the Securities Act)
*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 and
Assignment and Conveyance dated December 22, 1993.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
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, as amended by Amendment dated
April 30, 1993.
10.18 Promissory note dated May 22, 1986 by Cogen Technologies N.J., Inc.
in favor of Bayonne Industries, Inc.
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 Firm Gas Purchase and Sale Agreement and Performance Guarantee
between Cogen Technologies Linden Venture, L.P. and Anadarko Energy
Services Company dated July 1, 1997.
10.22 Firm Gas Purchase and Sale Agreement between Cogen Technologies
Linden Venture, L.P. and Engage Energy US, L.P. and Guaranty
Agreement between Cogen Technologies Linden Venture, L.P. and The
Coastal Corporation dated July 1, 1997.
10.23 Firm Gas Purchase and Sale Agreement between Cogen Technologies
Linden Venture, L.P. and Columbia Energy Services Corporation and
Guaranty Agreement between Cogen Technologies Linden Venture, L.P.
and Columbia Gas Systems Corporation dated July 1, 1997.
10.24 Firm Gas Purchase and Sale Agreement between Cogen Technologies
Linden Venture, L.P. and Sonat Marketing Company L.P. and Guaranty
Agreement between Cogen Technologies Linden Venture, L.P. Sonat,
Inc. dated July 1, 1997.
10.25 Amended and Restated Firm Gas Purchase and Sale Agreement between
Cogen Technologies Linden Venture, L.P. and Texaco Natural Gas Inc.
and Guaranty Agreement between Cogen Technologies Linden Venture,
L.P. and Texaco Exploration and Production Inc. dated July 1, 1997.
10.26 Firm Gas Purchase and Sale Agreement between Cogen Technologies
Linden Venture, L.P. and Vastar Gas Marketing, Inc. and Guaranty
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 Firm Gas Purchase and Sale Agreement between Camden Cogen, L.P. and
Columbia Energy Services Corporation and Guaranty Agreement between
Camden Cogen, L.P. and Columbia Gas Systems Corporation dated July
1, 1997.
10.29 Firm Gas Purchase and Sale Agreement between Camden Cogen, L.P. and
Texaco Natural Gas Inc. and Guaranty 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 (Confidential
Treatment for certain provisions of this agreement has been
requested pursuant to Rule 406 under the Securities Act).
*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.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
*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., as amended by First Amendment
to Mortgage dated April 19, 1993 and Assignment of Mortgage dated
December 22, 1993.
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 and Successor Security Deposit Agreement dated December
22, 1993.
10.48 Security Agreement dated as of the Conformed Agreement Date between
General Electric Capital Corporation and Camden Cogen, L.P.,
Amendment No. 1 dated April 1, 1993 and Amendment No. 2 dated
December 22, 1993.
10.49 Pledge and Security Agreement dated as of the Conformed Agreement
Date between General Electric Capital Corporation and Cogen
Technologies Camden Inc., Amendment No. 1 dated April 1, 1993 and
Amendment No. 2 dated December 22, 1993.
10.50 Mortgage from Camden Cogen L.P., Mortgagor, to General Electric
Power Funding Corporation, Mortgagee, Dated as of February 4, 1992.
10.51 Second Mortgage from Camden Cogen L.P., Mortgagor, to Public
Service Electric and Gas Company, Mortgagee, Dated as of February
4, 1992.
10.52 Interest Rate and Currency Exchange Agreement dated April 1, 1993
General Electric Capital Corporation and Camden Cogen, L.P.,
Confirmation Letter dated April 1, 1993 and Amendment No. 1 dated
December 22, 1993.
10.53 Firm Gas Purchase and Sale Agreement and Performance Guarantee
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., as amended by
Amendment dated May 26, 1986 and Consent to Assignment dated
December 15, 1988.
10.55 Agreement for the Sale of Steam between Cogen Technologies NJ
Venture and Exxon Company U.S.A., as amended by Amendment dated
August 21, 1988.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
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, as amended by
Amendment dated December 15, 1988.
*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 $5,000,000 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 and
Consent to Assignment 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, as amended by Amendment dated April 22, 1995 and Waiver
dated July 28, 1995.
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, as amended by
Amendment dated February 9, 1989.
10.78 Kerosene Fuel Storage Agreement dated May 5, 1994 between IMTT-
Bayonne and Cogen Technologies NJ Venture.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
12.1 Computation of Ratio of Earnings to Fixed Charges.
+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).
24.1 Power-of-attorney (contained on page II-7).
</TABLE>
- --------
* Previously filed
+ To be filed by amendment.
<PAGE>
EXHIBIT 10.16
EASEMENT AGREEMENT
------------------
THIS EASEMENT AGREEMENT (this "Agreement") is made and entered into as of
the 21st day of June, 1991 (the "Effective Date"), by and among TEXAS EASTERN
CRYOGENICS, INC., a Delaware corporation ("TEC") TEXAS EASTERN TRANSMISSION
CORPORATION, a Delaware corporation ("TET") and HOUSTON CENTER CORPORATION, a
Delaware corporation ("HCC") (TEC, TET and HCC are hereinafter referred to
collectively as "Grantors") and COGEN TECHNOLOGIES LINDEN VENTURE, L.P., a
Delaware limited partnership ("Grantee").
W I T N E S S E T H:
---------------------
WHEREAS, TEC is the fee owner of those certain tracts of land situated in
the Borough and County of Richmond, New York described as "Parcel A" and "Parcel
D" on Exhibit A attached hereto; and
WHEREAS, TET is the fee owner of that certain tract of land situated in the
Borough and County of Richmond, New York, described as "Parcel B" on Exhibit A
attached hereto; and
WHEREAS, HCC is the fee owner of that certain tract of land situated in the
Borough and County of Richmond, New York described as "Parcel C" on Exhibit A
attached hereto (Parcels A, B, C and D are hereinafter referred to collectively
as the "Property"); and
WHEREAS, Grantee desires to obtain and Grantors desire to grant to Grantee
an easement (the "Interconnection Easement") over, under, upon, through and
across the land (the "Interconnection Area") which constitutes a portion of the
Property and which is described on Exhibit B attached hereto, for the purposes
of constructing, operating and maintaining within the Interconnection Area
certain underground wires and cables and above ground facilities as more ful1y
set forth herein, all to enable the transmission of ELECTRIC POWER PRODUCED at a
certain electric generating cogeneration facility to be located in Linden, New
Jersey and any expansions of such facility (such facility and any and all
expansions thereof are hereinafter referred to collectively as the "Facility")
to or through Consolidated Edison Company of New York, Inc., a New York
corporation ("ConEd") and its successors or assigns.
NOW THEREFORE, for and in consideration of the sum of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties intend to be legally bound by this
Agreement and agree as follows:
1. Definitions. The following term used in this Agreement shall have the
following meanings:
A. "Easement Rights" means the rights described as follows:
<PAGE>
(1) the right of ingress and egress for
pedestrian, vehicular and other traffic over those portions of
the Property as Grantee may reasonably require, with
Grantors' consent, such consent not to be unreasonably
withheld, delayed or conditioned, to (i) set, construct, install,
erect, operate, maintain, inspect, alter, repair, replace and
remove the Improvements (as such term is defined herein)
and (ii) otherwise transmit or receive electrical power to,
through or from the Interconnection Area; and
(2) the right to set, construct, install, erect,
operate, maintain, inspect, alter, repair, replace and remove
the Improvements within the Interconnection Area; and
(3) the right to use the Staging Areas (as
such term is defined herein) to store, set, place, inspect and
operate material and equipment used by Grantee or its
agents during the construction and removal of the
Improvements and during periods of time when Grantee is
repairing, altering, replacing or maintaining the
Improvements; and
(4) the right to trim and cut vegetation
growing on, within or over the Interconnection Area or the
Staging Areas and to remove fences and other obstructions
thereon as is reasonable in the exercise of the Easement
Rights without unreasonably impeding Grantors' use of the
Property.
B. "Improvements" means the permanent structures, pipes, wires,
lines, conduits, manholes and other electrical interconnection
facilities and any other improvements constructed or placed on the
Interconnection Area by Grantee or its agents.
C. "Staging Areas" means that portion or those portions
of the Property upon which Grantee shall either locate material or
equipment during periods of time when Grantee is constructing or
removing the Improvements or during periods of time when Grantee is
repairing, replacing, altering or maintaining the Improvements. The
location of such Staging Areas shall be determined so as to minimize
their inconvenience to Grantors and such locations shall be subject to
the reasonable approval, in writing, of Grantors, which approval shall
not be unreasonably withheld, delayed or conditioned.
2. Grant of Easement.
A. TEC hereby grants, warrants, bargains, sells and
conveys unto Grantee, its successors and assigns, the Interconnection
-2-
<PAGE>
Easement over, under, upon, through and across Parcel A and Parcel D and
otherwise grants, warrants, bargains, sells and conveys unto Grantee, its
successors and assigns, the Easement Rights covering Parcel A and Parcel D,
subject to all easements and other encumbrances of record or shown on that
certain survey of the Property evidenced by Exhibit C attached hereto; and
B. TET hereby grants, warrants, bargains, sells and conveys unto
Grantee, its successors and assigns, the Interconnection Easement over,
under, upon, through and across Parcel B and otherwise grants, warrants,
bargains, sells and conveys unto Grantee, its successors and assigns, the
Easement Rights covering Parcel B, subject to all easements and other
encumbrances of record or shown on that certain survey of the Property
evidenced by Exhibit C attached hereto; and
C. HCC hereby grants, warrants, bargains, sells and conveys unto
Grantee, its successors and assigns, the Interconnection Easement over,
under, upon, through and across Parcel C and otherwise CM grants, warrants,
bargains, sells and conveys unto Grantee, its successors and assigns, the
Easement Rights covering Parcel C, subject to all easements and other
encumbrances of record or shown on that certain survey of the Property
evidenced by Exhibit attached hereto.
3. Compensation to Grantors. Subject to paragraph 6 of this Agreement,
Grantee shall recompense TET for all damage to any portion of the Property or
improvements thereon caused by Grantee's activities under this Agreement or the
activities of Grantee's agents, employees, servants or contractors, and TET
shall be responsible to apportion and pay such sum to TEC, TET and/or HCC on
whose portion of the Property or improvements thereon such damage occurred.
4. Term. The term of the Interconnection Easement and the Easement
Rights granted herein (the "Term") shall extend until the earlier of the date on
which (a) Grantee or its successors or assigns notifies Grantors that Grantee or
its successors or assigns has ceased use of the Interconnection Easement and the
Easement Rights for the purposes contemplated by this Agreement, (b) Grantee or
its successors or assigns fails to use the Interconnection Easement and the
Easement Rights for two (2) consecutive years for the purposes contemplated by
this Agreement or (c) Grantee or its successors or assigns ceases to utilize the
Facility for the purpose of producing electric power for sale to or through
ConEd or its successors or assigns for two (2) consecutive years; provided,
however, in the case of (b) or (c) referenced in this sentence, the Term shall
not terminate at the expiration of the applicable two (2) year period described
therein in the event (y) of force majeure, including, but not 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 Grantee and
-3-
<PAGE>
(z) Grantee or its successors or assigns is exercising reasonable efforts to
cure the problem which gave rise to the failure to either use the
Interconnection Easement and the Easement Rights pursuant to clause (b) of this
sentence or utilize the Facility pursuant to clause (c) of this sentence.
5. Improvements. The Improvements are and shall remain the
property of Grantee, which shall be responsible for and shall pay all taxes,
applicable assessments and other governmental charges resulting from ownership
or use of the Improvements. In addition, Grantee shall pay to TET all real
estate taxes attributable to the Interconnection Area (the "Taxes") (calculated
by multiplying all real estate taxes assessed on the Property, excluding any
such taxes on any improvements situated on the Property, by the ratio of the
acreage of the Interconnection Area to the acreage of the Property) for each
calendar year during the Term but prorated for the first calendar year of the
Term as of the Effective Date and prorated for the last calendar year of the
Term as of the last day of the Term pursuant to paragraph 4 of this Agreement.
Each such payment of Taxes shall be made by Grantee to TET promptly after
Grantee's receipt from Grantors of a copy of bills for the Taxes from applicable
governmental authorities, and TET shall be responsible to apportion such payment
among the respective parties comprising Grantors hereunder. TET shall provide
Grantee with written evidence of Grantors' payment of all such bills to the
appropriate governmental authorities promptly after Grantors' payment of the
same.
6. Restoration. Upon expiration of this Agreement, Grantee shall
remove the Improvements from the Interconnection Area and restore the grading
and contouring of the land included in the Interconnection Area and the Staging
Areas to the grading and contouring of such land prior to installation of the
Improvements. Neither Grantee nor its successors or assigns shall have the
obligation to restore the vegetation (except as required by law) removed
pursuant to paragraph 1.A.4 of this Agreement.
7. Indemnification. Grantee shall defend, indemnify and hold
Grantors and their employee's and agents harmless from and against all claims,
actions, liabilities, losses, damages and expenses (including reasonable
attorneys' fees) whether for injury to person or damage to property incurred by
or asserted against Grantors or their employees or agents which is either (a)
caused by the activities of Grantee or its employees or agents upon the Property
or (b) due to the placement by Grantee of any Improvements or other materials
upon the Property. Notwithstanding the foregoing, Grantee shall not be liable to
Grantors or their employees or agents for any environmental loss, damage, cost
or expense which results from the condition of the Property existing prior to
the Effective Date or from the activities of Grantors or their employees or
agents on or with respect to the Property. Nothing contained herein shall be
deemed to indemnify any party hereto against its own gross negligence or willful
misconduct.
-4-
<PAGE>
8. Grantors' Right to Terminate. All rights created hereunder are
strictly for the transmission of electric power from the Facility to or through
ConEd and its successors or assigns, and usage for any other purposes shall
entitle Grantors, upon thirty days' notice to Grantee or its successors or
assigns, to terminate this Agreement.
9. Representations. TEC hereby represents that it is the fee owner of
those certain tracts of land described as "Parcel A" and "Parcel D" on Exhibit A
attached hereto, subject to the liens, easements and other encumbrances shown on
Exhibit C attached hereto. TET hereby represents that it is the fee owner of
that certain tract of land described as "Parcel B" on Exhibit A attached hereto,
subject to the liens, easements and other encumbrances shown on Exhibit C
attached hereto. HCC hereby represents that it is the fee owner of that certain
tract of land described as "Parcel C" on Exhibit A attached hereto, subject to
the liens, easements and other encumbrances shown on Exhibit C attached hereto.
Grantors hereby represent that Exhibit C attached hereto correctly and
accurately identifies and locates all easements, pipelines and other structures
of Grantors affecting the Property.
10. Use of Easement. All Improvements shall be installed so as not to
interfere with the operations of Grantors or the rights of any party having an
interest superior to the interests created hereunder in favor of Grantee.
Further, Grantors fully reserve all rights reasonably necessary to allow each of
them to cross the Interconnection Area with both personnel and machinery as may
be reasonably necessary for their respective routine operations on the Property;
provided, however, that any such crossing must be performed to cause minimal
inconvenience to Grantee and its successors, assigns and agents. Without
limiting any of the foregoing, Grantors and Grantee acknowledge and agree that
Exhibit C attached hereto indicates the intended location of some or all of the
Improvements. Before installing any Improvements not indicated on Exhibit C
attached hereto, Grantee shall submit to Grantors written plans regarding the
location of such Improvements and shall obtain Grantors' written approval
regarding the same, which approval shall not be unreasonably withheld, delayed
or conditioned.
11. Burial of Pipes. The underground pipes, wires and cables installed
under this Agreement shall be buried and maintained by Grantee or its
successors, assigns or agents at a depth of at least three feet below the
surface of the Interconnection Area or at any greater depth which may be
required by applicable governmental statutes or regulations or standard
industrial practice.
12. Recording. This Agreement will be recorded in the Richmond County,
New York, County Clerk's Office, Mortgages and Deeds, Registrar's Department.
13. Assignments. This Agreement shall be freely assignable by Grantee
to (a) ConEd, (b) any entity lending money to Grantee for the
-5-
<PAGE>
construction, operation, maintenance, repair, replacement or removal of the
Facility, (c) any entity subsequently providing funds for the refinancing or
taking-out of such loans, (d) any limited partner of Grantee or (e) any other
entity, provided that in the case of (e) Grantors shall consent to such
assignment, such consent not to be unreasonably withheld, delayed or
conditioned. Any assignee of this Agreement shall take such assignment subject
to all the terms and conditions set forth herein. The Interconnection Easement
and the Easement Rights created herein shall be irrevocable, running with the
land, and shall bind all permitted subsequent purchasers, transferees,
successors and assignees of the parties hereto.
14. Notices. All notices, requests, consents, demands and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be given to each applicable party hereto at its address or
facsimile number set forth in this paragraph or at such other address or
facsimile number as such party may hereafter specify for such purpose by notice
to the other parties, and shall be either delivered personally or sent by
facsimile or mail, postage prepaid, and shall be deemed to have been made or
given (a) if given by facsimile, when sent and the appropriate confirmation is
received, and (b) if given by any other means, when delivered.
Unless changed in accordance with this paragraph, the addresses
for all such communications shall be as follows:
If to Grantors, to each of the following:
Texas Eastern Cryogenics, Inc.
5400 Westheimer Court
Houston, Texas 77056
Facsimile No.: (713) 627-4752
Attention: Mr. George L. Mazanec
and
Texas Eastern Transmission Corporation
5400 Westheimer Court
Houston, Texas 77056
Facsimile No.: (713) 627-4691
Attention: Mr. George L. Mazanec
and
Houston Center Corporation
5400 Westheimer Court
Houston, Texas 77056
Facsimile No.: (713) 627-4691
Attention: Mr. Herb E. Schulze, Jr.
-6-
<PAGE>
If to Grantee:
Cogen Technologies Linden Venture, L.P.
1600 Smith Street, Suite 5000
Houston, Texas 77002
Facsimile No.: (713) 951-7747
Attention: Mr. Joe Bollinger
15. Modifications. Any changes to this Agreement must be made
in writing and executed by the parties hereto.
16. Exhibits. All Exhibits attached to and referenced in this
Agreement are incorporated herein and made a part hereof for all purposes.
17. Paragraph Headings. Paragraph headings contained in this
Agreement are for convenience only and shall not be considered in
interpreting or construing this Agreement.
18. Consent to Jurisdiction. Grantors and Grantee hereby
irrevocably submit to the jurisdiction of any state or federal court sitting in
Harris County, Texas, in any action or proceeding arising out of or related to
this Agreement, and agree that no such party shall bring any such action or
proceeding in any other court, or seek to remove such action or proceeding to
any other court; provided, however, notwithstanding any other provision of this
Agreement to the contrary, this Paragraph 18 will not be binding on (a) any
transferee, successor or assignee of Grantee or of the general partner of
Grantee pursuant to foreclosure or a conveyance in lieu of foreclosure or
incident to the exercise of any remedy under the security documentation executed
by Grantee or the general partner of Grantee or (b) any partner of Grantee
which, pursuant to its rights under the partnership documentation of Grantee,
removes, replaces or substitutes for Cogen Technologies Linden, Ltd., as
managing general partner of Grantee, or which, pursuant to such documentation,
purports to act, in the place of Cogen Technologies Linden, Ltd., as the
managing general partner of Grantee.
19. Choice of Law. This Agreement shall be interpreted, construed
and enforced in accordance with the internal laws of the State of New York,
without regard to conflicts of law rules.
20. Severability. If any provision of this Agreement is determined
by a court of competent jurisdiction to be invalid or unenforceable, the
remainder of this Agreement shall nonetheless remain in full force and effect.
21. Future Development. Grantors and Grantee recognize that
Grantors may in the future desire to develop the Property for usage for or in
connection with an electric generating facility or for other purposes including,
but not limited to, the purposes set forth in that certain Agreement to
-7-
<PAGE>
Investigate between Grantors and Grantee attached hereto as Exhibit D. In the
event of any such development and upon written request of Grantors or their
affiliates, Grantee agrees to relocate to other portions of the Interconnection
Area as many of Grantee's underground lines installed in the Interconnection
Area as may be reasonably necessary for such development, all at Grantors' sole
cost and expense; provided, however, that such relocation may not result in any
unreasonable or permanent disruption of Grantee's intended or actual permitted
uses of the Interconnection Area and the Easement Rights.
22. Trust Funds. Grantor, in compliance with Section 13 of the
Lien Law, covenants that Grantor will receive the consideration for conveyance
of this Easement and will hold the right to receive such consideration as a
trust fund to be applied first for the purpose of paying the cost of the
improvement and will apply the same first to the payment of the cost of the
improvement before using any part of the total of the same for any other
purpose.
EXECUTED on the dates of the acknowledgments set forth below, to be
effective for all purposes as of the Effective Date.
ATTEST: TEXAS EASTERN CRYOGENICS, INC.,
A Delaware Corporation
/s/ ROBERT W. REED By /s/ G. L. MAZANEC
- ------------------------- ---------------------------
Secretary Name: G. L. Mazanec
Title: President
(SEAL)
ATTEST: TEXAS EASTERN TRANSMISSION
CORPORATION, a Delaware corporation
/s/ ??? By /s/ G. L. MAZANEC
- --------------------------- -----------------------------
Assistant Secretary Name: G. L. Mazanec
Title: President
(SEAL)
(Signatures continued next page)
-8-
<PAGE>
ATTEST: HOUSTON CENTER CORPORATION,
a Delaware corporation
/s/ ROBERT W. REED By P.B. WRIGHT
- ------------------------------ --------------------------
Secretary Name: P.B. Wright
Title: Vice President
(SEAL)
COGEN TECHNOLOGIES LINDEN
VENTURE, L.P., a Delaware limited
partnership
By: COGEN TECHNOLOGIES
LINDEN, LTD., its sole general
partner
ATTEST: By: COGEN TECHNOLOGIES, INC.,
its sole general partner
/s/ SIGNATURE APPEARS HERE By /s/ LAWRENCE D. THOMAS
- ---------------------------- ---------------------------------
Asst. Secretary Name: Lawrence D. Thomas
Title: Vice President
(Seal)
-9-
<PAGE>
THE STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
On this 18th day of June, 1991, before me personally appeared G.L. Mazanec
to me known and who, being me duly worn, did depose and say that he resides at
302 Fall River Ct, Houston, Texas, and is the President of Texas Eastern
Cryogenics, Inc., a Delaware corporation, which executed the forgoing instrument
by order of the board of directors of said corporation, and that he signed his
name thereto by like order.
/s/ PRISCILLA J. MASSEY
-------------------------------
Notary Public
My Commission Expires:
4/19/92
[NOTARY SEAL APPEARS HERE]
THE STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
On this 18th day of June, 1991, before me personally appeared G.L. Mazanec
to me known and who, being by me duly sworn, did depose and say that he resides
at 302 Fall River Ct. Houston, Texas, and is the President of Texas Eastern
Transmission Corporation, a Delaware corporation, which executed the forgoing
instrument by order of the board of directors of said corporation, and that he
signed his name thereto by like order.
/s/ PRISCILLA J. MASSEY
-------------------------------
Notary Public
My Commission Expires:
4/19/92
[NOTARY SEAL APPEARS HERE]
-10-
<PAGE>
THE STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
On this 18th day of June, 1991, before me personally appeared P.B. Wright to
me known and who, being by me duly worn, did depose and say that he resides at
2918 Ann Arbor, Houston, Texas, and is the V.P. of Houston Center Corporation, a
Delaware corporation, which executed the forgoing instrument by order of the
board of directors of said corporation, and that he signed his name thereto by
like order.
/s/ R.J. DOUGLAS
-------------------------------
Notary Public
My Commission Expires:
June 21, 1992
THE STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
On this 17th day of June, 1991, before me personally appeared Lawrence D.
Thomas, to me known and who, being by me duly sworn, did depose and say that he
resides at 3826 Olympia, Houston, Texas, and is the Vice President of Cogen
Technologies, Inc., general partner of Cogen Technologies Linden, Ltd., which in
turn is general partner of Cogen Technologies Linden Venture, L.P., a Delaware
limited partnership, which executed the foregoing instrument by order of the
board of directors of general partner Cogen Technologies, Inc., and that he
signed his name thereto by like order.
/s/ ELAINE A. CAMPBELL
-------------------------------
Notary Public
My Commission Expires:
July 27, 1993
- ----------------------
[NOTARY SEAL APPEARS HERE]
WHEN RECORDED, RETURN TO:
D. GREGORY BARKER
FULBRIGHT & JAWORSKI
1301 MCKINNEY, SUITE 5100
HOUSTON, TEXAS 77010-3095
-11-
<PAGE>
EXHIBIT A
---------
The following described Parcels A, B, C and D are as shown on a certain survey
drawing entitled MAP OF PROPOSED EASEMENTS THROUGH LANDS OF TEXAS EASTERN
CRYOGENICS, INC., TEXAS EASTERN TRANSMISSION CORPORATION AND HOUSTON CENTER
CORPORATION. BOROUGH OF RICHMOND, COUNTY OF RICHMOND, STATEN ISLAND, NEW YORK,
DATED APRIL 15, 1990.
Parcel A
All that certain lot piece or parcel of land situated lying and being in
the Borough and County of Richmond City and State of New York bounded and
described as follows:
BEGINNING at a point in the westerly side of the Right of Way of the
Staten Island Rapid Transit Railroad where the same is intersected by the
northerly high water line of Ball's or Merrill's Creek, the coordinates of said
point being south 15,085.26 and west 42,420.96; thence from said point of
beginning northerly along the westerly side of said Right of Way the following
courses and distances: north 15 degrees 03 minutes 30 seconds west 45.16 feet:
Thence on a curve to the right having a radius of 1489.19 feet a distance
of 1455.51 feet; thence north 40 degrees 56 minutes 30 seconds east 119.48 feet
to a point, the coordinates of said point being south 13,588.64 and west
41,861.25:
Thence through property of the Gulf Oil Corporation the following courses
and distances: north 48 degrees 46 minutes 00 seconds west passing through a
monument distance of 851.07 feet to a monument
Thence south 40 degrees 59 minutes 00 SECONDS WEST 1232.50 feet to a
monument:
Thence north 49 degrees 01 minute 00 seconds vast 25.00
feet to a monument;
Thence south 40 degrees 59 minutes 00 seconds west 84.59 feet to a
monument: thence on a curve to the right having a radius of 135.83 feet a
distance of 123.07 feet to a monument;
Thence north 87 degrees 06 minutes 00 seconds west passing through a
monument distant 271.32 feet from the last one a total distance of 337.87 feet
to the highwater line of Arthur Kill as it existed on October 26, 1965;
Thence along said highwater line and along highwater line of Prall's
River and Ball's or Merrill's Creek the following courses and distances:
south 06 degrees 27 minutes 00 seconds east 177.26 feet:
south 11 degrees 37 minutes 00 Seconds west 402.24 feet;
south 21 degrees 15 minutes 00 seconds east 212.24 feet;
south 19 degrees 39 minutes 10 seconds west 74.33 feet;
<PAGE>
south 61 degrees 57 minutes 35 seconds east 104.24 feet;
south 83 degrees 09 minutes 00 seconds east 360.57 feet;
south 70 degrees 42 minutes 30 seconds east 105.95 feet;
south 64 degrees 09 minutes 50 seconds east 211.10 feet;
south 48 degrees 24 minutes 30 seconds east 225.97 feet:
south 81 degrees 18 minutes 20 seconds east 85.99 feet;
south 52 degrees 07 minutes 30 seconds east 102.62 feet;
south 27 degrees 45 minutes 30 seconds east 128.83 feet;
north 72 degrees 01 minutes 30 seconds east 54.83 feet;
north 66 degrees 02 minutes 00 seconds east 204.71 feet;
north 29 degrees 22 minutes 50 seconds east 50.61 feet:
north 20 degrees 27 minutes 00 seconds east 50.00 feet;
north 13 degrees 43 minutes 00 seconds east 65.61 feet;
north 59 degrees 49 minutes 00 seconds east 180.91 feet; and
north 84 degrees 29 minutes 40 seconds east 10.61 feet to the
point and place of beginning.
The coordinates and bearings are in the system
established by the united States Coast and Geodetic
Survey for the borough of Richmond.
SUBJECT TO: rights of the State of New York to the lands
in the beds of tidal streams or former tidal streams
formerly running through the said promises, including
without limitation those known as Flat Creek, Mark's
Creek and Bates Creek;
SUBJECT TO: an easement and right of way granted to
Buckeye Pipeline Company by deed dated August 20, 1964
and recorded November 2, 1964 in Liber 1667 Cp 264; all
other easements, if any, of record; and easements and
rights of way granted by unrecorded instruments (a) to
Transcontinental Gas Pipeline Company for its 26 inch gas
pipeline, (b) to Colonial Pipeline Company for its
pipelines in part paralleling the easement granted to the
party of the second part for its 30 inch gas pipeline;
and (c) to Consolidated Edison Company at New York, Inc.
located generally across the south of the premises above
described for and on which is located a high voltage
electric transmission line.
PARCEL B
All that certain plot, piece or parcel of land. with buildings and improvements
thereon erected, situate, lying and described as follows: allows:
A 3.27 acre parcel of land out of that certain 58.456 acre tract or parcel
of land in that indenture recorded in Liber 1720, Page 102 of Deeds in the
Richmond County Clerks Office and situated in Tax Block 1835, Lot 50 of
Richmond County, New York, and being more particularly described as
follows:
<PAGE>
Beginning at the most northerly corner of the above
described tract of land:
Thence along a westerly line of said tract of land
S40 degrees 59'00"W, 1232.50 feet to a point;
Thence W49 degrees 01'00"W, 25.00 feet to a point;
Thence S40 degrees 59'00"W, 84,59 feet to a point of curvature
of a curve to the right;
Thence along said curve to the right having a radius of
135.83 feet and a central angle of 51 degrees 55'00" a distance
of 123.07 feet to a point of tangency;
Thence along a northerly line of said tract of land
N87 degrees 06'W, 337.87 feet to a northwesterly corner thereof;
Thence along a westerly line of said tract of land
S06 degrees 27'00"E, 177.26 feet to a point;
Thence S11 degrees 37'W, 15 feet to a point;
Thence leaving said westerly line, S87 degrees 06'E, 318 feet to
a point;
Thence N40 degrees 59'E, 295 feet to a point;
Thence S49 degrees 01'E, 10 feet to a point:
Thence N40 degrees 59'E, 60 feet to a point;
Thence N49 degrees 01'W, 10 feet to a point;
Thence N40 degrees 59'E, 537 feet to a point;
Thence S49 degrees 01'E, 10 feet to a point;
Thence N40 degrees 59'E, 60 feet to a point;
Thence N49 degrees 01'W, 10 feet to a point;
Thence N40 degrees 59'E, 618 feet to a point in a northerly line
of said tract of land;
Thence along said northerly line N48 degrees 46'00"W, 45 feet to the
Point of Beginning. The herein described tract of land containing 3.27
acres of land, more or less.
Coordinates and bearings used in the above Parcel are in the System as
established by the United States Coast and Geodetic Survey for the
Borough of Richmond.
SUBJECT, HOWEVER, to all matters of record and the terms and provisions thereof.
PARCEL C
All that certain lot, piece, or parcel of land, situate, lying and being in the
Borough and County of Richmond, City and State of New York, bounded and
described as follows:
BEGINNING at the corner formed by the intersection of the easterly side
of Second Avenue and the Southerly side of Fifth Street, the coordinates
of which are South 11001.722 and West 43240.155;
Running thence along the southerly side of Fifth Street South 49 degrees
03 minutes 30 seconds East 2736.80 feet to the easterly side of Eighth
Avenue;
<PAGE>
Thence along the easterly side of Eighth Avenue South 40
decrees 56 minutes 30 seconds West 1050.52 feet;
Thence North 48 degrees 46 minutes 00 seconds West 851.37
feet;
Thence South 40 degrees 59 minutes 00 seconds West
1232.50 feet;
Thence North 49 degrees 01 minutes 00 seconds West 25
feet;
Thence South 40 decrees 59 minutes 00 seconds West 84.59
feet to a point of curve;
Thence an a curve to the right having a radius of 135.23
feet subtending a central angle of 51 degrees 55 minutes
00 seconds for an arc length of 123.07 feet to a point
of tangency;
Thence North 87 degrees 06 minutes 00 seconds West 636.87
feet to the Pier and Bulkhead Line approved by the
Secretary of The Army March 24, 1954;
Thence along the same North 3 degrees 17 minutes 00
seconds West 1366.38 feet and North 8 degrees 20 minutes
00 seconds East 53.45 feet;
Thence South 83 degrees 53 minutes 04 seconds East 347.85
feet; thence along a line drawn Southerly in prolongation
of the Westerly side at Water Street North 6 degrees 06
minutes 56 seconds East 1067.28 feet to the southerly
prolongation of the easterly side of Second Avenue;
Thence along the same North 40 degrees 55 minutes 30
seconds East 763.64 feet to the southerly side of Fifth
Street and the point or place of Beginning.
COORDINATES and bearings used in the above Parcel are in the System
as established by the United States Coast and Geodetic Survey for
the Borough of Richmond; the streets referred to herein are private
streets and are referred to merely to aid in the description, but
the distances and bearings are intended to prevail.
TOGETHER WITH: (i) all riparian rights, water privileges and
appurtanances to the Subject Property belonging, and (ii) all the
estate and rights of Seller in and to the subject Property.
SUBJECT, HOWEVER, to all matters of record and the terms and
provisions of that certain Roadway and Utility Easement Agreement
dated July 24, 1987, entered into by and between Chevron U.S.A.,
Inc., Texas Eastern Cryogenics, Inc. and Fannin Square Corporation,
and recorded in Reel 811, Cp 286.
PARCEL D
All those parcels or land, formerly under the waters of Flat Creek,
Mark's Creek and Bate's Creek (tributaries of Arthur Kill) in the
County of Richmond, City and State of New York, lying within the
following described boundaries___________________________________
Beginning at a monument in the division line between lands of Gulf Oil
Corporation and Texas Eastern Cryogenics, Inc., said point being N 85 degrees
36' 01" E,
<PAGE>
1303.40' from United States Army Engineer Baseline
Station "Flug" (coordinates S 13,127.49, W 43,801.04);
thence along said division line, S 40 degrees 59' 00" W,
1232.50' to a monument; thence N 49 degrees 01' 00" W - 25.00'
to a monument; thence S 40 degrees 59' 00" W 84.59' to a
monument; thence on a curve to the right having a radius
of 135.83' a distance of 123.07' to a monument; thence
N 87 degrees 06' 00" W, passing through a monument distant
271.32' from the last one a total distance of 337.87' to
the high water line of Arthur Kill as it existed on
October 26, 1965; thence along said high water line and
along the high water line of Prall's River and Ball's or
Merrill's Creek the following courses and distances: S
06 degrees 27' 00" E, 177.25; S 11 degrees 37' 00" W, 402.24'; S 21
degrees 15' 00" E, 212.24'; S 19 degrees 39' 10" W, 74.33'; S 61 degrees
57' 35" E, 104.24'; S 83 degrees 09' 00" E, 360.57'; S 70 degrees 42'
30" E, 105.95'; S 64 degrees 09' 50" E, 211.10'; S 48 degrees 24' 30" E,
225.97'; S 81 degrees 18' 20" E, 85.99'; S 52 degrees 07' 30" E,
102.62'; S 27 degrees 45' 30" E, 128.83'; N 72 degrees 01' 30" E,
54.83'; N 66 degrees 02' 00" E, 204.71'; N 29 degrees 22' 50" E, 50.61';
N 20 degrees 27' 00" E, 50.00'; N 13 degrees 43' 00" E, 65.61'; N 59
degrees 49' 00" E, 180.91'; and N 84 degrees 29' 40" E, 10.61' to its
intersection with the Westerly right of way of the Staten Island Rapid
Transit Railroad (coordinates S 15,085.26, W 42,240.96); thence along
said right of way the following courses and distances; N 15 degrees
03' 30" W, 45.16'; thence on a curve to the right having a radius of
1489.19', a distance of 1455.51'; thence N 40 degrees 56' 30" E.,
119.48' to a point in the before mentioned division line between Gulf
Oil Corporation and Texas Eastern Cryogenics, Inc., coordinates of said
point being (S 13,588.64, W 41,861.25); thence along said division line
N 48 degrees 46' 00" W, 851.07' to the point of beginning.
The Area of Lands Formerly Under the Waters of Flat Creek, Mark's Creek, and
Bate's Creek. Within the Above Described Boundary is 1.10 Acres, More or Less.
The coordinates and bearings are in the system established by the United States
Coast and Geodetic Survey for the Borough of Richmond.
<PAGE>
EXHIBIT B
---------
BEING a 30' wide strip of land through Lots 50 and 300, Block 1835 as
delineated on the tax maps of the Borough of Richmond, County of Richmond, New
York, the centerline of which is more described as follows:
BEGINNING at a point in the division line between lands leased to the
Consolidated Edison Corporation contained in Liber 1776, page 371 and Lot 50,
Block 1835, now or formerly Texas Eastern Cryogenics Inc., said point being
four hundred sixty-seven and eighteen hundredths (467.18') feet along said
division line from the easterly sideline of lands now or formerly of the
Staten Island Rapid Transit Railroad and running; thence the following six
courses by a new line through said Lots 50 and 300, Block 1835.
1) North fifty-eight degrees, thirty-three minutes, fifty-nine seconds West (N
58 degrees 33' 59" W), six hundred ten and zero hundredths (610.00') feet to
a point of curve in same; thence
2) Westerly and northerly along a curve to the right having a radius of three
hundred seventy-five and zero hundredths (375,00') feet; an arc length of
four hundred forty-seven and seventy-nine hundredths (447.79') feet to a
point of compound curve in same; thence
3) Northerly along a curve to the left having a radius of three hundred
fifty and zero hundredths (350.00') feet, an arc length of two hundred one
and eighty-four hundredths (201.34') feet to a point of compound curve in
same; thence
[Exhibit B continued next page]
<PAGE>
4) Northerly along a curve to the right having a radius of seven hundred fifty
and zero hundredths (750.00') feet, an arc length of four hundred seven and
fifty-six hundredths (407.56') feet to a point of compound curve in same,
said line crossing the division lime between Lots 50 and 300 one hundred
thirteen and fifth hundredths (113.50') feet from its beginning; thence
5) Northerly and westerly along a curve to the left having a radius of three
hundred fifty and zero hundredths (350.00') feet, an arc length of three
hundred fifty-eight and seventy-seven hundredths (358.77') feet to a point
of compound curve in same; thence
6) Westerly and northerly along a curve to the right having a radius of six
hundred and zero hundredths (600.00') feet, an arch length of three hundred
thirty-five and ten hundredths (335.10') feet to a point in same; thence
7) Still a new line through Lot 300, Block 1835, now or formerly HCC Dev., Inc.
now being the centerline of a 50' wide permanent easement, North forty-eight
degrees, nine minutes, seven seconds West (N 48 degrees 09' 07"), one hundred
eighty six (136' plus or minus) feet more or less to a point in the
approximate mean high water line of the Arthur Kill and there to end.
Containing 1.84 plus or minus acres.
[Exhibit B continued next page]
<PAGE>
All in accordance with a map entitled "Map of Proposed Easements Through Lands
of Texas Eastern Cryogenics, Inc., Texas Eastern Transmission Corp., Houston
Center Corporation, Inc., Borough of Richmond, Staten Island, Richmond County,
New York", dated April 15, 1990, by Keller & Kirkpatrick, Parsippany, revised to
March 22, 1991.
<PAGE>
EASEMENT CROSSING AGREEMENT
This Agreement entered into this 17 day of December, 1990, by and between
Coastal Pipeline Company ("Coastal"), a Delaware corporation and Cogen
Technologies Linden Venture L.P. ("Cogen") a Delaware limited partnership.
WHEREAS, Coastal possesses an easement from the State of New York for its
12" Harbor Pipeline which passes under the Arthur Kill between Linden, New
Jersey and Staten Island, New York (hereinafter referred to as "Easement"), a
copy of the instrument creating the Easement is attached hereto as Exhibit "A";
and
WHEREAS, Cogen is desirous of crossing the Easement with underground
electrical transmission lines and related facilities from its Linden, New Jersey
cogeneration facility to an electric utility substation on Staten Island, New
York (hereinafter referred to as the "Project"); and
WHEREAS, Coastal has filed a remonstrance to the application of Cogen for a
license from the State of New York Office of General Services, Bureau of Land
Management to cross said Easement, expressing safety, environmental and other
concerns held by Coastal;
WHEREAS, the parties desire to address their mutual and individual concerns
by express provisions detailed in this written agreement;
NOW THEREFORE, the parties do hereby agree as follows:
1. Conditioned upon and in consideration of the full and faithful
performance by Cogen of the agreements set forth herein, Coastal agrees to
withdraw its remonstrance and file its written
<PAGE>
consent to the Project with the Bureau of Land Management, New York State Office
of General Services.
2. Cogen acknowledges that it has been advised that Coastal has future
plans to relocate its pipeline within the Easement to a depth of approximately
sixty five feet (65') below M.S.L. Therefore, Cogen agrees that its Project
shall cross the Easement at a depth of no less than seventy five feet (75')
below M.S.L. so as to avoid interference with Coastal's future plans. Cogen
further agrees that it has no objection to and will fully cooperate with Coastal
in its future efforts for relocation of its pipeline within the Easement.
3. Cogen agrees to notify Coastal's representative when the project
drilling begins, to keep said representative apprised of the progress of the
drilling and to allow said representative to be in attendance at the drill site.
Cogen shall specially notify the Coastal representative of the period of time
during which the drilling is expected to be within one hundred (100) feet from
the pipeline route. Cogen also agrees to notify said representative as its best
estimate of when the drilling will be taking place directly beneath Coastal's
pipeline.
Cogen agrees to reimburse Coastal for all reasonable costs incurred by
Coastal in retaining a qualified representative to serve the function described
in the preceding paragraph.
4. Cogen assumes full and complete responsibility for any and all damages
caused to Coastal by the drilling and other activities associated with the
construction of its Project. Cogen further agrees to indemnify and hold Coastal,
its agents and
-2-
<PAGE>
employees harmless for any and all demands, claims, costs, penalties, fines,
liabilities and expenses (including but not limited to attorneys' fees) for
personal injuries, deaths, property damage or otherwise which may arise or occur
during or as a result of the drilling and/or construction of the Project,
including those claims alleged to arise or occur from the joint or concurrent
negligence of the parties hereto.
5. At such time as Coastal proceeds with the repair, replacement or
maintenance of its pipeline within the Easement, Cogen shall, upon ninety (90)
days advance notice of such operation by Coastal, cooperate with Coastal so that
any work performed by or on behalf of Coastal, within one hundred feet (100') of
either side of Cogen's transmission lines may be safely performed. Cogen agrees
that, upon the written findings of two mutually acceptable independent
recognized experts, one in power transmission and one in horizontal drilling,
that drilling within an area identified in the written findings may be unsafe,
Cogen will cease transmitting electricity through the cables when the drilling
or other work associated with the Coastal pipeline is within said area. Coastal
agrees that it will make all reasonable efforts to minimize Cogen's downtime, if
any. All cost and expenses incurred in securing the services of the two experts
shall be shared equally by Coastal and Cogen.
6. Coastal shall be responsible for any and all direct damages to Cogen
caused by Coastal's negligence in its repair, replacement or maintenance of its
pipeline. Provided, however, that Coastal shall not be liable for any indirect,
consequential or
-3-
<PAGE>
special damages which may be incurred by Cogen, and Cogen hereby waives and
releases Coastal from any such damages.
7. This Agreement may be assigned by either party provided written notice
of such assignment is provided to the other party no later than ten (10) days
prior to the effective date of such assignment. Assignment shall not release
either party from responsibility for the obligations provided for herein.
8. This Agreement shall be governed by and construed in accordance with the
laws of the State of Texas, regardless of conflict of laws provisions.
Jurisdiction and venue shall be proper, and the parties hereby agree and submit
to same, in the appropriate Courts of Harris County, Texas.
This Agreement shall be effective upon the full and complete execution of
duplicate originals hereof.
COASTAL PIPELINE COMPANY
BY: /s/ HUGH C. WILLIAMS
-----------------------------
NAME: Hugh C. Williams
TITLE: Senior Vice President
DATE: December 14, 1990
-4-
COGEN
<PAGE>
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
BY ITS GENERAL PARTNER,
COGEN TECHNOLOGIES LINDEN, LTD.
BY ITS GENERAL PARTNER
COGEN TECHNOLOGIES, INC.
BY: /s/ J.M. BOLLINGER
------------------------------
NAME: JOSEPH M. BOLLINGER
------------------------------
TITLE: VICE PRESIDENT/GENERAL MANAGER
------------------------------
DATE: DECEMBER 14, 1990
------------------------------
-5-
COGEN
<PAGE>
CONFIDENTIAL
ASSIGNMENT AND CONVEYANCE
-------------------------
THE STATE OF NEW YORK (S)
(S) KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF RICHMOND (S)
That COGEN TECHNOLOGIES LINDEN VENTURE, L.P., a Delaware limited
partnership having its principal office at 1600 Smith Street, Suite 500,
Houston, Texas, 77002 ("Assignor"), for and in consideration of Ten Dollars
($10.00) and other good and valuable consideration in hand paid by CONSOLIDATED
EDISON COMPANY OF NEW YORK, INC., a New York corporation having its principal
office at 4 Irving Place, New York, New York, 10003 ("Assignee"), the receipt
and sufficiency of which are hereby acknowledged and confessed by the Assignor,
does hereby TRANSFER, ASSIGN, SELL, SET OVER, GRANT, CONVEY and DELIVER unto the
Assignee all of the Assignor's right, title and interest in and to the
following:
(i) that certain Indenture dated May 9, 1991, between The People of the
State of New York, as grantor, and Assign or, as grantee (the "Indenture"),
recorded in Richmond County, New York at reel 2991, page 0291, and in the
Department of State in Volume 33 of Miscellaneous Deeds and Title Papers at
page 60, covering and describing those certain tracts or parcels of land
located in Richmond County, New York, and being more fully described on
Exhibits A-1 and A-2 attached hereto and made a part hereof for all purposes
(the "State Property"),
(ii) that certain Easement Agreement dated as of June 21, 1991 by and among
Texas Eastern Cryogenics, Inc., Texas Eastern Transmission Corporation, and
Houston Center Corporation, as grantors, and Assignor, as grantee (the
"Easement Agreement"), recorded in Richmond County, New York at reel 3008, page
277, covering and describing those certain tracts or parcels of land located
in Richmond County, New York and being more fully described on Exhibits B-1 and
B-2 attached hereto and made a part hereof for all purposes (herein together
with the State Property called the "Land"),
(iii) that certain Easement Crossing Agreement dated December 17, 1990 by
and between Coastal Pipeline Company and Assignor (the "Coastal Crossing
Agreement"),
(iv) that certain letter agreement dated June 12, 1991 by and between
Colonial Pipeline Company and Assignor and pertaining to the crossing of a
right-of-way (the "Colonial Crossing Agreement"), and
(v) the permanent structures, cables, pipes, wires, lines, conduits,
manholes and other electrical interconnection facilities and any other
improvements owned by Assignor and located over, under, upon or within the
Land, but only to the extent so located over, under, upon or within the Land.
<PAGE>
CONFIDENTIAL
Assignee hereby assumes all of Assignor's obligations, and agrees to comply
with all terms, conditions and covenants, under the Indenture, the Easement
Agreement, the Coastal Crossing Agreement and the Colonial Crossing Agreement
arising from and after the date hereof.
Assignee hereby agrees to provide Assignor, in a timely manner, with a copy
of any notice or other communication received by Assignee under the Indenture,
the Easement Agreement, the Coastal Crossing Agreement and the Colonial Crossing
Agreement. Such notice shall be effectuated pursuant to the terms of Article
24.3 of that certain Power Purchase Agreement between Assignor and Assignee,
dated April 14, 1989, as such agreement has been and may be amended from time to
time (the "Power Purchase Agreement").
This Agreement is made by the Assignor without representation or warranty,
express or implied with respect to the subject matter hereof, except for the
rights and obligations of Assignor and Assignee as set forth in the Power
Purchase Agreement, which Power Purchase Agreement shall survive the execution
and delivery of this Assignment and Conveyance.
Executed as of the 22nd day of December, 1993.
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
a Delaware Limited Partnership
By: COGEN TECHNOLOGIES LINDEN, LTD.,
its sole general partner
By: COGEN TECHNOLOGIES, INC.,
its sole general partner
By: /s/ Nadeem Babar
--------------------------------
Name: Nadeem Babar
Title: Vice-President
CONSOLIDATED EDISON COMPANY OF
NEW YORK, INC.
By: /s/ WILLIAM A. HARKINS
-------------------------------
Name: William H. Harkins
Title: Vice President
-2-
<PAGE>
CONFIDENTIAL
THE STATE OF NEW YORK (S)
(S)
COUNTY OF NEW YORK (S)
On this 22nd day of December, 1993, before me personally appeared Nadeem
Babar, to me known and who, being by me duly sworn, did depose and say that he
resides at 3525 Sage Road #616, Houston, TX 77056, and is the Vice President of
Cogen Technologies, Inc., a Texas corporation and general partner of Cogen
Technologies Linden, Ltd., a Delaware limited partnership, which in turn is
general partner of Cogen Technologies Linden Venture, L.P., a Delaware limited
partnership, which executed the foregoing instrument by order of the board of
directors of Cogen Technologies, Inc., and that he signed his name thereto by
like order.
/s/ SIGNATURE APPEARS HERE
--------------------------
Notary Public
My Commission Expires: October 31, 1995
THE STATE OF NEW YORK (S)
(S)
COUNTY OF NEW YORK (S)
On this 22nd day of December, 1993, before me personally appeared William A.
Harkins, to me known and who, being by me duly sworn, did depose and say that he
resides at 417 Second Street, Oradell, New Jersey 07649, and is the Vice
President of Consolidated Edison Company of New York, Inc., a New York
corporation, which executed the foregoing instrument by order of the board of
directors of said corporation, and that he signed his name thereto by like
order.
/s/ SIGNATURE APPEARS HERE
--------------------------
Notary Public
My Commission Expires: October 31, 1995
<PAGE>
EXHIBIT 10.17
================================================================================
AMENDED AND RESTATED
SECURITY DEPOSIT AGREEMENT
AND ESCROW AGREEMENT
dated as of September 17, 1992
among
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
a Delaware Limited Partnership,
COGEN TECHNOLOGIES LINDEN, LTD.,
a Texas Limited Partnership,
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION (not in its individual
capacity but solely as Owner Trustee),
as Limited Partner,
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION (not in its individual
capacity but solely as Owner Trustee),
as Lender,
and
MIDLANTIC NATIONAL BANK,
as Security Agent and
as Escrow Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
Definitions..................... 3
ARTICLE II
Appointment of Escrow Agent;
Appointment of Security Agent;
Establishment of Accounts
Section 2.01. Appointment of Escrow Agent and Security Agent... 8
Section 2.02. Creation of Accounts............................. 9
Section 2.03. Security Interest................................ 10
Section 2.04. No Control over Accounts......................... 10
ARTICLE III
Deposits into Accounts
Section 3.01. Deposits on Second Capital Contribution Date.... 11
Section 3.02. Revenues........................................ 11
Section 3.03. Information to Accompany Amounts Delivered to
Escrow Agent or Security Agent;
Deposits Irrevocable....................... 11
Section 3.04. Books of Account; Statements.................... 12
ARTICLE IV
Payments from Accounts
Section 4.01. Revenue Account-Monthly Transfers............... 12
Section 4.02. Revenue Account-Monthly Payments................ 14
Section 4.03. Debt Service Account............................ 17
Section 4.04. Completion Account.............................. 18
Section 4.05. Insurance and Condemnation Proceeds Account..... 18
Section 4.06. Operation and Maintenance Account............... 19
Section 4.07. Windup Account.................................. 20
Section 4.08. Interest in All Accounts........................ 20
Section 4.09. Delivery of Officer's Certificates; Timing of
Payments...................................... 21
Section 4.10. Shortfalls...................................... 21
Section 4.11. Required Payments Account....................... 21
Section 4.12. Escrow Required Payments Account................ 22
Section 4.13. Special Events.................................. 23
Section 4.14. Distributions to the Lender or the Limited
Partner....................................... 23
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE V
Investment...................... 24
ARTICLE VI
Agent
Section 6.01. Rights, Duties, Etc.............................. 24
Section 6.02. Resignation or Removal........................... 25
ARTICLE VII
Determinations
Section 7.01. Value............................................ 26
Section 7.02. Other Determinations............................. 26
Section 7.03. Cash Available................................... 27
ARTICLE VIII
Representations and Warranties
Section 8.01. Representations.................................. 27
Section 8.02. Indemnification.................................. 27
ARTICLE IX
Miscellaneous
Section 9.01. Fees and Indemnification of Agent................ 28
Section 9.02. Termination...................................... 28
Section 9.03. Severability..................................... 28
Section 9.04. Counterparts..................................... 29
Section 9.05. Amendments....................................... 29
Section 9.06. APPLICABLE LAW................................... 29
Section 9.07. Notices.......................................... 29
Section 9.08. Benefit of Agreement............................. 29
</TABLE>
-ii-
<PAGE>
AMENDED AND RESTATED SECURITY DEPOSIT AGREEMENT AND ESCROW AGREEMENT
dated as of September 17, 1992, among Cogen Technologies Linden Venture, L.P., a
Delaware limited partnership (the "Partnership") of which Cogen Technologies
Linden, Ltd. (d/b/a Cogen Technologies Linden, Limited Partnership, in the State
of New Jersey), a Texas limited partnership, is the general partner (until such
time as the Limited Partner defined below notifies the Agent defined below of a
successor or substitute, the "General Partner" or the "Managing General
Partner"), the General Partner, State Street Bank and Trust Company of
Connecticut, National Association, not in its individual capacity but solely as
trustee under the Trust Agreement (as defined below) (together with its
successors and assigns, the "Owner Trustee"), as the limited partner of the
Partnership (in such capacity, the "Limited Partner"), the Owner Trustee, as
lender under the General Partner Credit Agreement referred to below (in such
capacity, the "Lender"), and Midlantic National Bank, as security agent (in such
capacity, the "Security Agent") and as escrow agent hereunder (in such capacity,
the "Escrow Agent"; together with the Security Agent, the "Agent").
W I T N E S S E T H
-------------------
WHEREAS, the Partnership, General Electric Power Funding Corporation
("GEPFC") and the Security Agent are parties to the Security Deposit Agreement,
dated as of February 15, 1990 (as amended, supplemented or otherwise modified to
the date hereof, the "Original Security Deposit Agreement");
WHEREAS, pursuant to the Capital Contribution Agreement, dated as of
February 15, 1990 (as amended, supplemented or otherwise modified from time to
time, the "Capital Contribution Agreement"), among the Partnership, the General
Partner, the Owner Trustee, as assignee of GEPFC, GEPFC and the Lender Agent (as
hereinafter defined), the Owner Trustee, as assignee of GEPFC, agreed, subject
to the satisfaction of certain conditions precedent, to make capital
contributions to the Partnership on the Initial Capital Contribution Date (as
defined in the Capital Contribution Agreement) in exchange for a limited
partnership interest in the Partnership and, subject to the satisfaction of
certain other conditions precedent, to make additional capital contributions to
the Partnership on or prior to the Second Capital Contribution Date (as defined
in the Capital Contribution Agreement);
WHEREAS, it is a condition precedent to the making by the Owner
Trustee of its capital contributions on the Initial Capital Contribution Date
that the General Partner, Robert C. McNair (the "Initial Limited Partner") and
the Limited Partner shall have executed and delivered the Amended and Restated
Agreement of Limited Partnership substantially in the form of Exhibit A to the
Capital Contribution Agreement (as amended,
<PAGE>
2
supplemented or otherwise modified from time to time, the "Partnership
Agreement");
WHEREAS, it is a condition precedent to the making by the Owner
Trustee of its capital contributions on the Second Capital Contribution Date
that the parties hereto shall have executed and delivered this Agreement, which
provides for the deposit, investment and disbursement of revenues, cash,
payments, insurance and condemnation proceeds, securities, investments and other
amounts during the term of the Partnership;
WHEREAS, pursuant to the terms of the Original Security Deposit
Agreement, upon the satisfaction of the conditions precedent to the Second
Capital Contribution Date (including, without limitation, the execution and
delivery of this Agreement), the terms and conditions of the accounts created
pursuant to the Original Security Deposit Agreement are to be governed by this
Agreement;
WHEREAS, the Lender and the General Partner are parties to an Amended
and Restated Term Loan Agreement, dated as of September 15, 1992 (as amended,
supplemented or otherwise modified from time to time, the "General Partner
Credit Agreement"), pursuant to which the Lender has agreed to make
pre-completion loans, post-completion loans and working capital loans (the
"Loans") to the General Partner;
WHEREAS, the obligations of the General Partner under the General
Partner Credit Agreement, including its obligation to repay the Loans with
interest thereon, are secured by a pledge of the General Partner's general
partner interest in the Partnership, including, without limitation, the General
Partner's right to receive a management fee from the Partnership pursuant to the
Partnership Agreement;
WHEREAS, in order to give effect to said pledge, the General Partner
has agreed that (i) the portion of the distributions in respect of its general
partner interest in the Partnership which is equal to interest due and payable
on each Interest Payment Date (as hereinafter defined) and interest and
principal due and payable on each Installment Payment Date (as hereinafter
defined) and (ii) from time to time, upon the occurrence of certain events, all
of the distributions to be made by the Partnership to the General Partner, in
each case, shall be paid directly to the Security Agent, as agent for the
Lender, held by the Security Agent in trust as collateral security for the
obligations referred to in the preceding recital, and distributed by the
Security Agent as provided herein;
WHEREAS, the General Partner has agreed that, under certain
circumstances after the fifteenth anniversary of the Second Capital Contribution
Date, amounts which would otherwise be distributions in respect of its general
partner interest in
<PAGE>
3
the Partnership shall be held in an escrow account maintained by the Escrow
Agent;
WHEREAS, effective upon repayment of the loans made under the
Construction Loan Agreement, dated as of February 15, 1990 (as amended,
supplemented or otherwise modified from time to time the "Construction Loan
Agreement"), among the Partnership, the lenders parties thereto and GEPFC, as
agent (in such capacity, the "Lender Agent"), the Lender Agent shall release its
liens on and security interest in the revenues and other amounts on deposit in
the accounts created pursuant to the Original Security Deposit Agreement, such
release to be evidenced by the Lender Agent's written consent to the execution
and delivery of this Agreement;
WHEREAS, the parties to the Original Security Deposit Agreement have
agreed to amend and restate the Original Security Deposit Agreement as
hereinafter set forth;
WHEREAS, Midlantic National Bank has agreed to act as security agent
and as escrow agent pursuant to the term of this Agreement;
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto hereby agree to amend and restate the Original Security Deposit Agreement
in its entirety as follows:
ARTICLE I
Definitions
-----------
Unless otherwise defined herein, capitalized terms used herein shall
have the meanings assigned to them in the Partnership Agreement (such
definitions to be equally applicable to the singular and plural forms of the
terms defined).
In addition, the following terms when used herein shall have the
following meanings:
"Accounts": the collective reference to the Debt Service Account,
Escrow Required Payments Account, Required Payments Account, Insurance and
Condemnation Proceeds Account, Revenue Account, Operation and Maintenance
Account, Completion Account and Windup Account.
"Agreement", "hereto", "hereunder" and words of similar import: this
Amended and Restated Security Deposit Agreement, as the same may from time
to time be amended, supplemented or otherwise modified in accordance with
the provisions hereof.
<PAGE>
4
"Annual Period": any twelve month period commencing with the Second
Capital Contribution Date and each anniversary thereof.
"Cash Equivalents": (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) money market funds
invested in instruments that meet the criteria above, such money market
funds may include funds registered under the Investment Company Act of
1940, as amended, having Midlantic National Bank as investment advisor for
which it may receive compensation from such funds in addition to its fee as
Security Agent; 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.
"Completion Account": the special account designated by that name
established by the Escrow Agent pursuant to Section 2.02.
"Completion Budget": the budget delivered to, and approved by, GEPFC
and the Owner Trustee pursuant to the Capital Contribution Agreement.
"Debt Service Account": the special account designated by that name
established by the Security Agent pursuant to Section 2.02.
"Eighth Year Required Payments Ratio": the ratio of:
(a) the sum of (i) Distributable Cash for the Annual Period commencing
with the seventh anniversary of the Second Capital Contribution Date, (ii)
the aggregate amount of cash income from Permitted Investments earned on
the Working Capital Fund during such Annual Period and (iii) the
<PAGE>
5
aggregate amount of interest paid by the Partnership to the General Partner
on loans made from the Working Capital Fund during such Annual Period to
(b) the sum of (i) the aggregate distributions of Distributable Cash
projected to be made pursuant to Section 4.3(a) of the Partnership
Agreement during the Annual Period commencing with the ninth anniversary of
the Second Capital Contribution Date, plus (ii) the sum of (x) the
aggregate amount of interest projected to be payable on the Loans during
such Annual Period and (y) the aggregate amount of scheduled repayments
projected to be made on the Post-Completion Note during such Annual Period
(such projections to be prepared by the General Partner to the satisfaction
of the Lender on the basis of the interest rate and amortization schedule
in effect with respect to the General Partner Credit Agreement at the time
of calculation).
"Escrow Accounts": all Accounts other than the Debt Service Account
and the Required Payments Account.
"Escrow Required Payments Account": the special account designated by
that name established by the Escrow Agent pursuant to Section 2.02.
"First Year Required Payments Ratio": the ratio of:
(a) the sum of (i) Distributable Cash for the Annual Period commencing
with the Second Capital Contribution Date, (ii) the aggregate amount of
cash income from Permitted Investments earned on the Working Capital Fund
during such Annual Period and (iii) the aggregate amount of interest paid
by the Partnership to the General Partner on loans made from the Working
Capital Fund during the Annual Period to
(b) the sum of (i) the aggregate distributions of Distributable Cash
projected to be made pursuant to Section 4.3(a) of the Partnership
Agreement during the Annual Period commencing with the second anniversary
of the Second Capital Contribution Date, plus (ii) the sum of (x) the
aggregate amount of interest projected to be payable on the Loans during
such Annual Period and (y) the aggregate amount of scheduled repayments
projected to be to be made on the Post-Completion Note during such Annual
Period (such projections to be prepared by the General Partner to the
satisfaction of the Lender on the basis of the interest rate and
amortization schedule in effect with respect to the General Partner Credit
Agreement at the time of calculation).
"Fixed Charge Coverage Ratio": as defined in the General Partner
Credit Agreement.
"Installment Payment Date": as defined in the General Partner Credit
Agreement.
<PAGE>
6
"Insurance and Condemnation Proceeds Account": the special account
designated by that name established by the Escrow Agent pursuant to Section
2.02.
"Insurance and Condemnation Proceeds Deposits": as defined in Section
4.05(b).
"Interest Payment Date": as defined in the General Partner Credit
Agreement.
"Loans": as defined in the General Partner Credit Agreement.
"Obligations": as defined in the General Partner Credit Agreement.
"Operation and Maintenance Account": the special account designated by
that name established by the Escrow Agent pursuant to Section 2.02.
"Operation and Maintenance Account Deposit Amount": defined in Section
4.01(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 one year 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, (d) commercial
paper issued by GEPFC or the parent corporation of GEPFC, 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, and (e) money market funds invested in instruments that meet
the criteria above, such money market funds may include funds registered
under the Investment Company Act of 1940, as amended, having Midlantic
National Bank as investment advisor for which it may receive compensation
from such funds in addition to its fee as Security Agent.
"Post-Completion Note": as defined in the General Partner Credit
Agreement.
<PAGE>
7
"Quarterly Required Payments Ratio": with respect to any calendar
quarter after the Second Capital Contribution Date, the ratio of:
(a) the sum of (i) Distributable Cash for such calendar quarter, (ii)
the aggregate amount of cash income from Permitted Investments earned on
the Working Capital Fund during such calendar quarter and (iii) the
aggregate amount of interest paid by the Partnership to the General Partner
on loans made from the Working Capital Fund during such calendar quarter to
(b) the sum of (i) the aggregate distributions of Distributable Cash
made pursuant to Section 4.3(a) of the Partnership Agreement during such
calendar quarter, plus (ii) the sum of (x) the aggregate amount of interest
payable on the Loans during such calendar quarter and (y) the aggregate
amount of scheduled repayments to be made on the Post-Completion Note
during such calendar quarter.
"Required Payments Account": the special account designated by that
name established by the Security Agent pursuant to Section 2.02.
"Revenue Account": the special account designated by that name
established by the Escrow Agent pursuant to Section 2.02.
"Revenues": all revenues and all other payments at any time received
by or on behalf of the Partnership (other than (i) Working Capital
Proceeds, (ii) the proceeds of capital contributions received from any of
the Partners and (iii) the proceeds of insurance or of a Taking payable
into the Insurance and Condemnation Proceeds Account pursuant to Section
4.05), including, without limitation, all interest and other income on
funds on deposit in the Escrow Accounts, all payments received by the
Partnership under the Power Purchase Agreement and the Steam Supply
Agreement and all other payments received by the Partnership from the sale
of electricity, heat and/or steam produced by the Facility.
"Taking": a taking of title to, or use or occupancy of, all or any
part of the Project as a result of the exercise of the right of
condemnation or power of eminent domain or similar power or the exercise by
a governmental body of a non-contractual right to purchase all or any part
of the Project, or a sale or other transfer of all or any part of the
Project in lieu of condemnation or exercise of power of eminent domain.
"Transaction Documents": as defined in the General Partner Credit
Agreement.
<PAGE>
8
"Value": as described in Section 7.01.
"Windup Account": the special account designated by that name
established by the Escrow Agent pursuant to Section 2.02.
"Working Capital Fund": as defined in the General Partner Credit
Agreement.
"Working Capital Fund Deposit Amount": as defined in Section 4.01(c).
"Working Capital Loan": as defined in the General Partner Credit
Agreement.
"Working Capital Proceeds": the proceeds of any loans made by the
General Partner for working capital purposes from amounts on deposit in the
Working Capital Fund.
ARTICLE II
Appointment of Escrow Agent;
Appointment of Security Agent;
Establishment of Accounts
Section 2.01. Appointment of Escrow Agent and Security Agent. (a)
Midlantic National Bank is hereby appointed by the Partnership, the General
Partner and the Limited Partner as escrow agent hereunder, and the Escrow Agent
hereby agrees to act as such and to accept all revenues, cash, payments,
insurance and condemnation proceeds, securities, investments and other amounts
to be delivered to or held by the Escrow Agent in the Escrow Accounts pursuant
to the terms of this Agreement. The Escrow Agent shall hold and safeguard the
Escrow Accounts (and the revenues, cash, payments, insurance and condemnation
proceeds, instruments, securities and other amounts on deposit therein) during
the term of this Agreement as agent for the Partnership, and shall administer
the Escrow Accounts strictly in accordance with the terms hereof and of the
other Operative Documents. The Escrow Agent shall act as agent for the
Partnership and shall not be deemed to be an agent for any Partner, in its
individual capacity, for any purposes hereunder.
(b) Midlantic National Bank is hereby appointed by the Lender and the
General Partner as security agent hereunder, and the Security Agent hereby
agrees to act as such and to accept all payments to be delivered to or held by
the Security Agent in the Debt Service Account and the Required Payments Account
pursuant to the terms of this Agreement. The Security Agent shall hold and
safeguard the Debt Service Account (and the cash, payments, instruments,
securities and other amounts on deposit therein) and the Required Payments
Account (and the cash, payments instruments, securities and other amounts on
deposit therein)
<PAGE>
9
during the term of this Agreement as agent for the Lender, and shall administer
the Debt Service Account and the Required Payments Account strictly in
accordance with the terms hereof and of the other Transaction Documents. In
addition, the Security Agent shall treat the cash, instruments and securities in
the Debt Service Account and the Required Payments Account as funds, instruments
and securities pledged by the General Partner to the Lender, to be held by the
Security Agent, as agent of the Lender, in trust in accordance with the
provisions hereof.
Section 2.02. Creation of Accounts. (a) The Escrow Agent hereby
establishes the following six special, segregated and irrevocable escrow
accounts which shall be maintained at all times until the termination of this
Agreement (except the Completion Account which shall be closed after giving
effect to the transfer required to be made by the Escrow Agent pursuant to the
last sentence of Section 4.04):
(1) Revenue Account (Account No. 11014971),
(2) Insurance and Condemnation Proceeds Account
(Account No. 11014972),
(3) Operation and Maintenance Account (Account
No. 11014973),
(4) Completion Account (Account No. 11014974),
(5) Windup Account (Account No. 11014975), and
(6) Escrow Required Payments Account (Account No. 11014976).
All moneys, investments and securities at any time on deposit in any of the
Escrow Accounts shall constitute escrow funds to be held in the custody of the
Escrow Agent for the purposes and on the terms set forth in this Agreement.
(b) The Security Agent hereby establishes a special, segregated and
irrevocable cash collateral account (Account No. 11014977) entitled the "Debt
Service Account" which shall be maintained at all times until the earlier of (i)
the termination of this Agreement with respect to the Debt Service Account and
(ii) the payment in full of all Loans and any other amounts owing to the Lender
under the General Partner Credit Agreement and the termination of the General
Partner Credit Agreement. All moneys, investments and securities at any time on
deposit in the Debt Service Account shall constitute trust funds to be held in
the custody of the Security Agent for the purposes and on the terms set forth in
this Agreement.
(c) The Security Agent hereby establishes a special, segregated and
irrevocable cash collateral account (Account No. 11014978) entitled the
"Required Payments Account" which shall be maintained at all times until the
earlier of (i) the termination of this Agreement with respect to the Required
Payments Account and (ii) the payment in full of all Loans and any other amounts
owing to the Lender under the General Partner Credit Agreement and the
termination of the General Partner Credit Agreement. All
<PAGE>
10
moneys, investments and securities at any time on deposit in the Required
Payments Account shall constitute trust funds to be held in the custody of the
Security Agent for the purposes and on the terms set forth in this Agreement.
(d) The Lender shall notify the Security Agent of the payment in full
of all Loans and the termination of the General Partner Credit Agreement and of
the Debt Service Account.
Section 2.03. Security Interest. In order to secure the performance by
the General Partner of all of its covenants, agreements and obligations under
the General Partner Credit Agreement and the other Transaction Documents (other
than the Partnership Agreement and the Partnership Agreement (as defined in the
General Partner Credit Agreement)) and the payment by the General Partner of all
Obligations, this Agreement is intended to create, and the General Partner
hereby grants and pledges to, and creates in favor of the Lender, a security
interest in and to, all of its right, title and interest in and to (i) the Debt
Service Account and the Required Payments Account, and (ii) all cash, cash
equivalents, instruments, investments and other securities at any time on
deposit in the Debt Service Account and the Required Payments Account, and all
proceeds of any of the foregoing. All such moneys, cash equivalents,
instruments, investments and securities at any time on deposit in the Debt
Service Account and the Required Payments Account shall constitute collateral
security for the payment by the General Partner of the Obligations and the
performance and observance by the General Partner of all the covenants and
conditions contained herein with respect to the Debt Service Account and the
Required Payments Account, in the General Partner Credit Agreement and in the
other Transaction Documents (other than the Partnership Agreement and the
Partnership Agreement (as defined in the General Partner Credit Agreement)), and
shall at all times be subject to the control of the Lender, acting through the
Security Agent, pursuant to the terms hereof, and shall be held in the custody
of the Security Agent in trust for the purposes of, and on the terms set forth
in, this Agreement. For the purpose of perfecting the foregoing security
interest of the Lender in and to the Debt Service Account and the Required
Payments Account and all cash, investments and securities at any time on deposit
in the Debt Service Account and the Required Payments Account, the Security
Agent shall be deemed to be the agent of the Lender.
Section 2.04. No Control over Accounts. Neither the Partnership nor
the General Partner shall have any rights or powers with respect to any amounts
in the Accounts or any part thereof except (i) as provided in Sections 4.01(a),
4.02 (to the extent of distributions to the General Partner), 4.04, 4.05(d),
4.05(e), 4.06, 4.07(b) (to the extent of distributions to the General Partner),
4.08(a)(ii), 4.11(b), 4.11(c), 4.12(b), 4.12(c) and in Article V hereof and (ii)
the right to have such amounts applied in accordance with the provisions hereof.
<PAGE>
11
ARTICLE III
Deposits into Accounts
----------------------
Section 3.01. Deposits on Second Capital Contribution Date. (a) On the
Second Capital Contribution Date, after making all payments required to be made
on such date pursuant to Sections 4.02(a) and 4.03(a) of the Original Security
Deposit Agreement, the Escrow Agent shall transfer all remaining amounts on
deposit in the accounts maintained pursuant to the Original Security Deposit
Agreement to the Completion Account.
(b) On the Second Capital Contribution Date, the Owner Trustee shall
transfer or cause to be transferred to the Escrow Agent for deposit in the
Completion Account, the amount referred to in Section 2(a)(ii)(x)(B) of the
Capital Contribution Agreement.
Section 3.02. Revenues. The Managing General Partner shall instruct
each other Person from whom the Partnership receives any Revenues to pay such
Revenues directly to the Escrow Agent for deposit in the Revenue Account, and if
the Partnership or the Managing General Partner shall receive any Revenues it
shall deliver such Revenues in the exact form received (but with the
Partnership's or the Managing General Partner's endorsement, if necessary) to
the Escrow Agent for deposit in the Revenue Account not later than the second
Business Day after the Partnership's or the Managing General Partner's receipt
thereof. The Escrow Agent shall have the right to receive all Revenues directly
from the Persons owing the same. All Revenues received by the Escrow Agent shall
be deposited in the Revenue Account. After the occurrence of a Special Event,
upon receipt of a certificate of a Responsible Officer of the Limited Partner
stating that the Limited Partner chooses to dissolve the Partnership, the Escrow
Agent shall deposit all payments into the Windup Account.
Section 3.03. Information to Accompany Amounts Delivered to Escrow
Agent or Security Agent; Deposits Irrevocable. (a) All amounts delivered to the
Escrow Agent or the Security Agent shall be accompanied by information in
reasonable detail specifying the source of the amounts and the Account or
Accounts into which such amounts are to be deposited.
(b) Any deposit made into any Escrow Account hereunder shall be
irrevocable and the amount of such deposit and any instrument or security held
in such Account hereunder and all interest thereon shall be held in escrow by
the Escrow Agent and applied solely as provided herein. Any deposit made into
the Debt Service Account or the Required Payments Account hereunder shall be
irrevocable and the amount of such deposit and any instrument or security held
in such Accounts hereunder and all interest therein shall be held in trust by
the Security Agent and applied solely as provided herein.
<PAGE>
12
Section 3.04. Books of Account; Statements. (a) The Escrow Agent shall
maintain books of account for the Partnership on a cash basis and record therein
all deposits into and transfers to and from the Escrow Accounts and all
investment transactions effected by the Escrow Agent pursuant to Article V. The
Escrow Agent shall make such books of account available during normal business
hours with reasonable advance notice for inspection and audit by any Partner and
its representatives.
(b) The Security Agent shall maintain books of account for the General
Partner on a cash basis and record therein all deposits into and transfers to
and from the Debt Service Account and the Required Payments Account and all
investment transactions effected by the Security Agent pursuant to Article V.
The Security Agent shall make such books of account available during normal
business hours with reasonable advance notice for inspection and audit by the
General Partner and the Lender and their representatives.
(c) Not later than the fifteenth Business Day of each month, the Agent
shall deliver to each of the Partners and the Lender, a statement setting forth
the transactions in each Account during the preceding month and specifying the
Revenues, Insurance and Condemnation Proceeds Deposits, Cash Equivalents,
Permitted Investments and other amounts held in each Account at the close of
business on the last Business Day of the preceding month and the Value thereof
at such time.
ARTICLE IV
Payments from Accounts
----------------------
Section 4.01. Revenue Account--Monthly Transfers. (a) Except as
provided in paragraph (d) below, on the first Business Day of each calendar
month (a "Transfer Date"), the Escrow Agent shall transfer, from the cash
available in the Revenue Account, to the Managing General Partner the amount,
certified in a certificate of a Responsible Officer of the Managing General
Partner and accompanied by an accounting of the cumulative draws hereunder for
the current fiscal year and a certificate of such Responsible Officer to the
effect that no Special Event has occurred and is continuing, set forth in the
Operating Budget to be equal to the excess of (i) the Partnership's estimated
amounts payable pursuant to the Operating Budget for such month (other than in
respect of expenses provided for in Section 4.04) for operating, maintenance and
improvement expenses (excluding, to the extent of cash available in the
Operation and Maintenance Account, any operating, maintenance and improvement
expenses that are 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
<PAGE>
13
a party, payments required by FERC and any other governmental entity, fees and
expenses of trustees 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), over (ii) the sum of (A) the Operation and
Maintenance Account Deposit Amount, (B) the Working Capital Fund Deposit Amount,
(C) the amount of any funds previously transferred to the Managing General
Partner pursuant to this Section 4.01 that remain unspent and (D) the amount of
interest and other income on funds previously transferred to the Managing
General Partner pursuant to this Section 4.01; provide that if the Limited
Partner shall have delivered a certificate to the Escrow Agent stating that a
Special Event shall have occurred and be continuing or that the Arrears Account
has a positive balance, the amount set forth in clause (i) above shall be
reduced by the amount set forth in the Operating Budget for such month in
respect of the Cost Portion of the Management Fee; provided, further, that the
foregoing proviso shall not be applicable if the Preferred Limited Partner shall
have appointed a substitute Managing General Partner pursuant to Section 14.2 of
the Partnership Agreement.
(b) On each Transfer Date, after giving effect to the transfers to be
made on such date pursuant to paragraph (a) above, the Escrow Agent shall
transfer, from the cash available in the Revenue Account, to the Operation and
Maintenance Account, an amount (the "Operation and Maintenance Account Deposit
Amount"), certified in a certificate of a Responsible Officer of the Managing
General Partner, equal to $0.0005 per net kilowatt hour for the aggregate number
of kilowatt hours generated by the Facility during such calendar month.
(c) On each Transfer Date following the first Quarterly Period, after
giving effect to the transfers to be made on such date pursuant to paragraphs
(a) and (b) above, the Escrow Agent shall transfer, from the cash available in
the Revenue Account, to the General Partner for deposit in the Working Capital
Fund an amount (the "Working Capital Fund Deposit Amount"), certified in a
certificate of a Responsible Officer of the Managing General Partner, equal to
the aggregate unpaid principal amount of all loans made by the General Partner
to the Partnership for working capital purposes from amounts on deposit in the
Working Capital Fund, together with accrued interest thereon.
(d) If, as of the last Business Day of any Quarterly Period, as
determined within five Business Days after the end of such Quarterly Period, the
Fixed Charge Coverage Ratio is less than 1.5 to 1.0 or, if projections provided
by the Partnership during the course of any fiscal year show that the Fixed
Charge Coverage Ratio for any Quarterly Period will be less than 1.5 to 1.0, the
Escrow Agent, on the first Business Day of each succeeding calendar month
(unless the last sentence of this
<PAGE>
14
paragraph (d) shall be applicable), upon receipt from the Limited Partner of a
certificate to such effect, shall distribute on behalf of the Partnership, from
the cash available in the Revenue Account, to the Persons entitled thereto and
in the respective amounts as certified in writing by the Managing General
Partner, the excess of (i) amounts then due and owing by the Partnership in
respect of operating, maintenance and improvement expenses (excluding, to the
extent of cash available in the Operation and Maintenance Account, any operating
maintenance and improvement expenses that are 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 and escrow agents and
other reasonable expenses incurred in connection with the Project, over (ii) the
sum of (A) the Operation and Maintenance Account Deposit Amount and (B) the
Working Capital Fund Deposit Amount. Upon receipt by the Escrow Agent of a
certificate from the Limited Partner to the effect that the Fixed Charge
Coverage Ratio for the Quarterly Period then ended was equal to or greater than
1.5 to 1.0 and revised projections show that the Fixed Charge Coverage Ratio for
each of the remaining Quarterly Periods in the current fiscal year will be equal
to or greater than 1.5 to 1.0, the Escrow Agent shall comply with the provisions
of paragraph (a) of this Section 4.01.
(e) For the purposes of this Section 4.01, cash available in the
Revenue Account shall not include any check or other instrument which may be
deposited therein until the final collection thereof.
Section 4.02. Revenue Account--Monthly Payments. (a) Subject to the
provisions of paragraphs (b)-(e) below, once a month on a Business Day (each a
"Monthly Distribution Date") not later than the fifteenth day of such calendar
month (or if any such day is not a Business Day, on the next preceding Business
Day), after giving effect to all the transfers to be made on or prior to that
date pursuant to Section 4.01, the Escrow Agent shall transfer, from the Revenue
Account, the Distributable Cash of the Partnership to the Partners, and the
Profit Portion for such month to the General Partner, in each case in such
amounts and in such order of priority as are specified in the Partnership
Agreement and as are certified in a certificate of a Responsible Officer of the
Managing General Partner, accompanied by a certificate of such Responsible
Officer to the effect that no Special Event has occurred and is continuing;
provided, however, that the amount to be distributed to the General Partner
pursuant to Sections 4.3(a), 4.3(b) and 4.5 of the Partnership Agreement and the
amount to be paid as the Profit Portion, in each case as certified in such
certificate of such Responsible Officer, shall be reduced by the amounts
specified in clauses
<PAGE>
15
first and second below, which amounts shall also be certified in the aforesaid
certificate and shall be transferred by the Escrow Agent to the Debt Service
Account; provided, further, that if a Special Event shall have occurred and be
continuing, as certified by the Preferred Limited Partner, the Escrow Agent
shall make such transfers in such amounts and in such order of priority as are
specified in the Partnership Agreement and as are certified in a certificate of
a Responsible Officer of the Preferred Limited Partner or the substitute
Managing General Partner appointed pursuant to Section 14.2(b) of the
Partnership Agreement; provided, further, that if the Lender shall have notified
the Escrow Agent that a Default or Event of Default under the General Partner
Credit Agreement shall have occurred and be continuing, all amounts required to
be distributed to the General Partner pursuant to this Section shall be
transferred to the Debt Service Account;
first, an amount equal to one-third of the aggregate amount of accrued
and unpaid interest on the Loans which is due and payable (other than any
such interest which is due and payable in connection with a payment to be
made pursuant to clause second below) on the next succeeding Interest
Payment Date (together with any deficiency in accumulation of such amount
during any preceding month or months since the last Interest Payment Date),
plus, if such Interest Payment Date will occur on or before the last
Business Day of the next succeeding month, an amount equal to the excess of
(A) the aggregate amount of interest on the Loans which will be due and
payable (other than any such interest which is due and payable in
connection with a payment to be made pursuant to clause second below) on
such Interest Payment Date over (B) the aggregate amount then on deposit in
the Debt Service Account for the purpose of paying such interest; and
second, commencing with the first month immediately succeeding the
second anniversary of the Second Capital Contribution Date, an amount equal
to one-third of the aggregate principal amount of and interest on the Loans
(other than the Working Capital Loan) which is due and payable on the next
succeeding Installment Payment Date (together with any deficiency in
accumulation of such amount during any preceding month or months since the
last Installment Payment Date), plus, if such Installment Payment Date
will occur on or before the last Business Day of the next succeeding month,
an amount equal to the excess of (A) the aggregate principal amount of and
interest on the Loans which will be due and payable on such Installment
Payment Date over (B) the aggregate amount then on deposit in the Debt
Service Account for the purpose of paying such principal and interest
amount.
(b) If, as of the end of any calendar quarter, the Quarterly Required
Payments Ratio is less than (i) 1.1 to
<PAGE>
16
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 (the "First Period") or (ii) 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 (the "Second Period"), the Escrow
Agent, on the Monthly Distribution Date of the third month in such calendar
quarter and on each succeeding Monthly Distribution Date (unless the last
sentence of this paragraph (b) shall be applicable), upon receipt from the
Lender of a certificate to such effect, shall transfer all amounts that
would otherwise be distributed to the General Partner pursuant to Section
4.02(a) hereof (except for the amount in respect of the Profit Portion
which shall be paid, in accordance with the provisions of Section 4.02(a),
to the General Partner) to the Required Payments Account. Upon receipt by
the Escrow Agent of (i) a certificate from the Lender (except if paragraph
(c) or (d) of this Section 4.02 is applicable) to the effect that the
Quarterly Required Payments Ratio for the calendar quarter then ended was
greater than (x) 1.1 to 1.0 during the First Period or (y) 1.2 to 1.0
during the Second Period or (ii) a certificate from the Lender to the
effect that a Default or Event of Default under the General Partner Credit
Agreement shall have occurred and be continuing, the Escrow Agent shall
comply with the provisions of Section 4.02(a) hereof.
(c) If the First Year Required Payments Ratio is less than 1.1 to 1.0,
as certified in writing by the Lender, the Escrow Agent, on the Monthly
Distribution Date of each calendar month in the succeeding fiscal year,
shall transfer all amounts that would otherwise be distributed to the
General Partner pursuant to Section 4.02(a) hereof (except for the amount
in respect of the Profit Portion which shall be paid, in accordance with
the provisions of Section 4.02(a), to the General Partner) to the Required
Payments Account; provided, that if the Lender shall have notified the
Escrow Agent that a Default or Event of Default under the General Partner
Credit Agreement shall have occurred and be continuing, all such amounts
(including the Profit Portion) shall be transferred to the Debt Service
Account.
(d) If the Eighth Year Required Payments Ratio is less than 1.2 to
1.0, as certified in writing by the Lender, the Escrow Agent, on the
Monthly Distribution Date of each calendar month in the succeeding fiscal
year, shall transfer all amounts that would otherwise be distributed to the
General Partner pursuant to Section 4.02(a) hereof (except for the amount
in respect of the Profit Portion which shall be paid, in
<PAGE>
17
accordance with the provisions of Section 4.02(a), to the General Partner)
to the Required Payments Account; provided, that if the Lender shall have
notified the Escrow Agent that a Default or Event of Default under the
General Partner Credit Agreement shall have occurred and be continuing, all
such amounts (including the Profit Portion) shall be transferred to the
Debt Service Account.
(e) If, as of the end of any calendar quarter after the fifteenth
anniversary of the Second Capital Contribution Date, the ratio of: (x)
Distributable Cash for such calendar quarter to (y) the aggregate
distributions of Distributable Cash made pursuant to Section 4.3(a) of the
Partnership Agreement during such calendar quarter is less than 1.2 to 1.0,
the Escrow Agent, on the Monthly Distribution Date of the third month of
such quarter and on the Monthly Distribution Date of each succeeding
calendar month (unless the last sentence of this paragraph (e) shall be
applicable), upon receipt from the Limited Partner of a certificate to such
effect, shall transfer all amounts that would otherwise be distributed to
the General Partner pursuant to Section 4.02(a) hereof (except for the
amount in respect of the Profit Portion which shall be paid, in accordance
with the provisions of Section 4.02(a), to the General Partner) to the
Escrow Required Payments Account, provided that, if, at any time during
such period, any transfer would cause the amount on deposit in the Escrow
Required Payments Account to exceed $12,000,000, the amount of such
transfer attributable to such excess shall be paid to the General Partner
in accordance with the provisions of Section 4.02(a) and shall not be
transferred to the Escrow Required Payments Account pursuant to this
Section 4.02(e). Upon receipt by the Escrow Agent of a certificate from the
Limited Partner to the effect that the ratio described in the preceding
sentence for the calendar quarter then ended was greater than 1.2 to 1.0,
the Escrow Agent shall comply with the provisions of Section 4.02(a)
hereof.
Section 4.03. Debt Service Account. (a) On each Interest Payment Date,
the Security Agent shall distribute to the Lender for payment of interest on the
Loans from the cash available in the Debt Service Account, an amount equal to
such interest then due and payable as specified in writing by the Lender.
(b) On each Installment Payment Date, the Security Agent shall
distribute to the Lender for payment of principal of and interest on the Loans
from the cash available in the Debt Service Account, an amount equal to such
interest and principal then due and payable as specified in writing by the
Lender.
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18
(c) Upon request of the Lender, if an Event of Default under the
General Partner Credit Agreement shall have occurred and be continuing, the
Security Agent shall promptly withdraw amounts on deposit in the Debt Service
Account and deliver the same to the Lender to be applied by the Lender to the
payment of the Obligations in accordance with the provisions of the General
Partner Credit Agreement and the Transaction Documents.
Section 4.04. Completion Account. On a Transfer Date, the Escrow
Agent shall transfer, from the cash available in the Completion Account, to the
Managing General Partner, an amount, certified in a certificate of a
Responsible Officer of the Managing General Partner (which shall be delivered
to GEPFC and the Owner Trustee together with copies of any invoices or other
evidence of any such amounts so certified) and accompanied by a certificate of
such Responsible Officer to the effect that no Special Event has occurred and
is continuing, as being set forth in the Completion Budget and as being equal
to the excess of (i) the Partnership's estimated amounts payable for the month
commencing with such Transfer Date in respect of expenses set forth in the
Completion Budget, over (ii) the amount of any funds previously transferred to
the Managing General Partner pursuant to this Section 4.04 that remain unspent.
On the date on which the Facility shall have been completed and all expenses
required to be paid by the Managing General Partner or the Partnership and set
forth in the Completion Budget shall have been paid, as certified by a
certificate of a Responsible Officer of the Managing General Partner and
accompanied by a certificate of such Responsible Officer to the effect that no
Special Event shall have occurred and be continuing, the Escrow Agent shall
transfer the balance of the Completion Account to the Revenue Account; provided
however that $1,000,000 or, if less, the balance of the Completion Amount shall
remain in the Completion Account until (x) Exxon and the Partnership shall have
executed and recorded an amendment to the Site Lease Agreement setting forth
the metes and bounds description of the easement between the two parcels of the
Site on which the Project is located and (y) Chicago Title Insurance Company
shall have issued an endorsement to the Partnership's title insurance policy
insuring such easement.
Section 4.05. Insurance and Condemnation Proceeds Account. (a) Each
of the Partnership and the Managing General Partner shall deposit in the
Insurance and Condemnation Proceeds Account (i) all payments received by it
from any insurer pursuant to the insurance maintained by the Partnership under
Section 7.2(f) of the Partnership Agreement and Section 6.5(a) of the General
Partner Credit Agreement and (ii) all awards and proceeds of a Taking with
respect to the Project.
(b) All cash, cash equivalents, instruments, investments and
securities at any time on deposit in the Insurance and Condemnation Proceeds
Account, are herein called the "Insurance and Condemnation Proceeds Deposits".
<PAGE>
19
(c) The Insurance and Condemnation Proceeds Deposits shall be
accumulated in the Insurance and Condemnation Proceeds Account and held therein
until paid to or upon the order of the Managing General Partner as provided in
paragraph (d) of this Section 4.05, or applied as provided in Sections 4.05(e),
4.08 or 9.02.
(d) Insurance and Condemnation Proceeds Deposits shall be paid over to
or upon the order of the Partnership to reimburse it for, or to pay, the cost of
renewing, repairing, rebuilding or otherwise replacing the damaged or destroyed
or lost property in respect of which such moneys were received, upon the receipt
by the Escrow Agent of a certificate of a Responsible Officer of the Managing
General Partner, (i) describing in reasonable detail the work done and materials
purchased by way of the renewal, repair, rebuilding or other replacement of the
damaged or destroyed or lost property, (ii) stating the specific amount
requested to be paid over to or upon the order of the Partnership, that such
amount is requested to reimburse the Partnership for, or to pay, the cost of
such renewal, repair, rebuilding or other replacement and that such amount,
together with amounts remaining in the Insurance and Condemnation Proceeds
Account for such purpose and other funds of the Partnership available for such
purpose, are sufficient to pay in full the cost of such renewal, repair,
rebuilding or other replacement, and (iii) stating that no Special Event has
occurred and is continuing.
(e) In the event that Insurance and Condemnation Proceeds Deposits
shall remain in the Insurance and Condemnation Proceeds Account after
application thereof in accordance with paragraph (d), the Escrow Agent shall
transfer the same to the Managing General Partner to be applied in accordance
with Section 4.7 of the Partnership Agreement.
Section 4.06. Operation and Maintenance Account. (a) Upon receipt by
the Escrow Agent of a certificate of a Responsible Officer of the Managing
General Partner (i) stating that a major inspection or repair with respect to a
steam turbine, a gas turbine, a heat recovery steam generator, a boiler feed
pump, a step up transformer, switchgear or a catalyst for the Project has
occurred, (ii) describing in reasonable detail the work that was or will be
required to be done or the materials that were or will be required to be
purchased as a result of such major inspection or repair, (iii) stating the
specific amount requested to be paid over to the Partnership and that such
amount is equal to the excess of (x) the cost of such work that was or will be
required to be done or the materials that were or will be required to be
purchased as a result of such major inspection or repair over (y) the cost of
spares taken from inventory maintained by the Partnership pursuant to Section
7.2(k) of the Partnership Agreement to prepare for such inspection or to make
such repair and (iv) stating that no Special Event has occurred and is
continuing, the Escrow Agent shall transfer, from the cash available in the
Operation and Maintenance Account, the amount
<PAGE>
20
specified in clause (iii) to the Managing General Partner or to such Persons as
may be specified by the Managing General Partner.
(b) Upon receipt by the Escrow Agent of a certificate of a Responsible
Officer of the Managing General Partner (i) stating that a spare part listed on
Schedule 6 to the Partnership Agreement must be purchased for a steam turbine, a
gas turbine, a heat recovery steam generator, a boiler feed pump, a step up
transformer, switchgear or a catalyst for the Project, (ii) specifying the
amount of the purchase price therefor, (iii) stating that such spare part is not
maintained in the inventory for the Project and (iv) stating that no Special
Event has occurred and is continuing, the Escrow Agent shall transfer, from the
cash available in the Operation and Maintenance Account, the amount specified in
clause (ii) to the Managing General Partner or to such Persons as may be
specified by the Managing General Partner.
Section 4.07. Windup Account. (a) Notwithstanding any other provision
of this Agreement, upon receipt of notice from the Limited Partner that the
Partnership shall be dissolved in accordance with the terms of the Partnership
Agreement, the Escrow Agent shall transfer to the Windup Account all amounts in
all the Accounts (other than the Debt Service Account and the Required Payments
Account) and all amounts subsequently received by the Escrow Agent.
(b) On any date specified in a certificate of a Responsible Officer of
the Limited Partner (which date shall not be earlier than five, Business Days
following the date of receipt by the Escrow Agent of the certificate of a
Responsible Officer of the Limited Partner specified in Section 4.07(a) (the
"Windup Date")), the Escrow Agent shall transfer, from and to the extent of cash
available in the Windup Account, to the Limited Partner and the General Partner
such amounts, certified in such certificate, as are required to be distributed
pursuant to Section 14.4(c) of the Partnership Agreement.
Section 4.08. Interest in all Accounts. (a) On each Transfer Date, (i)
immediately prior to the transfers required pursuant to Section 4.01, the Escrow
Agent shall transfer all interest and other income on the funds on deposit in
the Escrow Accounts (other than the Revenue Account) to the Revenue Account and
(ii) immediately after the transfers required pursuant to Section 4.01, the
Security Agent shall transfer all interest and other income on the funds on
deposit in the Debt Service Account to the General Partner, provided, however,
that no such transfer shall be made to the General Partner unless the amount on
deposit in the Debt Service Account at such time is equal to or greater than the
amount then required to be deposited in the Debt Service Account pursuant to
Section 4.02(a).
(b) On any date on which a transfer from the Required Payments
Account is required pursuant to Section 4.11, the
<PAGE>
21
Security Agent shall transfer all interest and other income on the funds on
deposit in the Required Payments Account in accordance with the provisions of
such Section.
Section 4.09. Delivery of Officer's Certificates; Timing of Payments.
(a) Each of the certificates of a Responsible Officer required to be delivered
hereunder shall be delivered not later than 12:00 P.M., New York City time, on
the day on which the Agent is required to make transfers hereunder. Any
certificate of a Responsible Officer delivered later than the time specified
herein shall nevertheless be considered valid and shall be honored by the Escrow
Agent or the Security Agent, as the case may be, on or as promptly after the
date otherwise specified herein for payment as is practicable, subject to the
availability of cash in the applicable Account.
(b) Subject to (i) the timely receipt of a certificate of a
Responsible Officer as prescribed herein, (ii) the availability of cash in the
applicable Account and (iii) any other circumstances beyond the control of the
Escrow Agent or the Security Agent, as the case may be, the Escrow Agent or the
Security Agent, as the case may be, shall make any payment hereunder required
(except for transfers between Accounts) by means of wire transfer of immediately
available funds, to the address of the payee set forth on Schedule I hereto, to
be received prior to 1:00 p.m., New York City time, on the date specified herein
for such payment, or by such other means of payment, to such other address or at
such late time as shall be specified in the certificate of a Responsible Officer
of such payee.
(c) Each Partner shall deliver to the other Partners, simultaneously
with the delivery thereof to the Escrow Agent, a true copy of any certificate of
a Responsible Officer delivered by such Partner pursuant to this Agreement.
Section 4.10. Shortfalls. If, on the date specified for payments
pursuant to Section 4.07, the amount required to be transferred to the Limited
Partner and the General Partner pursuant to Section 4.07 shall exceed the cash
available in the Windup Account, the Escrow Agent shall notify the Limited
Partner and the General Partner of their respective shortfalls.
Section 4.11. Required Payments Account. (a) Upon request of the
Lender, (i) if, as of the end of any two consecutive calendar quarters, the
Quarterly Required Payments Ratio described in Section 4.02(b) has not been met,
or (ii) if the First Year Required Payments Ratio described in Section 4.02(c)
is not met and if, as of the end of any two consecutive calendar quarters during
the Annual Period commencing with the second anniversary of the Second Capital
Contribution Date, the Quarterly Required Payments Ratio is less than 1.1 to
1.0, or (iii) if the Eighth Year Required Payments Ratio described in Section
4.02(d) is not met and if, as of the end of any two
<PAGE>
22
consecutive calendar quarters during the Annual Period commencing with the ninth
anniversary of the Second Capital Contribution Date, the Quarterly Required
Payments Ratio is less than 1.2 to 1.0, or (iv) if an Event of Default under the
General Partner Credit Agreement shall have occurred and be continuing, in each
case as certified in writing by the Lender, the Security Agent shall promptly
withdraw amounts on deposit in the Required Payments Account and deliver the
same to the Lender to be applied by the Lender to the payment of the Obligations
in accordance with the provisions of the General Partner Credit Agreement and
the Transaction Documents.
(b) Upon request of the General Partner, (i)(x) if, as of the end of
any two consecutive calendar quarters, the Quarterly Required Payments Ratio
described in Section 4.02(b) has been met, provided that this clause (x) shall
not be applicable during the Annual Period commencing with the first anniversary
of the Second Capital Contribution Date or during the Annual Period commencing
with the eighth anniversary of the Second Capital Contribution Date to the
extent that paragraph (c) or (d) of Section 4.02 is applicable, or (y) if, as of
the end of any two consecutive calendar quarters during the Annual Period
commencing with the second anniversary of the Second Capital Contribution Date,
the Quarterly Required Payments Ratio is greater than 1.1 to 1.0, or (z) if, as
of the end of any two consecutive calendar quarters during the Annual Period
commencing with the ninth anniversary of the Second Capital Contribution Date,
the Quarterly Required Payments Ratio is greater than 1.20 to 1.0 and (ii) no
Default or Event of Default under the General Partner Credit Agreement shall
have occurred and be continuing, all as certified in writing by the General
Partner, the Security Agent shall promptly withdraw amounts on deposit in the
Required Payments Account, including without limitation all interest and other
income from the funds on deposit therein, and deliver the same to the General
Partner.
(c) Upon the written request of the General Partner, the Security
Agent shall transfer to the Lender such amounts from the cash available in the
Required Payments Account as may be requested by the General Partner to be
applied in accordance with Section 3.2(b)(ii) of the General Partner Credit
Agreement.
Section 4.12. Escrow Required Payments Account. (a) If, at any time
after the fifteenth anniversary of the Second Capital Contribution Date, a
Special Event shall have occurred and be continuing, as certified in writing by
the Limited Partner, the Security Agent shall promptly withdraw the amounts on
deposit in the Escrow Required Payments Account, including without limitation
all interest on and other income from the funds on deposit therein, and
distribute such amounts in the manner set forth in Section 14.2(c) of the
Partnership Agreement and as certified in a certificate of a Responsible Officer
of the Limited Partner.
<PAGE>
23
(b) Upon the written request of the General Partner, if as of the end
of any two consecutive calendar quarters, the coverage ratio in paragraph (e) of
Section 4.02 hereof has been met and no Special Event has occurred and is
continuing, all as certified in writing by the General Partner, the Security
Agent shall promptly withdraw amounts on deposit in the Escrow Required Payments
Account, including without limitation all interest on and other income from the
funds on deposit therein, and deliver the same to the General Partner.
(c) On one but only one Monthly Distribution Date after the fifteenth
anniversary of the Second Capital Contribution Date, the Managing General
Partner may request that amounts on deposit in the Escrow Required Payments
Account, including without limitation all interest on and other income from the
funds on deposit therein, be applied in accordance with Section 4.3(a) of the
Partnership Agreement, upon delivery to the Escrow Agent of a certificate of the
Managing General Partner to such effect, together with a certificate that no
Special Event shall have occurred and be continuing.
(d) If, on any Monthly Distribution Date after the fifteenth
anniversary of the Second Capital Contribution Date, the Arrears Account shall
have a positive balance, as certified in writing by the Preferred Limited
Partner, the Security Agent shall promptly withdraw the amounts on deposit in
the Escrow Required Payments Account, including without limitation all interest
on and other income from the funds on deposit therein, and apply such amounts in
accordance with the provisions of Section 4.5 of the Partnership Agreement. Any
such application, together with such amounts as may be contributed at such time
by the General Partner to the Partnership to eliminate positive balances in the
Arrears Account, shall be deemed to be the exercise by the Managing General
Partner of its right under Section 14.1(q) of the Partnership Agreement to
eliminate positive balances in the Arrears Account.
Section 4.13. Special Events. Notwithstanding anything to the contrary
contained in this Article IV, if a Special Event shall have occurred and be
continuing, as certified in writing by the Preferred Limited Partner, the
transfers from Accounts provided in this Article IV shall be made in accordance
with the instructions of the Preferred Limited Partner or the substitute
Managing General Partner appointed pursuant to Section 14.2 of the Partnership
Agreement.
Section 4.14. Distributions to the Lender or the Limited Partner. Any
amounts to be distributed by the Security Agent to the Lender or by the Escrow
Agent to the Limited Partner hereunder shall be distributed to such account and
such Person as shall be specified in writing by the Lender or the Limited
Partner, as the case may be.
<PAGE>
24
ARTICLE V
Investment
----------
(a) Any cash held by the Escrow Agent in any Account (other than the
Debt Service Account and the Required Payments Account) shall be invested by the
Escrow Agent from time to time as directed in writing by the Managing General
Partner (or, if the Escrow Agent shall have been notified by the Limited Partner
that a Special Event has occurred and is continuing, by the substitute Managing
General Partner appointed pursuant to Section 14.2 of the Partnership Agreement)
in Cash Equivalents which mature at least one Business Day prior to the next
following Transfer Date. Any income or gain realized as a result of any such
investment shall be held as part of the applicable Account and reinvested as
provided herein until such income or gain is required to be transferred from
such Account pursuant to Section 4.08.
(b) Any cash held by the Security Agent in the Debt Service Account or
the Required Payments Account shall be invested by the Security Agent from time
to time as directed in writing by the General Partner (or, if the Lender shall
have notified the Security Agent that a Default or Event of Default under the
General Partner Credit Agreement has occurred and is continuing, by the Lender)
in Permitted Investments. Any income or gain realized as a result of any such
investment shall be held as part of the Debt Service Account or the Required
Payments Account and reinvested as provided herein until such income or gain is
required to be transferred from such Account pursuant to Section 4.08.
(c) The Agent shall have no liability for any loss resulting from any
such investment or sale thereof other than by reason of its willful misconduct
or gross negligence. Any such investment may be sold (without regard to maturity
date) by the Agent whenever necessary to make any distribution required by this
Agreement.
ARTICLE VI
Agent
-----
Section 6.01. Rights, Duties. Etc. The acceptance by the Agent of its
duties hereunder is subject to the following terms and conditions which the
parties to this Agreement hereby agree shall govern and control with respect to
its rights, duties, liabilities and immunities:
(a) it shall act hereunder as an agent only and shall not be
responsible or liable in any manner whatever for soliciting any funds or
for the sufficiency, correctness,
<PAGE>
25
genuineness or validity of any funds, securities or other amounts deposited
with or held by it;
(b) it shall be protected in acting or refraining from acting upon any
written notice, certificate, instruction, request or other paper or
document, as to the due execution thereof and the validity and
effectiveness of the provisions thereof and as to the truth of any
information therein contained, which the Agent in good faith believes to be
genuine;
(c) it shall not be liable for any error of judgment or for any act
done or step taken or omitted except in the case of its gross negligence,
willful misconduct or bad faith;
(d) it may consult with and obtain advice from counsel of its own
choice in the event of any dispute or question as to the construction of
any provision hereof;
(e) it shall have no duties as Agent except those which are expressly
set forth herein and in any modification or amendment hereof; provided,
however, that no such modification or amendment hereof shall affect its
duties unless it shall have given its prior written consent thereto;
(f) it may execute or perform any duties hereunder either directly or
through agents or attorneys;
(g) it may engage or be interested in any financial or other
transactions with any party hereto and may act on, or as depositary,
trustee or agent for, any committee or body of holders of obligations of
such Persons as freely as if it were not Agent hereunder; and
(h) it shall not be obligated to take any action which in its
reasonable judgment would involve it in expense or liability unless it has
been furnished with reasonable indemnity.
Section 6.02. Resignation or Removal. (a) The Partners, by mutual
agreement at any time may replace the Escrow Agent with another escrow agent.
The Lender at any time may replace the Security Agent with another security
agent. The Agent may at any time resign by giving notice to each other party to
this Agreement, such resignation to be effective upon the appointment of a
successor Agent as hereinafter provided.
(b) In the event of any resignation or removal of the Agent, a
successor Agent (which (i) shall be a bank or trust company organized under the
laws of the United States of America or of the State of New York, the State of
New Jersey or the State of Connecticut, having a capital and surplus of not less
than
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26
$100,000,000 and (ii) shall be acceptable to the Partners (in the case of the
Escrow Agent) and the Lender (in the case of the Security Agent)), (x) in the
case of the Escrow Agent, shall be selected by the Managing General Partner and
appointed by the Partners and (y) in the case of the Security Agent, shall be
selected by the General Partner (or, if a Default or Event of Default under the
General Partner Credit Agreement shall have occurred and be continuing, by the
Lender) and appointed by the Lender. If a successor Agent shall not have been
appointed and accepted its appointment as Agent hereunder within 45 days after
such notice of resignation of the Agent or such notice of removal of the Agent,
the Agent or the Partners (in the case of the Escrow Agent) or the Lender (in
the case of the Security Agent) may apply to any court of competent jurisdiction
to appoint a successor Agent to act until such time, if any, as a successor
Agent shall have accepted its appointment as above provided. Any successor Agent
so appointed by such court shall immediately and without further act be
superseded by any successor Agent appointed by the Partners (in the case of the
Escrow Agent) or by the Lender (in the case of the Security Agent). Any such
successor Agent shall deliver to each party to this Agreement a written
instrument accepting such appointment hereunder and thereupon such successor
Agent shall succeed to all the rights and duties of the applicable Agent
hereunder and shall be entitled to receive the applicable Accounts from the
predecessor Agent.
ARTICLE VII
Determinations
--------------
Section 7.01. Value. Cash, Cash Equivalents and Permitted Investments
on deposit from time to time in the Accounts shall be valued by the Agent as
follows:
(a) cash shall be valued at the face amount thereof;
(b) Cash Equivalents and Permitted Investments shall be valued at the
amount which the Agent would have received at such time if the Agent had
liquidated such Cash Equivalents and Permitted Investments (at then
prevailing market prices).
Section 7.02. Other Determinations. The Partnership, the Partners, the
Lender and the Agent may establish procedures not inconsistent with this
Agreement pursuant to which the Agent may conclusively determine, for purposes
of this Agreement, the amounts from time to time to be distributed or paid by
the Agent from cash available in the Accounts. In the event of any dispute as to
whether a Special Event, a Default or an Event of Default has occurred and is
continuing, the Agent is authorized and directed to (a) make the distributions
required by Sections 4.01,
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27
4.03, 4.04, 4.05, 4.06 and 4.08, (b) make the distributions provided for in
Section 4.3(a) of the Partnership Agreement and such payments in respect of
interest and principal on the Loans as are required by Section 4.02(a) hereof as
if no Special Event, Default or Event of Default had occurred and was continuing
and (c) transfer all amounts in the Revenue Account after making such
distributions to a segregated escrow account in the name of the Agent. The Agent
shall maintain such amounts in the segregated escrow account until such dispute
shall have been settled by mutual agreement of the Partnership and the Partners
(in the case of a Special Event) and by mutual agreement of the General Partner
and the Lender (in the case of a Default or an Event of Default) or by a final
order, decree or judgment of a Federal or state court of competent jurisdiction
located in the State of Delaware or the State of New York.
Section 7.03. Cash Available. In determining the amount of cash
available in any Account at any time, in addition to any cash then on deposit in
such Account, the Agent shall treat as cash available the amount which the Agent
would have received on such day if the Agent had liquidated all the Cash
Equivalents and Permitted Investments (in each case, at then prevailing market
prices) then on deposit in such Account. The Agent will use its best efforts to
sell Cash Equivalents and Permitted Investments such that actual cash is
available on each date on which a transfer or a distribution is to be made
pursuant to this Agreement.
ARTICLE VIII
Representations and Warranties
------------------------------
Section 8.01. Representations. Each Partner represents and warrants,
for the benefit of each other Partner and the Lender, that each certificate of a
Responsible Officer delivered by such Partner in connection with this Agreement
shall be true and correct in all material respects and that the amounts of money
certified thereby shall be the proper amounts to be set forth in such
certificate of a Responsible Officer.
Section 8.02. Indemnification. Subject to the provisions of Section
7.5 of the Partnership Agreement, the Managing General Partner hereby undertakes
to indemnify and hold harmless each Partner and the Lender from and against any
and all expenses imposed on, incurred by or asserted against such other Partner
in any way relating to or arising out of any inaccuracy in any certificate of a
Responsible Officer delivered by the Managing General Partner.
<PAGE>
28
ARTICLE IX
Miscellaneous
-------------
Section 9.01. Fees and Indemnification of Agent. The Partnership
agrees to pay the reasonable fees of the Agent as compensation for its services
under this Agreement. In addition, the Partnership assumes liability for, and
agrees to indemnify, protect, save and keep harmless the Agent and its officers,
employees, successors, assigns, agents and servants from and against, any and
all claims, liabilities, obligations, losses, damages, penalties, costs and
expenses that may be imposed on, incurred by, or asserted against, at any time,
the Agent or its officers and employees and in any way relating to or arising
out of the execution and delivery of this Agreement, the establishment of the
Accounts, the acceptance of deposits, the purchase or sale of Cash Equivalents
or Permitted Investments, the retention of cash, Cash Equivalents and Permitted
Investments or the proceeds thereof and any payment, transfer or other
application of cash, Cash Equivalents or Permitted Investments by the Agent in
accordance with the provisions of this Agreement, or as may arise by reason of
any act, omission or error of the Agent made in good faith in the conduct of its
duties; except that the Partnership shall not be required to indemnify, protect,
save and keep harmless the Agent against its own gross negligence, active or
passive, or willful misconduct. The indemnities contained in this Section 9.01
shall survive the termination of this Agreement.
Section 9.02. Termination. This Agreement (with respect to the Escrow
Accounts) shall terminate upon written notice by the Managing General Partner
and the Limited Partner to the Escrow Agent and to each other Partner that
elects to terminate this Agreement. This Agreement (with respect to the Debt
Service Account and the Required Payments Account) shall terminate upon written
notice by the General Partner and the Lender to the Security Agent. Upon
termination of this Agreement, except following a transfer pursuant to Section
4.07, the Agent shall transfer any remaining amounts, together with any interest
thereon, on deposit in the Accounts to the party or parties specified in such
notice. Any liability or obligation hereunder arising prior to the termination
of this Agreement shall survive such termination.
Section 9.03. Severability. If any one or more of the covenants or
agreements provided in this Agreement on the part of the parties hereto to be
performed should be determined by a court of competent jurisdiction to be
contrary to law, such covenant or agreement shall be deemed and construed to be
severable from the remaining covenants and agreements herein contained and shall
in no way affect the validity of the remaining provisions of this Agreement.
<PAGE>
29
Section 9.04. 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.
Section 9.05. Amendments. This Agreement may not be modified or
amended without the prior written consent of each of the parties hereto.
SECTION 9.06. APPLICABLE LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
Section 9.07. Notices. Unless otherwise specifically provided herein,
all notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person shall be in writing and shall become effective, if mailed, five Business
Days after being deposited in the United States mail, proper postage for first-
class mail affixed thereto or, if delivered by hand or courier service or in the
form of a telex, telecopy or telegram, when received, and shall be directed to
the address, telecopy or telex number of such Person (other than the Lender)
designated pursuant to the Partnership Agreement, or in the case of the Lender,
to the address, telecopy or telex number designated in the General Partner
Credit Agreement, or in the case of the Agent, to Midlantic Bank, 499 Thornall
Street, Edison, New Jersey 08837, or to such other address, telecopy or telex
number as may be specified from time to time by such Person, the Lender or the
Agent.
Section 9.08. Benefit of Agreement. This Agreement shall inure to the
benefit of, and be enforceable by, the parties hereto and their respective
successors and permitted assigns, and no other Person shall be entitled to any
of the benefits of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Amended
and Restated Security Deposit Agreement and Escrow Agreement to be duly
executed, all as of the day and year first above written.
COGEN TECHNOLOGIES LINDEN VENTURE, L.P., a Delaware
Limited Partnership
By: Cogen Technologies Linden, Ltd.
(d/b/a Cogen Technologies Linden, Limited
Partnership, in the State
of New Jersey), its General Partner
By: Cogen Technologies, Inc.,
its General Partner
/s/ [Illegible Signature]
By _______________________________________
Title: Vice President
COGEN TECHNOLOGIES LINDEN, LTD.
(d/b/a COGEN TECHNOLOGIES LINDEN,
LIMITED PARTNERSHIP, in the State of
New Jersey), a Texas Limited Partnership
By: Cogen Technologies, Inc.,
its General Partner
/s/ [Illegible Signature]
By _______________________________________
Title: Vice President
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, (not in its individual capacity
but solely as Owner Trustee), as Limited Partner
/s/ [Illegible Signature]
By ________________________________________
Title: Assistant Vice President
<PAGE>
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION,
(not in its individual capacity but
solely as owner Trustee), as Lender
/s/ [Illegible Signature]
By __________________________________________
Title: Assistant Vice President
MIDLANTIC NATIONAL BANK, as Agent
/s/ Laura A. Truett
By __________________________________________
Title: Vice President
Consented and Agreed
to as of the date
first above written:
GENERAL ELECTRIC POWER FUNDING
CORPORATION, as Lender Agent
/s/ Jamie H. Gearon
By ________________________________
Title: Attorney-in-Fact
<PAGE>
FIRST AMENDMENT TO
SECURITY DEPOSIT AGREEMENT
--------------------------
FIRST AMENDMENT, dated as of April 30, 1993 (the "Amendment"), to the
Amended and Restated Security Deposit Agreement and Escrow Agreement dated as of
September 17, 1992 (the "Security Deposit Agreement"), among Cogen Technologies
Linden Venture, L.P., a Delaware limited partnership (the "Partnership") of
which Cogen Technologies Linden, Ltd. (d/b/a Cogen Technologies Linden, Limited
Partnership, in the State of New Jersey), a Texas limited partnership, is the
general partner (the "General Partner" or the "Managing General Partner"), the
General Partner, State Street Bank and Trust Company of Connecticut, National
Association, not in its individual capacity but solely as trustee under the
Trust Agreement (as defined below) (together with its successors and assigns,
the "Owner Trustee"), as the limited partner of the Partnership (in such
capacity, the "Limited Partner"), the Owner Trustee, as lender under the General
Partner Credit Agreement defined below (in such capacity, the "Lender"), and
Midlantic National Bank, as security agent (in such capacity, the "Security
Agent") and as escrow agent hereunder (in such capacity, the "Escrow Agent";
together with the Security Agent, the "Agent").
W I T N E S S E T H :
-------------------
WHEREAS, the Partnership, the General Partner, the Limited Partner,
the Lender, the Security Agent and the Escrow Agent desire to enter into certain
amendments to the Security Deposit 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 Security Deposit Agreement shall have such defined meanings when used
herein.
2. Amendments to Article I of the Security Deposit Agreement
(Definitions). Article I of the Security Deposit Agreement is hereby amended by
inserting the following new definition in alphabetical order:
"'Fuel Expenses': with respect to any calendar month, the sum of (a)
the expenses required to be paid by the
<PAGE>
2
Partnership pursuant to Section 8.1 of the Gas Transportation and Swing
Supply Agreement in such month which accrued during the immediately
preceding calendar month and (b) the expenses required to be paid by the
Partnership in such month in connection with the procurement of gas for the
Facility during the immediately preceding calendar month."
3. Amendments to Sections 4.01(a) and (c) of the Security Deposit
Agreement (Revenue Account--Monthly Transfers). Section 4.01(a) of the Security
Deposit Agreement is hereby amended to read in its entirety as follows:
"(a) (i) Except as provided in paragraph (d) below, on each Transfer
Date (as defined in the Partnership Agreement), the Escrow Agent shall
transfer, from the cash available in the Revenue Account, to the Managing
General Partner the amount (certified in a certificate of a Responsible
Officer of the Managing General Partner and accompanied by an accounting of
the cumulative draws hereunder for the current fiscal year and a
certificate of such Responsible Officer to the effect that no Special Event
has occurred and is continuing) set forth in the Operating Budget to be
equal to the excess of (x) the Partnership's estimated amounts payable
pursuant to the Operating Budget for the month in which such Transfer Date
occurs (other than in respect of expenses provided for in Section 4.04) for
operating, maintenance and improvement expenses (excluding, to the extent
of cash available in the Operation and Maintenance Account, any operating,
maintenance and improvement expenses that are 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 and escrow agents and other reasonable expenses
incurred in connection with the Project, and the Cost Portion of the
Management Fee, over (y) the sum of (A) the Operation and Maintenance
Account Deposit Amount, (B) the Working Capital Fund Deposit Amount, (C)
the amount of any funds previously transferred to the Managing General
Partner pursuant to this Section 4.01 that remain unspent and (D) the
amount of interest and other income on funds previously transferred to the
Managing General Partner pursuant to this Section 4.01; provided that (1)
if the Limited Partner shall have delivered a certificate to the Escrow
Agent stating that a Special Event shall have occurred and be continuing or
that the Arrears Account has a positive balance, the amount set forth in
clause (x) above shall be reduced by the amount set
<PAGE>
3
forth in the Operating Budget for such month in respect of the Cost Portion
of the Management Fee and (2) the amount set forth in clause (x) above may
be reduced by such amount as the Managing General Partner reasonably
determines will be withdrawn from the Revenue Account during such month to
pay Fuel Expenses pursuant to the provisions of paragraph (iii) of this
Section 4.01(a); and provided, further, that clause (1) of the foregoing
proviso shall not be applicable if the Preferred Limited Partner shall have
appointed a substitute Managing General Partner pursuant to Section 14.2 of
the Partnership Agreement.
(ii) Notwithstanding the provisions of paragraph (i) of this Section
4.01(a), if, as of any Transfer Date (the "Current Transfer Date"), (x) the
Managing General Partner shall have made a withdrawal from the Revenue
Account pursuant to paragraph (iii) of this Section 4.01(a) to pay Fuel
Expenses and (y) after giving effect to the withdrawals from the Revenue
Account to be made on the Current Transfer Date pursuant to paragraphs
(a)(i), (b) and (c) of this Section 4.01, the aggregate amount of cash
available in the Revenue Account would be less than the amount required to
be distributed to the Limited Partner on the Current Transfer Date pursuant
to Sections 4.3(a) and 4.5 of the Partnership Agreement and Section 4.02(a)
of this Agreement, the amount set forth in clause (i)(x) of this Section
4.01(a) in respect of Fuel Expenses shall be reduced by such amount as will
result in the cash available in the Revenue Account being sufficient to pay
the amounts to be distributed to the Limited Partner on the Current
Transfer Date pursuant to Sections 4.3(a) and 4.5 of the Partnership
Agreement and Section 4.02(a) of this Agreement.
(iii) Except as provided in paragraph (d) below, once a calendar
month, commencing with May, 1993, on the day on which the Partnership is
required to pay Fuel Expenses, upon the request of the Managing General
Partner, the Escrow Agent shall transfer, from the cash available in the
Revenue Account, to the Managing General Partner the amount (certified in a
certificate of a Responsible Officer of the Managing General Partner and
accompanied by a certificate of such Responsible Officer to the effect that
(x) no Special Event has occurred and is continuing and (y) the amounts
requested to be withdrawn from the Revenue Account to pay such Fuel
Expenses have not previously been withdrawn from the Revenue Account by the
Managing General Partner) equal to the excess of (1) the Fuel Expenses set
forth in the Operating Budget which are required to be paid by the
Partnership in such month over (2) the amount previously withdrawn from the
Revenue Account to pay such Fuel Expenses."
<PAGE>
4
4. Amendments to Section 4.02(a) of the Security Deposit Agreement
(Revenue Account--Monthly Transfers). Section 4.02(a) of the Security Deposit
Agreement is hereby amended as follows:
(a) by deleting the words "once a month on a Business Day (each a
"Monthly Distribution Date") not later than the fifteenth day of such
calendar month (or if any such day is not a Business Day, on the next
preceding Business Day)," appearing therein and substituting therefor the
following:
"on each Transfer Date (as defined in the Partnership Agreement)
(each a 'Monthly Distribution Date'),";
(b) by inserting the words "on such Monthly Distribution Date, if
such Date is an Interest Payment Date, and otherwise" after the first
parenthetical in clause first thereof;
(c) by deleting the words "commencing with the first month
immediately succeeding the second anniversary of the Second Capital
Contribution Date," from clause second thereof and substituting, in lieu
thereof, the words "commencing with the Monthly Distribution Date occurring
in October, 1994,"; and
(d) by inserting the words "on such Monthly Distribution Date, if
such Date is an Installment Payment Date, and otherwise" after the first
parenthetical in clause second thereof.
5. Amendment to Section 4.04 (Completion Account). Section 4.04 of
the Security Deposit Agreement is hereby amended by deleting clause (i) of the
first sentence thereof in its entirety and substituting, in lieu thereof, the
following new clause (i):
"(i) the Partnership's estimated amounts payable for the month in which
such Transfer Date occurs, in respect of expenses set forth in the
Completion Budget, over"
6. Full Force and Effect. Except as expressly amended and modified by
this Amendment, the Security Deposit Agreement shall continue to be, and shall
remain, in full force and effect in accordance with its terms.
7. 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 Security Deposit Agreement or
(ii) to prejudice any other right or rights which the Limited Partner or
<PAGE>
5
the Lender may now have or may have in the future under or in connection with
the Security Deposit Agreement.
8. 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.
9. Conditions Precedent. This Amendment shall become effective as of
the date first above written upon (i) receipt by the Limited Partner, the Lender
and the Agent of counterparts of this Amendment duly executed by the Limited
Partnership, the General Partner, the Limited Partner, the Lender, the Security
Agent and the Escrow Agent, and (ii) receipt by the Limited Partner and the
Lender of counterparts of (x) a First Amendment to the Partnership Agreement,
dated as of the date hereof, duly executed by the Limited Partner and the
General Partner and (y) a First Amendment to the General Partner Credit
Agreement, dated as of the date hereof, duly executed by the Lender and the
General Partner.
10. 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>
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 VENTURE, L.P.
By: Cogen Technologies Linden Ltd.,
its general partner
By: Cogen Technologies, Inc.,
its general partner
/s/ LAWRENCE THOMAS
By: ____________________________________
Title: VICE PRESIDENT
COGEN TECHNOLOGIES LINDEN, LTD.,
By: Cogen Technologies, Inc.,
it general partner
/s/ LAWRENCE THOMAS
By: ______________________________________
Title: VICE PRESIDENT
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION (not
in its individual capacity, but solely
as trustee), as Limited Partner and as
Lender
By: _______________________________________
Title:
MIDLANTIC NATIONAL BANK, as Escrow Agent
and as Security Agent
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 VENTURE, L.P.
By: Cogen Technologies Linden Ltd., its general
partner
By: Cogen Technologies, Inc., its general partner
By: ___________________________________________
Title:
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 Limited Partner and as
Lender
/s/ [Illegible Signature]
By: ______________________________________________
Title: Assistant Vice President
MIDLANTIC NATIONAL BANK, as Escrow Agent and as
Security Agent
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 VENTURE, L.P.
By: Cogen Technologies Linden Ltd.,
its general partner
By: Cogen Technologies, Inc.,
its general partner
By: _____________________________________
Title:
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 Limited Partner and as
Lender
By: _______________________________________
Title:
MIDLANTIC NATIONAL BANK, as Escrow
Agent and as Security Agent
/s/ Illegible Signature]
By: ________________________________________
Title: Vice President
<PAGE>
EXHIBIT 10.18
NON-NEGOTIABLE
PROMISSORY NOTE
---------------
$2,600,000.00
May 22, 1986
New York, New York
FOR VALUE RECEIVED, Cogen Technologies NJ, Inc., a Delaware corporation with an
address at 14614 Falling Creek Drive, Suite 212, Houston, Texas 77068 (the
"Maker"), promises to pay to Bayonne Industries, Inc., a New Jersey corporation
with an address at the Foot of East 22nd Street, Bayonne, New Jersey 07002 (the
"Holder"), in lawful money of the United States of America, the principal amount
of Two Million Six Hundred Thousand Dollars ($2,600,000.00), with interest
thereon computed on the unpaid principal balance of this Note from the date
hereof at a fluctuating rate per annum equal to one percent (1%) in excess of
the Prime Rate of First National Bank of Chicago. The term "Prime Rate" means
the interest rate (sometimes referred to as the "Base Rate") for large
commercial loans to creditworthy entities published by First National Bank of
Chicago, or its successor bank, as such rate may be in effect from time to time.
The principal amount of and interest on this Note shall be payable in the
following manner:
(i) Interest on the first $2,400,000.00 of
the principal amount shall accrue from
the date hereof and shall be payable
on the 22nd day of June, 1986, and on
the 22nd day of each month thereafter
until the first $2,400,000.00 of the
principal amount is paid in full.
<PAGE>
-2-
(ii) Interest on the last $200,000.00 of
the principal amount (hereinafter
referred to as the "Deferred Interest")
shall accrue from the date hereof
until the last $200,000.00 of the
principal amount is paid in full and
shall be payable in accordance with the
provision of paragraph (iv) below.
(iii) Commencing on 22nd day of May, 1988,
and on each of the next four succeeding
anniversary dates thereof, installments
of $480,000.00 of the first $2,400,000.00
of the principal amount shall be payable.
(iv) The last $200,000.00 of the principal amount
hereof (the "Deferred Principal Amount"),
plus Deferred Interest on the Deferred
Principal Amount (collectively, the
"Deferred Amount") shall be due and payable
on the 22nd day of May 1998; provided, however,
that if on such date the term of that certain
agreement between Cogen Technologies NJ, Inc.
and IMTT-Bayonne dated June 13, 1985 for the
sale of steam and electricity from a cogeneration
plant, and all amendments thereto that may be
made from time to time, is in effect, such
payment date shall be extended to the
termination date of such agreement or of any
extension or renewal of the term thereof.
The first $2,400,000.00 of the principal amount of this Note may be
prepaid in whole or in part at any time and from time to time in integral
multiples of $10,000.00. Any prepayments made from the date hereof through May,
1992 shall be applied to the payments required in (iii) above in the inverse
order of maturity of the payments thereof.
<PAGE>
-3-
All payments under this Note shall be made at the office of the Holder
hereinabove referred to or at any other address as the Holder may designate in
writing to the Maker, in any coin or currency of the United States of America
which, at the time of payment, is legal tender for payment of public and private
debts.
The payment hereof is secured pursuant to the provisions of a security
agreement of even date herewith between the Maker and the Holder (the "Security
Agreement"). Upon the occurrence of an Event of Default (as such term is defined
in the Security Agreement), all unpaid principal and interest on this Note shall
become due and payable at the option of the Holder as provided therein.
Payment of the Deferred Interest is secured solely by the Collateral (as
such term is defined in the Security Agreement) upon the occurrence of an Event
of a Default under the Security Agreement, and neither the Maker nor any of its
officers, directors or shareholder (nor the officers, directors, shareholders or
partners of any assignee of Maker) shall be personally liable for the payment of
any deficiency resulting from the application of the proceeds of the sale of
the Collateral to the Deferred Interests and the Holder shall not initiate any
action or proceeding against the Maker or such persons to collect the same.
<PAGE>
-4-
The Maker hereby waives presentment, demand for payment, protest and notice
of dishonor of this Note.
In case this Note should be placed in the hands of an attorney, after its
stated maturity or upon acceleration, to institute legal proceedings to recover
the amount hereof, or any part hereof, in principal or interest, or to protect
the interests of the Holder hereof, or in case the same should be placed in the
hands of an attorney for collection, compromise or other action, the Maker and
endorsers bind themselves to pay the reasonable fees of the attorney who may be
employed for that purpose if the Holder is the prevailing party in any such
legal proceeding.
No delay on the part of Holder in exercising any rights hereunder shall
operate as a waiver of such rights. Forbearance to exercise any right in favor
of the Holder, provided herein, shall not constitute a waiver of that right as
to any subsequent failure or breach.
This Note shall be governed by the laws of the State of New Jersey.
<PAGE>
-5-
IN WITNESS WHEREOF, the Maker has caused this Note to be signed as of
the date first written above.
[SEAL]
ATTEST: COGEN TECHNOLOGIES NJ, INC.
/s/ John B. Wing By: /s/ Robert C. McNair
- ----------------------------- --------------------------
John B. Wing, Robert C. McNair,
Assistant Secretary President
<PAGE>
EXHIBIT 10.19
ASSIGNMENT AND SECURITY AGREEMENT
ASSIGNMENT and SECURITY AGREEMENT, dated as of February 15, 1990, made
by COGEN TECHNOLOGIES LINDEN, LTD. (d/b/a COGEN TECHNOLOGIES LINDEN, LIMITED
PARTNERSHIP in the State of New Jersey), a Texas limited partnership (the
"Pledgor" or the "General Partner,"), the sole general partner of Cogen
Technologies Linden Venture, L.P. (the "Limited Partnership") , a Delaware
limited partnership, in favor of General Electric Power Funding Corporation
("GEPFC"), as collateral agent for the LP Agent (as defined below) and the LP
Lenders (as defined below) under the Limited Partnership Loan Agreement (as
defined below) and for the GP Lender (as defined below) under the General
Partner Loan Agreement (as defined below) (in such capacity, the "Collateral
Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Construction Loan Agreement, dated as of
February 15, 1990, among the Limited Partnership, the Lenders from time to time
party thereto (the "LP Lenders") and GEPFC, as agent for the LP Lenders (in such
capacity, the LP Agent") (as the same may be amended, supplemented or
otherwise modified from time to time, the "Limited Partnership Loan Agreement"),
the LP Lenders have agreed to make loans (the "LP Loans") to, and GEPFC has
agreed to issue letters of credit (the "Letters of Credit") for the account of,
the Limited Partnership; and
WHEREAS, pursuant to the Term Loan Agreement, dated as of February 15,
1990, between the Pledgor and General Electric Power Funding Corporation (in
such capacity, the "GP Lender") (as the same may be amended supplemented or
otherwise modified from time to time, the "General Partner Loan Agreement",
together with the Limited Partnership Loan Agreement, the "Loan Agreements"),
the GP Lender has agreed to make certain loans (the "GP Loans", together with
the LP Loans, the "Loans") for the account of the General Partner; and
WHEREAS, it is a condition precedent to (i) the obligation of the LP
Lenders to make LP Loans to, and of GEPFC to issue Letters of Credit for the
account of, the Limited Partnership under the Limited Partnership Loan Agreement
and (ii) the obligation of the GP Lender to make the GP Loans to the
<PAGE>
2
General Partner under the General Partner Loan Agreement that the Pledge shall
have executed and delivered this Pledge and Security Agreement; and
WHEREAS, pursuant to the Collateral Agency Agreement (as defined
below), the LP Agent and the GP Lender have appointed GEPFC to act as Collateral
Agent hereunder;
NOW, THEREFORE, in consideration of the premises and to induce the LP
Lenders, the LP Agent and the GP Lender (collectively, the "Secured Parties") to
enter into the Loan Agreements and to make Loans and to issue Letters of Credit
thereunder, the Pledge hereby agrees with the Collateral Agent as follows:
1. Defined Terms. (a) All capitalized terms used herein which are
defined in the Loan Agreements shall have their respective meanings as therein
defined, unless such terms are defined herein. All terms defined herein or in
the Loan Agreements in the singular shall have the same meanings when used in
the plural and vice versa.
(b) The following terms defined in Article 9 of the Uniform Commercial
Code as in effect in the State of New York are used herein as so defined:
Chattel Paper and Instrument; and the following terms shall have the following
meanings:
"Agreement" shall mean this Assignment and Security Agreement, as the
same may from time to time be amended, supplemented or otherwise modified.
"Amended and Restated Partnership Agreement" shall have the meaning
set forth in the Capital Contribution Agreement.
"Code" shall mean the Uniform Commercial Code as the same may from
time to time be in effect in the State of New York.
"Collateral" shall have the meaning assigned to it in Section 2 of
this Agreement.
"Collateral Agency Agreement" shall mean the Collateral Agency
Agreement, dated as of February 15, 1990, among the Collateral Agent, the
Pledge, the LP Agent and the GP Lender.
"General Partner Partnership Agreement" shall mean the certificate of
limited partnership of the Pledgor, dated as of June 28, 1989 between Cogen
Technologies, Inc., as general partner, and Cogen Technologies Limited Partners
Joint Venture, a Texas partnership, as limited partner.
<PAGE>
3
"Limited Partnership Agreement" shall mean the collective reference to (a)
the certificate of limited partnership of the Limited Partnership, dated
December 4, 1989, filed by the General Partner with the Secretary of State of
the State of Delaware on December 6, 1989, and (b) the Agreement of Limited
Partnership of the Limited Partnership, dated as of December 4, 1989, between
the General Partner, as general partner, and Robert C. McNair, as limited
partner.
"Obligations" shall mean (i) all the unpaid principal amount of, and
accrued interest on, the Notes (as defined in the Limited Partnership Loan
Agreement) and all other obligations and liabilities of the Limited Partnership
to the LP Agent and the LP 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 the Limited Partnership Loan
Agreement, the Notes (as defined in the Limited Partnership Loan Agreement), the
Letters of Credit, this Agreement, the other Collateral Security Documents or
the Borrower Indemnity Agreement, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses (including,
without limitation, all fees and disbursements of counsel to the LP Agent and
the LP Lenders) or otherwise and (ii) all the unpaid principal amount of, and
accrued interest on, the Notes (as defined in the General Partner Loan
Agreement) and all other obligations and liabilities of the Pledgor to the GP
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 the General Partner Loan Agreement, the Notes (as defined in the
General Partner Loan Agreement), this Agreement, or the other Collateral
Security Documents (as defined in the General Partner Loan Agreement), whether
on account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses (including, without limitation, all fees and disbursements of
counsel to the GP Lender) or otherwise.
"Proceeds" shall have the meaning assigned to it under the Code and, in any
event, shall include, but not be limited to, (i) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to the Pledgor from time to
time with respect to any of the Collateral, (ii) any and all payments (in any
form whatsoever) made or due and payable to the Pledgor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any person acting under color of governmental authority) and (iii) any and
all other amounts from time to time paid or payable under or in connection
with any of the Collateral.
<PAGE>
4
2. Assignment and Grant of Security Interest. As collateral security
for the prompt and complete payment and performance when due (whether at the
stated maturity, by acceleration or otherwise) of the Loans and all other
Obligations, the Pledgor hereby sells, assigns, conveys, mortgages, pledges,
hypothecates and transfers to the Collateral Agent for the ratable benefit of
the Secured Parties, and hereby grants to the Collateral Agent for the ratable
benefit of the Secured Parties a continuing first (other than as to Permitted
Liens) priority security interest in, to and under all of the following property
now owned or at any time hereafter acquired by the Pledgor or in which the
Pledgor now has or at any time in the future may acquire any rights, title or
interest (all of which being hereinafter collectively called the "Collateral"):
(i) all right, title and interest of the Pledgor in the Limited
Partnership;
(ii) any and all moneys due and to become due to the Pledgor now or in
the future by way of a distribution made to the Pledgor in its capacity as a
partner of the Limited Partnership;
(iii) any and all moneys due or to become due to the Pledgor now or in
the future by virtue of the Pledgor's interest as a partner in the Limited
Partnership;
(iv) any other property of the Limited Partnership to which the
Pledgor now or in the future may be entitled in its capacity as a partner of the
Limited Partnership by way of distribution, return of capital or otherwise;
(v) any other claim which the Pledgor now has or may in the future
acquire in its capacity as a partner of the Limited Partnership against the
Limited Partnership and its property; and
(vi) to the extent not otherwise included, all Proceeds of any or all
of the foregoing.
3. Registration of Pledge. Concurrently with the execution of this
Agreement, the Pledgor shall send written instructions in the form of Exhibit A
hereto to the Limited Partnership, and shall cause the Limited Partnership to,
and the Limited Partnership shall, deliver to the Collateral Agent the Initial
Transaction Statement in the form of Exhibit B hereto confirming that such
Partnership has registered the pledge effected by this Agreement on its books.
4. Limitations on Distributions. So long as this Agreement shall
remain in full force and effect and no Default or Event of Default under the
Loan Agreements shall have occurred
<PAGE>
5
and be continuing, any distributions of cash or other property payable in
respect of the Collateral shall be paid to the Pledger in accordance with the
Amended and Restated Partnership Agreement and the Security Deposit Agreement.
After the occurrence of a Default or Event of Default and for so long as such
Default or Event of Default is continuing, such distributions shall be applied
by the collateral Agent to the payment in whole or in part of the obligations,
in accordance with the Collateral Agency Agreement.
5. Representations and Warranties. The Pledgor hereby represents and
warrants that:
(a) The Pledger (i) is a limited partnership validly existing under
the laws of the State of Texas, (ii) has all the requisite partnership power and
authority to own and operate its properties, to carry on its business as now
conducted and to pledge its interest in the Collateral pursuant to this
Agreement and (iii) 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 require such qualification. The Pledger is
the sole general partner of the Limited Partnership, and its partnership
interest is as specified in the Limited Partnership Agreement. Complete and
correct copies of the Limited Partnership Agreement and the General Partner
Partnership Agreement and of all contracts and agreements between the Pledger
and the Limited Partnership have been delivered to the Secured Parties.
(b) Except for those filings and registrations required to perfect the
Liens created by this Agreement, neither the Limited Partnership nor the Pledger
is required to obtain any order, consent, approval or authorization of, or
required to make any declaration or filing with, any Governmental Authority or
any other Person in connection with the execution and delivery of this Agreement
and the granting and perfection of the security interests pursuant to this
Agreement.
(c) This Agreement has been duly executed and delivered on behalf of
the Pledger, and this Agreement constitutes a legal, valid and binding
obligation of the Pledger, enforceable against the Pledger in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and except as enforceability may be subject to
general principles of equity, whether such principles are applied in a court of
equity or at law.
(d) The execution, delivery and performance of this Agreement will not
result in any violation of or be in
<PAGE>
6
conflict with or constitute a default under any term of the Limited Partnership
Agreement or the General Partner Partnership Agreement, or of any Requirement of
Law or Contractual Obligation applicable to the Pledge except to the extent that
the failure to comply therewith could not reasonably be expected to (i) have a
material adverse effect on the Collateral or (ii) materially adversely affect
the ability of the Pledgor to perform its obligations under this Agreement or
the other Basic Documents or Transaction Documents to which it is a party, or
result in the creation of any Lien upon any of the properties or revenues of the
Pledgor pursuant to any such Requirement of Law or Contractual obligation other
than the Liens in favor of the Collateral Agent created pursuant to this
Agreement and in favor of the Secured Parties created pursuant to the other
Collateral Security Documents.
(e) Except for the security interest granted to the Collateral Agent
pursuant to this Agreement, the Pledgor is the sole owner of the Collateral,
having good title thereto, free and clear of any and all Liens other than
Permitted Liens and the Liens in favor of the Collateral Agent created pursuant
to this Agreement and in favor of the Secured Parties created pursuant to the
other Collateral Security Documents.
(f) No security agreement, financing statement, equivalent security or lien
instrument or continuation statement covering all or any part of the Collateral
is on file or of record in any public office or with the Limited Partnership,
except such as may have been or will be filed or registered by the Pledgor in
favor of the Collateral Agent pursuant to this Agreement and in favor of the
Secured Parties created pursuant to the other Collateral Security Documents.
(g) This Agreement constitutes a valid and continuing first lien (other
than as to the Permitted Liens) on and perfected security interest in the
Pledger's right, title and interest in and to the Collateral (other than those
items of Collateral which, individually or in the aggregate, are not material)
in favor of the Collateral Agent, prior (other than as to the Permitted Liens)
to all other Liens, and is enforceable as such against creditors of and
purchasers from the Pledgor. All action necessary or desirable to protect and
perfect such security interest, including, but not limited to, the filing of
financing statements in the jurisdictions referred to on Schedule I to this
Agreement and the registration of the pledge effected hereby on the books of the
Limited Partnership in accordance with the provisions of the Uniform Commercial
Code in effect in the jurisdiction in which the Limited Partnership is
organized, in each item of the collateral (other than those
<PAGE>
7
Items of Collateral which, individually or in the aggregate, are not material)
has been duly taken.
(h) The Pledge's principal place of business and chief executive office and
the place where its records concerning the Collateral are kept is located at the
address, set forth with its signature below and the Pledge will not change such
address or remove such records without 30 days' prior written notice to the
Collateral Agent.
6. Covenants. The Pledgor covenants and agrees with the Collateral
Agent and the Secured Parties that from and after the date of this Agreement and
until the Obligations are fully satisfied:
(a) Further Documentation; Pledge of Instruments. At any time and from time
to time, upon the written request of the Collateral Agent and at the sole
expense of the Pledgor, the Pledgor will promptly and duly execute and deliver
any and all such further instruments and documents and take such further action
as the Collateral Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code in effect in any
jurisdiction with respect to the Lien granted hereby. The Pledgor also hereby
authorizes the Collateral Agent to file any such financing or continuation
statement without the signature of the Pledgor to the extent permitted by
applicable law. The Pledgor and the Collateral Agent agree that a carbon,
photographic or other reproduction of this Agreement or a financing statement is
sufficient as a financing statement. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
promissory note or other Instrument or Chattel Paper, such note, Instrument or
Chattel Paper shall be immediately delivered to the Collateral Agent, duly
indorsed in a manner satisfactory to the Collateral Agent, to be held as
Collateral pursuant to this Agreement.
(b) Maintenance of Records. The Pledgor will keep and maintain at its own
cost and expense satisfactory and complete records of the Collateral including,
without limitation, a record of all payments received and all credits granted
with respect to the Collateral and all other dealings with the Collateral. The
Pledgor will mark its books and records pertaining to the Collateral to evidence
this Agreement and the security interests granted hereby. For the further
security of the Collateral Agent and the Secured Parties, the Pledge agrees that
the Collateral Agent, for the ratable benefit of the Secured Parties, shall have
a special property interest in all of the Pledgor's
<PAGE>
8
books and records pertaining to the Collateral and the Pledgor shall, upon the
acceleration of the Loans and any other amounts due under any Loan Agreement or
the Collateral Security Documents, deliver and turn over any books and records
to the Collateral Agent or to its representatives at any time on demand of the
Collateral Agent. The Collateral Agent in turn agrees to provide the Pledgor
with reasonable access to such records during normal business hours and also
with such copies of such records (made at the Pledgor's expense) as the Pledgor
may reasonably request, such access and such copies to be available subject to
the Collateral Agent's prior right to use such records to enforce its rights in
or to realize upon the Collateral.
(c) Limitation on Rights and Liens with Respect to Collateral. The Pledgor
will not (i) vote to enable, or take any other action to permit, the Limited
Partnership to issue any other partnership interests in the Limited Partnership
(other than the interest of the Limited Partner) or grant any right to purchase
or otherwise acquire any existing or other partnership interests in the Limited
Partnership, except as contemplated by the Capital Contribution Agreement and
the Amended and Restated Partnership Agreement, (ii) sell, assign, transfer or
exchange, or otherwise dispose of, or grant any option with respect to, or
mortgage, pledge or hypothecate its interest in, the Collateral, or attempt,
offer or contract to do so, except as provided herein and as contemplated by the
Capital Contribution Agreement and the Amended and Restated Partnership
Agreement, or (iii) create, incur, permit or suffer to exist, and will defend
the Collateral against and will take such other action as is necessary to
remove, any Lien or claim on or to the Collateral, other than Permitted Liens,
and will defend the right, title and interest of the Collateral Agent in and to
any of the Pledgor's rights to the Collateral and in and to the Proceeds thereof
against the claims and demands of all Persons whomsoever.
(d) Regulatory Filings. If and to the extent required, the Pledgor will
file this Agreement, and any other agreements or instruments which are required
to be filed with any regulatory body in accordance with the rules and
regulations of such regulatory body.
(e) Notices. The Pledge will advise the Collateral Agent and the Secured
Parties promptly, in reasonable detail, of any Lien or claim made or asserted
against any of the Collateral.
(f) Change of Name. The Pledgor will not change its name or identity in any
manner which might make any financing statement filed hereunder seriously
misleading unless the Pledgor shall have given the Collateral Agent and
<PAGE>
9
the Secured Parties at least 30 days' prior written notice thereof.
(g) Compliance with Laws, etc, The Pledge will comply in all material
respects with all acts, rules, regulations, orders, decrees and directions of
any Governmental Authority applicable to the Collateral or any part thereof,
except any thereof the non-compliance with which could not reasonably be
expected to have a material adverse effect on the Collateral or any part
thereof.
(h) Taxes and Claims. The Pledgor shall pay and discharge all taxes,
assessments and governmental charges or levies imposed on the Limited
Partnership 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 Limited Partnership. The Pledgor
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: (i) the Pledgor
diligently prosecutes such contest, (ii) during the period of such contest the
enforcement of any contested item is effectively stayed; provided, however, that
this clause (ii) shall apply to contested income taxes of a Partner only if the
failure to pay such tax may then become a Lien on the Collateral and (iii) in
the reasonable opinion of the Collateral Agent, such contest does not involve
any substantial danger of the sale, forfeiture or loss of any part of the
Collateral, title thereto or any interest therein. The Pledgor 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. Collateral Agent's appointment as Attorney-in-Fact. (a) Powers.
The Pledgor hereby irrevocably constitutes and appoints the Collateral Agent and
any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of the Pledgor and in the name of the Pledgor or in its own name, from
time to time in the Collateral Agent's discretion, for the purpose of carrying
out the terms of this Agreement, to take any and all appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement, and, without limiting
the generality of the foregoing, the Pledgor hereby gives the Collateral Agent
the power and right, on behalf of the Pledgor, without notice to or assent by
the Pledgor to do the following:
<PAGE>
10
(i) to pay or discharge taxes and Liens levied or placed on or threatened
against the Collateral; and
(ii) upon the occurrence and during the continuance of any Default or
Event of Default, (A) to direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Collateral Agent or as the Collateral Agent shall
direct; (B) to ask or demand for, collect, receive payment of and receipt for,
any and all moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (C) in the name of the Pledgor or
its own name or otherwise, to take possession of and endorse and collect any
checks, drafts, notes, acceptances or other instruments for the payment of
moneys due with respect to the Collateral; (D) to file any claim or to commence
and prosecute any suits, actions or proceedings in any court of law or equity or
otherwise as deemed appropriate by the Collateral Agent to collect the
Collateral or any part thereof and to enforce any other right in respect of any
Collateral; (E) to defend any suit, action or proceeding brought against the
Pledgor with respect to any Collateral; (F) to settle, compromise or adjust any
suit, action or proceeding described in clause (D) or (E) above and, in
connection therewith, to give such discharges or releases as the Collateral
Agent may deem appropriate; and (G) generally, to sell, transfer, pledge and
make any agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though the Collateral Agent were the absolute owner
thereof for all purposes, and to do, at the Collateral Agent's option and the
Pledgor's expense, at any time, or from time to time, all acts and things which
the Collateral Agent reasonably deems necessary to protect, preserve or realize
upon the Collateral and the Liens of the Collateral Agent and the Secured
Parties thereon and to effect the intent of this Agreement, all as fully and
effectively as the Pledgor might do.
The Pledgor hereby ratifies all that said attorneys shall lawfully do or
cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
(b) Other Powers. The Pledgor also authorizes the Collateral Agent, at
anytime and from time to time, to execute, in connection with the sale provided
for in Section 8 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
(c) No Duty on Part of the Collateral Agent, and the Secured Parties.
The powers conferred on the Collateral Agent and the Secured Parties hereunder
are solely to protect the
<PAGE>
11
interests of the Collateral Agent and the secured Parties in the Collateral and
shall not impose any duty upon any of them to exercise any such powers. The
Collateral Agent and the Secured Parties shall be accountable only for amounts
that they actually receive as a result of the exercise of such powers, and
neither they nor any of their officers, directors, employees or agents shall be
responsible to the Pledgor for any act or failure to act hereunder, except for
their own gross negligence or willful misconduct.
8. Performance by Collateral agent of Pledgor's Obligations; Rights
of Pledgor Prior to Default or Event of Default. (a) If the Pledgor fails to
perform or comply with any of its agreements contained herein and the Collateral
Agent, as provided for by the terms of this Agreement, shall itself perform or
comply, or otherwise cause performance or compliance, with such agreement, the
expenses of the collateral Agent incurred in connection with such performance or
compliance, together with interest thereon at a rate per annum equal to the
Default Rate shall be payable by the Pledgor to the Collateral Agent on demand
and shall constitute Obligations secured hereby.
(b) Unless and until a Default or Event of Default shall have occurred
and be continuing, the Pledgor shall be entitled to take any action, or omit to
take any action, as the Pledgor may deem necessary or advisable or convenient
with respect to the Collateral; provided that no action shall be taken, or
omitted to be taken, by the Pledgor which would (i) violate or be inconsistent
with any of the terms of this Agreement or the Loan Agreements, or (ii) give
rise to any defense, counterclaim or offset in favor of the Pledgor against the
Collateral Agent or the Secured Parties or to any claim or action against the
Pledgor or (iii) have the effect of materially impairing the position or
interests of the Collateral Agent or the Secured Parties or of the value of the
Collateral. All such rights of the Pledgor to take or omit to take any action
shall cease upon the occurrence of a Default or an Event of Default and the
continuance thereof.
9. Remedies, Rights Upon the Occurrence of a Default or an Event of
Default. (a) If any Default or Event of Default shall occur and be continuing,
the Collateral Agent, on behalf of the Secured Parties, may exercise, in
addition to all other rights and remedies granted to then in this Agreement and
in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party un Per the Code, with
the express obligation of the Pledgor to cooperate with the Collateral Agent in
all respects as are necessary to perfect such rights and remedies. Without
limiting the generality of the foregoing, the Collateral Agent, without demand
of performance or other demand, presentment, protest, advertisement or notice of
any kind (except the notice specified below of time and place of public or
private sale) to or upon the
<PAGE>
12
Pledgor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances (i)
exercise all voting, partnership and other rights of the Pledgor in its capacity
as a partner in the Limited Partnership as fully and completely as though the
Collateral Agent were the absolute owner of the Pledgor's partnership interest
in the Limited Partnership, (ii) transfer all or any part of the Collateral into
the Collateral Agent's name or the name of its nominee or Nominees, (iii)
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell,.lease, assign, give option or options
to purchase, or otherwise dispose of and deliver said Collateral or any part
thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, at any exchange, broker's board or office of
the Collateral Agent or any Secured Party or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The collateral Agent or any Secured Party shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of said Collateral so sold,
free of any right or equity of redemption in the Pledgor, which right or equity
is hereby waived or released. The Pledgor further agrees, at the Collateral
Agent's request, to assemble the Collateral and make it available to the
collateral Agent at places which the Collateral Agent shall reasonably select,
whether at the Pledgor's premises or elsewhere. The Collateral Agent shall apply
the net proceeds of any collection, recovery, receipt, appropriation,
realization or sale of or with respect to the Collateral, after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care, safe keeping or otherwise of any or all of the Collateral or in any
way relating to the rights of the Collateral Agent and the Secured Parties
hereunder, including reasonable attorneys' fees and legal expenses, to the
payment in whole or in part of the obligations, in accordance with the
Collateral Agency Agreement, the Pledgor remaining liable for any deficiency
remaining unpaid after such application, and only after so applying such net
proceeds and after the payment by the Collateral Agent of any other amount
required by any provision of law, including Section 9-504(l)(c) of the Code,
need the Collateral Agent account for the surplus, if any, to the Pledgor to the
extent permitted by applicable law, the Pledgor waives all claims, damages, and
demands against the Collateral Agent or any Secured Party arising out of the
repossession, retention or sale of the Collateral. The Pledgor agrees that the
Collateral Agent need not give more than 10 days' notice (which notification
shall be deemed given when mailed, postage prepaid, addressed to the Pledgor at
its address referred to in paragraph 11 hereof) of the time and place of any
public sale or of the time after which a private sale may take place and that
such notice is reasonable notification of such matters.
<PAGE>
13
(b) The Pledgor also agrees to pay all costs of the Collateral Agent,
including attorneys, fees, incurred with respect to the collection of any of the
Obligations and the enforcement of any of the rights of the Collateral Agent or
any Secured Party hereunder.
(c) The Pledgor hereby waives presentment, demand, protest or any
notice (to the extent permitted by applicable law) of any kind in connection
with this Agreement or any Collateral and expressly waives and agrees not to
assert any rights or privileges it may acquire under Section 9-112 of the Code.
(d) The Pledgor consents and agrees that the Collateral Agent may
exercise any or all of its rights and remedies hereunder notwithstanding any
provision in the Limited Partnership Agreement which purports to limit the
transferability of partnership interests without the consent of any partners.
10. Limitation on Duties in Respect of Collateral; Limitations on
Collateral Agent's Obligations. (a) Beyond the use of reasonable care in the
custody thereof, the Collateral Agent shall not have any duty as to any
Collateral in its possession or control or in the possession or control of any
agent or nominee of it or any income thereon or as to the preservation of rights
against prior parties or any other rights pertaining thereto.
(b) It is expressly agreed by the Pledgor that, anything herein to the
contrary notwithstanding, the Pledgor shall remain liable under each of its
contracts or other agreements, including, without limitation, the Limited
Partnership Agreement and the General Partner Partnership Agreement, to observe
and perform all the conditions and obligations to be observed and performed by
it thereunder, all in accordance with and pursuant to the terms of the
provisions thereof. The Collateral Agent and the Secured Parties shall not have
any obligation or liability by reason of or arising out of this Agreement, nor
shall the Collateral Agent or any Secured Party be required or obligated in any
manner to perform or fulfill any of the obligations of the Limited Partnership
or the Pledgor, or to make any payment, or to make any inquiry as to the nature
or the sufficiency of any payment received by it or the sufficiency of any
performance by the Pledgor, or to present or file any claim, or to take any
action to collect or enforce any performance or the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
<PAGE>
14
11. Notices. Notices hereunder may be given by mail, by telex or by
facsimile transmission, addressed or transmitted to, in the case of the Pledgor,
as set forth with its signature hereto, in the case of the Collateral Agent and
the LP Lenders, at such Person's address or transmission number set forth in the
Limited Partnership Loan Agreement and in the case of the GP Lender, as set
forth in the General Partner Loan Agreement, and shall be effective as provided
for in the Loan Agreements. The Pledgor may change its address and transmission
number by written notice to the Collateral Agent and the Secured Parties, and
the Collateral Agent or any Secured Party may change its address and
transmission number by written notice to the Pledgor and, in the case of a
Secured Party, to the Collateral Agent.
12. Severability. Any provision of this Agreement 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. Where provisions
of any law or regulation resulting in such prohibition or unenforceability may
be waived they are hereby waived by the Pledgor and the Collateral Agent and the
Secured Parties to the full extent permitted by law so that this Agreement shall
be deemed a valid and binding agreement, and the security interest created
hereby shall constitute a continuing first lien (other than as to the Permitted
Liens) on and first (other than as to the Permitted Liens) perfected security
interest in the Collateral, in each case enforceable in accordance with its
terms.
13. Release of Lien in Favor of the LP Agent and the LP Lenders. (a)
Upon receipt by the Collateral Agent from the LP Agent of a written notice
stating that all of the Obligations (as defined in the Limited Partnership Loan
Agreement) have been paid in full and the Commitments under the Limited
Partnership Loan Agreement have been terminated, the security interests in favor
of the LP Agent and the LP Lenders created pursuant to Section 2 shall forthwith
terminate and the security interests created pursuant to Section 2 shall
continue in favor of the Collateral Agent and the GP Lender, exclusively.
(b) Upon receipt by the Collateral Agent from the GP Lender of a
written notice stating that all of the obligations (as defined in the General
Partner Loan Agreement) have been paid in full and the Commitments thereunder
have been terminated, the security interests in favor of the GP Lender created
pursuant to Section 2 shall forthwith terminate.
(c) The Collateral Agent, upon request by the Pledgor shall execute
and deliver, at the Pledgor's expense, all such documentation reasonably
necessary to release the lien in its favor in and to this Agreement.
<PAGE>
15
14. Section Headings. The section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
15. No Waiver; Cumulative Remedies. The Collateral Agent and Secured
Parties shall not by any act (except pursuant to the execution of a written
instrument pursuant to Section 16 hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquired in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Collateral Agent or any Secured Party, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, remedy, power or privilege hereunder
shall preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. A waiver by the Collateral Agent or any
Secured Party of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Collateral Agent or any
Secured Party would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any rights or remedies provided by law.
16. Waivers and Amendments; Successors and Assigns; Governing Law.
None of the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Pledgor and the Collateral Agent. This Agreement shall be binding upon the
successors and assigns of the Pledgor and shall inure to the benefit of the
Collateral Agent and the Secured Parties and their respective successors and
assigns. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
17. Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the collateral are irrevocable and powers
coupled with an interest.
18. Indemnification. The Pledgor agrees to pay, indemnify and hold
the Collateral Agent, each Secured Party and their respective affiliates,
directors and/or 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
Obligations) be imposed on, incurred by or asserted against any such Person in
any way relating to or arising out of this Agreement or the Collateral, or any
documents contemplated by or referred to herein or the transactions contemplated
hereby
<PAGE>
16
or thereby (all of the foregoing, collectively, the "indemnified liabilities"),
provided, that the Pledgor 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 obligations and all other amounts
payable hereunder.
19. Collateral Agent Not a Partner. Nothing contained in this
Agreement shall be construed or interpreted (a) to transfer to the Collateral
Agent or any Secured Party any of the rights and obligations of a partner of the
Limited Partnership other than the rights of collateral security in and to the
Collateral described herein or (b) to constitute the Collateral Agent or any
Secured Party a partner of the Limited Partnership.
20. Authority of Collateral Agent. The Pledgor acknowledges that the
rights and responsibilities of the Collateral Agent under this Agreement with
respect to any action taken by the Collateral Agent or the exercise or non-
exercise by the Collateral Agent of any option, right, request, judgment or
other right or remedy provided for herein or resulting or arising out of this
Agreement shall, as between the Collateral Agent and the Secured Parties, be
governed by the Collateral Agency Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Collateral Agent and the Pledgor, the Collateral Agent shall be conclusively
presumed to be acting an agent for the Secured Parties with full and valid
authority so to act or refrain from acting, and the Pledgor shall not be under
any obligation, or entitlement, to make any inquiry respecting such authority.
21. Limitation of Liability. The Collateral Agent and the Secured
Parties agree that the liability of the Pledgor under this Agreement and the
obligations shall be limited to the Collateral (as defined in the Loan
Agreements) and the rights and remedies of the Collateral Agent and the Secured
Parties against the Collateral (as defined in the Loan Agreements) pursuant to
this Agreement and the other Collateral Security Documents, and in no event
shall the Pledgor 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 Collateral Agent and the Secured
Parties, to the Collateral (as defined in the Loan Agreements) pursuant to this
Agreement or the other 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
<PAGE>
17
misrepresentation made by such Person herein or in any certificate or document
delivered pursuant hereto.
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly
executed and delivered as of the date first set forth above.
COGEN TECHNOLOGIES LINDEN, LTD.
(d/b/a COGEN TECHNOLOGIES
LINDEN, LIMITED PARTNERSHIP
in the State of New Jersey)
By: Cogen Technologies, Inc.,
its general partner
1600 Smith Street
Suite 5000
Houston, Texas 77002
/s/ ROBERT C. MCNAIR
By: ____________________________
Title: PRESIDENT
<PAGE>
ASSIGNMENT
----------
AGREEMENT, dated as of September 15, 1992, (this "Agreement") among
GENERAL ELECTRIC POWER FUNDING CORPORATION, a Delaware corporation ("GEPFC"),
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a
national banking association (the "Bank"), as trustee (in such capacity, the
"Owner Trustee") under a Trust Agreement, dated as of December 28, 1990,
between Linden Owner Partnership, a Delaware general partnership (the "Owner
Partnership"), and the Bank (in such capacity, the "Owner Trustee"), and COGEN
TECHNOLOGIES LINDEN, LTD., a Texas limited partnership (the "Borrower").
W I T N E S S E T H:
-------------------
WHEREAS, this Agreement is being executed and delivered in accordance
with (i) subsections 9.3 and 9.8 of the Term Loan Agreement, dated as of
February 15, 1990, between the Borrower and GEPFC (as amended, supplemented or
otherwise modified from time to time, the "Loan Agreement"; terms defined
therein being used herein as therein defined), (ii) Section 16 of the Borrower
Pledge Agreement and (iii) Section 2 of the Assignment Agreement, dated as of
September 15, 1992 (as amended, supplemented or otherwise modified from time to
time, the "Assignment Agreement"), between GEPFC and the Owner Trustee; and
WHEREAS, the Owner Trustee wishes to become the Lender party to the
Loan Agreement and the secured party under the Collateral Security Documents;
and
WHEREAS, GEPFC is selling and assigning to the Owner Trustee all of
its rights, obligations and commitments under the Loan Agreement, the Notes and
the Collateral Security Documents; and
WHEREAS, in connection with the assignment to the Owner Trustee of
GEPFC's rights and obligations under the Borrower Pledge Agreement, the
Borrower, GEPFC and the Owner Trustee desire to enter into certain amendments to
the Borrower Pledge Agreement; and
WHEREAS, the parties to the Collateral Agency Agreement desire to
terminate such Agreement; and
WHEREAS, concurrently herewith, GEPFC is assigning to the Owner
Trustee its obligations under the Capital Contribution Agreement (as defined in
the Assignment Agreement) to become limited partner of the Project Partnership
(as defined in the Assignment Agreement); and
<PAGE>
2
WHEREAS, GEPFC is a party to the Recognition Agreements (as defined in
the Assignment Agreement) which provide certain rights to the limited partner of
the Project Partnership, and desires to assign to the Owner Trustee its rights
and obligations thereunder; and
WHEREAS, the Owner Trustee wishes to assume GEPFC's rights and
obligations under the Recognition Agreements;
NOW, THEREFORE, in consideration of the premises herein and other good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto hereby agree as follows:
1. Upon receipt by GEPFC of a counterpart of this Agreement executed
by GEPFC, the Owner Trustee and the Borrower, the Owner Trustee shall become the
Lender party to the Loan Agreement, the secured party under the Collateral
Security Documents and the limited partner party to the Recognition Agreements
for all purposes thereof.
2. GEPFC hereby irrevocably sells, assigns and transfers to the Owner
Trustee, without recourse, representation or warranty (except to the extent set
forth in Section 5 of the Assignment Agreement) and the Owner Trustee hereby
irrevocably purchases, takes and assumes from GEPFC, all of GEPFC's interests,
rights and obligations (except to the extent set forth in Section 3(d) hereof)
under the Recognition Agreements, the Loan Agreement and the Collateral Security
Documents (including GEPFC's right, interest and obligations as Collateral Agent
and as a secured party under the Borrower Pledge Agreement and any UCC-1
financing statements relating thereto), including, without limitation, all of
its Commitments, Loans owing to it as of the date hereof and other amounts owing
to GEPFC under the Loan Agreement and the Notes, together with all instruments,
documents and collateral security pertaining thereto.
3. (a) In consideration for the sale and assignment by GEPFC pursuant
to Section 2 hereof, on the Second Capital Contribution Date, the Owner Trustee
shall pay to GEPFC an amount equal to the outstanding principal amount of the
loans under the Loan Agreement, together with all accrued and unpaid interest
thereon plus any other accrued and any unpaid fees owing to GEPFC under the Loan
Agreement and the Collateral Security Documents.
(b) On and as of the Second Capital Contribution Date, all principal
payments that would otherwise be payable to or for the account of GEPFC
pursuant to the Loan Agreement and the Notes shall, instead, be payable to or
for the account of the Owner Trustee.
(c) On and as of the Second Capital Contribution Date, all interest,
fees and other amounts that would otherwise accrue for the account of GEPFC
pursuant to the Loan Agreement and the
<PAGE>
3
Notes shall, instead, accrue for the account of, and be payable to, the Owner
Trustee.
(d) On and as of the date hereof, GEPFC shall cease to be a party to
the Loan Agreement and the Collateral Security Documents in all respects, except
to the extent set forth in paragraphs (a), (b) and (c) above and to the extent
the Owner Trustee fails to make any loans required to be made by it under the
Loan Agreement, in which case GEPFC shall remain liable for making, and retain
all rights in respect of, such required loans. In the event of any such failure,
the parties hereto agree to enter into such amendments to the Loan Agreement,
the Collateral Security Documents and any other documents as shall be necessary
to ensure that GEPFC retains its rights in respect of such required loans. The
amendment and restatement of the Loan Agreement on the date hereof shall not
affect GEPFC's liability hereunder.
4. On the Second Capital Contribution Date, GEPFC shall request the
Borrower to execute and deliver to GEPFC in exchange for GEPFC's surrendered
Notes new Notes to the order of the Owner Trustee. Such new Notes shall be: (i)
in the case of the Post-Completion Note, in an aggregate principal amount equal
to the Post-Completion Commitment and in the case of the Working Capital Note,
in an aggregate principal amount equal to $10,000,000; (ii) dated the date of
such surrendered Notes; and (iii) otherwise in substantially the form of
Exhibits A-2 or A-3 to the Loan Agreement, as the case may be.
5. By executing and delivering this Agreement, GEPFC and the Owner
Trustee confirm to and agree with each other as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of the
interest being assigned hereby free and clear of any adverse claim, the
representations and warranties set forth in Sections 5 and 6(b)(iv) of the
Assignment Agreement, GEPFC makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Recognition Agreements, the Loan Agreement,
the Notes, the Collateral Security Documents or any other instrument or document
furnished pursuant thereto; (ii) GEPFC makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under the Loan Agreement, the Notes, the Collateral Security
Documents or any other instrument or document furnished pursuant thereto or by
the Project Partnership or any other party of its obligations under the
Recognition Agreements or any instrument or document relating thereto; and (iii)
the Owner Trustee agrees that it will perform in accordance with their terms all
of the obligations which by the terms of the Loan Agreement are required to be
performed by it as the Lender.
<PAGE>
4
6. The Borrower, GEPFC and the Owner Trustee hereby agree that, from
and after the date hereof, all references in the Borrower Pledge Agreement to
the "Collateral Agent", the "GP Lender", and the "Secured Parties" shall be
deemed to be references to the owner Trustee in its capacity as lender to the
Borrower under the Loan Agreement.
7. The parties to the Collateral Agency Agreement hereby agree that
such Agreement shall be terminated (except for the provisions thereof which
expressly state that they shall survive termination thereof) on the Second
Capital Contribution Date.
8. The Borrower hereby agrees that, except as hereinafter set forth,
any claim or liability under the Recognition Agreements, the Loan Agreement, the
Notes 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. 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, the Owner Partnership nor any officer, employee, partner,
servant, controlling Person, manager, agent, authorized representative or
Affiliate of the Owner Trustee or the Owner Partnership (collectively, the "Non-
Recourse Persons") shall have any liability to the Project Partnership, 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 the Loan
Agreement or the Collateral Security Document, or if any claim of the Borrower
or the Project Partnership against the Owner Trustee or alleged liability to the
Borrower or the Project Partnership of the Owner Trustee shall be asserted under
the Recognition Agreements, 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 Section 8 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
<PAGE>
5
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 the Loan Agreement and the Recognition Agreements and shall
be enforceable by any Non-Recourse Person.
9. 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.
10. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to
be executed as of the day and year first above written.
GENERAL ELECTRIC POWER FUNDING
CORPORATION, as Collateral Agent,
as Lender and as Agent
/s/ JAMIE H. GEARON
By: ______________________________
Title: ATTORNEY-IN-FACT
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, not in its
individual capacity, but solely
as Owner Trustee
/s/
By: _______________________________
Title: Assistant Vice President
COGEN TECHNOLOGIES LINDEN, LTD.
By: Cogent Technologies Inc.,
its managing general partner
/s/
By: _______________________________
Title: Vice President
Agreed to and accepted as
of the date first above written
with respect to Section 7:
GENERAL ELECTRIC CAPITAL CORPORATION
By: _____________________________
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to
be executed as of the day and year first above written.
GENERAL ELECTRIC POWER FUNDING
CORPORATION, as Collateral Agent,
as Lender and as Agent
By: ________________________________
Title:
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, not in its
individual capacity, but solely
as Owner Trustee
By: _________________________________
Title:
COGEN TECHNOLOGIES LINDEN, LTD.
By: Cogen Technologies, Inc.,
its managing general partner
By: _________________________________
Title:
Agreed to and accepted as
of the date first above written
with respect to Section 7:
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/
________________________________
Title:
<PAGE>
EXHIBIT 10.20
============================================================================
COLLATERAL AGENCY AGREEMENT
Dated as of February 15, 1990
GENERAL ELECTRIC POWER FUNDING CORPORATION,
as Collateral Agent
============================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS................................................ 1
1.1 Defined Terms.............................................. 1
1.2 Other Definitional Provisions.............................. 2
SECTION 2. ACCELERATION OF SECURED OBLIGATIONS........................ 3
2.1 Notices of Acceleration.................................... 3
2.2 General Authority of the Collateral Agent
over the Collateral...................................... 3
2.3 Right to Initiate Judicial Proceedings..................... 4
2.4 Right to Appoint a Receiver................................ 4
2.5 Exercise of Powers; Instructions of Secured
Parties.................................................. 5
2.6 Limitation on Collateral Agent's Duty in
Respect of Collateral.................................... 6
2.7 Limitation by Law.......................................... 6
2.8 Rights of Secured Parties under the Loan
Agreements............................................... 6
SECTION 3. COLLATERAL ACCOUNT; DISTRIBUTIONS.......................... 6
3.1 The Collateral Account..................................... 6
3.2 Control of Collateral Account.............................. 7
3.3 Investment of Funds Deposited in Collateral
Account.................................................. 7
3.4 Application of Moneys...................................... 7
3.5 Collateral Agent's Calculations ........................... 9
3.6 Pro Rata Sharing........................................... 9
SECTION 4. AGREEMENTS WITH COLLATERAL AGENT........................... 9
4.1 Delivery of Secured Instruments............................ 9
4.2 Certain Information........................................ 10
4.3 Compensation and Expenses.................................. 10
4.4 Stamp and Other Similar Taxes.............................. 10
4.5 Filing Fees,.Excise Taxes, Etc............................. 10
4.6 Indemnification............................................ 11
SECTION 5. THE COLLATERAL AGENT....................................... 11
5.1 Appointment................................................ 11
5.2 Exculpatory Provisions..................................... 12
5.3 Delegation of Duties....................................... 13
5.4 Reliance by Collateral Agent............................... 13
5.5 Limitations on Duties of Collateral Agent.................. 14
i
<PAGE>
Page
----
5.6 Treatment of Payee or Indorsee by Collateral Agent;
Representatives of Secured Parties........................ 15
5.7 Resignation and Removal of the Collateral Agent............... 15
5.8 Non-Reliance on Collateral Agent; Indemnification............. 17
5.9 Status of Successor Collateral Agent.......................... 18
5.10 Merger of the Collateral Agent................................ 18
5.11 Co-Collateral Agent; Separate Collateral
Agent; Trustee............................................. 18
SECTION 6. MISCELLANEOUS................................................ 20
6.1 Notices....................................................... 20
6.2 No Waivers.................................................... 20
6.3 Amendments, Supplements and Waivers........................... 21
6.4 Headings...................................................... 21
6.5 Severability.................................................. 21
6.6 Successors and Assigns........................................ 21
6.7 Governing Law................................................. 21
6.8 Counterparts.................................................. 21
6.9 Termination................................................... 21
ii
<PAGE>
COLLATERAL AGENCY AGREEMENT, dated as of February 15, 1990, among
GENERAL ELECTRIC POWER FUNDING CORPORATION ("GEPFC"), a Delaware corporation, as
Agent for the lenders (the "LP Lenders") under the LP Loan Agreement (as defined
below) (in such capacity, the "LP Agent"), GEPFC, as lender under the GP Loan
Agreement (as defined below) (in such capacity, the "GP Lender"), COGEN
TECHNOLOGIES LINDEN, LTD. (d/b/a COGEN TECHNOLOGIES LINDEN, LIMITED PARTNERSHIP
in the State of New Jersey), a Texas limited partnership (the "Pledgor"), and
GEPFC, as collateral agent for the LP Agent and the GP Lender (in such capacity,
the "Collateral Agent").
W I T N E S S E T H :
WHEREAS, in order to induce (i) the LP Lenders and the LP Agent to
enter into the LP Loan Agreement (as defined in the Security Agreement
hereinafter referred to) and (ii) the GP Lender to enter into the GP Loan
Agreement (as defined in the Security Agreement hereinafter referred to), the
Pledgor has granted to the Collateral Agent for the ratable benefit of the
Secured Parties (as defined below), a security interest in the Collateral (as
defined in the Security Agreement hereinafter referred to) pursuant to the
Assignment and Security Agreement, dated as of February 15, 1990 (as amended,
supplemented or otherwise modified from time to time, the "Security Agreement"),
made by the Pledgor in favor of the Collateral Agent; and
WHEREAS the Secured Parties wish to set forth their agreement as to
the allocation of sales and other recoveries of and realizations on the
Collateral; and
WHEREAS, GEPFC is willing to act as collateral agent for the Secured
Parties hereunder;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. (a) All capitalized terms used herein which are
defined in the Security Agreement shall have their respective meanings as
therein defined, unless such terms are defined herein. All terms defined herein
or in the Security Agreement in the singular shall have the same meanings when
used in the plural and vice versa.
(b) The following terms shall have the following meanings:
<PAGE>
2
"Business Day" shall mean any day other than a day on which banks in
New York City or in the city in which the principal office of the
Collateral Agent is located are authorized or required by the law to close.
"Collateral Account" shall have the meaning assigned in subsection 3.1
hereof.
"Collateral Agency Agreement" shall mean this Collateral Agency
Agreement, as the same may from time to time be amended, supplemented or
otherwise modified.
"Collateral Agent" shall mean GEPFC, in its capacity as collateral
agent hereunder, and any successor collateral agent appointed hereunder.
"Distribution Date" shall mean each date, so long as a Notice of
Acceleration is in effect, fixed by the Collateral Agent for a distribution
to the Secured Parties of funds held in the Collateral Account.
"Dollars" and "$" shall mean lawful currency of the United States of
America.
"Notice of Acceleration" shall mean a notice delivered to the
Collateral Agent by the LP Agent with respect to the Obligations under the
LP Loan Agreement or by the GP Lender with respect to the Obligations under
the GP Loan Agreement, stating that an event of default has occurred under
the provisions of LP Loan Agreement or the GP Loan Agreement, as the case
may be, and, either, as a result thereof, the indebtedness outstanding
under such Loan Agreement has become due and payable prior to the stated
maturity thereof, or such indebtedness has matured in accordance with the
terms of such Loan Agreement.
"Person" shall mean an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentally thereof.
"Required Secured Parties" shall mean Secured Parties holding 66-2/3%
or more of the sum of all loans outstanding (including the stated amount of
all letters of credit) and unused Commitments under the Loan Agreements.
"Secured Parties" shall mean the holders from time to time of the
Obligations.
1.2 Other Definitional Provisions. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Collateral Agency
Agreement shall refer to this Collateral
<PAGE>
3
Agency Agreement as a whole and not to any particular provision of this
Collateral Agency Agreement, and section and subsection references are to this
Collateral Agency Agreement unless otherwise specified.
SECTION 2. ACCELERATION OF SECURED OBLIGATIONS
2.1 Notices of Acceleration. (a) Upon receipt by the Collateral Agent
of a Notice of Acceleration, the Collateral Agent shall (i) immediately notify
the Pledgor and the LP Agent or the GP Lender, as the case may be, of the
receipt and contents thereof. So long as such Notice of Acceleration is in
effect, the Collateral Agent shall exercise the rights and remedies provided in
this Collateral Agency Agreement and in the Security Agreement subject to the
direction of the Required Secured Parties as provided herein. The Collateral
Agent is not empowered to exercise any remedy hereunder or thereunder unless a
Notice of Acceleration is in effect.
(b) A Notice of Acceleration delivered by the LP Agent or the GP
Lender, as the case may be, shall become effective upon receipt thereof by the
Collateral Agent. A Notice of Acceleration, once effective, shall remain in
effect unless and until it is cancelled as provided in subsection 2.1(c).
(c) A Notice of Acceleration may be cancelled by the LP Agent or the
GP Lender, as the case may be, by the delivery, by the LP Agent or the GP
Lender, as the case may be, of a written notice of cancellation to the
Collateral Agent (i) before the Collateral Agent takes any action to exercise
any remedy with respect to the Collateral or (ii) thereafter, if the Collateral
Agent believes that all actions it has taken to exercise any remedy or remedies
with respect to the Collateral can be reversed without undue difficulty;
provided, that no Notice of Acceleration shall be cancelled more than 60 days
after it is received by the Collateral Agent. The Collateral Agent shall
immediately notify the Pledgor, the LP Agent and the GP Lender as to the receipt
and contents of any such notice of cancellation and shall promptly notify the
Pledgor as to the cancellation of any Notice of Acceleration.
2.2 General Authority of the Collateral Agent over the Collateral. The
Pledgor irrevocably constitutes and appoints the Collateral Agent and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full power and authority in the name of the Pledgor
or in its own name, from time to time in the Collateral Agent's discretion, so
long as any Notice of Acceleration is in effect, to take any and all appropriate
action and to execute any and all documents and instruments which may be
necessary or desirable to carry out the terms of this Collateral Agency
Agreement and the
<PAGE>
4
Security Agreement and accomplish the purposes hereof and thereof and, without
limiting the generality of the foregoing, the Pledgor hereby gives the
Collateral Agent the power and right on behalf of the Pledgor, without notice to
or further assent by the Pledgor, to do the following:
(i) to ask for, demand, sue for, collect, receive and give
acquittance for any and all moneys due or to become due upon, or in
connection with, the Collateral;
(ii) to receive, take, endorse, assign and deliver any and all
checks, notes, drafts, acceptances, documents and other negotiable and non-
negotiable instruments taken or received by the Collateral Agent as, or in
connection with, the Collateral;
(iii) to commence, prosecute, defend, settle, compromise or adjust
any claim, suit, action or proceeding with respect to, or in connection
with, the Collateral;
(iv) to sell, transfer, assign or otherwise deal in or with the
Collateral or any part thereof as fully and effectively as if the
Collateral Agent were the absolute owner thereof; and
(v) to do, at its option and at the expense and for the account of
the Pledgor, at any time or from time to time, all acts and things which
the Collateral Agent deems necessary to protect or preserve the Collateral
and to realize upon the Collateral.
2.3 Right to Initiate Judicial Proceedings. If a Notice of
Acceleration is in effect, the Collateral Agent, subject to the provisions of
subsection 2.5(b), (i) shall have the right and power to institute and maintain
such suits and proceedings as it may deem appropriate to protect and enforce the
rights vested in it by this Collateral Agency Agreement and the Security
Agreement and (ii) may either after entry, or without entry, proceed by suit or
suits at law or in equity to enforce such rights and to foreclose upon the
Collateral and to sell all or, from time to time, any of the Collateral under
the judgment or decree of a court of competent jurisdiction.
2.4 Right to Appoint a Receiver. If a Notice of Acceleration is in
effect, upon the filing of a bill in equity or other commencement of judicial
proceedings to enforce the rights of the Collateral Agent under this Collateral
Agency Agreement or the Security Agreement, the Collateral Agent shall, to the
extent permitted by law, without notice to the Pledgor or any party claiming
through the Pledgor, without regard to the solvency or insolvency at the time of
any Person then liable for the payment of any of the Obligations, without regard
to the then value of the
<PAGE>
5
Collateral, and without requiring any bond from any complainant in such
proceedings, be entitled as a matter of right to the appointment of a receiver
or receivers (which may be the Collateral Agent) of the Collateral Agent's
right, title and interest in the Security Agreement and the Collateral, or any
part thereof, and of the rents, issues, tolls, profits, royalties, revenues and
other income thereof, pending such proceedings, with such powers as the court
making such appointment shall confer, and to the entry of an order directing
that the rents, issues, tolls, profits, royalties, revenues and other income of
the property relating to the Collateral be segregated, sequestered and impounded
for the benefit of the Collateral Agent and the Secured Parties, and, to the
extent permitted by applicable law, the Pledgor irrevocably consents to the
appointments of such receiver or receivers and to the entry of such order;
provided that, notwithstanding the appointment of any receiver, the Collateral
Agent shall be entitled to retain possession and control of all cash held by or
deposited with it pursuant to this Collateral Agency Agreement or the Security
Agreement.
2.5 Exercise of Powers; Instructions of Secured Parties. (a) All of
the powers, remedies and rights of the Collateral Agent as set forth in this
Collateral Agency Agreement may be exercised by the Collateral Agent in respect
of the Security Agreement as though set forth in full herein and all of the
powers, remedies and rights of the Collateral Agent as set forth in the Security
Agreement may be exercised from time to time as herein and therein provided.
(b) The Required Secured Parties shall have the right, by one or more
instruments in writing executed and delivered to the Collateral Agent, to direct
the time, method and place of conducting any proceeding for any right or remedy
available to the Collateral Agent, or of exercising any trust or power conferred
on the Collateral Agent, or for the appointment of a receiver, or to direct the
taking or the refraining from taking of any action authorized by this Collateral
Agency Agreement or the Security Agreement; provided that (i) such direction
shall not conflict with the provisions of law or of this Collateral Agency
Agreement or of the Security Agreement and (ii) the Collateral Agent shall be
adequately secured and indemnified as provided in subsection 5.4(d). Nothing in
this subsection 2.5(b) shall impair the right of the Collateral Agent in its
discretion to take any action which it deems proper and which is not
inconsistent with such direction by the Required Secured Parties. In the absence
of such direction, the Collateral Agent shall have no duty to take or refrain
from taking any action unless explicitly required herein.
(c) If, within 45 days after the Collateral Agent receives a Notice of
Acceleration which has not been cancelled, the Collateral Agent shall not have
received written directions from the Required Secured Parties pursuant to
subsection 2.5(b)
<PAGE>
6
for the exercise of rights or remedies by the Collateral Agent, the Collateral
Agent shall, until the Collateral Agent receives written directions from the
Required Secured Parties, follow written directions from the first to give
instructions of the LP Agent or the GP Lender.
2.6 Limitation on Collateral Agent's Duty in Respect of Collateral.
Beyond its duties as to the custody thereof expressly provided herein or in the
Security Agreement and to account to the Secured Parties and the Pledgor for
moneys and other property received by it hereunder or under the Security
Agreement, the Collateral Agent shall not have any duty to the Pledgor or the
Secured Parties as to any Collateral in its possession or control other than to
deal with it in the same manner as the Collateral Agent deals with similar
property for its own account or in the possession or control of any of its
agents or nominees, or any income thereon or as to the preservation of rights
against prior parties or any other rights pertaining thereto.
2.7 Limitation by Law. All rights, remedies and powers provided herein
may be exercised only to the extent that the exercise thereof does not violate
any applicable provision of law, and all the provisions hereof are intended to
be subject to all applicable mandatory provisions of law which may be
controlling and to be limited to the extent necessary so that they will not
render this Collateral Agency Agreement or the Security Agreement invalid,
unenforceable in whole or in part or not entitled to be recorded, registered or
filed under the provisions of any applicable law.
2.8 Rights of Secured Parties under the Loan Agreements.
Notwithstanding any other provision of this Collateral Agency Agreement or the
Security Agreement, the right of each Secured Party to receive payment of the
Obligations held by such Secured Party when due (whether at the stated maturity
thereof, by acceleration or otherwise) as expressed in the related Loan
Agreement or other instrument evidencing or agreement governing an Obligation or
to institute suit for the enforcement of such payment on or after such due date,
and the obligation of the Limited Partnership or the Pledgor, as the case may
be, to pay such Obligation when due, shall not be impaired or affected without
the consent of such Secured Party.
SECTION 3. COLLATERAL ACCOUNT; DISTRIBUTIONS
3.1 The Collateral Account. (a) All moneys which are required by this
Collateral Agency Agreement or the Security Agreement to be delivered to the
Collateral Agent while a Notice of Acceleration is in effect or which are
received by the Collateral Agent or any agent or nominee of the Collateral Agent
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7
in respect of the Collateral, whether in connection with the exercise of the
remedies provided in this Collateral Agency Agreement or the Security Agreement
or otherwise, while a Notice of Acceleration is in effect shall be deposited in
an account established and, at all times thereafter until this Collateral Agency
Agreement shall have terminated, maintained by the Collateral Agent with a
commercial bank selected with the written consent of the Pledgor (which consent
shall not be unreasonably withheld) (the "Collateral Account") and held by the
Collateral Agent and applied in accordance with the terms of this Collateral
Agency Agreement. Upon the cancellation of any Notice of Acceleration pursuant
to subsection 2.1(c) the Collateral Agent shall (subject to the first and second
sentence of subsection 3.4(a)) cause all funds on deposit in the Collateral
Account to be paid over to the Pledgor.
(b) Any Collateral not deemed appropriate at the time of receipt of
such property by the Collateral Agent for deposit or credit to the Collateral
Account and distribution therefrom shall be held by the Collateral Agent for the
benefit of the Secured Parties until such time as any cash proceeds are realized
from the sale or other recovery of such Collateral or the Collateral Agent deems
such Collateral appropriate for deposit or credit to the Collateral Account.
(c) Any determination made by the Collateral Agent as to whether
property is appropriate for deposit in, or credit to, and distribution from, the
Collateral Account, shall, if made in good faith and without manifest error, be
conclusive and binding on the Secured Parties, the Pledgor and the other parties
hereto.
3.2 Control of Collateral Account. All right, title and interest in
and to the Collateral Account shall vest in the Collateral Agent, and funds on
deposit in the Collateral Account shall constitute part of the Collateral. The
Collateral Account shall be subject to the exclusive dominion and control of the
Collateral Agent.
3.3 Investment of Funds Deposited in Collateral Account. The
Collateral Agent shall invest and reinvest moneys on deposit in the Collateral
Account (but shall not bear any risk of loss thereof) at any time in Permitted
Investments,
All such investments and the interest and income received thereon and
the net proceeds realized on the sale or redemption thereof shall be held in the
Collateral Account as part of the Collateral.
3.4 Application of Moneys. (a) All moneys held by the Collateral Agent
in the Collateral Account or received by the Collateral Agent while a Notice of
Acceleration is in effect shall, to the extent available for distribution (it
being
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8
understood that the Collateral Agent may liquidate investments prior to maturity
in order to make a distribution pursuant to this subsection 3.4), be distributed
by the Collateral Agent on each Distribution Date in the following order of
priority:
First: to the Collateral Agent amounts equal to all sums which
constitute unreimbursed costs and expenses of the Collateral Agent and its
representatives incurred under or in connection with this Collateral Agency
Agreement or the Security Agreement;
Second: to the Secured Parties amounts equal to all sums which
constitute unreimbursed costs and expenses of such Secured Parties paid to
the Collateral Agent under or in connection with this Collateral Agency
Agreement or the Security Agreement;
Third: to the Secured Parties, in an amount equal to the unpaid
principal or face amount of, and unpaid interest on and fees or charges, if
any, in respect of, the Obligations then outstanding held by the Secured
Parties whether or not then due and payable and, if such moneys shall be
insufficient to pay such amounts in full, then ratably (without priority of
any one over any other) to the Secured Parties in proportion to the unpaid
amounts thereof on such Distribution Date; and
Fourth: to the Secured Parties, amounts equal to all other sums which
constitute Obligations held by the Secured Parties, including without
limitation the costs and expenses of the Secured Parties and their
representatives which are due and payable under the relevant Loan Agreement
and which constitute Obligations as of such Distribution Date, and, if such
moneys shall be insufficient to pay such sums in full, then ratably to such
Secured Parties in proportion to such sums; and
Fifth: any surplus then remaining shall be paid to the Pledgor or its
successors or assigns or to whomsoever may be lawfully entitled to receive
the same or as a court of competent jurisdiction may direct.
(b) The term "unpaid" as used in clause Third of subsection 3.4(a)
refers:
(i) in the absence of a bankruptcy proceeding with respect to
the Limited Partnership or the Pledgor, to all amounts of Obligations
outstanding as of a Distribution Date, and
(ii) during the pendency of a bankruptcy proceeding with respect
to the Limited Partnership or the Pledgor, to
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9
all amounts allowed by the bankruptcy court in respect of Obligations as a
basis for distribution (including estimated amounts, if any, allowed in
respect of contingent claims),
to the extent that prior distributions have not been made in respect thereof.
(c) The Collateral Agent shall make all payments and distributions
under subsection 3.4(a): (i) on account of Obligations owing to the LP Agent or
the LP Lenders to the LP Agent for re-distribution in accordance with the
provisions of the LP Loan Agreement; and (ii) on account of Obligations owing to
the GP Lender to the GP Lender.
3.5 Collateral Agent's Calculations. In making the determinations and
allocations required by subsection 3.4, the Collateral Agent may rely upon
information supplied by the LP Agent as to the amount payable with respect to
Obligations owing to the LP Agent or the LP Lenders or upon information supplied
by the GP Lender as to the amount payable with respect to the Obligations owing
to the GP Lender, and the Collateral Agent shall have no liability to any of the
Secured Parties for actions taken in reliance on such information. All
distributions made by the Collateral Agent pursuant to subsection 3.4 shall be
(subject to any decree of any court of competent jurisdiction) final, and the
Collateral Agent shall have no duty to inquire as to the application by the
holders of the Obligations of any amounts distributed to them.
3.6 Pro Rata Sharing. If, through the operation of any bankruptcy,
reorganization, insolvency or other laws or otherwise, the Collateral Agent's
security interest hereunder and under the Security Agreement is enforced with
respect to some, but not all, of the Obligations then outstanding, the
Collateral Agent shall nonetheless apply the proceeds of the Collateral for the
benefit of the holders of all Obligations in the proportions and subject to the
priorities specified in subsection 3.4(a). To the extent that the Collateral
Agent distributes Proceeds collected with respect to Obligations held by one
holder (including by way of set-off) to or on behalf of Obligations held by a
second holder, the first holder shall be deemed to have purchased a
participation in the Obligations held by the second holder, or shall be
subrogated to the rights of the second holder to receive any subsequent payments
and distributions made with respect to the portion thereof paid or to be paid by
the application of such Proceeds.
SECTION 4. AGREEMENTS WITH COLLATERAL AGENT
4.1 Delivery of Secured Instruments. The Pledgor has delivered to the
Collateral Agent true and complete copies of the
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10
Loan Agreements and the Security Agreement. The Pledgor, shall deliver to the
Collateral Agent, promptly upon the execution thereof, a true and complete copy
of all amendments, modifications or supplements to any such document entered
into after the date hereof. So long as GEPFC shall be the Collateral Agent,
satisfaction of this subsection shall be met by compliance with any similar
provision contained in the Loan Agreements.
4.2 Certain Information. The Pledgor shall deliver to the Collateral
Agent from time to time upon request of the Collateral Agent, a list setting
forth as of a date not more than 10 days prior to the date of such delivery, the
aggregate unpaid principal or face amount of Obligations outstanding.
4.3 Compensation and Expenses. In addition to the costs specified in
the Security Agreement, the Pledgor agrees to pay to the Collateral Agent, from
time to time within 30 days of demand with respect to clause (i) below and upon
demand with respect to clauses (ii) and (iii) below, all of the fees, costs and
expenses incurred by the Collateral Agent (including, without limitation, the
fees and disbursements of counsel) (i) arising in connection with the
preparation, execution, delivery, modification, and termination of this
Collateral Agency Agreement and the Security Agreement or the enforcement of any
of the provisions hereof or thereof, (ii) incurred or required to be advanced in
connection with the administration of the Collateral, the sale or other
disposition of Collateral pursuant to the Security Agreement and the
preservation, protection or defense of the Collateral Agent's rights under this
Collateral Agency Agreement and the Security Agreement and in and to the
Collateral or (iii) incurred by the Collateral Agent in connection with the
resignation of the Collateral Agent pursuant to subsection 5.7. The obligations
of the Pledgor pursuant to this subsection shall survive the termination of the
other provisions of this Collateral Agency Agreement.
4.4 Stamp and Other Similar Taxes. The Pledgor agrees to indemnify
and hold harmless the Collateral Agent and each Secured Party from any present
or future claim for liability for any stamp or any other similar (but not
including any taxes on the net income of the Collateral Agent) tax and any
penalties or interest with respect thereto, which may be assessed, levied or
collected by any jurisdiction in connection with this Collateral Agency
Agreement, the Security Agreement, or any Collateral. The obligations of the
Pledgor under this subsection 4.4 shall survive the termination of the other
provisions of this Collateral Agency Agreement.
4.5 Filing Fees, Excise Taxes, Etc. The Pledgor agrees to pay or to
reimburse the Collateral Agent for any and all payments made by the Collateral
Agent in respect of all search, filing, recording and registration fees, taxes,
excise taxes and
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11
other similar imposts which may be payable or determined to be payable in
respect of the execution and delivery of this Collateral Agency Agreement and
the Security Agreement. The obligations of the Pledgor under this subsection 4.5
shall survive the termination of the other provisions of this Collateral Agency
Agreement.
4.6 Indemnification. The Pledgor agrees to pay indemnify, and hold the
Collateral Agent, the LP Agent, the GP Lender and each Secured Party harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, the reasonable fees and disbursements of counsel) or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Collateral Agency Agreement
and the Security Agreement (all of the foregoing, collectively, the "indemnified
liabilities"); provided that the Pledgor shall have no obligation under this
subsection 4.6 to an indemnified party for indemnified liabilities arising from
the gross negligence or willful misconduct of the indemnified party. In any
suit, proceeding or action brought by the Collateral Agent under or with respect
to any contract, agreement, interest or obligation constituting part of the
Collateral for any sum owing thereunder, or to enforce any provisions thereof,
the Pledgor will save, indemnify and keep the Collateral Agent, the LP Agent,
the GP Lender and the Secured Parties harmless from and against all reasonable
expense, loss or damage suffered by reason of any defense, setoff, counterclaim,
recoupment or reduction of liability whatsoever of the obligor thereunder,
arising out of a breach by the Pledgor of any obligation thereunder or arising
out of any other agreement, indebtedness or liability at any time owing to or in
favor of such obligor or its successors from the Pledgor, and all such
obligations of the Pledgor shall be and remain enforceable against and only
against and shall not be enforceable against the Pledgor and shall not be
enforceable against the Collateral Agent or any Secured Party. The agreements in
this subsection shall survive the termination of the other provisions of this
Agreement.
SECTION 5. THE COLLATERAL AGENT
5.1 Appointment. The LP Agent, on behalf of the LP Lenders, and the GP
Lender, hereby irrevocably designate and appoint General Electric Power Funding
Corporation as the Collateral Agent for the Secured Parties under this
Collateral Agency Agreement and the Security Agreement, and irrevocably
authorize General Electric Power Funding Corporation, as the Collateral Agent,
to take such action on its behalf under the provisions of this Collateral Agency
Agreement and the Security Agreement and to exercise such powers and perform
such duties as are expressly delegated to the Collateral Agent by the terms of
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12
this Collateral Agency Agreement, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Collateral Agency Agreement, the Collateral Agent shall not
have any duties or responsibilities, except those expressly set forth herein, or
any fiduciary relationship with any Secured Party, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Collateral Agency Agreement or otherwise exist against the Collateral
Agent.
5.2 Exculpatory Provisions. (a) The Collateral Agent shall not be
responsible in any manner whatsoever for the correctness of any recitals,
statements, representations or warranties herein. The Collateral Agent makes no
representations as to the value or condition of the Collateral or any part
thereof, or as to the title of the Pledgor thereto or as to the security
afforded by this Collateral Agency Agreement or the Security Agreement, or as to
the validity, execution (except its own execution), enforceability, legality or
sufficiency of this Collateral Agency Agreement, the Security Agreement or the
Obligations, and the Collateral Agent shall incur no liability or responsibility
in respect of any such matters. The Collateral Agent shall not be responsible
for insuring the Collateral or for the payment of taxes, charges or assessments
or discharging of liens upon the Collateral or otherwise as to the maintenance
of the Collateral, except that if the Collateral Agent takes possession of any
Collateral, the Collateral Agent shall use reasonable care in the preservation
of the Collateral in its possession.
(b) The Collateral Agent shall not be required to ascertain or inquire
as to the performance by the Limited Partnership or the Pledgor of any of the
covenants or agreements contained in the Security Agreement or any Loan
Agreement. Whenever it is necessary, or in the opinion of the Collateral Agent
advisable, for the Collateral Agent to ascertain the amount of Obligations then
held by Secured Parties, the Collateral Agent may rely on a certificate of the
LP Agent, in the case of Obligations owing to the LP Agent or the LP Lenders, or
a certificate of the GP Lender, in the case of Obligations owing to the GP
Lender, and, if the LP Agent or the GP Lender shall not give such information to
the Collateral Agent, the LP Agent and the LP Lenders or the GP Lender shall not
be entitled to receive distributions hereunder (in which case distributions to
those Persons who have supplied such information, or as to whom such information
has been supplied, to the Collateral Agent shall be calculated by the Collateral
Agent using, for those Persons who have not supplied such information or as to
whom such information has not been supplied, the information most recently
delivered by the Pledgor to the Collateral Agent), and the amount so calculated
to be distributed to the Person who fails to give such information or as to whom
such information has not been given shall be
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13
segregated and held for such Person until such Person does supply such
information, or as to whom such information is supplied, to the Collateral
Agent, whereupon on the next Distribution Date the amount distributable to such
Person shall be recalculated using such information and distributed to it.
(c) The Collateral Agent shall be under no obligation or duty to take
any action under this Collateral Agency Agreement or the Security Agreement if
taking such action (i) would subject the Collateral Agent to a tax in any
jurisdiction where it is not then subject to a tax, unless the Collateral Agent
receives security or indemnity satisfactory to it against such tax or (ii) would
require the Collateral Agent to qualify to do business in any jurisdiction where
it is not then so qualified.
(d) Notwithstanding any other provision of this Collateral Agency
Agreement, the Collateral Agent shall not be personally liable for any action
taken or omitted to be taken by it in accordance with this Collateral Agency
Agreement or the Security Agreement except for its own gross negligence or
willful misconduct.
(e) The Collateral Agent shall have the same rights with respect to
any Obligations held by it as any other Secured Party and may exercise such
rights as though it were not the Collateral Agent hereunder, and may accept
deposits from, lend money to, and generally engage in any kind of business with
the Limited Partnership or the Pledgor as if it were not the Collateral Agent.
5.3 Delegation of Duties. The Collateral Agent may execute any of its
duties or powers hereunder either directly or by or through agents or attorneys-
in-fact, who may include officers and employees of the Pledgor, except that no
partner or employee of the Pledgor may hold Collateral. The Collateral Agent
shall be entitled to advice of counsel concerning all matters pertaining to such
trusts, powers and duties. The Collateral Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by them
without gross negligence or willful misconduct.
5.4 Reliance by Collateral Agent. (a) Whenever in the administration
of this Collateral Agency Agreement or the Security Agreement the Collateral
Agent shall deem it necessary or desirable that the factual matter be proved or
established in connection with the Collateral Agent taking, suffering or
omitting any action hereunder or thereunder, such matter (unless other evidence
in respect thereof is herein specifically prescribed) may be deemed to be
conclusively proved or established by a certificate of the GP Lender, the
Pledgor, or the LP Agent delivered to the Collateral Agent, and such certificate
shall be
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14
full warrant to the Collateral Agent for any action taken, suffered or omitted
in reliance thereon.
(b) The Collateral Agent may consult with counsel, and any advice of
such counsel shall be full and complete authorization and protection in respect
of any action taken or suffered by it hereunder or under the Security Agreement
in accordance therewith. The Collateral Agent shall have the right to any time
to seek instructions concerning the administration of this Collateral Agency
Agreement and the Security Agreement from any court of competent jurisdiction.
(c) The Collateral Agent may rely, and shall be fully protected in
acting, upon any resolution, statement, certificate, instrument, opinion,
report, notice, request, consent, order, bond or other paper or document which
it has no reason to believe to be other than genuine and to have been signed or
presented by the proper party or parties or, in the case of cables, telecopies
and telexes, to have been sent by the proper party or parties. In the absence of
its gross negligence or willful misconduct, the Collateral Agent may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions furnished to the
Collateral Agent and conforming to the requirements of this Collateral Agency
Agreement.
(d) The Collateral Agent shall not be under any obligation to exercise
any of the rights or powers vested in the Collateral Agent by this Collateral
Agency Agreement and the Security Agreement, at the request or direction of the
Required Secured Parties pursuant to this Collateral Agency Agreement or
otherwise, unless the Collateral Agent shall have been provided adequate
security and indemnity against the costs, expenses and liabilities which may be
incurred by it in compliance with such request or direction, including such
reasonable advances as may be requested by the Collateral Agent.
(e) Any advice of counsel may be based, insofar as it relates to
factual matters, upon a certificate of the LP Agent, the GP Lender or the
Pledgor or representations made by the LP Agent, the GP Lender or the Pledgor in
a writing filed with the Collateral Agent.
5.5 Limitations on Duties of Collateral Agent. (a) Unless a Notice of
Acceleration is in effect, the Collateral Agent shall be obligated to perform
such duties and only such duties as are specifically set forth in this
Collateral Agency Agreement and the Security Agreement, and no implied covenants
or obligations shall be read into this Collateral Agency Agreement or the
Security Agreement against the Collateral Agent. If and so long as a Notice of
Acceleration is in effect, the Collateral Agent shall, subject to the provisions
of subsection 2.5(b), exercise
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15
the rights and powers vested in it by this Collateral Agency Agreement and the
Security Documents, and shall not be liable with respect to any action taken by
it, or omitted to be taken by it in accordance with the direction of the
Required Secured Parties.
(b) Except as herein otherwise expressly provided, the Collateral
Agent shall not be under any obligation to take any action which is
discretionary with the Collateral Agent under the provisions hereof or of the
Security Agreement except upon the written request of the Required Secured
Parties.
(c) No provision of this Collateral Agency Agreement or of the
Security Agreement shall be deemed to impose any duty or obligation on the
Collateral Agent to perform any act or acts or exercise any right, power, duty
or obligation conferred or imposed on it, in any jurisdiction in which it shall
be illegal, or in which the Collateral Agent shall be unqualified or
incompetent, to perform any such act or acts or to exercise any such right,
power, duty or obligation or if such performance or exercise would constitute
doing business by the Collateral Agent in such jurisdiction or imposes a tax on
the Collateral Agent by reason thereof.
5.6 Treatment of Payee or Indorsee by Collateral Agent;
Representatives of Secured Parties. (a) The Collateral Agent may treat the
registered holder or, if none, the payee or indorsee of any promissory note or
debenture evidencing a part of the Obligations as the absolute owner thereof for
all purposes and shall not be affected by any notice to the contrary, whether
such promissory note or debenture shall be past due or not.
(b) Any Person (other than the LP Agent or the GP Lender), which
shall be designated as the duly authorized representative of one or more Secured
Parties to act as such in connection with any matters pertaining to this
Collateral Agency Agreement or the Collateral shall present to the Collateral
Agent such documents, including, without limitation, opinions of counsel, as the
Collateral Agent may reasonably require, in order to demonstrate to the
Collateral Agent the authority of such Person to act as the representative of
such Secured Parties.
5.7 Resignation and Removal of the Collateral Agent. (a) The
Collateral Agent may at any time, by giving written notice to the Pledgor, the
Limited Partnership, the LP Agent and the GP Lender, resign and be discharged of
the responsibilities hereby created, such resignation to become effective upon
(i) the appointment of a successor Collateral Agent, (ii) the acceptance of such
appointment by such successor Collateral Agent, and (iii) the approval of such
successor Collateral Agent evidenced by one or more instruments signed by the
Pledgor, the LP Agent and the GP Lender. If no successor Collateral Agent shall
be appointed and shall have accepted such appointment within 90 days after the
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16
Collateral Agent gives the aforesaid notice of resignation, the Collateral
Agent, the LP Agent or the GP Lender may apply to any court of competent
jurisdiction to appoint a successor to act until such time, if any, as a
successor Collateral Agent shall have been appointed as provided in this
subsection 5.7. Any successor so appointed by such court shall immediately and
without further act be superseded by any successor Collateral Agent appointed by
the LP Agent and the GP Lender or the Collateral Agent, as the case may be, as
provided in this subsection 5.7. The LP Agent and the GP Lender may, at any time
upon giving 10 days' prior written notice thereof to the Collateral Agent and
the Pledgor, remove the Collateral Agent and appoint a successor Collateral
Agent, such removal to be effective upon the acceptance of such appointment by
the successor. The Collateral Agent who has resigned or been removed shall be
entitled to fees, costs and expenses to the extent incurred or arising, or
relating to events occurring, before its resignation or removal.
(b) If at any time the Collateral Agent shall resign or be removed or
otherwise become incapable of acting, or if at any time a vacancy shall occur in
the office of the Collateral Agent for any other cause, a successor may be
appointed by the LP Agent and the GP Lender with the written consent of the
Pledgor (which consent shall not be unreasonably withheld). In either case, the
powers, duties, authority and title of the predecessor Collateral Agent shall be
terminated and cancelled without procuring the resignation of such predecessor
and without any other formality (except as may be required by applicable law)
than appointment and designation of a successor in writing duly acknowledged and
delivered to the predecessor and the Pledgor. Such appointment and designation
shall be full evidence of the right and authority to make the same and of all
the facts therein recited, and this Collateral Agency Agreement and the Security
Agreement shall vest in such successor, without any further act, deed or
conveyance, all the estates, properties, rights, powers, trusts, duties,
authority and title of its predecessor; but such predecessor shall,
nevertheless, on the written request of the Pledgor, the LP Agent or the GP
Lender or the successor execute and deliver an instrument transferring to such
successor all the estates, properties, rights, powers, trusts, duties, authority
and title of such predecessor hereunder and under the Security Agreement and
shall deliver all Collateral held by it or its agents to such successor. Should
any deed, conveyance or other instrument in writing from the Pledgor be required
by any successor Collateral Agent for more fully and certainly vesting in such
successor the estates, properties, rights, powers, trusts, duties, authority and
title vested or intended to be vested in the predecessor Collateral Agent any
and all such deeds, conveyances and other instruments in writing shall, on
request of such successor, be executed, acknowledged and delivered by the
Pledgor. If the Pledgor shall not have executed and delivered any such deed,
conveyance or other instrument within 10 days after it received a
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17
written request from the successor Collateral Agent to do so, or if a Notice of
Acceleration is in effect, the predecessor Collateral Agent may execute the same
on behalf of the Pledgor. The Pledgor hereby appoints any predecessor Collateral
Agent as its agent and attorney to act for it as provided in the next preceding
sentence.
(c) The provisions of this Section 5 shall inure to the benefit of the
resigning or removed collateral agent as to any actions taken or omitted to be
taken by it while it was Collateral Agent under this Collateral Agency
Agreement.
5.8 Non-Reliance on Collateral Agent; Indemnification. (a) Each
Secured Party expressly acknowledges that neither the Collateral Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or affiliates
has made any representations or warranties to it and that no act by it
hereinafter taken, including any review of the affairs of the Pledgor or the
Limited Partnership, shall be deemed to constitute any representation or
warranty by the Collateral Agent to any Secured Party. Each Secured Party
represents to the Collateral Agent that it has or will, independently and
without reliance upon the Collateral Agent, and based on such documents and
information as it has deemed or will deem appropriate, made and will make its
own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Pledgor and the
Limited Partnership and has made and will make its own decision to extend credit
to the Pledgor and the Limited Partnership. Each Secured Party also represents
that it will, independently and without reliance upon the Collateral Agent, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under the Loan Agreements, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Pledgor and the Limited Partnership. Except for notices, reports and other
documents expressly required to be furnished to the Secured Parties by the
Collateral Agent hereunder, the Collateral Agent shall not have any duty or
responsibility to provide any Secured Party with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of the Pledgor or the Limited Partnership, which may come into
its possession or the possession of any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates. Each Secured Party acknowledges that
the Collateral Agent and its affiliates may exercise all contractual and legal
rights and remedies which may exist from time to time with respect to other
existing and future relationships with the Pledgor and the Limited Partnership
without any duty to account therefor to such Secured Party.
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(b) The Secured Parties agree to indemnify the Collateral Agent (in
its capacity as such), to the extent not paid or reimbursed by the Pledgor or
the Limited Partnership and without limiting the obligation of the Pledgor or
the Limited Partnership to do so, ratably according to the respective principal
amounts of the Obligations held by them at the date of any claim by the
Collateral Agent for indemnity under this subsection, 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
Obligations) be imposed on, incurred by or asserted against the Collateral Agent
in any way relating to or arising out of this Collateral Agency Agreement or the
Security Agreement, or any documents contemplated by or referred to herein or
therein or the transactions contemplated thereby or any action taken or omitted
by the Collateral Agent hereunder or thereunder or in connection therewith,
provided that the Secured Parties shall not be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from the
gross negligence or wilful misconduct of the Collateral Agent. The agreements in
this subsection 5.8 shall survive the payment of the Obligations and all other
amounts payable hereunder.
5.9 Status of Successor Collateral Agent. Every successor Collateral
Agent appointed pursuant to subsection 5.7 shall be a commercial bank or trust
company in good standing and having power to act as Collateral Agent hereunder,
incorporated under the laws of the United States of America or any State thereof
or the District of Columbia and shall also have capital, surplus and undivided
profits of not less than $100,000,000, if there be such an institution with such
capital, surplus and undivided profits willing, qualified and able to accept the
agency hereunder upon reasonable or customary terms.
5.10 Merger of the Collateral Agent. Any corporation into which the
Collateral Agent may be merged, or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Collateral
Agent shall be a party, shall be Collateral Agent under this Collateral Agency
Agreement and the Security Agreement without the execution or filing of any
paper or any further act on the part of the parties hereto.
5.11 Co-Collateral Agent; Separate Collateral Agent; Trustee. (a) If
at any time or times it shall be necessary or prudent in order to conform to any
law of any jurisdiction in which any of the Collateral shall be located, or to
avoid any violation of law or imposition on the Collateral Agent of taxes by
such jurisdiction not otherwise imposed on the Collateral Agent, or the
Collateral Agent shall be advised by counsel, satisfactory to it, that it is
necessary or prudent in
<PAGE>
19
the interest of the Secured Parties, or the Required Secured Parties shall in
writing so request the Collateral Agent, or the Collateral Agent shall deem it
desirable for its own protection in the performance of its duties hereunder or
under the Security Agreement, the Collateral Agent shall execute and deliver all
instruments and agreements necessary or proper to constitute a bank or trust
company meeting the requirements of subsection 5.9 and approved, in writing, by
the Pledgor (which approval shall not be unreasonably withheld), or one or more
persons approved, in writing, by the Collateral Agent and the Pledgor (which
approval shall not be unreasonably withheld), either to act as co-collateral
agent or co-collateral agents or separate collateral agent or separate
collateral agents or trustee or trustees for the benefit of the collateral Agent
and Secured Parties of all or any of the Collateral under this Collateral Agency
Agreement or under the Security Agreement, jointly with the Collateral Agent
originally named herein or therein or any successor Collateral Agent, or to act
as separate collateral agent or collateral agents, co-collateral agent or co-
collateral agents or trustee trustees of any of the Collateral.
(b) Every separate collateral agent and every co-collateral agent,
other than any successor Collateral Agent appointed pursuant to subsection 5.7,
and each trustee, shall, to the extent permitted by law, be appointed and act
and be such, subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred upon the
Collateral Agent in respect of the custody, control and management of
moneys, papers or securities shall be exercised solely by the Collateral
Agent or any agent appointed by the Collateral Agent;
(ii) all rights, powers, duties and obligations conferred or imposed
upon the Collateral Agent hereunder and under the Security Agreement shall
be conferred or imposed and exercised or performed by the Collateral Agent
and such separate collateral agent or separate collateral agents or co-
collateral agent or co-collateral agents or trustee or trustees jointly, as
shall be provided in the instrument appointing such separate collateral
agent or separate collateral agents or co-collateral agent or co-collateral
agents or trustee or trustees, except to the extent that under any law of
any jurisdiction in which any particular act or acts are to be performed
the Collateral Agent shall be incompetent or unqualified to perform such
act or acts, or unless the performance of such act or acts would result in
the imposition of any tax on the Collateral Agent which would not be
imposed absent such joint act or acts, in which event such rights, powers,
duties and obligations shall be exercised and performed by such separate
collateral agent or
<PAGE>
20
separate collateral agents or co-collateral agent or co-collateral agents
or trustee or trustees;
(iii) no power given hereby or by the Security Agreement to, or
which it is provided herein or therein may be exercised by, any such co-
collateral agent or co-collateral agents or separate collateral agent or
separate collateral agents or trustee or trustees, shall be exercised
hereunder or thereunder by such co-collateral agent or co-collateral agents
or separate collateral agent or separate collateral agents or trustee or
trustees except jointly with, or with the consent in writing of, the
Collateral Agent, anything contained herein to the contrary
notwithstanding;
(iv) no collateral agent (including the Collateral Agent), separate
collateral agent, co-collateral agent or trustee hereunder shall be
personally liable by reason of any act or omission of any other collateral
agent, separate collateral agent, co-collateral agent or trustee hereunder;
and
(v) the Collateral Agent, at any time by an instrument in writing
executed by them jointly, may accept the resignation of or remove any such
separate collateral agent, co-collateral agent or trustee, and, in that
case by an instrument in writing executed by it, may appoint with the
Pledgor's written consent (which consent shall not be unreasonably
withheld) a successor to such separate collateral agent, co-collateral
agent or trustee, as the case may be, anything contained herein to the
contrary notwithstanding. If the Collateral Agent shall have appointed a
separate collateral agent or separate collateral agents or co-collateral
agent or co-collateral agents or trustee or trustees as above provided, the
Collateral Agent may at any time, by an instrument in writing, accept the
resignation of or remove any such separate collateral agent, co-collateral
agent or trustee, and the successor to any such separate collateral agent,
co-collateral agent or trustee shall be appointed by the Collateral Agent.
SECTION 6. MISCELLANEOUS
6.1 Notices. Unless otherwise specified herein, all notices, requests,
demands or other communications given to the Pledgor, the Collateral Agent, the
LP Agent or the GP Lender shall be given and shall be effective as provided in
the Security Agreement.
6.2 No Waivers. No failure on the part of the Collateral Agent, any
co-collateral agent, any separate collateral agent, any trustee or any Secured
Party to exercise, no course of
<PAGE>
21
dealing with respect to, and no delay in exercising, any right, power or
privilege under this Collateral Agency Agreement or the Security Agreement shall
operate as a waiver thereof nor shall any single or partial exercise of any such
right, power or privilege preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
6.3 Amendments, Supplements and Waivers. With the written consent of
the Required Secured Parties, the Collateral Agent and the Pledgor may, from
time to time, enter into written agreements supplemental hereto or to the
Security Agreement for the purpose of adding to, or waiving any provisions of,
this Collateral Agency Agreement or the Security Agreement or changing in any
manner the rights of the Collateral Agent, the Secured Parties or the Pledgor
hereunder or thereunder; provided that no such supplemental agreement shall
amend, modify or waive any provision of Section 4 or 5 or alter the duties,
rights or obligations of the Collateral Agent hereunder or under the Security
Agreement without the written consent of the Collateral Agent. Any such
supplemental agreement shall be binding upon the Pledgor, the LP Agent, the GP
Lender, the Secured Parties and the Collateral Agent and their respective
successors and assigns.
6.4 Headings. The table of contents and the headings of Sections and
subsections have been included herein for convenience only and should not be
considered in interpreting this Collateral Agency Agreement.
6.5 Severability. Any provision of this Collateral Agency Agreement
which is prohibited or unenforceable in any jurisdiction shall not invalidate
the remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
6.6 Successors and Assigns. This Collateral Agency Agreement shall be
binding upon and inure to the benefit of each of the parties hereto and shall
inure to the benefit of each of the Secured Parties and their respective
successors and assigns, and nothing herein is intended or shall be construed to
give any other Person any right, remedy or claim under, to or in respect of this
Collateral Agency Agreement or any Collateral.
6.7 Governing Law. THIS COLLATERAL AGENCY AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
6.8 Counterparts. This Collateral Agency Agreement may be signed in
any number of counterparts with the same effect as if the signatures thereto and
hereto were upon the same instrument.
<PAGE>
22
6.9 Termination. This Collateral Agency Agreement shall terminate
when the security interest granted under the Security Agreement has terminated
and the Collateral has been released in accordance with the Security Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Collateral
Agency Agreement to be duly executed as of the day and year first written above.
GENERAL ELECTRIC POWER FUNDING
CORPORATION, as LP Agent
By: /s/ Signature Appears Here
---------------------------------
Title: President
GENERAL ELECTRIC POWER FUNDING
CORPORATION, as GP Lender
By: /s/ Signature Appears Here
---------------------------------
Title: President
GENERAL ELECTRIC POWER FUNDING
CORPORATION, as Collateral Agent
By: /s/ Signature Appears Here
---------------------------------
Title: President
COGEN TECHNOLOGIES LINDEN, LTD.
(d/b/a Cogen Technologies Linden,
Limited Partnership in the State
of New Jersey), as Pledgor
By: Cogen Technologies, Inc.,
its general partner
By: /s/ Roberta Mchan
----------------------------------
Title: President
<PAGE>
ASSIGNMENT
AGREEMENT, dated as of September 15, 1992, (this "Agreement") among
GENERAL ELECTRIC POWER FUNDING CORPORATION, a Delaware corporation ("GEPFC"),
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a
national banking association (the "Bank"), as trustee (in such capacity, the
"Owner Trustee") under a Trust Agreement, dated as of December 28, 1990, between
Linden Owner Partnership, a Delaware general partnership (the "Owner
Partnership"), and the Bank (in such capacity, the "Owner Trustee"), and COGEN
TECHNOLOGIES LINDEN, LTD., a Texas limited partnership (the "Borrower").
W I T N E S S E T H :
WHEREAS, this Agreement is being executed and delivered in accordance
with (i) subsections 9.3 and 9.8 of the Term Loan Agreement, dated as of
February 15, 1990, between the Borrower and GEPFC (as amended, supplemented or
otherwise modified from time to time, the "Loan Agreement"; terms defined
therein being used herein as therein defined), (ii) Section 16 of the Borrower
Pledge Agreement and (iii) Section 2 of the Assignment Agreement, dated as of
September 15, 1992 (as amended, supplemented or otherwise modified from time to
time, the "Assignment Agreement"), between GEPFC and the Owner Trustee; and
WHEREAS, the Owner Trustee wishes to become the Lender party to the
Loan Agreement and the secured party under the Collateral Security Documents;
and
WHEREAS, GEPFC is selling and assigning to the Owner Trustee all of
its rights, obligations and commitments under the Loan Agreement, the Notes and
the Collateral Security Documents; and
WHEREAS, in connection with the assignment to the Owner Trustee of
GEPFC's rights and obligations under the Borrower Pledge Agreement, the
Borrower, GEPFC and the Owner Trustee desire to enter into certain amendments to
the Borrower Pledge Agreement; and
WHEREAS, the parties to the Collateral Agency Agreement desire to
terminate such Agreement; and
WHEREAS, concurrently herewith, GEPFC is assigning to the Owner
Trustee its obligations under the Capital Contribution Agreement (as defined in
the Assignment Agreement) to become limited partner of the Project Partnership
(as defined in the Assignment Agreement); and
<PAGE>
2
WHEREAS, GEPFC is a party to the Recognition Agreements (as defined in
the Assignment Agreement) which provide certain rights to the limited partner of
the Project Partnership, and desires to assign to the owner Trustee its rights
and obligations thereunder; and
WHEREAS, the Owner Trustee wishes to assume GEPFC's rights and
obligations under the Recognition Agreements;
NOW, THEREFORE, in consideration of the premises herein and other good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto hereby agree as follows:
1. Upon receipt by GEPFC of a counterpart of this Agreement executed
by GEPFC, the Owner Trustee and the Borrower, the Owner Trustee shall become the
Lender party to the Loan Agreement, the secured party under the Collateral
Security Documents and the limited partner party to the Recognition Agreements
for all purposes thereof.
2. GEPFC hereby irrevocably sells, assigns and transfers to the Owner
Trustee, without recourse, representation or warranty (except to the extent set
forth in Section 5 of the Assignment Agreement) and the Owner Trustee hereby
irrevocably purchases, takes and assumes from GEPFC, all of GEPFC's interests,
rights and obligations (except to the extent set forth in Section 3(d) hereof)
under the Recognition Agreements, the Loan Agreement and the Collateral Security
Documents (including GEPFC's right, interest and obligations as Collateral Agent
and as a secured party under the Borrower Pledge Agreement and any UCC-1
financing statements relating thereto), including, without limitation, all of
its Commitments, Loans owing to it as of the date hereof and other amounts owing
to GEPFC under the Loan Agreement and the Notes, together with all instruments,
documents and collateral security pertaining thereto.
3. (a) In consideration for the sale and assignment by GEPFC pursuant
to Section 2 hereof, on the Second Capital Contribution Date, the Owner Trustee
shall pay to GEPFC an amount equal to the outstanding principal amount of the
loans under the Loan Agreement, together with all accrued and unpaid interest
thereon plus any other accrued and any unpaid fees owing to GEPFC under the Loan
Agreement and the Collateral Security Documents.
(b) On and as of the Second Capital Contribution Date, all principal
payments that would otherwise be payable to or for the account of GEPFC pursuant
to the Loan Agreement and the Notes shall, instead, be payable to or for the
account of the Owner Trustee.
(c) On and as of the Second Capital Contribution Date, all interest,
fees and other amounts that would otherwise accrue for the account of GEPFC
pursuant to the Loan Agreement and the
<PAGE>
3
Notes shall, instead, accrue for the account of, and be payable to, the Owner
Trustee.
(d) On and as of the date hereof, GEPFC shall cease to be a party to
the Loan Agreement and the Collateral Security Documents in all respects, except
to the extent set forth in paragraphs (a), (b) and (c) above and to the extent
the Owner Trustee fails to make any loans required to be made by it under the
Loan Agreement, in which case GEPFC shall remain liable for making, and retain
all rights in respect of, such required loans. In the event of any such failure,
the parties hereto agree to enter into such amendments to the Loan Agreement,
the Collateral Security Documents and any other documents as shall be necessary
to ensure that GEPFC retains its rights in respect of such required loans. The
amendment and restatement of the Loan Agreement on the date hereof shall not
affect GEPFC's liability hereunder.
4. On the Second Capital Contribution Date, GEPFC shall request the
Borrower to execute and deliver to GEPFC in exchange for GEPFC's surrendered
Notes new Notes to the order of the Owner Trustee. Such new Notes shall be: (i)
in the case of the Post-Completion Note, in an aggregate principal amount equal
to the Post-Completion Commitment and in the case of the Working Capital Note,
in an aggregate principal amount equal to $10,000,000; (ii) dated the date of
such surrendered Notes; and (iii) otherwise in substantially the form of
Exhibits A-2 or A-3 to the Loan Agreement, as the case may be.
5. By executing and delivering this Agreement, GEPFC and the Owner
Trustee confirm to and agree with each other as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of the
interest being assigned hereby free and clear of any adverse claim, the
representations and warranties set forth in Sections 5 and 6(b)(iv) of the
Assignment Agreement, GEPFC makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Recognition Agreements, the Loan Agreement,
the Notes, the Collateral Security Documents or any other instrument or document
furnished pursuant thereto; (ii) GEPFC makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under the Loan Agreement, the Notes, the Collateral Security
Documents or any other instrument or document furnished pursuant thereto or by
the Project Partnership or any other party of its obligations under the
Recognition Agreements or any instrument or document relating thereto; and (iii)
the Owner Trustee agrees that it will perform in accordance with their terms all
of the obligations which by the terms of the Loan Agreement are required to be
performed by it as the Lender.
<PAGE>
4
6. The Borrower, GEPFC and the Owner Trustee hereby agree that, from
and after the date hereof, all references in the Borrower Pledge Agreement to
the "Collateral Agent", the "GP Lender", and the "Secured Parties" shall be
deemed to be references to the Owner Trustee in its capacity as lender to the
Borrower under the Loan Agreement.
7. The parties to the Collateral Agency Agreement hereby agree that
such Agreement shall be terminated (except for the provisions thereof which
expressly state that they shall survive termination thereof) on the Second
Capital Contribution Date.
8. The Borrower hereby agrees that, except as hereinafter set forth,
any claim or liability under the Recognition Agreements, the Loan Agreement, the
Notes 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. 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, the Owner Partnership nor any officer, employee, partner,
servant, controlling Person, manager, agent, authorized representative or
Affiliate of the Owner Trustee or the Owner Partnership (collectively, the "Non-
Recourse Persons") shall have any liability to the Project Partnership, 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 the Loan
Agreement or the Collateral Security Document, or if any claim of the Borrower
or the Project Partnership against the Owner Trustee or alleged liability to the
Borrower or the Project Partnership of the Owner Trustee shall be asserted under
the Recognition Agreements, 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 Section 8 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
<PAGE>
5
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 the Loan Agreement and the Recognition Agreements and shall
be enforceable by any Non-Recourse Person.
9. 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.
10. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to
be executed as of the day and year first above written.
GENERAL ELECTRIC POWER FUNDING
CORPORATION, as Collateral Agent,
as Lender and as Agent
By: /s/ Jamie H. Gearm
-------------------------------
Title: Attorney-In-Fact
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, not in its
individual capacity, but solely
as Owner Trustee
By: /s/???????????????
-------------------------------
Title: Assistant Vice President
COGEN TECHNOLOGIES LINDEN, LTD.
By: Cogen Technologies, Inc.,
its managing general partner
By: /s/ ????????????????
-------------------------------
Title: President
Agreed to and accepted as
of the date first above written
with respect to Section 7:
GENERAL ELECTRIC CAPITAL CORPORATION
By:
-----------------------------
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to
be executed as of the day and year first above written.
GENERAL ELECTRIC POWER FUNDING
CORPORATION, as Collateral Agent,
as Lender and as Agent
By:
---------------------------------
Title:
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, not in its
individual capacity, but solely
as Owner Trustee
By:
---------------------------------
Title:
COGEN TECHNOLOGIES LINDEN, LTD.
By: Cogen Technologies, Inc.,
its managing general partner
By:
---------------------------------
Title:
Agreed to and accepted as
of the date first above written
with respect to Section 7:
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Michael J. ????????????
-----------------------------------
Title:
<PAGE>
EXHIBIT 10.21
FIRM GAS PURCHASE AND SALE AGREEMENT
between
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
and
ANADARKO ENERGY SERVICES COMPANY
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
TABLE OF CONTENTS............................................. i
ARTICLE 1: DEFINITIONS..................................... 1
ARTICLE 2: QUANTITIES...................................... 5
ARTICLE 3: NOMINATIONS..................................... 5
ARTICLE 4: PRICE........................................... 6
ARTICLE 5: RESERVATION CHARGES AND SUBSTITUTE FUELS........ 12
ARTICLE 6: PAYMENT......................................... 13
ARTICLE 7: TAXES........................................... 16
ARTICLE 8: POINT(S) OF DELIVERY............................ 17
ARTICLE 9: PRESSURE........................................ 17
ARTICLE 10: MEASUREMENT..................................... 17
ARTICLE 11: QUALITY......................................... 17
ARTICLE 12: TRANSPORTATION AND IMBALANCE CHARGES............ 18
ARTICLE 13: TERM............................................ 19
ARTICLE 14: FORCE MAJEURE................................... 19
ARTICLE 15: NOTICE.......................................... 21
ARTICLE 16: LAWS, ORDERS & REGULATIONS...................... 22
ARTICLE 17: APPLICABLE LAW.................................. 23
ARTICLE 18: WAIVER.......................................... 23
ARTICLE 19: TITLE........................................... 23
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 20: ASSIGNMENT...................................... 24
ARTICLE 21: ARBITRATION..................................... 25
ARTICLE 22: DEFAULT......................................... 27
ARTICLE 23: GENERAL......................................... 28
ARTICLE 24: CONFIDENTIALITY................................. 29
EXHIBIT A..................................................... 31
EXHIBIT B..................................................... 32
EXHIBIT C..................................................... 33
</TABLE>
ii
<PAGE>
FIRM GAS PURCHASE AND SALE AGREEMENT
This AGREEMENT ("Agreement") is made and entered into this 1st day of July,
1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P., (in the State of
New Jersey D/B/A COGEN TECHNOLOGIES LINDEN VENTURE, LIMITED PARTNERSHIP), a
Delaware limited partnership, hereinafter referred to as "Buyer," and ANADARKO
ENERGY SERVICES COMPANY, a Delaware corporation, hereinafter referred to as
"Seller;"
WHEREAS, Buyer requires a supply of gas for use in Buyer's cogeneration
facility in Linden, New Jersey; and
WHEREAS, Seller is willing to sell gas to Buyer on a firm basis to meet its
requirements.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties do hereby covenant and agree as follows:
ARTICLE 1: DEFINITIONS
----------------------
In addition to the terms "Buyer" and "Seller" which shall-refer to the
parties identified above, or their duly designated agents or representatives,
the following terms shall have the specified meanings:
1.1 The term "Alternate Commodity Price" shall have the meaning set forth
in Section 4.3.
1.2 The term "Btu" shall mean the amount of heat required to raise the
temperature of one (1) pound avoirdupois pure water from fifty-eight and five-
tenths degrees (58.50) to fifty-nine and five-tenths degrees (59.50) Fahrenheit,
as defined in
1
<PAGE>
the American Gas Association Gas Measurement Manual and any subsequent
revisions.
1.3 The term "Cancellation Notice" shall mean the notice described in
Section 22.1.
1.4 The term "Commodity Price" shall have the meaning set forth Section
4.2.
1.5 The term "Con Ed" shall mean The Consolidated Edison Company of New
York, Inc.
1.6 The term "Daily Contract Quantity" or "DCQ" shall mean nine thousand
one hundred two (9,102) MMBtu per day at the Texas Gas Mamou Point of Delivery,
plus Transporter(s)' Market Area Fuel.
1.7 The term "day" shall mean a period of twenty-four (24) consecutive
hours, beginning and ending at the time specified in the receiving
Transporter(s)' tariff (s) at the Point of Delivery.
1.8 The term "Delivery Period" shall mean a period of five (5) consecutive
months beginning with the commencement of deliveries of gas hereunder.
1.9 The term "Elizabethtown" shall mean Elizabethtown Gas Company.
1.10 The term "Facility" shall mean the cogeneration facility owned and
operated by Buyer that is located in Linden, New Jersey.
1.11 The term "force majeure" shall have the meaning set forth in Section
14.2.
1. 12 The term "Gas" or "gas" shall mean any mixture of hydrocarbons or of
hydrocarbons and non-combustible gases, in a gaseous state, consisting
essentially of
2
<PAGE>
methane and shall include casinghead gas produced with crude oil, natural gas
from gas wells, coal-bed methane gas, synthetic gas, coal gasification gas and
residue gas resulting from processing any of the foregoing.
1.13 The term "Lender" shall mean (i) any and all lenders (other than
Seller) providing the construction, interim or long-term financing or re-
financing of the Facility (including financing by way of a leveraged lease) and
any trustee or agent acting on their behalf, and (ii) any and all equity
investors or limited partners providing any such financing or re-financing of
the Facility and any trustee or agent acting on their behalf. The Lender
initially shall be State Street Bank & Trust Company, as Trustee, and thereafter
such entity or entities as shall be designated in writing by Buyer to Seller.
1.14 The term "Market Area Fuel" shall mean the volume of gas retained by
Transporter(s) as fuel for the transportation of gas from the Point(s) of
Delivery to the Point(s) of Redelivery.
1.15 The term "Market Price" shall have the meaning set forth in Section
4.3.
1.16 The term "Minimum Quantity" shall mean one hundred percent (100%) of
the product of the DCQ and the number of days in each month of the Delivery
Period, as reduced by circumstances of force majeure.
1.17 The term "MMBtu" shall mean one million (1,000,000) Btus.
1.18 The term "month" shall mean the period commencing on the beginning of
the first day of a calendar month and ending on the beginning of the first day
of the succeeding calendar month.
1.19 The term "Nominated Quantity" shall have the meaning set forth in
Section 3. 1.
3
<PAGE>
1.20 The term "Nomination Notice" shall mean the notice described in
Section 3.1 and Exhibit A to this Agreement.
1.21 The term "NYMEX" shall mean the New York Mercantile Exchange.
1.22 The term "NYMEX Forward Price" shall have the meaning set forth in
Section 4.7 (b).
1.23 The term "NYMEX Price" shall have the meaning set forth in Section
4.7 (a).
1.24 The term "Point(s) of Delivery" shall have the meaning set forth in
Article 8.
1.25 The term "Point(s) of Redelivery" shall mean the point or points on
Transporter(s)' pipeline system where gas is redelivered to or for the account
of Buyer, PSE&G or Elizabethtown on the PSE&G system in New Jersey.
1.26 The term "Power Purchase Agreement" shall mean Contract No. 344, dated
April 14, 1989, between Buyer and Con Ed, covering the sale of electricity from
the Facility, and any amendments thereto that may be made from time to time.
1.27 The term "PSE&G" shall mean Public Service Electric and Gas Company.
1.28 The term "Reservation Charge" shall have the meaning set forth in
Section 5.2.
1.29 The term "Reservation Rate" shall mean one and three-fourths cents
($0.0175) per MMBtu.
1.30 The term "Spot Market Price" shall mean the arithmetic average of the
prices reported in the weekly and bi-weekly updates of the reference pricing
reports during the month of delivery for the reference points set forth in
Exhibit "B" hereto.
4
<PAGE>
1.31 The term "Texas Gas" shall mean Texas Gas Transmission Corporation.
1.32 The term "TGPL" shall mean Transcontinental Gas Pipe Line Corporation.
1.33 The term "Transporter(s)" shall mean any pipeline(s) transporting gas
sold hereunder to and from the Point(s) of Delivery and to the Point(s) of
Redelivery.
ARTICLE 2: QUANTITIES
---------------------
2.1 Buyer shall purchase and receive and Seller shall sell and deliver the
Nominated Quantity at the Point(s) of Delivery, except to the extent excused
under the provisions of this Agreement.
2.2 If during any month of the Delivery Period Buyer purchases and receives
less than the Minimum Quantity for each Point of Delivery except to the extent
excused under the provisions of this Agreement or due to Seller's unexcused
failure to deliver, then Buyer shall pay Seller an amount equal to the
difference between the price payable hereunder and the then effective Spot
Market Price of gas at the reference points set forth in Exhibit B multiplied by
the difference between the Minimum Quantity and the quantity of gas purchased
and received by Buyer. Except in the case of Buyer's willful misconduct or gross
negligence and except as described in Articles 12, 14 and 22, this is the sole
remedy available to Seller for any failure by Buyer to purchase and receive gas.
ARTICLE 3: NOMINATIONS
----------------------
3.1 On or before the day prior to which pipeline nominations are required
to be nominated by Buyer and Seller to the applicable pipeline company(s)
referenced herein, and subject to the provisions of Sections 3.2 and 3.3, Buyer
shall notify Seller in writing by providing a Nomination Notice, substantially
in the form attached hereto
5
<PAGE>
as Exhibit A, specifying the daily quantity of gas, in MMBtus, up to the DCQ,
that Buyer shall purchase and receive from Seller during the next month
(hereinafter the "Nominated Quantity"). In the alternative, Buyer may specify a
standing Nominated Quantity to be effective until changed in writing pursuant to
the first sentence of this section.
3.2 The parties recognize that fluctuations in the production and
transportation of gas can occur on a daily basis. Buyer and Seller will attempt
to receive and deliver gas on a uniform hourly basis. Notwithstanding anything
to the contrary herein, any revisions to the Nominated Quantity shall be
implemented in accordance with Transporter(s)' nomination procedures, unless a
waiver of such procedures is received by either Buyer or Seller.
3.3 Buyer and Seller shall be responsible for nominations to their
respective Transporters and the nominations in each case shall reflect the
Nominated Quantity.
3.4 If no Nominated Quantity is submitted by Buyer in accordance with
Section 3.1, the DCQ shall be the Nominated Quantity.
ARTICLE 4: PRICE
----------------
4.1 For all gas nominated by Buyer and delivered by Seller during a month,
Buyer shall pay the Commodity Price or the Alternate Commodity Price per MMBtu,
rounded to the nearest $0.001.
4.2 The term "Commodity Price" shall mean the price of gas for each month
which shall be mutually agreed upon by the parties and subsequently confirmed in
writing prior to the date Buyer's nomination notice to Seller is due for the
month of delivery. In the event that the parties fail to reach agreement as to
the Commodity
6
<PAGE>
Price, the Alternate Commodity Price determined in accordance with Section 4.3
shall apply.
4.3 The term "Alternate Commodity Price" shall mean the arithmetic average
of the prices reported in the referenced issue of the month of delivery for the
price references included in the "Market Price Index," set forth in Exhibit B.
The price references in the Market Price Index are intended to reflect the price
paid for gas delivered at the Point(s) of Delivery under spot contracts (the
"Market Price"). The price references in the "Backup Price Index" set forth in
Exhibit B are intended to serve as a substitute for the price references in the
Market Price Index in the event the latter price references are not available or
are "erroneous," as that term is defined in Section 4.5.
4.4 Either party may request that a price reference be added to or deleted
from the Market Price Index or Backup Price Index by providing written notice to
the other party. For a price reference to be added to the Market Price Index or
Backup Price Index, the price reference must reflect the Market Price and be
from an independent publication which is not controlled by a buyer, seller or
broker of gas. For a price reference to be deleted from the Market Price Index
or Backup Price Index, such price reference must no longer reflect the Market
Price. If within thirty (30) days after the date of notice by a party, the
parties are unable to agree to add or delete a price reference, then the party
seeking such addition or deletion may submit the issue to arbitration which
shall be conducted pursuant to Article 21. A price reference shall be added or
deleted effective the first day of the month after notice by the requesting
party and the price ultimately determined by negotiation or arbitration will be
given
7
<PAGE>
retroactive effect to take into account the period of negotiation or arbitration
with interest assessed at the rate provided in Section 6.3. Unless otherwise
agreed by the parties, in no event may either party request that a price
reference be added to or deleted from the Market Price Index or Backup Price
Index more than once during the Delivery Period.
4.5 If during any month a price reference included in the Market Price
Index is not published, the Market Price Index will exclude such price reference
from the Market Price Index for so long as such price reference is not published
and the price reference(s) from the Backup Price Index shall be substituted for
the excluded price reference. If the excluded price reference is the only price
reference in the Market Price Index and no price references in the Backup Price
Index are published, then Section 4.6 below shall apply. If an erroneous price
is published and the publisher confirms such error, then the correct price, if
available, shall be used. If the publisher does not confirm such error or if the
correct price is not available, then the price reference containing such
erroneous price shall not be included in the Market Price Index or Backup Price
Index for such month. For purposes of Sections 4.3 and 4.5, the term "erroneous"
price shall mean any price reference that varies by more than four percent (4%)
from the average of the other price references included in the Market Price
Index and Backup Price Index for such month.
4.6 If no Market Price Index and no Backup Price Index reference prices
are available or if, in the opinion of either party, there are no price
references which reasonably reflect the Market Price and the basis of such
opinion is provided in writing to the other party, then a new method to
determine the Alternate Commodity Price will
8
<PAGE>
be negotiated. If the parties are unable to agree within thirty (30) days after
notice by a party, then the matter of determining whether a basis exists to
invoke this provision and, if so, the determination of a new method to determine
the Alternate Commodity Price shall be submitted to arbitration pursuant to
Article 21. During a period of negotiation or arbitration, the last applicable
Commodity Price or Alternate Commodity Price shall remain in effect and shall be
adjusted at the conclusion of such negotiation or arbitration to give
retroactive effect to the result with interest assessed at the rate provided in
Section 6.3.
4.7 Alternatively, and in lieu of the price calculated pursuant to Sections
4.2 and 4.3 hereof, the parties may mutually agree to a NYMEX Price or a NYMEX
Forward Price based on the NYMEX posting for the natural gas futures contract,
calculated as follows:
(a) On or before the business day prior to the NYMEX Settlement day,
Buyer may propose that the price under this Agreement for gas nominated by
Buyer for delivery in the applicable month be the NYMEX Price, plus or
minus the basis differentials that may be mutually agreed upon at the time
of Buyer's proposal. The NYMEX Price shall be the arithmetic average of the
NYMEX settlement price of the natural gas futures contract for the last
three trading days applicable to the month of delivery. Buyer's proposal
shall designate the volume of gas for delivery in the applicable month at
the proposed price, up to the volume nominated in accordance with Section
3.1 of this Agreement. Upon receipt of Buyer's proposal, the parties shall
confer by telephone as soon as possible and decide whether or not to use
the NYMEX Price, which decision
9
<PAGE>
shall ultimately be made by Buyer and Seller no later than 11:00 a.m.
Central Time on the business day before the last trading day of the
applicable natural gas futures contract. In the event the parties agree to
use the NYMEX Price and agree on the basis differential, the parties'
agreement shall be set forth in a confirmation prepared by Buyer and
transmitted by telecopy to Seller. The parties' agreement shall be deemed
conclusive upon receipt of the confirmation (as evidence by electronic
confirmation of transmission) unless Seller objects promptly in writing
following receipt of the confirmation. Either party shall have the right to
withhold agreement on any price proposed under this Section 4.7 (a) at its
sole discretion, in which case the price under this Agreement will be
calculated under Sections 4.2 or 4.3 hereof. If the parties are unable to
agree on the basis differentials or methodology for determining the basis,
the NYMEX Price shall be deemed to be rejected. In the event the parties
agree to use the NYMEX Price, the nominated volumes which are covered by
the NYMEX Price shall remain in effect during the applicable month and
shall not be reduced or increased pursuant to Sections 3.2 or 3.3 of this
Agreement.
(b) In addition to the NYMEX PRICE, Buyer shall have the right to
propose that the NYMEX Forward Price, plus or minus the basis differentials
that may be mutually agreed upon at the time of Buyer's proposal, be the
price to be paid under this Agreement during any calendar months designated
by Buyer. The NYMEX Forward Price shall be the NYMEX posting for the
natural gas futures contract applicable to the month or months selected by
Buyer and prevailing at the time Buyer's proposal is communicated to Seller
by telephone
10
<PAGE>
and confirmed by Seller. Buyer's proposal shall designate the volume of gas
for delivery during the designated months at the proposed price, up to the
volume that can be nominated in accordance with Section 3.1 of this
Agreement. Upon receipt of Buyer's proposal, the parties shall confer by
telephone and decide whether or not to use the NYMEX Forward Price, which
decision shall be made no later than 11:00 a.m. Central Time on the first
business day following Seller's receipt and confirmation of Buyer's
proposal. In the event the parties agree to use the NYMEX Forward Price and
agree on the basis differential or methodology for determining the basis,
the parties' agreement shall be set forth in a confirmation prepared by
Buyer and transmitted by telecopy to Seller. The parties' agreement shall
be deemed conclusive upon receipt of the confirmation (as evidenced by
electronic confirmation of transmission) unless Seller objects promptly in
writing following receipt of the confirmation. Either party shall have the
right to withhold agreement on any price proposed under this Section
4.7(b), at its sole discretion, prior to the execution of the NYMEX
transaction, in which case the price under this Agreement will be
calculated under Sections 4.2 or 4.3 hereof. If the parties are unable to
agree on the basis differentials or methodology for determining the basis,
the NYMEX Forward Price shall be deemed to be rejected. Nothing in this
subsection (b) shall be construed to prevent Buyer from proposing the NYMEX
Forward Price in any designated month if either of the parties had
previously rejected the NYMEX Forward Price for that month. In the event
the parties agree to use the NYMEX Forward Price, the nominated volumes
which are covered by the NYMEX Forward Price shall
11
<PAGE>
remain in effect during the designated months and shall not be decreased or
increased pursuant to Sections 3.2 or 3.3 of this Agreement. In addition,
should the parties agree to use the NYMEX Forward Price, the selection of
that option shall remain in effect during the months selected by the
parties unless the parties mutually agree to use a different pricing
option.
ARTICLE 5: RESERVATION CHARGES AND SUBSTITUTE FUELS
---------------------------------------------------
5.1 If during any month, Seller sells and delivers less than one hundred
percent (100%), but greater than ninety percent (90%), of the Nominated Quantity
multiplied by the number of days in the month, except to the extent excused
under the provisions of this Agreement or due to Buyer's unexcused failure to
receive, then Buyer shall be relieved of its obligation to pay Seller the
Reservation Charge applicable to the volumes not made available and Seller shall
refund to Buyer any payments attributable to such volumes if already invoiced
and paid. If during any month Seller sells and delivers less than ninety percent
(90%) of the Nominated Quantity multiplied by the number of days in the month,
except to the extent excused under the provisions of this Agreement or due to
Buyer's unexcused failure to receive, then Buyer shall be relieved of its
obligation to pay Seller the Reservation Charge Set forth in Section 5.2 for the
entire month during which such supply failure occurred. Under such circumstances
in this Section 5.1, Seller shall also reimburse Buyer its actual costs incurred
for the purchase and/or production and transportation of alternate supplies of
fuel equal to the undelivered volume, including but not limited to any imbalance
carrying charges and/or cash-out costs and penalties imposed by Transporter(s),
PSE&G and/or Elizabethtown, less the costs that Buyer would have
12
<PAGE>
otherwise incurred for the purchase and transportation of gas under this
Agreement. Buyer shall use commercially reasonable efforts to minimize its
incremental actual costs for acquiring alternate supplies of fuel. In the
exercise of its commercially reasonable efforts, Buyer shall exercise diligent
good faith efforts to purchase least cost substitute fuel, including purchasing
gas under existing agreements with other sellers which will enable Buyer to
utilize its transportation rights used to transport gas hereunder. Because of
environmental restrictions on Buyer's use of fuels other than gas at the
Facility, Buyer shall have the sole discretion whether to purchase gas or an
alternate fuel as a substitute for gas not delivered by Seller hereunder, even
where gas is more expensive. Except in the case of Seller's willful misconduct
or gross negligence and except as described in Articles 12, 14 and 22, these are
the sole and exclusive remedies available to Buyer for any failure by Seller to
deliver gas.
5.2 Buyer shall pay Seller a monthly Reservation Charge in consideration
for maintaining the capability to deliver gas up to the DCQ, assuming market and
supply risks, and agreeing to reimburse Buyer for any amounts pursuant to
Section 5. 1. The Reservation Charge shall be the Reservation Rate multiplied by
the DCQ, multiplied by the number of days in such month. To illustrate how the
Reservation Charge would be calculated assume that the DCQ is 9,102 MMBtus per
Day, at the Reservation Rate hereunder, the Reservation Charge during the month
of November would be: $4,779 (9,102 x $0.0175 x 30).
ARTICLE 6: PAYMENT
------------------
6.1 Seller shall render an invoice on or before the tenth (10th) day of
each month setting forth the actual quantity of gas nominated by Buyer and
delivered by
13
<PAGE>
Seller hereunder during the preceding month, the Commodity Price, Alternate
Commodity Price, NYMEX Price or NYMEX Forward Price, the Reservation Charge, any
amounts due under Sections 2.2 and 12.2 and the total amount due. In the event
that the actual quantity delivered, the Alternate Commodity Price or the
Reservation Charge is not known at the time the invoice is rendered, an
estimated quantity, Alternate Commodity Price and Reservation Charge, based on
the best available information, shall be used. Buyer shall pay Seller for the
amount due by wire transfer with immediately available funds to Seller's account
in accordance with instructions contained in Seller's invoice. Payment shall be
due on or before the twenty-first (21st) day of such month or ten (10) days from
the date of such invoice, whichever is later. If Con Ed fails to pay Buyer under
the Power Purchase Agreement by the twentieth (20th) day of the month, Buyer's
obligation to pay Seller shall be suspended from the twenty-first (21st) day of
the month, or ten (10) days from the date of Seller's invoice, until one (1) day
following Buyer's receipt of Con Ed's payment, but, in such a case, Buyer's
obligation to pay Seller shall not be suspended past the twenty-fifth (25th)
day of the month. When the actual quantity, Alternate Commodity Price or
Reservation Charge becomes known and if an adjustment is necessary, an invoice
containing the adjustment for the difference between the actual value and the
estimated value will be rendered. Payment will be made in subsequent months'
payment cycles.
6.2 Buyer shall submit an invoice on or before the tenth (10th) day of
the month, if necessary, for any amount due pursuant to Sections 5.1 and 12.2.
Seller shall pay Buyer in accordance with instructions contained in Buyer's
invoice. Payment
14
<PAGE>
shall be due on or before the twenty-fifth (25th) day of such month or ten (10)
days from the date of such invoice, whichever is later.
6.3 Should either party fail to pay any amount not in dispute when due,
interest thereon shall accrue at the lesser of (i) the rate of one percent (1%)
above the prime commercial rate charged by Citibank, N.A., New York, New York,
compounded annually from the due date or (ii) the maximum lawful contract rate
permitted by applicable law, until the amount due and interest have been paid in
full. Such interest shall be in addition to any other rights and remedies the
owed party may have for the owing party's failure to pay any amount not in
dispute. Should the owing party dispute the amount invoiced, such party shall
pay the undisputed amount and notify the other party of any disputed amount by
the due date. Both parties will mutually resolve the disputed amount in a timely
manner with interest accruing from the original due date on any disputed amount
determined to be a valid amount due. Notwithstanding the foregoing or any other
provision herein, if Buyer fails to pay any amount within five (5) days after
receiving written notice from Seller that payment is delinquent, Seller may
withhold deliveries and, should said nonpayment continue for a period of thirty
(30) days after such notice, subject to the provisions of Article 22, Seller may
terminate this Agreement upon written notice.
6.4 Upon reasonable notice, each party shall have the right at reasonable
times to have an independent public accounting firm examine the books, records,
and charts controlled by the other party to the extent necessary to verify the
accuracy of any statement, payment, charge, or computation made pursuant to this
Agreement. In the event an error is discovered in any statement, payment,
charge, or computation,
15
<PAGE>
the adjusted amount shall be due within thirty (30) days of the determination
thereof, provided that any statement, payment, charge, or computation shall be
final as to both parties unless objected to in writing within twelve (12) months
after payment has been made.
6.5 If either party pays any amount shown due and owing upon the invoice of
the other party, and such amount is subsequently determined by agreement,
arbitration or judgment of court not to have been due and owing when paid, the
payee will refund such amount to the paying party together with interest from
the date of payment to the date of refund at the interest rate set forth in
Section 6.3 hereof.
ARTICLE 7: TAXES
----------------
7.1 Seller shall pay, or cause to be paid, all taxes, assessments, fees or
other charges now and hereafter lawfully levied and imposed by federal, state,
or local authorities upon Seller with respect to the gas prior to the Point(s)
of Delivery. In the event Buyer is required to remit such taxes, assessments,
fees or charges, Seller shall reimburse Buyer for such amount. Seller shall
furnish Buyer with a copy of the exemption certificate in situations in which
exemption from any such imposition is claimed by Seller.
7.2 Buyer shall pay, or cause to be paid, all taxes, assessments, fees or
other charges (including, but not limited to, sales and value added taxes) now
and hereafter lawfully levied and imposed by federal, state, or local
authorities upon Buyer with respect to the gas at and subsequent to the Point(s)
of Delivery. In the event Seller is required to remit such taxes, assessments,
fees or charges, Buyer shall reimburse Seller for such amount. Buyer shall
furnish Seller with a copy of the exemption
16
<PAGE>
certificate in situations in which exemption from any such imposition is claimed
by Buyer.
ARTICLE 8: POINT(S) OF DELIVERY
-------------------------------
The "Point(s) of Delivery" shall be the point(s) on Transporter(s)'
pipeline system(s) where gas is delivered by Seller to Transporter(s) for
Buyer's account, as specified in Exhibit C attached hereto and made a part
hereof. As between the parties hereto, title, risk of loss, and liabilities
associated with delivered gas shall pass to and vest in Buyer at the Point(s) of
Delivery. Changes in the Point(s) of Delivery shall require the mutual consent
of the parties.
ARTICLE 9: PRESSURE
-------------------
Seller shall deliver gas at the Point(s) of Delivery at a pressure
sufficient to effect delivery into the receiving Transporter(s)' facilities.
ARTICLE 10: MEASUREMENT
-----------------------
All measurements of gas delivered and sold hereunder shall be in accordance
with the provisions of the receiving Transporter(s)' tariff at the Point(s) of
Delivery.
ARTICLE 11: QUALITY
-------------------
The gas delivered and sold by Seller to Buyer at the Point(s) of Delivery
shall meet the quality specifications set forth in the receiving Transporter(s)'
tariff at the Point(s) of Delivery. Buyer shall have the right to be represented
and to participate in all tests of gas delivered hereunder performed by Seller,
and to inspect any equipment used in such tests to determine the nature of the
quality of gas delivered hereunder. In the event the gas does not meet such
quality specifications, Buyer may refuse delivery of the gas. Seller's delivery
of gas refused by Buyer for failure to meet quality
17
<PAGE>
specifications shall not constitute delivery for the purposes of Articles 2, 5
and 6. Buyer's sole remedy for such failure of gas to meet quality
specifications shall be to refuse receipt of the gas and receive the remedy
specified in Article 5.
ARTICLE 12: TRANSPORTATION AND IMBALANCE CHARGES
------------------------------------------------
12.1 Transporter(s)' rules, guidelines, operational procedures and
policies, as may be changed from time to time, may define and set forth the
manner in which gas delivered and sold under this Agreement is transported.
Seller and Buyer agree to provide to the other, in as prompt a manner as
reasonable, all information necessary to permit scheduling pursuant to such
requirements. Seller shall prorate Buyer with other firm purchasers of Seller's
gas when nominating or allocating volumes to Transporter(s)' for delivery to
Buyer under this Agreement.
12.2 Each party agrees to make all reasonable efforts to cooperate with the
other in operating under this Agreement to avoid pipeline imbalance charges,
cash-out costs and penalties. Buyer shall bear any under or over delivery
charges, cash-out costs and penalties assessed by Transporter(s)' PSE&G and
Elizabethtown which are caused by variances (including variances due to events
of force majeure declared by Buyer) in Buyer's receipts from the Nominated
Quantity and Seller shall bear any under or over delivery charges, cash-out
costs and penalties assessed by Transporter(s)' PSE&G and Elizabethtown which
are caused by variances (including variances due to events of force majeure
declared by Seller) in Seller's deliveries from the Nominated Quantity.
12.3 Seller shall be responsible for transportation to the Point(s) of
Delivery and payment of all transportation charges relating thereto. Buyer shall
be responsible for
18
<PAGE>
transportation from the Point(s) of Delivery and payment of all transportation
charges relating thereto. The parties recognize that the gas purchased hereunder
may be transported by Transporter(s) whose transportation rates and related
charges such as fuel reimbursement and take-or-pay surcharges are subject to
refund. The party which pays the Transporter(s) for transportation of gas
hereunder shall be entitled to retain any refunds associated therewith.
ARTICLE 13: TERM
----------------
This Agreement shall be effective from the date first set forth above and,
unless sooner terminated under the provisions of this Agreement, shall continue
for five (5) months from the commencement of deliveries of gas hereunder. The
commencement of deliveries of gas hereunder shall be November 1, 1997, unless
otherwise agreed by the parties. The term of this Agreement may be extended by
mutual agreement of the Parties.
ARTICLE 14: FORCE MAJEURE
-------------------------
14.1 If, by reason of force majeure either party is rendered unable, wholly
or in part, to carry out its obligations under this Agreement, and such party
provides written notice and full particulars of such event of force majeure as
soon as practicable after the occurrence thereof, the obligations of such
affected party shall be suspended to the extent and for the period of such event
of force majeure, except for the payment of monies in respect of obligations
that have accrued hereunder prior to such event of force majeure. The cause of
suspension other than strikes or lockouts shall be remedied so far as possible
with reasonable dispatch. Settlement of strikes and lockouts shall be wholly
within the discretion of the party having the difficulty.
19
<PAGE>
14.2 The term "force majeure" shall mean any act or event which wholly or
partially prevents or delays the performance of obligations arising under this
Agreement if such act or event is not reasonably within the control of and not
caused by the fault or negligence of the party claiming force majeure and which
by the exercise of due diligence such party is unable to prevent or overcome,
including, without limitation by the following enumeration: acts of God, the
public enemy or the elements; fire, accidents, breakdowns, shutdowns for
purposes of necessary repairs, maintenance, relocation or construction of
facilities; breakage, freezing or accidents to wells, machinery or lines of
pipe; the necessity of making repairs or alterations to machinery or lines of
pipe; inability to obtain materials, supplies, permits, or labor to perform or
comply with any obligation or condition of this Agreement; any curtailment of
firm gas transportation service to, of electricity or steam purchases from, or
of resale service by PSE&G and Elizabethtown to, the Facility; strikes and any
other industrial, civil or public disturbances; any laws, orders, rules,
regulations, acts, restraints of any government or governmental body or
authority, civil or military which have the effect of prohibiting performance of
a party's obligations. The term "force majeure" shall also expressly include the
imposition upon Buyer of any gross receipts, franchise or other gas consumption
tax which Buyer is not obligated to pay on the date of execution of this
Agreement, which tax Buyer determines has a material economic impact on its
ability to continue to purchase gas at the prices or in the quantities set forth
herein.
14.3 Except as provided in Section 14.2, neither party may rely upon
changes in market conditions, curtailment of interruptible transportation, or
denial by a
20
<PAGE>
regulatory authority of the pass through of the cost of gas purchased under this
Agreement as events of force majeure. In the event of force majeure that causes
Seller to curtail its deliveries hereunder, Seller shall treat Buyer on a pro
rata basis with Seller's other firm customers and shall give Buyer priority of
service over all interruptible customers.
14.4 In the event Buyer fails to take or Seller fails to make available,
due to a declared event of force majeure, at least fifty percent (50%) of the
aggregate DCQ for a period of sixty (60) consecutive days, then the non-
declaring party may terminate this Agreement upon written notice, provided that
such notice is given prior to the date the force majeure is remedied.
ARTICLE 15: NOTICE
------------------
Any notice, request, demand, statement, or bill provided for in this
Agreement shall be in writing and delivered by hand, mail, or telecopy. All such
written communications shall be effective upon receipt by the other party at
the address of the parties hereto as follows:
Buyer:
Notices & Statements
--------------------
Cogen Technologies Linden Venture, L.P.
c/o Cogen Technologies, Inc.
Suite 5000, 50th Floor
1600 Smith Street
Houston, TX 77002
Attention: Vice President - Fuel Supply
Telephone No.: (713) 951-7768
Telecopy No.: (713) 951-7803
21
<PAGE>
Seller:
Anadarko Energy Services Company
P. 0. Box 1330
Houston, TX 77251-1330
Notices & Statements
--------------------
Attention: Marketing Department
Telephone No.: (281) 874-3226
Telecopy No.: (281) 874-3354
Payments:
---------
By Wire Transfer:
To the Account of:
Anadarko Energy Services Company
Mellon Bank, N.A. Pittsburgh, PA
Account No. 1157237
Transit Routing No. 043000261
Nomination Notices:
-------------------
Attention: Marketing, Gas Control
Telephone No.: (281) 874-3525
Telecopy No.: (281) 874-3354
Either of the parties may designate a further or different address by giving
written notice to the other party.
ARTICLE 16: LAWS. ORDERS & REGULATIONS
--------------------------------------
This Agreement, and all terms and provisions contained herein, and the
respective obligations of the parties are subject to valid laws, orders, rules,
and regulations of duly constituted authorities having jurisdiction over Buyer,
Seller, Transporter(s), PSE&G or Elizabethtown. In the event that any regulatory
or government body asserting jurisdiction over Transporter(s), PSE&G,
Elizabethtown or
22
<PAGE>
either party prohibits any of the transactions described in this Agreement or
any transportation or delivery agreement between Transporter(s), PSE&G,
Elizabethtown and/or Buyer covering the transportation and delivery of the gas
sold hereunder, or otherwise conditions such transactions in a form that is
unacceptable in the reasonable judgment of the party affected thereby, then
either party hereto so affected or prohibited may, by giving one (1) month's
prior written notice to the other party, terminate this Agreement and each party
shall be held harmless as a result of such termination except for obligations
which were incurred prior to termination; provided, however, such termination
shall be effective immediately where required by law, rule or regulation.
ARTICLE 17: APPLICABLE LAW
--------------------------
THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS.
ARTICLE 18: WAIVER
------------------
No waiver by either party of anyone or more defaults in the performance of
any provision of this Agreement shall operate or be construed as a waiver of any
future default, whether of a like or a different character.
ARTICLE 19: TITLE
-----------------
Seller warrants title to, or good right to sell, all gas delivered
hereunder by Seller, and that such gas is free from liens and adverse claims of
every kind. Seller will pay, or cause to be paid, all royalties and other sums
imposed on the production, gathering, or transportation of the gas prior to its
delivery by Seller to Buyer. Seller will indemnify and save Buyer harmless
against all loss, damage, and expense of every
23
<PAGE>
character on account of adverse claims to the gas delivered by it or of
royalties, payments or other charges thereon applicable before delivery to
Buyer. If any adverse claim of any character is asserted with respect to
Seller's right to deliver gas hereunder, or with respect to Seller's right to
receive payment for such gas, or if Seller's title is questioned or involved in
any action, then Buyer shall immediately notify Seller of such adverse claim and
then may withhold, that portion of sums due hereunder reasonably related to such
claim until such claim is finally determined or title is clear, or until such
time as Seller furnishes a corporate undertaking conditioned to save Buyer
harmless from such claim.
ARTICLE 20: ASSIGNMENT
----------------------
Either party may, without relieving itself of its obligations under this
Agreement, assign any of its rights hereunder to an entity with which it is
affiliated, but otherwise no assignment of this Agreement or any of the rights
or obligations hereunder shall be made unless there first shall have been
obtained the consent thereto in writing of the other party, which consent shall
not be unreasonably withheld. Any successor-in interest of Buyer or Seller shall
be entitled to the rights and shall be subject to the obligations of its
predecessor-in-interest under this Agreement. It is agreed, however, that the
restrictions on assignment contained in this paragraph shall not in any way
prevent either party to this Agreement from pledging, mortgaging or assigning
its rights hereunder as security for its indebtedness. In connection with any
such pledge, mortgage or assignment by Buyer, Seller will execute an appropriate
consent to any such pledge, mortgage or assignment as reasonably requested by
Buyer's lender. Any such consent will acknowledge, in effect, that this
Agreement has been duly
24
<PAGE>
authorized and is valid and enforceable against Seller and that this Agreement
is in full force and effect; that Seller will not agree to any amendment to this
Agreement without the lender's approval in writing, which approval shall not be
unreasonably withheld by the lender; that Seller will make all payments due to
Buyer hereunder in accordance with the instructions of the lender; that Seller
will not terminate this Agreement by reason of Buyer's default or by reason of
force majeure, without giving the lender notice of default and notice of
termination and the same opportunity to cure provided to Buyer under this
Agreement (plus any longer period as may be necessary, not to exceed one (1)
month, if the lender in good faith is endeavoring to obtain possession of the
Facility and pays Seller in accordance with the terms of this Agreement during
such period); that Seller will deliver to the lender a copy of each notice of
default and notice of termination at the same time that such notice is delivered
to Buyer; and that in the event the lender exercises its rights under its loan
documentation or partnership documentation with Buyer, Seller will accept
performance by the lender or any successor or assign thereof, provided that the
lender or any such successor or assign pays all sums then due to Seller
hereunder and is also otherwise in compliance with this Agreement.
ARTICLE 21: ARBITRATION
-----------------------
21.1 Should an issue be submitted to binding arbitration pursuant to the
provisions of this Agreement, the parties shall each appoint one (1) arbitrator
and the two (2) arbitrators so appointed will select a third arbitrator, all of
such arbitrators to be qualified by education, knowledge, and experience to
resolve the dispute or controversy. If either party fails to appoint an
arbitrator within ten (10) days after a
25
<PAGE>
request for such appointment is made by the other party in writing, or if the
two (2) appointed fail, within ten (10) days after the appointment of the
second, to agree on a third arbitrator, the arbitrator or arbitrators necessary
to complete a board of three (3) arbitrators will be appointed upon application
by either party therefor by the American Arbitration Association.
21.2 The jurisdiction of the arbitrators will be limited to the single
issue or issues referred to arbitration and the arbitration shall be conducted
pursuant to the guidelines set forth by the American Arbitration Association;
provided, however, that should there be any conflict between such guidelines and
the procedures set forth in this Agreement, the terms of this Agreement shall
control.
21.3 Within fifteen (15) days following selection of the third arbitrator,
each party shall furnish the arbitrators in writing its position and supporting
arguments regarding the issue or issues being arbitrated. The arbitrators may,
if they deem necessary, convene a hearing regarding the issue or issues being
arbitrated. All hearings shall be held at a location to be agreed upon among the
arbitrators in Houston, Harris County, Texas. Within thirty (30) days following
the later of the appointment of the third arbitrator or of the hearing, if one
is held, the arbitrators shall notify the parties in writing as to which of the
two (2) positions submitted with respect to the issue or issues in question is
most consistent with the intent of this Agreement. Such decision shall be
binding on the parties hereto until and unless changed in accordance with the
provisions of this Agreement.
21.4 Enforcement of the award may be entered in any court having
jurisdiction over the parties.
26
<PAGE>
21.5 Each party will pay the expense of the arbitrator selected by or for
it, and its counsel, witnesses and employees. All other costs of arbitration
will be equally divided between the parties.
ARTICLE 22: DEFAULT
-------------------
22.1 In the event either party fails to perform any of the material
covenants or obligations imposed upon it under and by virtue of this Agreement,
the party not in default hereto, having first given thirty (30) days written
notice to the party in default stating specifically the nature of the default
and declaring it to be the intention of the party giving notice to cancel this
Agreement (the "Cancellation Notice"), may, at its option, cancel this Agreement
in accordance with this Article 22. If within said period of thirty (30) days
the party in default remedies or removes said default, including payment of sums
due with interest at the rate set forth in Section 6.3 hereof, or provides
adequate security to fully indemnify the party not in default for any and all
direct damages of such breach, including payment of sums due with interest at
the rate set forth in Section 6.3 hereof, then such Cancellation Notice shall be
withdrawn and this Agreement shall continue in full force and effect; provided,
however, that if the default is the failure to pay sums due hereunder, then the
party not in default shall have the right to suspend gas deliveries or takes, as
the case may be, after service of the Cancellation Notice.
22.2 If the party in default does not so remedy or remove the default or
does not provide adequate security to fully indemnify the party not in default
for any and all direct damages of such breach, and fails to represent that
further defaults shall not occur and that steps have been taken to avoid such a
recurrence, within said period
27
<PAGE>
of thirty (30) days, this Agreement, at the option of the party not in default,
shall be canceled upon written notice to the defaulting party. Cancellation of
this Agreement, pursuant to the provisions of this Article 22, shall be without
prejudice to any other rights and remedies the party not in default has
available to it. Further, such cancellation of this Agreement or failure to
cancel shall be without prejudice to the right of Seller to collect any amounts
then due Seller for gas delivered prior to the time of cancellation.
ARTICLE 23: GENERAL
-------------------
23.1 The headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement.
23.2 Any modification, revision or amendment of this Agreement made
subsequent to its execution shall be valid and effective only if and when made
in writing and duly executed by the parties hereto.
23.3 This Agreement and any Exhibit hereto shall constitute a single
agreement, superseding all prior agreements or undertakings between the parties
or! the subject matter hereof. This Agreement contains the entire agreement of
the parties and, except as stated herein, there are no promises, agreements,
warranties, obligations, assurances or conditions precedent or otherwise
affecting it.
23.4 By executing this Agreement, each of the individuals so executing
warrants that (i) the individual has all necessary corporate power and authority
to enter into and execute this Agreement and (ii) this Agreement constitutes the
valid and binding obligation of the party on whose behalf it is executed,
enforceable in accordance with its terms, subject to applicable bankruptcy and
insolvency laws.
28
<PAGE>
23.5 The parties shall execute such additional documents and shall cause
such additional action to be taken as may be required, or, in the reasonable
judgment of any party, as may be necessary or desirable, to effect or evidence
the provisions of this Agreement and the transactions contemplated hereby.
23.6 The parties acknowledge that each provision to this Agreement
constitutes their joint work product.
ARTICLE 24: CONFIDENTIALITY
---------------------------
24.1 The terms of this Agreement and information disclosed pursuant to this
Agreement, including but not limited to the price paid for gas, shall be kept
confidential by Seller and Buyer, (a) except to the extent any information must
be disclosed to (i) Transporter(s), PSE&G and Elizabethtown for the purpose of
effectuating transportation and resale of the gas sold and purchased under this
Agreement, (ii) Con Ed for the purpose of complying with Article 4.6 of the
Power Purchase Agreement and (iii) Buyer's lender and (b) except as required by
law, regulation or request of governmental authority.
29
<PAGE>
IN WITNESS WHEREOF, by execution in duplicate originals, the parties hereto
have caused this Agreement to be effective as of the day and year first above
written.
"BUYER" "SELLER"
COGEN TECHNOLOGIES LINDEN ANADARKO ENERGY SERVICES COMPANY
VENTURE, L.P.
By: Cogen Technologies Linden, Ltd. By: /s/ R. J. Sharplas
(in the State of New Jersey d/b/a -------------------------------
Cogen Technologies Linden, Limited Name: R. J. Sharplas
Partnership), a Texas limited -----------------------------
partnership, its general partner Title: President
----------------------------
Date: 8-18-97
----------------------------
By: Cogen Technologies, Inc., a
Texas corporation, its general partner
By: /s/ W. Colin Harper
-------------------------------
W. Colin Harper
Vice President - Fuel Supply
Date: August 7, 1997
-----------------------------
30
<PAGE>
EXHIBIT A
---------
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997 by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
as Buyer, and ANADARKO ENERGY SERVICES COMPANY, as Seller.
NOMINATION NOTICE
-----------------
Date: -----------
Anadarko Energy Services Company
17001 Northchase Drive
Houston, TX 77060
Attention: Mr. John Ripple
Reference Firm Gas Purchase and Sale Agreement
Dated: July 1, 1997
Buyer: Cogen Technologies Linden Venture, L.P.
Seller: Anadarko Energy Services Company
Point of Delivery: --------------------------------------
Contract No.:
- ------ --------------------------------------
Gentlemen:
Pursuant to Section 3.1 of the subject Agreement, Cogen Technologies Linden
Venture, L.P., hereby nominates the following:
Month of Delivery:
--------------------------------
Nominated Quantity (MMBtu/D):
---------------------
Very truly yours,
- ------------------------
W. Colin Harper
Vice President - Fuel Supply
31
<PAGE>
EXHIBIT B
---------
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE,
L.P., as Buyer, and ANADARKO ENERGY SERVICES COMPANY, as Seller.
MARKET PRICE INDEX (TXG/MAMOU)
------------------------------
<TABLE>
<CAPTION>
Publication* Table Row Column
<S> <C> <C> <C>
Natural Gas Spot Prices on Region - South Contract Index
Intelligence - Weekly Interstate Pipeline Louisiana; Texas Gas (current month)
Gas Price Index (first Systems; Delivered to Zone SL
report in applicable Pipeline ($/MMBtu)
month)
Inside FERC's Gas Prices of Spot Gas; Texas Gas Index
Market Report (first Delivered to Pipelines Transmission Corp. -
report in applicable (per MMBtu dry) Zone SL
month)
BACKUP PRICE INDEX (TXG/MAMOU)
------------------------------
Publication* TABLE Row COLUMN
Natural Gas Week Spot Gas Prices; Texas Gas Bid Week
(first report in Delivered to Pipelines Transmission Corp.; (for current month)
applicable month) (per MMBtu dry) Zone SL: South
Louisiana
</TABLE>
32
<PAGE>
EXHIBIT C
---------
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
as Buyer, and ANADARKO ENERGY SERVICES COMPANY, as Seller.
POINT(S) OF DELIVERY
--------------------
The Point(s) of Delivery shall be:
A. The existing point of interconnection between Texas Gas and TGPL at
Mamou, Evangeline Parish, Louisiana
33
<PAGE>
STATE OF TEXAS )
) SS.
COUNTY OF HARRIS )
On this 7th day of August, 1997, before me, Joy R. Toups, the undersigned
officer, personally appeared, W. Colin Harper, known to me to be the person
whose name is subscribed to the within instrument and acknowledged that Cogen
Technologies, Inc., as General Partner of Cogen Technologies Linden, Ltd. (D/B/A
Cogen Technologies Linden, Limited Partnership), in turn acting as General
Partner of Cogen Technologies Linden Venture, L.P. (D/B/A Cogen Technologies
Linden Venture, Limited Partnership) executed the same for the purpose therein
contained.
In witness whereof I hereunto set my hand and official seal.
/s/ Joy R. Toups
-------------------------------------------
Notary Public in and for the State of Texas
JOY R. TOUPS
MY COMMISSION EXPIRES
AUGUST 13, 2001
(SEAL)
=====
STATE OF TEXAS )
) SS.
COUNTY OF HARRIS )
On this 18th day of August, 1997, before me, Vicki Gustin, the undersigned
officer, personally appeared, R. J. Sharples, known to me to be the person whose
name is subscribed to the within instrument and acknowledged that Anadarko
Energy Services Company executed the same for the purposes therein contained.
In witness whereof I hereunto set my hand and official seal.
/s/ Vicki Gustin
---------------------------------
Notary Public in and for the State of Texas
VICKI GUSTIN
NOTARY PUBLIC, STATE OF TEXAS
MY COMMISSION EXPIRES 2-28-98
(SEAL)
======
34
<PAGE>
PERFORMANCE GUARANTEE
---------------------
WHEREAS, Anadarko Energy Services Company, a company incorporated under the
laws of the State of Delaware (hereinafter "Anadarko") has entered into a Firm
Gas Purchase and Sale Agreement dated July 1, 1997, with Cogen Technologies
Linden Venture, L.P. d/b/a Cogen Technologies Linden Venture, Limited
Partnership, (hereinafter "Cogen"):
NOW, THEREFORE:
1. Anadarko Petroleum Corporation, the parent company of Anadarko, a company
incorporated under the laws of Delaware and having its office at 17001
Northchase Drive, Houston, Texas (hereinafter "Guarantor"), hereby guarantees
the due performance by Anadarko, of all obligations of Anadarko under the terms
of the Firm Gas Purchase and Sale Agreement and all amendments thereof which may
subsequently be executed by all relevant parties.
2. If Anadarko in any respect fails to perform any of its obligations
contained in the Firm Gas Purchase and Sale Agreement, the Guarantor, subject to
any claim of set off or counterclaim of Anadarko, if any, or any other defense,
shall undertake the following for Cogen upon Cogen's request.
(a) Guarantor irrevocably and unconditionally guarantees to perform such
obligation in a timely fashion in accordance with the terms of the Firm Gas
Purchase and Sale Agreement.
(b) Guarantor shall not be discharged or released from its undertaking
hereunder by any waiver or forbearance by Cogen whether as to payment, time,
performance or otherwise. Notwithstanding the foregoing the maximum amount of
<PAGE>
such obligations performed by the Guarantor shall not exceed the aggregate
amount of $4.7 million.
3. In the event and for the duration that the Guarantor assumes the
obligations of Anadarko under the Firm Gas Purchase and Sale Agreement, the
Guarantor shall be entitled to all of the rights of Anadarko under the Firm Gas
Purchase and Sale Agreement, and further shall assume all liabilities, losses or
damages arising from Anadarko's failure to perform its obligations under the
Firm Gas Purchase and Sale Agreement to the extent that Anadarko could be held
liable therefor.
4. This Guarantee shall inure to the benefit of and be binding upon Cogen and
its successors and assigns, and shall be binding upon the Guarantor and its
successors and assigns.
5. This Guarantee shall remain in force until the expiration or termination of
the Firm Gas Purchase and Sale Agreement, whichever is earlier.
6. THIS GUARANTEE SHALL BY GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS.
7. The Guarantor represents and warrants as follows:
(a) The Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty Agreement are within the Guarantor's corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene (i) the
Guarantor's certificate of incorporation or by-laws or (ii) any law, rule,
regulation
2
<PAGE>
or order, or any restriction contained in any material agreement or instrument,
binding on or affecting the Guarantor.
(c) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by the Guarantor of this Guaranty
Agreement, except such as have been duly obtained or made and are in full force
and effect.
(d) This Guaranty Agreement is a legal, valid and binding obligation of the
Guarantor enforceable against the Guarantor in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceeding in equity or at law).
(e) The Guarantor owns, directly or indirectly, all the issued and
outstanding capital stock of Anadarko.
IN WITNESS WHEREOF, this Guarantee has been duly executed by a proper
representative of Anadarko Petroleum Corporation duly authorized to act in that
capacity as of the 8th day of August, 1997.
GUARANTOR
WITNESS:
/s/ Albert L. Richey
-------------------------------------
Albert L. Richey
Title: Vice President and Treasurer
-------------------------------
/s/ Gloria ???
- --------------------------
3
<PAGE>
EXHIBIT 10.22
FIRM GAS PURCHASE AND SALE AGREEMENT
between
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
and
ENGAGE ENERGY US, L.P.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
TABLE OF CONTENTS........................................ i
ARTICLE 1: DEFINITIONS.................................. 1
ARTICLE 2: QUANTITIES................................... 5
ARTICLE 3: NOMINATIONS.................................. 6
ARTICLE 4: PRICE........................................ 7
ARTICLE 5: RESERVATION CHARGES AND SUBSTITUTE FUELS..... 12
ARTICLE 6: PAYMENT...................................... 14
ARTICLE 7: TAXES........................................ 17
ARTICLE 8: POINT(S) OF DELIVERY......................... 17
ARTICLE 9: PRESSURE..................................... 18
ARTICLE 10: MEASUREMENT.................................. 18
ARTICLE 11: QUALITY...................................... 18
ARTICLE 12: TRANSPORTATION AND IMBALANCE CHARGES......... 18
ARTICLE 13: TERM......................................... 19
ARTICLE 14: FORCE MAJEURE................................ 20
ARTICLE 15: NOTICE....................................... 21
ARTICLE 16: LAWS, ORDERS & REGULATIONS................... 23
ARTICLE 17: APPLICABLE LAW............................... 23
ARTICLE 18: WAIVER....................................... 23
ARTICLE 19: TITLE........................................ 24
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE 20: ASSIGNMENT.................................. 24
ARTICLE 21: ARBITRATION................................. 26
ARTICLE 22: DEFAULT..................................... 27
ARTICLE 23: GENERAL..................................... 28
ARTICLE 24: CONFIDENTIALITY............................. 29
EXHIBIT A................................................ 31
EXHIBIT B................................................ 32
EXHIBIT C................................................ 34
</TABLE>
ii
<PAGE>
FIRM GAS PURCHASE AND SALE AGREEMENT
This AGREEMENT ("Agreement") is made and entered into this 1st day of
July, 1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P. (in the State
of New Jersey D/B/A COGEN TECHNOLOGIES LINDEN VENTURE, LIMITED PARTNERSHIP), a
Delaware limited partnership, hereinafter referred to as "Buyer," and ENGAGE
ENERGY US, L.P., a Delaware limited partnership, hereinafter referred to as
"Seller; "
WHEREAS, Buyer requires a supply of gas for use in Buyer's cogeneration
facility in Linden, New Jersey; and
WHEREAS, Seller is willing to sell gas to Buyer on a firm basis to meet
its requirements.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties do hereby covenant and agree as follows:
ARTICLE 1: DEFINITIONS
In addition to the terms "Buyer" and "Seller" which shall refer to the
parties identified above, or their duly designated agents or representatives,
the following terms shall have the specified meanings:
1.1 The term "Alternate Commodity Price" shall have the meaning set
forth in Section 4.3.
1.2 The term "Btu" shall mean the amount of heat required to raise the
temperature of one (1) pound avoirdupois pure water from fifty-eight and five-
tenths degrees (58.5 degrees) to fifty-nine and five-tenths degrees (59.5
degrees) Fahrenheit, as defined in
1
<PAGE>
the American Gas Association Gas Measurement Manual and any subsequent revisions
as determined on a dry basis.
1.3 The term "Cancellation Notice" shall mean the notice described in
Section 22.1.
1.4 The term "Commodity Price" shall have the meaning set for Section
4.2.
1.5 The term "Con Ed" shall mean The Consolidated Edison Company of New
York, Inc.
1.6 The term "Daily Contract Quantity" or "DCQ" shall mean fifteen
thousand eight hundred sixty nine (15,869) MMBtu per day, with a maximum of ten
thousand eight hundred sixty nine (10,869) MMBtu per day at Texas Gas - Ada and
five thousand (5,000) MMBtu per day at TETCO - East Louisiana Points of
Delivery, plus Transporter'(s) Market Area Fuel.
1.7 The term "day" shall mean a period of twenty-four (24) consecutive
hours, beginning and ending at the time specified in the receiving
Transporter(s)' tariff(s) at the Point of Delivery.
1.8 The term "Delivery Period" shall mean a period of five (5)
consecutive months beginning with the commencement of deliveries of gas
hereunder.
1.9 The term "Elizabethtown" shall mean Elizabethtown Gas Company.
1.10 The term "Facility" shall mean the cogeneration facility owned and
operated by Buyer that is located in Linden, New Jersey.
1.11 The term "force majeure" shall have the meaning set forth in
Section 14.2.
2
<PAGE>
1.12 The term "Gas" or "gas" shall mean any mixture of hydrocarbons or
of hydrocarbons and non-combustible gases, in a gaseous state, consisting
essentially of methane and shall include casinghead gas produced with crude oil,
natural gas from gas wells, coal-bed methane gas, synthetic gas, coal
gasification gas and residue gas resulting from processing any of the foregoing.
1.13 The term "Lender" shall mean (i) any and- all lenders -(other than
Seller) providing the construction, interim or long-term financing or re-
financing of the Facility (including financing by way of a leveraged lease) and
any trustee or agent acting on their behalf, and (ii) any and all equity
investors or limited partners providing any such financing or re-financing of
the Facility and any trustee or agent acting on their behalf. The Lender
initially shall be State Street Bank & Trust Company, as Trustee, and thereafter
such entity or entities as shall be designated in writing by Buyer to Seller.
1.14 The term "Market Area Fuel" shall mean the quantity of gas retained
by Transporter(s) as fuel for the transportation of gas from the Point(s) of
Delivery to the Point(s) of Redelivery.
1. 15 The term "Market Price" shall have the meaning set forth in
Section 4.3.
1. 16 The term Minimum Quantity" shall mean one hundred percent (100%)
of the product of the DCQ and the number of days in each month of the Delivery
Period, as reduced by circumstances of force majeure.
1.17 The term "MMBtu" shall mean one million (1,000,000) Btus.
1.18 The term "month" shall mean the period commencing on the beginning
of the first day of a calendar month and ending on the beginning of the first
day of the succeeding calendar month.
3
<PAGE>
1.19 The term "Nominated Quantity" shall have the meaning set forth in
Section 3.1.
1.20 The term "Nomination Notice" shall mean the notice described in
Section 3.1 and Exhibit A to this Agreement.
1.21 The term "NYMEX' shall mean the New York Mercantile Exchange.
1.22 The term "NYMEX Forward Price" shall have the meaning set forth in
Section 4.7 (b).
1.23 The term "NYMEX Price" shall have the meaning set forth in Section
4.7 (a).
1.24 The term "Point(s) of Delivery" shall have the meaning set forth in
Article 8.
1.25 The term "Point(s) of Redelivery" shall mean the point or points on
Transporter(s)' pipeline system where gas is redelivered to or for the account
of Buyer, PSE&G or Elizabethtown on the PSE&G system in New Jersey.
1.26 The term "Power Purchase Agreement" shall mean Contract No. 344,
dated April 14, 1989, between Buyer and Con Ed, covering the sale of electricity
from the Facility, and any amendments thereto that may be made from time to
time.
1.27 The term "PSE&G" shall mean Public Service Electric and Gas
Company.
1.28 The term "Resale Service" shall mean the resale service provided by
PSE&G and Elizabethtown under the Gas Service Agreement with Buyer dated July
13, 1990, which is used to effectuate the delivery of Seller's gas to Buyer's
cogeneration facility.
4
<PAGE>
1.29 The term "Reservation Charge" shall have the meaning set forth in
Section 5.2.
1.30 The term "Reservation Rate" shall mean one cent ($0.01) per MMBtu.
1.31 The term "Spot Market Price" shall mean the arithmetic average of
the prices reported in the weekly and bi-weekly updates of the reference pricing
reports during the month of delivery for the reference points set forth in
Exhibit "B" hereto.
1.32 The term "TETCO"shall mean Texas Eastern Transmission Corporation.
1.33 The term "Texas Gas" shall mean Texas Gas Transmission Corporation.
1.34 The term "Transporter(s)" shall mean any pipeline(s) transporting
gas sold hereunder to and from the Point(s) of Delivery and to the Point(s) of
Redelivery.
ARTICLE 2: QUANTITIES
2.1 Buyer shall purchase and receive and Seller shall sell and deliver
the Nominated Quantity at the Point(s) of Delivery, except to the extent excused
under the provisions of this Agreement.
2.2 If on any day during the Delivery Period Buyer purchases and
receives less than the DCQ, except to the extent excused under the provisions of
this Agreement or due to Seller's unexcused failure to deliver, then Buyer shall
pay Seller an amount equal to the difference between the price payable hereunder
and the then effective Spot Market Price of gas at the reference points set
forth in Exhibit B multiplied by the difference between the Minimum Quantity and
the quantity of gas purchased and received by Buyer on each such day. Except in
the case of Buyer's willful misconduct or gross negligence and except as
described in Articles 12,14 and 22, this is the sole remedy available to Seller
for any failure by Buyer to purchase and receive gas.
5
<PAGE>
ARTICLE 3: NOMINATIONS
3.1 On or before the day prior to which pipeline nominations are
required to be nominated by Buyer and Seller to the applicable pipeline
company(s) referenced herein, and subject to the provisions of Sections 3.2 and
3.3, Buyer shall notify Seller in writing by providing a Nomination Notice,
substantially in the form attached hereto as Exhibit A, specifying the daily
quantity of gas, in MMBtus, up to the DCQ, that Buyer shall purchase and receive
from Seller during the next month (hereinafter the "Nominated Quantity"). In the
alternative, Buyer may specify a standing Nominated Quantity to be effective
until changed in writing pursuant to the first sentence of this section.
3.2 The parties recognize that fluctuations in the production and
transportation of gas can occur on a daily basis. Buyer and Seller will attempt
to receive and deliver gas on a uniform hourly basis. Notwithstanding anything
to the contrary herein, any revisions to the Nominated Quantity shall be
implemented in accordance with Transporter(s)' nomination procedures, unless a
waiver of such procedures is received by either Buyer or Seller.
3.3 Buyer and Seller shall be responsible for nominations to their
respective Transporters and the nominations in each case shall reflect the
Nominated Quantity .
3.4 If no Nominated Quantity is submitted by Buyer in accordance with
Section 3.1, the DCQ shall be the Nominated Quantity.
6
<PAGE>
ARTICLE 4: PRICE
4.1 For all gas nominated by Buyer and delivered by Seller during a
month, Buyer shall pay the Commodity Price or the Alternate Commodity Price per
MMBtu, rounded to the nearest $0.001.
4.2 The term "Commodity Price" shall mean the price of gas for each
month which shall be mutually agreed upon by the parties and subsequently
confirmed in) writing prior to the date Buyer's nomination notice to Seller is
due for the month of delivery. In the event that the parties fail to reach
agreement as to the Commodity Price, the Alternate Commodity Price determined in
accordance with Section 4.3 shall apply.
4.3 For the deliveries at TETCO - East Louisiana, the term "Alternate
Commodity Price" shall mean the arithmetic average of the prices reported in the
referenced issue of the month of delivery for the price references included in
the "Market Price Index," set forth in Exhibit B. For deliveries at Texas Gas
Ada, the term "Alternate Commodity Price" shall mean the arithmetic average of
the prices reported in the referenced issue of the month of delivery for the
price references included in the "Market Price Index," set forth in Exhibit B,
less $0.02 per MMBtu. The price references in the Market Price Index are
intended to reflect the price paid for gas delivered at the Point(s) of Delivery
under spot contracts (the "Market Price"). The price references in the "Backup
Price Index" set forth in Exhibit B are intended to serve as a substitute for
the price references in the Market Price Index in the event the latter price
references are not available or are "erroneous," as that term is defined in
Section 4.5.
7
<PAGE>
4.4 Either party may request that a price reference be added to or
deleted from the Market Price Index or Backup Price Index by providing written
notice to the other party. For a price reference to be added to the Market Price
Index or Backup Price Index, the price reference must reflect the Market Price
and be from an independent publication which is not controlled by a buyer,
seller or broker of gas. For a price reference to be deleted from the Market
Price Index or Backup Price Index, such price reference must no longer reflect
the Market Price. If within thirty (30) days after the date of notice by a
party, the parties are unable to agree to add or delete a price reference, then
the party seeking such addition or deletion may submit the issue to arbitration
which shall be conducted pursuant to Article 21. A price reference shall be
added or deleted effective the first day of the month after notice by the
requesting party and the price ultimately determined by negotiation or
arbitration will be given retroactive effect to take into account the period of
negotiation or arbitration with interest assessed at the rate provided in
Section 6.3. Unless otherwise agreed by the parties, in no event may either
party request that a price reference be added to or deleted from the Market
Price Index or Backup Price Index more than once during the Delivery Period.
4.5 If during any month a price reference included in the Market Price
Index is not published, the Market Price Index will exclude such price reference
from the Market Price Index for so long as such price reference is not published
and the price reference(s) from the Backup Price Index shall be substituted for
the excluded price reference. If the excluded price reference is the only price
reference in the Market Price Index and no price references in the Backup Price
Index are published, then
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Section 4.6 below shall apply. If an erroneous price is published and the
publisher confirms such error, then the correct price, if available, shall be
used. If the publisher does not confirm such error or if the correct price is
not available, then the price reference containing such erroneous price shall
not be included in the Market Price Index or Backup Price Index for such month.
For purposes of Sections 4.3 and 4.5, the term "erroneous" price shall mean
any price reference that varies by more than. four percent (4%) from the average
of the other price references included in the Market Price Index and Backup
Price Index for such month.
4.6 If no Market Price Index and no Backup Price Index reference prices
are available or if, in the opinion of either party, there are no price
references which reasonably reflect the Market Price and the basis of such
opinion is provided in writing to the other party, then a new method to
determine the Alternate Commodity Price will be negotiated. If the parties are
unable to agree within thirty (30) days after notice by a party, then the matter
of determining whether a basis exists to invoke this provision and, if so, the
determination of a new method to determine the Alternate Commodity Price shall
be submitted to arbitration pursuant to Article 21. During a period of
negotiation or arbitration, the last applicable Commodity Price or Alternate
Commodity Price shall remain in effect and shall be adjusted at the conclusion
of such negotiation or arbitration to give retroactive effect to the result with
interest assessed at the rate provided in Section 6.3.
4.7 Alternatively, and in lieu of the price calculated pursuant to
Sections 4.2 and 4.3 hereof, the parties may mutually agree to a NYMEX Price or
a NYMEX
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Forward Price based on the NYMEX posting for the natural gas futures contract,
calculated as follows:
(a) On or before the business day prior to the NYMEX
Settlement day, Buyer may propose that the price under this Agreement
for gas nominated by Buyer for delivery in the applicable month be the
NYMEX Price, plus or minus the basis differentials that may be mutually
agreed upon at the time of Buyer's proposal. The NYMEX Price shall be
the arithmetic average of the NYMEX settlement price of the natural gas
futures contract for the last three trading days applicable to the month
of delivery. Buyer's proposal shall designate the volume of gas for
delivery in the applicable month at the proposed price, up to the volume
nominated in accordance with Section 3.1 of this Agreement. Upon receipt
of Buyer's proposal, the parties shall confer by telephone as soon as
possible and decide whether or not to use the NYMEX Price, which
decision shall ultimately be made by Buyer and Seller no later than
11:00 a.m. Central Time on the business day before the last trading day
of the applicable natural gas futures contract. In the event the parties
agree to use the NYMEX Price and agree on the basis differential, the
parties' agreement shall be set forth in a confirmation prepared by
Buyer and transmitted by telecopy to Seller. The parties' agreement
shall be deemed conclusive upon receipt of the confirmation (as evidence
by electronic confirmation of transmission) unless Seller objects
promptly in writing following receipt of the confirmation. Either party
shall have the right to withhold agreement on any price proposed under
this Section 4.7 (a) at its sole discretion, in which case the price
under this Agreement will
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be calculated under Sections 4.2 or 4.3 hereof. If the parties are
unable to agree on the basis differentials, or methodology for
determining the basis, the NYMEX Price shall be deemed to be rejected.
In the event the parties agree to use the NYMEX Price, the nominated
volumes which are covered by the NYMEX Price shall remain in effect
during the applicable month and shall not be reduced or increased
pursuant to Sections 3.2 or 3.3 of this Agreement.
(b) In addition to the NYMEX Price, Buyer shall have the right
to propose that the NYMEX Forward Price, plus or minus the basis
differentials that may be mutually agreed upon at the time of Buyer's
proposal, be the price to be paid under this Agreement during any
calendar months designated by Buyer. The NYMEX Forward Price shall be
the NYMEX posting for the natural gas futures contract applicable to the
month or months selected by Buyer and prevailing at the time Buyer's
proposal is communicated to Seller by telephone and confirmed by Seller.
Buyer's proposal shall designate the volume of gas for delivery during
the designated months at the proposed price, up to the volume that can
be nominated in accordance with Section 3.1 of this Agreement. Upon
receipt of Buyer's proposal, the parties shall confer by telephone and
decide whether or not to use the NYMEX Forward Price, which decision
shall be made no later than 11:00 a.m. Central Time on the first
business day following Seller's receipt and confirmation of Buyer's
proposal. In the event the parties agree to use the NYMEX Forward Price
and agree on the basis differential or methodology for determining the
basis, the parties' agreement shall be set forth in a confirmation
prepared by Buyer and transmitted by telecopy to Seller. The
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parties' agreement shall be deemed conclusive upon receipt of the
confirmation (as evidenced by electronic confirmation of transmission)
unless Seller objects promptly in writing following receipt of the
confirmation. Either party shall have the right to withhold agreement on
any price proposed under this Section 4.7 (b), at its sole discretion,
prior to the execution of the NYMEX transaction, in which case the price
under this Agreement will be calculated under Sections 4.2 or 4.3
hereof If the parties are unable to agree on the basis differentials or
methodology for determining the basis, the NYMEX Forward Price shall be
deemed to be rejected. Nothing in this subsection (b) shall be construed
to prevent Buyer from proposing the NYMEX Forward Price in any
designated month if either of the parties had previously rejected the
NYMEX Forward Price for that month. In the event the parties agree to
use the NYMEX Forward Price, the nominated volumes which are covered by
the NYMEX Forward Price shall remain in effect during the designated
months and shall not be decreased or, increased pursuant to Sections 3.2
or 3.3 of this Agreement. In addition, should the parties agree to use
the NYMEX Forward Price, the selection of that option shall remain in
effect during the months selected by the parties unless the parties
mutually agree to use a different pricing option.
ARTICLE 5: RESERVATION CHARGES AND SUBSTITUTE FUELS
5.1 If during any month, Seller sells and delivers less than one hundred
percent (100%), but greater than ninety percent (90%), of the Nominated Quantity
multiplied by the number of days in the month, except to the extent excused
under the provisions of this Agreement or due to Buyer's unexcused failure to
receive, then Buyer
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shall be relieved of its obligation to pay Seller the Reservation Charge
applicable to the volumes not made available and Seller shall refund to Buyer
any payments attributable to such volumes if already invoiced and paid. If
during any month Seller sells and delivers less than ninety percent (90%) of the
Nominated Quantity multiplied by the number of days in the month, except to the
extent excused under the provisions of this Agreement or due to Buyer's
unexcused failure to receive, then Buyer shall be relieved of its obligation to
pay Seller the Reservation Charge set forth in Section 5.2 for the entire month
during which such supply failure occurred. Under such circumstances in this
Section 5. 1, Seller shall also reimburse Buyer its actual higher costs incurred
for the purchase and/or production and transportation of alternate supplies of
fuel acquired to replace the underdelivered quantity, not to exceed the
undelivered quantity, including but not limited to any imbalance carrying
charges and/or cash-out costs and penalties imposed by Transporter(s), PSE&G
and/or Elizabethtown, less the costs that Buyer would have otherwise incurred
for the purchase and transportation of such gas delivered under this Agreement.
Buyer shall use commercially reasonable efforts to minimize its incremental
actual costs for acquiring alternate supplies of fuel. In the exercise of its
commercially reasonable efforts, Buyer shall exercise diligent good faith
efforts to purchase least cost substitute fuel, including purchasing gas under
existing agreements with other sellers which will enable Buyer to utilize its
transportation rights used to transport gas hereunder. Because of environmental
restrictions on Buyer's use of fuels other than gas at the Facility, Buyer shall
have the sole discretion whether to purchase gas or an alternate fuel as a
substitute for gas not delivered by Seller hereunder, even where gas is more
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expensive. Except in the case of Seller's willful misconduct or gross negligence
and except as described in Articles 12, 14 and 22, these are the sole and
exclusive remedies available to Buyer for any failure by Seller to deliver gas.
5.2 Buyer shall pay Seller a monthly Reservation Charge for TETCO - East
Louisiana deliveries only, in consideration for maintaining the capability to
deliver gas at such Point of Delivery up to the DCQ, assuming market and supply
risks, and agreeing to reimburse Buyer for any amounts pursuant to Section 5.1.
The Reservation Charge shall be the Reservation Rate multiplied by the DCQ, for
the TETCO - East Louisiana Point of Delivery, multiplied by the number of days
in such month. To illustrate how the Reservation Charge for the TETCO - East
Louisiana deliveries would be calculated, assume that the DCQ, is 5,000 MMBtus
per day, at the Reservation Rate, the Reservation Charge during November would
be $1,500 (5,000 x $0.01 x 30).
ARTICLE 6: PAYMENT
6.1 Seller shall render an invoice on or before the tenth (10th) day of
each month setting forth the actual quantity of gas nominated by Buyer and
delivered by Seller hereunder during the preceding month, the Commodity Price,
Alternate Commodity Price, NYMEX Price or NYMEX Forward Price, the Reservation
Charge, any amounts due under Sections 2.2 and 12.2 and the total amount due. In
the event that the actual quantity delivered, the Alternate Commodity Price or
the Reservation Charge is not known at the time the invoice is rendered, an
estimated quantity, Alternate Commodity Price and Reservation Charge, based on
the best available information, shall be used. Buyer shall pay Seller for the
amount due by wire transfer
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with immediately available funds to Seller's account in accordance with
instructions contained in Seller's invoice. Payment shall be due on or before
the twenty-first (21st) day of such month or ten (10) days from the date of such
invoice, whichever is later. If Con Ed falls to pay Buyer under the Power
Purchase Agreement by the twentieth (20th) day of the month, Buyer's obligation
to pay Seller shall be suspended from the twenty-first (21st) day of the month,
or ten (10) days from the date of Seller's invoice, until one (1) day following
Buyer's receipt of Con Ed's payment, but, in such a case, Buyer's obligation to
pay Seller shall not be suspended past the twenty-fifth (25th) day of the month.
When the actual quantity, Alternate Commodity Price or Reservation Charge
becomes known and if an adjustment is necessary, an invoice containing the
adjustment for the difference between the actual value and the estimated value
will be rendered. Payment will be made in subsequent months' payment cycles.
6.2 Buyer shall submit an invoice on or before the tenth (10th) day of
the month, if necessary, for any amount due pursuant to Sections 5.1 and 12.2.
Seller shall pay Buyer in accordance with instructions contained in Buyer's
invoice. Payment shall be due on or before the twenty-fifth (25th) day of such
month or ten (10) days from the date of such invoice, whichever is later.
6.3 Should either party fail to pay any amount not in dispute when due,
interest thereon shall accrue at the lesser of (I) the rate of one percent (1%)
above the prime commercial rate charged by Citibank, N.A., New York, New York,
compounded annually from the due date or (ii) the maximum lawful contract rate
permitted by applicable law, until the amount due and interest have been paid in
full. Such interest shall be in addition to any other rights and remedies the
owed party may have for the owing party's failure to pay any amount not in
dispute. Should the owing party
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dispute the amount invoiced, such party shall pay the undisputed amount and
notify the other party of any disputed amount by the due date. Both parties will
mutually resolve the disputed amount in a timely manner with interest accruing
from the original due date on any disputed amount determined to be a valid
amount due. Notwithstanding the foregoing or any other provision herein, if
Buyer fails to pay any amount within five (5) days after receiving written
notice from Seller that payment is delinquent, Seller may withhold deliveries
and, should said: nonpayment continue for a period of thirty (30) days after
such notice, subject to the provisions of Article 22, Seller may terminate this
Agreement upon written notice.
6.4 Upon reasonable notice, each party shall have the right at
reasonable times to have an independent public accounting firm examine the
books, records, and charts controlled by the other party to the extent necessary
to verify the accuracy of any statement, payment, charge, or computation made
pursuant to this Agreement. In the event an error is discovered in any
statement, payment, charge, or computation, the adjusted amount shall be due
within thirty (30) days of the determination thereof, provided that any
statement, payment, charge, or computation shall be final as to both parties
unless objected to in writing within twelve (12) months after payment has been
made.
6.5 If either party pays any amount shown due and owing upon the invoice
of the other party, and such amount is subsequently determined by agreement,
arbitration or judgment of court not to have been due and owing when paid, the
payee will refund such amount to the paying party together with interest from
the date of payment to the date of refund at the interest rate set forth in
Section 6.3 hereof.
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ARTICLE 7: TAXES
7.1 Seller shall pay, or cause to be paid, all taxes, assessments, fees
or other charges now and hereafter lawfully levied and imposed by federal,
state, or local authorities upon Seller with respect to the gas prior to the
Point(s) of Delivery. In the event Buyer is required to remit such taxes,
assessments, fees or charges, Seller shall reimburse Buyer for such amount.
Seller shall furnish Buyer with a copy of the exemption certificate in
situations in which exemption from any such imposition is claimed by Seller.
7.2 Buyer shall pay, or cause to be paid, all taxes, assessments, fees
or other charges (including, but not limited to, sales and value added taxes)
now and hereafter lawfully levied and imposed by federal, state, or local
authorities upon Buyer with respect to the gas at and subsequent to the Point(s)
of Delivery. In the event Seller is required to remit such taxes, assessments,
fees or charges, Buyer shall reimburse Seller for such amount. Buyer shall
furnish Seller with a copy of the exemption certificate in situations in which
exemption from any such imposition is claimed by Buyer.
ARTICLE 8: POINT(S) OF DELIVERY
The "Point(s) of Delivery" shall be the point(s) on Transporter(s)'
pipeline system(s) where gas is delivered by Seller to Transporter(s) for
Buyer's account, as specified in Exhibit C attached hereto and made a part
hereof. As between the parties hereto, title, risk of loss, and liabilities
associated with delivered gas shall pass to and vest in Buyer at the Point(s) of
Delivery. Changes in the Point(s) of Delivery shall require the mutual consent
of the parties.
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ARTICLE 9: PRESSURE
Seller shall deliver gas at the Point(s) of Delivery at a pressure
sufficient to effect delivery into the receiving Transporter(s)' facilities.
ARTICLE 10: MEASUREMENT
All measurements of gas delivered and sold hereunder shall be in
accordance with the provisions of the receiving Transporter(s)' tariff at the
Point(s) of Delivery .
ARTICLE 11: QUALITY
The gas delivered and sold by Seller to Buyer at the Point(s) of
Delivery shall meet the quality specifications set forth in the receiving
Transporter(s)' tariff at the Point(s) of Delivery. Buyer shall have the right
to be represented and to participate in all tests of gas delivered hereunder
performed by Seller, and to inspect any equipment used in such tests to
determine the nature of the quality of gas delivered hereunder. In the event the
gas does not meet such quality specifications, Buyer may refuse delivery of the
gas. Seller's delivery of gas refused by Buyer for failure to meet quality
specifications shall not constitute delivery for the purposes of Articles 2, 5
and 6. Buyer's sole remedy for such failure of gas to meet quality
specifications shall be to refuse receipt of the gas and receive the remedy
specified in Article 5.
ARTICLE 12: TRANSPORTATION AND IMBALANCE CHARGES
12.1 Transporter(s)' rules, guidelines, operational procedures and
policies, as may be changed from time to time, may define and set forth the
manner in which gas delivered and sold under this Agreement is transported.
Seller and Buyer agree to provide to the other, in as prompt a manner as
reasonable, an information necessary to permit scheduling pursuant to such
requirements. Seller shall give Buyer the equivalent ranking given to any other
firm purchaser of Seller's gas in any priority
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queue when nominating or allocating volumes to Transporter(s) for delivery to
Buyer under this Agreement.
12.2 Each party agrees to make all reasonable efforts to cooperate with
the other in operating under this Agreement to avoid pipeline imbalance charges,
cash-out costs and penalties. Buyer shall bear any under or over delivery
charges, cash-out costs and penalties assessed by Transporter(s), PSE&G and
Elizabethtown which are caused by variances (including variances due to events
of force majeure declared by Buyer) in Buyer's receipts from the Nominated
Quantity and Seller shall bear any under or over delivery charges, cash-out
costs and penalties assessed by Transporter(s), PSE&G and Elizabethtown which
are caused by variances (including variances due to events of force majeure
declared by Seller) in Seller's deliveries from the Nominated Quantity.
12.3 Seller shall be responsible for transportation to the Point(s) of
Delivery and payment of all transportation charges relating thereto. Buyer shall
be responsible for transportation from the Point(s) of Delivery and payment of
an transportation charges relating thereto. The parties recognize that the gas
purchased hereunder may be transported by Transporter(s) whose transportation
rates and related charges such as fuel reimbursement and take-or-pay surcharges
are subject to refund. The party which pays the Transporter(s) for
transportation of gas hereunder shall be entitled to retain any refunds
associated therewith.
ARTICLE 13: TERM
This Agreement shall be effective from the date first set forth above
and, unless sooner terminated under the provisions of this Agreement, shall
continue for five (5) months from the commencement of deliveries of gas
hereunder. The commencement
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of deliveries of gas hereunder shall be November 1, 1997, unless otherwise
agreed by the parties. The term of this Agreement may be extended by mutual
agreement of the Parties.
ARTICLE 14: FORCE MAJEURE
14.1 If, by reason of force majeure either party is rendered unable,
wholly or in part, to carry out its obligations under this Agreement, and such
party provides written notice and full particulars of such event of force
majeure as soon as practicable after the occurrence thereof, the obligations of
such affected party shall be suspended to the extent and for the period of such
event of force majeure, except for the payment of monies in respect of
obligations that have accrued hereunder prior to such event of force majeure.
The cause of suspension other than strikes or lockouts shall be remedied so far
as possible with reasonable dispatch. Settlement of strikes and lockouts shall
be wholly within the discretion of the party having the difficulty.
14.2 The term "force majeure" shall mean any act or event which wholly
or partially prevents or delays the performance of obligations arising under
this Agreement if such act or event is not reasonably within the control of and
not caused by the fault or negligence of the party claiming force majeure and
which by the exercise of due diligence such party is unable to prevent or
overcome, including, without limitation by the following enumeration: acts of
God, the public enemy or the elements; fire, accidents, breakdowns, shutdowns
for purposes of necessary repairs, maintenance, relocation or construction of
facilities; breakage, freezing or accidents to wells, machinery or lines of
pipe; the necessity of making repairs or alterations to machinery or lines of
pipe; inability to obtain materials, supplies, permits, or labor to perform or
comply with any obligation or condition of this Agreement; any curtailment of
firm gas transportation service to, of electricity or steam purchases from, or
of Resale Service
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by PSE&G and Elizabethtown to, the Facility; strikes and any other industrial,
civil or public disturbances; any laws, orders, rules, regulations, acts,
restraints of any government or governmental body or authority, civil or
military which have the effect of prohibiting performance of a party's
obligations. The term "force majeure" shall also expressly include the
imposition upon Buyer of any gross receipts, franchise or other gas consumption
tax which Buyer is not obligated to pay on the date of execution of this
Agreement, which tax Buyer determines has a material economic impact on its
ability to continue to purchase gas at the prices or in the quantities set forth
herein.
14.3 Except as provided in Section 14.2, neither party may rely upon
changes in market conditions, curtailment of interruptible transportation, or
denial by a regulatory authority of the pass through of the cost of gas
purchased under this Agreement as events of force majeure" In the event of force
majeure" that causes Seller to curtail its deliveries hereunder, Seller shall
treat Buyer on a pro rata basis with Seller's other firm customers and shall
give Buyer priority of service over all interruptible customers.
14.4 In the event Buyer fails to take or Seller fails to make available,
due to a declared event of force majeure" at least fifty percent (50%) of the
aggregate DCQ for a period of sixty (60) consecutive days, then the non-
declaring party may terminate this Agreement upon written notice, provided that
such notice is given prior to the date the force majeure" is remedied.
ARTICLE 15: NOTICE
Any notice, request, demand, statement, or bill provided for in this
Agreement shall be in writing and delivered by hand, mail, or telecopy. All such
written
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communications shall be effective upon receipt by the other party at the address
of the parties hereto as follows:
Buyer:
Notices & Statements
Cogen Technologies Linden Venture, L.P.
Cogen Technologies, Inc.
Suite 5000, 50th Floor
1600 Smith Street
Houston, TX 77002
Attention: Vice President - Fuel Supply
Telephone No.: (713) 951-7768
Telecopy No.: (713) 951-7803
Seller: Notices and Nominations:
Engage Energy US, L.P.
460 McLaws Circle, Suite 200
Williamsburg, VA 23185
Attention: Mr. Martin Minnaugh
Telephone No.: (757) 253-0336
Telecopy No.: (757) 253-0753
Payments:
By wire transfer to:
Citibank, N.A., New York, New York
ABA # 0210-008-9
Account No. 4071-9415
Either of the parties may designate a further or different address by giving
written notice to the other party.
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ARTICLE 16: LAWS, ORDERS & REGULATIONS
This Agreement, and all terms and provisions contained herein, and the
respective obligations of the parties are subject to valid laws, orders, rules,
and regulations of duly constituted authorities having jurisdiction over Buyer,
Seller, Transporter(s), PSE&G or Elizabethtown. In the event that any regulatory
or government body asserting jurisdiction over Transporter(s), PSE&G,
Elizabethtown or either party prohibits any of the transactions described in
this Agreement or any transportation or delivery agreement between
Transporter(s), PSE&G, Elizabethtown and/or Buyer covering the transportation
and delivery of the gas sold hereunder, or otherwise conditions such
transactions in a form that is unacceptable in the reasonable judgment of the
party affected thereby, then either party hereto so affected or prohibited may,
by giving one (1) month prior written notice to the other party, terminate this
Agreement and each party shall be held harmless as a result of such termination
except for obligations which were incurred prior to termination; provided,
however, such termination shall be effective immediately where required by law,
rule or regulation.
ARTICLE 17: APPLICABLE LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS.
ARTICLE 18: WAIVER
No waiver by either party of any one or more defaults in the performance
of any provision of this Agreement shall operate or be construed as a waiver of
any future default, whether of a like or a different character.
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ARTICLE 19: TITLE
Seller warrants title to, or good right to sell, all gas delivered
hereunder by Seller, and that such gas is free from liens and adverse claims of
every kind. Seller will pay, or cause to be paid, all royalties and other sums
imposed on the production, gathering, or transportation of the gas prior to its
delivery by Seller to Buyer. Seller will indemnify and save Buyer harmless
against all loss, damage, and expense of every character on account of adverse
claims to the gas delivered by-it or of royalties, payments or other charges
thereon applicable before delivery to Buyer. If any adverse claim of any
character is asserted with respect to Seller's right to deliver gas hereunder,
or with respect to Seller's right to receive payment for such gas, or if
Seller's title is questioned or involved in any action, then Buyer shall
immediately notify Seller of such adverse claim and then may withhold that
portion of sums due hereunder reasonably related to such claim until such claim
is finally determined or title is clear, or until such time as Seller furnishes
a corporate undertaking conditioned to save Buyer harmless from such claim.
ARTICLE 20: ASSIGNMENT
Either party may, without relieving itself of its obligations under this
Agreement, assign any of its rights hereunder to an entity with which it is
affiliated, but otherwise no assignment of this Agreement or any of the rights
or obligations hereunder shall be made unless there first shall have been
obtained the consent thereto in writing of the other party, which consent shall
not be unreasonably withheld. Any successor-in-interest of Buyer or Seller shall
be entitled to the rights and shall be subject to the obligations of its
predecessor-in-interest under this Agreement. It is agreed, however, that the
restrictions on assignment contained in this
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paragraph shall not in any way prevent either party to this Agreement from
pledging, mortgaging or assigning its rights hereunder as security for its
indebtedness. In connection with any such pledge, mortgage or assignment by
Buyer, Seller will execute an appropriate consent to any such pledge, mortgage
or assignment as reasonably requested by Buyer's lender. Any such consent will
acknowledge, in effect, that this Agreement has been duly authorized and is
valid and enforceable against Seller and that this Agreement is in full force
and effect; that Seller will not agree to any amendment to this Agreement
without the lender's approval in writing, which approval shall not be
unreasonably withheld by the lender that Seller win make an payments due to
Buyer hereunder in accordance with the instructions of the lender; that Seller
will not terminate this Agreement by reason of Buyer's default or by reason of
force majeure, without giving the lender notice of default and notice of
termination and the same opportunity to cure provided to Buyer under this
Agreement (plus any longer period as may be necessary, not to exceed one (1)
month, if the lender in good faith is endeavoring to obtain possession of the
Facility and pays Seller in accordance with the terms of this Agreement during
such period); that Seller will deliver to the lender a copy of each notice of
default and notice of termination at the same time that such notice is delivered
to Buyer; and that in the event the lender exercises its rights under its loan
documentation or partnership documentation with Buyer, Seller will accept
performance by the lender or any successor or assign thereof, provided that the
lender or any such successor or assign pays all sums then due to Seller
hereunder, meets Seller's credit requirements and is also otherwise in
compliance with this Agreement.
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ARTICLE 21: ARBITRATION
21.1 Should an issue be submitted to binding arbitration pursuant to the
provisions of this Agreement, the parties shall each appoint one (1) arbitrator
and the two (2) arbitrators so appointed will select a third arbitrator, all of
such arbitrators to be qualified by education, knowledge, and experience to
resolve the dispute or controversy. If either party fails to appoint an
arbitrator within ten (10) days after a request for such appointment is made by
the other party in writing, or if the two (2) appointed fail, within ten (10)
days after the appointment of the second, to agree on a third arbitrator, the
arbitrator or arbitrators necessary to complete a board of three (3) arbitrators
will be appointed upon application by either party therefor by the American
Arbitration Association.
21.2 The jurisdiction of the arbitrators win be limited to the single
issue or issues referred to arbitration and the arbitration shall be conducted
pursuant to the guidelines set forth by the American Arbitration Association;
provided, however, that should there be any conflict between such guidelines and
the procedures set forth in this Agreement, the terms of this Agreement shall
control.
21.3 Within fifteen (15) days following selection of the third
arbitrator, each party shall furnish the arbitrators in writing its position and
supporting arguments regarding the issue or issues being arbitrated. The
arbitrators may, if they deem necessary, convene a hearing regarding the issue
or issues being arbitrated. All hearings shall be held at a location to be
agreed upon among the arbitrators in Houston, Harris County, Texas. Within
thirty (30) days following the later of the appointment of the third arbitrator
or of the hearing, if one is held, the arbitrators shall notify the parties in
writing as to which of the two (2) positions submitted with
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respect to the issue or issues in question is most consistent with the intent of
this Agreement. Such decision shall be binding on the parties hereto until and
unless changed in accordance with the provisions of this Agreement.
21.4 Enforcement of the award maybe entered in any court having
jurisdiction over the parties.
21.5 Each party will pay the expense of the arbitrator selected by or
for it, and its counsel, witnesses and employees. All other costs of arbitration
will be equally divided between the parties.
ARTICLE 22: DEFAULT
22.1 In the event either party fails to perform any of the material
covenants or obligations imposed upon it under and by virtue of this Agreement,
the party not in default hereto, having first given thirty (30) days written
notice to the party in default stating specifically the nature of the default
and declaring it to be the intention of the party giving notice to cancel this
Agreement (the "Cancellation Notice"), may, at its option, cancel this Agreement
in accordance with this Article 22. If within said period of thirty (30) days
the party in default remedies or removes said default, including payment of sums
due with interest at the rate set forth in Section 6.3 hereof, or provides
adequate security to fully indemnify the party not in default for any and all
direct damages of such breach, including payment of sums due with interest at
the rate set forth in Section 6.3 hereof, then such Cancellation Notice shall be
withdrawn and this Agreement shall continue in full force and effect; provided,
however, that if the default is the failure to pay sums due hereunder, then the
party not in default shall have the right to suspend gas deliveries or takes, as
the case may be, after service of the Cancellation Notice.
27
<PAGE>
22.2 If the party in default does not so remedy or remove the default or
does not provide adequate security to fully indemnify the party not in default
for any and all direct damages of such breach, and fails to represent that
further defaults shall not occur and that steps have been taken to avoid such a
recurrence, within said period of thirty (30) days, this Agreement, at the
option of the party not in default, shall be canceled upon written notice to the
defaulting party. Cancellation of this Agreement, pursuant to the provisions of
this Article 22, shall be without prejudice to any other rights and remedies the
party not in default has available to it. Further, such cancellation of this
Agreement or failure to cancel shall be without prejudice to the right of Seller
to collect any amounts then due Seller for gas delivered prior to the time of
cancellation.
ARTICLE 23: GENERAL
23.1 The headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement.
23.2 Any modification, revision or amendment of this Agreement made
subsequent to its execution shall be valid and-effective only if and when made
in writing and duly executed by the parties hereto.
23.3 This Agreement and any Exhibit hereto shall constitute a single
agreement, superseding all prior agreements or undertakings between the parties
on the subject matter hereof. This Agreement contains the entire agreement of
the parties and, except as stated herein, there are no promises, agreements,
warranties, obligations, assurances or conditions precedent or otherwise
affecting it.
23.4 By executing this Agreement, each of the individuals so executing
warrants that (1) the individual has all necessary corporate power and authority
to
28
<PAGE>
enter into and execute this Agreement and (ii) this Agreement constitutes the
valid and binding obligation of the party on whose behalf it is executed,
enforceable in accordance with its terms, subject to applicable bankruptcy and
insolvency laws.
23.5 The parties shall execute such additional documents and shall cause
such additional action to be taken as may be reasonably required, or, in the
reasonable judgment of any party, as may be reasonably necessary or desirable,
to effect or evidence the provisions of this Agreement and the transactions
contemplated hereby.
23.6 The parties acknowledge that each provision to this Agreement
constitutes their joint work product.
ARTICLE 24: CONFIDENTIALITY
24.1 The terms of this Agreement and information disclosed pursuant to
this Agreement, including but not limited to the price paid for gas, and Buyer's
financial statements shall be kept confidential by Seller and Buyer, (a) except
to the extent any information must be disclosed to (i) Transporter(s), PSE&G and
Elizabethtown for the purpose of effectuating transportation and resale of the
gas sold and purchased under this Agreement, (ii) Con' Ed for the purpose of
complying with Article 4.6 of the Power Purchase Agreement and (iii) Buyer's
lender and (b) except as required by law, regulation or request of governmental
authority.
29
<PAGE>
IN WITNESS WHEREOF, by execution in duplicate originals, the parties
hereto have caused this Agreement to be effective as of the day and year first
above written.
"BUYER" "SELLER"
COGEN TECHNOLOGIES ENGAGE ENERGY US, L.P.
LINDEN VENTURE, L.P.
By: Cogen Technologies Linden, Ltd. By: /s/ J. R. Milam
in the State of New Jersey d/b/a ----------------------------
Cogen Technologies Linden, Limited Name: J.R. Milam
Partnership), a Texas limited Title: Senior Vice President
partnership, its general partner Date: August 18, 1997
By: Cogen Technologies, Inc., a
Texas corporation, its general partner
By: /s/ W. Colin Harper
-----------------------------------
W. Colin Harper
Vice President - Fuel Supply
Date: August 1, 1997
30
<PAGE>
EXHIBIT A
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
as Buyer, and ENGAGE ENERGY US, L.P., as Seller.
NOMINATION NOTICE
Date:
------------
Engage Energy US, L.P.
460 McLaws Circle
Williamsburg, VA 23185
Attention:
-------------
Reference: Firm Gas Purchase and Sale Agreement
Dated: July 1, 1997
Buyer: Cogen Technologies Linden Venture, L.P.
Seller: Engage Energy US, L.P.
Point of Delivery:
---------------------------------------
Contract No.:
- ----- ---------------------------------------
Gentlemen:
Pursuant to Section 3.1 of the subject Agreement, Cogen Technologies Linden
Venture, L.P., hereby nominates the following:
Month of Delivery:
----------------------
Nominated Quantity (MMBtu/D):
-----------
Very truly yours,
- -------------------------------
W. Cohn Harper
Vice President - Fuel Supply
31
<PAGE>
EXHIBIT B
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
as Buyer, and ENGAGE ENERGY US, L.P., as Seller.
<TABLE>
<CAPTION>
MARKET PRICE INDEX (TETCO/EAST LOUISIANA)
- -----------------------------------------------------------------------------------------------------------------
Publication* Table Row Column
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Inside FERC's Gas Prices of Spot Gas Texas Eastern East Louisiana
Market Report (first Delivered to (current month
report in applicable Pipelines (per Index)
month) MMBtu dry)
- -----------------------------------------------------------------------------------------------------------------
Natural Gas Spot Gas Prices; Texas Eastern Texas Eastern; East
Intelligence Gas Delivered to Louisiana (current
Price Index (first Pipelines (per month's) Contract
report in applicable MMBtuy dry) Index
month)
- -----------------------------------------------------------------------------------------------------------------
BACKUP PRICE INDEX (TETCO/EAST LOUISIANA)
- -----------------------------------------------------------------------------------------------------------------
Publication* Table Row Column
- -----------------------------------------------------------------------------------------------------------------
Natural Gas Week Spot Prices on Texas Eastern East Louisiana
(first report in Interstate Pipeline (current month) Bid
applicable month) Systems; Delivered to Week
Pipeline ($/MMBtu)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
MARKET PRICE INDEX (TEXAS GAS/ADA)
- ----------------------------------------------------------------------------------------------------------
Publication* Table Row Column
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Natural Gas Spot Gas Prices; Region - Contract Index
Intelligence - Delivered to North Louisiana; (for current month)
Weekly Gas Price Pipelines Texas Gas; Zone 1
Index (first report (30 Day Supply
in applicable Transactions)
month)
- ----------------------------------------------------------------------------------------------------------
Inside FERC's Gas Prices of Spot Gas Texas Gas Index (for current
Market Report Delivered to Transmission Corp. month)
(first report in Pipelines (per Zone 1
applicable month) MMBtu dry)
- -----------------------------------------------------------------------------------------------------------
BACKUP PRICE INDEX (TEXAS GAS/ADA)
- -----------------------------------------------------------------------------------------------------------
Publication* Table Row Column
- -----------------------------------------------------------------------------------------------------------
Natural Gas Week Spot Prices on Texas Gas Bid Week (for
(first report in Interstate Pipeline Transmission current month)
applicable month) Systems; Delivered Corporation
to Pipeline Zone 1: North
($/MMBtu) Louisiana
- -----------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
EXHIBIT C
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
as Buyer, and ENGAGE ENERGY US, L.P., as Seller.
POINT(S) OF DELIVERY
The Point(s) of Delivery shall be:
A. The existing point(s) of receipt on the tetco Venice or Main Pass
Systems in East Louisiana.
B. The existing point of receipt on Texas Gas at Ada, Webster Parish,
Louisiana.
34
<PAGE>
STATE OF TEXAS )
) SS.
COUNTY OF HARRIS )
On this 1st day of August 1997, before me, Joy R. Toups, the undersigned
officer, personally appeared, W. Colin Harper, known to me to be the person
whose name is subscribed to the within instrument and acknowledged that Cogen
Technologies, Inc., as General Partner of Cogen Technologies Linden, Ltd. (D/B/A
Cogen Technologies Linden, Limited partnership), in turn acting as General
Partner of Cogen Technologies Linden Venture, L.P. (D/B/A Cogen Technologies
Linden Venture, Limited Partnership) executed the same for the purpose therein
contained.
In witness whereof I hereunto set my hand and official seal.
JOY R. TOUPS
(SEAL) MY COMMISSION EXPIRES /s/ Joy R. Toups
August 13, 2001 -------------------------------
Notary Public in and for the State of Texas
STATE OF TEXAS )
) SS.
COUNTY OF HARRIS )
On this 18th of August 1997, before me, Marchelle D. Cleveland, the
undersigned officer, personally appeared, J.R. Milam, known to me to
be the person whose name is subscribed to the within instrument and acknowledged
that ENGAGE ENERGY US, L.P. executed the same for the purposes therein
contained.
In witness whereof I hereunto set hand and official seal.
/s/ Marchelle D. Cleveland
----------------------------------------
Notary Public in and for the State of Texas
MARCHELLE D. CLEVELAND
(SEAL) Notary Public, State of Texas
My Commission Expires
MAY 05, 2001
35
<PAGE>
GUARANTY AGREEMENT
THIS AGREEMENT, shall be effective July 1, 1997, by and between THE
COASTAL CORPORATION (hereinafter referred to as "Guarantor") and COGEN
TECHNOLOGIES LINDEN VENTURE, L.P. (hereinafter referred to as "Cogen").
WITNESSETH:
WHEREAS, Cogen and ENGAGE ENERGY US, L.P. (hereinafter referred to as
"ENGAGE"), an affiliate of Guarantor, contemporaneously herewith are entering
into a Firm Gas Purchase and Sale Agreement effective July 1, 1997, as amended
from time to time (the "Agreement"), pursuant to which Cogen will purchase from
ENGAGE natural gas for a cogeneration facility (the "Facility") located in
Linden, New Jersey, in the quantities and upon the terms and conditions that are
set forth in the Agreement; and
WHEREAS, Cogen desires assurances that Guarantor will be responsible for
obligations of ENGAGE set forth in the Agreement in the event ENGAGE does not
satisfy such obligations; and
WHEREAS, Guarantor desires that the Agreement be executed and,
therefore, desires to give such assurances.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and other valuable consideration, the adequacy and receipt of
which are hereby acknowledged, Guarantor and Cogen hereby agree as follows:
1. Guarantor hereby irrevocably and unconditionally guarantees to Cogen
the full, prompt and complete performance of the financial obligations of ENGAGE
set forth in, and subject to the terms of, the Agreement up to a maximum amount
in the
<PAGE>
aggregate of $10 million. If ENGAGE fails to perform any of its financial
obligations then due under the Agreement, Guarantor shall cause ENGAGE or
another of its subsidiaries or affiliates to perform said obligation in
accordance with the terms of the Agreement. Without limiting the generality of
the foregoing, the Guarantor agrees that the occurrence of any one or more of
the following shall not affect the liability of the Guarantor hereunder: (a) at
any time or from time to time, without notice to the Guarantor, the time for any
performance of or compliance with any of the obligations of ENGAGE set forth in
the Agreement or such obligations shall be extended, or such performance or
compliance shall be waived, (b) any of the acts mentioned in any of the
provisions of the Agreement shall be done or omitted or (c) any right under the
Agreement shall be waived.
The Guarantor hereby expressly waives diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that Cogen or
any lender (as defined in the Agreement) exhaust any right, power or remedy or
proceed against ENGAGE under the Agreement.
2. This Guaranty Agreement shall be assignable to the lenders as defined
in the Agreement under the same terms and conditions set forth in the Agreement.
Any other assignment shall not be permitted, in whole or in part, except with
the consent of the other party, which consent shall not be unreasonably
withheld. This Guaranty Agreement shall be binding upon the parties hereto and
their permitted successors and assigns.
-2-
<PAGE>
3. This Guaranty Agreement is for the sole and exclusive benefit of the
parties hereto and any permitted successors and assigns. Nothing expressed or
implied herein is intended to benefit any other person, firm or corporation not
a party hereto. None of such other persons shall have any legal or equitable
right, remedy or claim under this Guaranty Agreement or under any provisions
hereof. Notwithstanding anything contained in this paragraph 3, if any claim or
demand is made against Guarantor pursuant to this Guaranty Agreement, Guarantor
shall be subject to all rights, set-offs, counterclaims and defenses to which
ENGAGE may be entitled, except for defenses arising out of bankruptcy,
insolvency, liquidation or dissolution of ENGAGE.
4. This Guaranty Agreement shall remain in full force and effect from
November 1, 1997 and until March 31, 1998. Such termination shall not affect
Guarantor's liability pursuant to this Guaranty with respect to any financial
obligation of Engage under the Agreement which arise prior to such date of
termination.
5. In the event of default by ENGAGE in performance of obligations under
the Agreement, recovery may be had against the Guarantor for failure to perform,
together with reasonable attorneys' fees or expenses paid, suffered or incurred
by Cogen in enforcing this Guaranty Agreement without requiring the prosecution
of the claim against ENGAGE.
6. No delays on the part of Cogen in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Cogen of
any right or remedy shall preclude other or further exercise thereof or the
exercise of any
-3-
<PAGE>
right or remedy. No actions of Cogen permitted hereunder shall in any way impair
or affect this Guaranty Agreement.
7. WHEREVER POSSIBLE, EACH PROVISION OF THIS GUARANTY AGREEMENT SHALL BE
INTERPRETED IN SUCH MANNER TO BE EFFECTIVE AND VALID UNDER TEXAS LAW; BUT IF ANY
PROVISIONS OF THIS GUARANTY AGREEMENT SHALL BE PROHIBITED OR INVALID UNDER SUCH
LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR
INVALIDITY WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING
PROVISIONS OF THIS GUARANTY AGREEMENT.
8. The Guarantor represents and warrants as follows:
(a) The Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of
incorporation.
(b) The execution, delivery and performance by the Guarantor of
this Guaranty Agreement are within the Guarantor's corporate powers,
have been duly authorized by all necessary corporate action, and do not
contravene (I) the Guarantor's certificate of incorporation or by-laws
or (ii) any law, rule, regulation or order, or any restriction contained
in any material agreement or instrument, binding on or affecting the
Guarantor.
(c) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the
Guarantor of this Guaranty
-4-
<PAGE>
Agreement, except such as have been duly obtained or made and are in full
force and effect.
(d) This Guaranty Agreement is a legal, valid and binding
obligation the Guarantor enforceable against the Guarantor in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceeding in equity or at law).
(e) Subsidiaries of the Guarantor own, directly or indirectly,
on of the ownership interest of ENGAGE.
IN WITNESS WHEREOF, this instrument is executed as of the day and year
above written.
THE COASTAL CORPORATION COGEN TECHNOLOGIES LINDEN
(GUARANTOR) VENTURE, L.P.
By: Cogen Technologies Linden, Ltd
Its General Partner
By: /s/ J. B. Levos
------------------------
Name: J. B. Levos By: Cogen Technologies, Inc.
Title: Vice President and Controller Its General Partner
[SEAL]
By: /s/ W. Colin Harper
---------------------------------
Name: W. Colin Harper
Title: Vice President - Fuel Supply
-5-
<PAGE>
EXHIBIT 10.23
FIRM GAS PURCHASE AND SALE AGREEMENT
between
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
and
COLUMBIA ENERGY SERVICES CORPORATION
<PAGE>
TABLE OF CONTENTS
Page
----
TABLE OF CONTENTS i
ARTICLE 1: DEFINITIONS 1
ARTICLE 2: QUANTITIES 5
ARTICLE 3: NOMINATIONS 6
ARTICLE 4: PRICE 7
ARTICLE 5: RESERVATION CHARGES AND SUBSTITUTE FUELS 12
ARTICLE 6: PAYMENT 14
ARTICLE 7: TAXES 16
ARTICLE 8: POINT(S) OF DELIVERY 17
ARTICLE 9: PRESSURE 17
ARTICLE 10: MEASUREMENT 18
ARTICLE 11: QUALITY 18
ARTICLE 12: TRANSPORTATION AND IMBALANCE CHANGES 18
ARTICLE 13: TERM 19
ARTICLE 14: FORCE MAJEURE 20
ARTICLE 15: NOTICE 22
ARTICLE 16: LAWS, ORDERS & REGULATIONS 23
ARTICLE 17: APPLICABLE LAW 24
ARTICLE 18: WAIVER 24
ARTICLE 19: TITLE 24
i
<PAGE>
ARTICLE 20: ASSIGNMENT 25
ARTICLE 21: ARBITRATION 26
ARTICLE 22: DEFAULT 27
ARTICLE 23: GENERAL 29
ARTICLE 24: CONFIDENTIALITY 30
EXHIBIT A 32
EXHIBIT B 33
EXHIBIT C 35
ii
<PAGE>
FIRM GAS PURCHASE AND SALE AGREEMENT
This AGREEMENT ("Agreement") is made and entered into this 1st day of July
1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P., (in the State of
New Jersey D/B/A COGEN TECHNOLOGIES LINDEN VENTURE, LIMITED PARTNERSHIP), a
Delaware limited partnership, hereinafter referred to as "Buyer," and COLUMBIA
ENERGY SERVICES CORPORATION, a Kentucky corporation, hereinafter referred to as
"Seller;"
WHEREAS, Buyer requires a supply of gas for use in Buyer's cogeneration
facility in Linden, New Jersey; and
WHEREAS, Seller is willing to sell gas to Buyer on a firm basis to meet its
requirements.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties do hereby covenant and agree as follows:
ARTICLE 1: DEFINITIONS
----------------------
In addition to the terms "Buyer" and "Seller" which shall refer to the
parties identified above, or their duly designated agents or representatives,
the following terms shall have the specified meanings:
1.1 The term "Alternate Commodity Price" shall have the meaning set forth
in Section 4.3.
1.2 The term "Btu" shall mean the amount of heat required to raise the
temperature of one (1) pound avoirdupois pure water from fifty-eight and five-
tenths degrees (58.5 degrees) to fifty-nine and five-tenths degrees (59.5
degrees) Fahrenheit, as defined in
1
<PAGE>
the American Gas Association Gas Measurement Manual and any subsequent
revisions.
1.3 The term "Cancellation Notice" shall mean the notice described in
Section 22.1.
1.4 The term "Commodity Price" shall have the meaning set forth in
Section 4.2.
1.5 The term "Con Ed" shall mean The Consolidated Edison Company of New
York, Inc.
1.6 The term "Daily Contract Quantity" or "DCQ" shall mean fifteen thousand
two hundred seventy (15,270) MMBtu per day, with a maximum of ten thousand
(10,000) MMBtu per day at Trunkline South Louisiana Point of Delivery and five
thousand two hundred seventy (5,270) MMBtu at Station No. 30 (Zone 1) Point of
Delivery, plus Transporter(s)' Market Area Fuel.
1.7 The term "day" shall mean a period of twenty-four (24) consecutive
hours, beginning and ending at the time specified in the receiving
Transporter(s)' tariff(s) at the Point of Delivery.
1.8 The term "Delivery Period" shall mean a period of five (5) consecutive
months beginning with the commencement of deliveries of gas hereunder.
1.9 The term "Elizabethtown" shall mean Elizabethtown Gas Company.
1.10 The term "Facility" shall mean the cogeneration facility owned and
operated by Buyer that is located in Linden, New Jersey.
1.11 The term "force majeure" shall have the meaning set forth in
Section 14.2.
2
<PAGE>
1.12 The term "Gas" or "gas" shall mean any mixture of hydrocarbons or of
hydrocarbons and non-combustible gases, in a gaseous state, consisting
essentially of methane and shall include casinghead gas produced with crude oil,
natural gas from gas wells, coal-bed methane gas, synthetic gas, coal
gasification gas and residue gas resulting from processing any of the foregoing.
1.13 The term "Lender" shall mean (i) any and all lenders (other than
Seller) providing the construction, interim or long-term financing or re-
financing of the Facility (including financing by way of a leveraged lease) and
any trustee or agent acting on their behalf, and (ii) any and all equity
investors or limited partners providing any such financing or re-financing of
the Facility and any trustee or agent acting on their behalf. The Lender
initially shall be State Street Bank & Trust Company, as Trustee, and thereafter
such entity or entities as shall be designated in writing by Buyer to Seller.
1.14 The term "Market Area Fuel" shall mean the volume of gas retained by
Transporter(s) as fuel for the transportation of gas from the Point(s) of
Delivery to the Point(s) of Redelivery.
1.15 The term "Market Price" shall have the meaning set forth in Section
4.3.
1.16 The term "Minimum Quantity" shall mean one hundred percent (100%) of
the product of the DCQ and the number of days in each month of the Delivery
Period, as reduced by circumstances of force majeure.
1.17 The term "MMBtu" shall mean one million (1,000,000) Btus.
1.18 The term "month" shall mean the period commencing on the beginning of
the first day of a calendar month and ending on the beginning of the first day
of the succeeding calendar month.
3
<PAGE>
1.19 The term "Nominated Quantity" shall have the meaning set forth in
Section 3. 1.
1.20 The term "Nomination Notice" shall mean the notice described in
Section 3.1 and Exhibit A to this Agreement.
1.21 The term "NYMEX" shall mean the New York Mercantile Exchange.
1.22 The term "NYMEX Forward Price" shall have the meaning set forth in
Section 4.7(b).
1.23 The term "NYMEX Price" shall have the meaning set forth in Section
4.7 (a).
1.24 The term "Point(s) of Delivery" shall have the meaning set forth in
Article 8.
1.25 The term "Point(s) of Redelivery" shall mean the point or points on
Transporter(s)' pipeline system where gas is redelivered to or for the account
of Buyer, PSE&G or Elizabethtown on the PSE&G system in New Jersey.
1.26 The term "Power Purchase Agreement" shall mean Contract No. 344, dated
April 14, 1989, between Buyer and Con Ed, covering the sale of electricity from
the Facility, and any amendments thereto that may be made from time to time.
1.27 The term "PSE&G" shall mean Public Service Electric and Gas Company.
1.28 The term "Reservation Charge" shall have the meaning set forth in
Section 5.2.
1.29 The term "Reservation Rate" shall mean one and two-tenths cents
($0.012) per MMBtu for Station 30 deliveries and one and one-half cents ($0.015)
for Trunkline deliveries.
4
<PAGE>
1.30 The term "Spot Market Price" shall mean the arithmetic average of the
prices reported in the weekly and bi-weekly updates of the reference pricing
reports during the month of delivery for the reference points set forth in
Exhibit "B" hereto.
1.31 The term "TGPL" shall mean Transcontinental Gas Pipe Line Corporation.
1.32 The term "Transporter(s)" shall mean any pipeline(s) transporting gas
sold hereunder to and from the Point(s) of Delivery and to the Point(s) of
Redelivery.
1.33 The term "Trunkline" shall mean Trunkline Gas Company.
ARTICLE 2: QUANTITIES
---------------------
2.1 Buyer shall purchase and receive and Seller shall sell and deliver the
Nominated Quantity at the Point(s) of Delivery, except to the extent excused
under the provisions of this Agreement.
2.2 If during any month of the Delivery Period Buyer purchases and receives
less than the Minimum Quantity for each Point of Delivery except to the extent
excused under the provisions of this Agreement or due to Seller's unexcused
failure to deliver, then Buyer shall pay Seller an amount equal to the
difference between the price payable hereunder and the then effective Spot
Market Price of gas at the reference points set forth in Exhibit B multiplied by
the difference between the Minimum Quantity and the quantity of gas purchased
and received by Buyer. Except in the case of Buyer's willful misconduct or gross
negligence and except as described in Articles 12, 14 and 22, this is the sole
remedy available to Seller for any failure by Buyer to purchase and receive gas.
5
<PAGE>
ARTICLE 3: NOMINATIONS
----------------------
3.1 On or before the day prior to which pipeline nominations are required
to be nominated by Buyer and Seller to the applicable pipeline company(s)
referenced herein, and subject to the provisions of Sections 3.2 and 3.3, Buyer
shall notify Seller in writing by providing a Nomination Notice, substantially
in the form attached hereto as Exhibit A, specifying the daily quantity of gas,
in MMBtus, up to the DCQ, that Buyer shall purchase and receive from Seller
during the next month (hereinafter the "Nominated Quantity"). In the
alternative, Buyer may specify a standing Nominated Quantity to be effective
until changed in writing pursuant to the first sentence of this section.
3.2 The parties recognize that fluctuations in the production and
transportation of gas can occur on a daily basis. Buyer and Seller will attempt
to receive and deliver gas on a uniform hourly basis. Notwithstanding anything
to the contrary herein, any revisions to the Nominated Quantity shall be
implemented in accordance with Transporter(s)' nomination procedures, unless a
waiver of such procedures is received by either Buyer or Seller.
3.3 Buyer and Seller shall be responsible for nominations to their
respective Transporters and the nominations in each case shall reflect the
Nominated Quantity.
3.4 If no Nominated Quantity is submitted by Buyer in accordance with
Section 3.1, the DCQ shall be the Nominated Quantity.
6
<PAGE>
ARTICLE 4: PRICE
----------------
4.1 For all gas nominated by Buyer and delivered by Seller during a month,
Buyer shall pay the Commodity Price or the Alternate Commodity Price per MMBtu,
rounded to the nearest $0.001.
4.2 The term "Commodity Price" shall mean the price of gas for each month
which shall be mutually agreed upon by the parties and subsequently confirmed in
writing prior to the date Buyer's nomination notice to Seller is due for the
month of delivery. In the event that the parties fail to reach agreement as to
the Commodity Price, the Alternate Commodity Price determined in accordance with
Section 4.3 shall apply.
4.3 The term "Alternate Commodity Price" shall mean the arithmetic average
of the prices reported in the referenced issue of the month of delivery for the
price references included in the "Market Price Index," set forth in Exhibit B.
The price references in the Market Price Index are intended to reflect the price
paid for gas delivered at the Point(s) of Delivery under spot contracts (the
"Market Price"). The price references in the "Backup Price Index" set forth in
Exhibit B are intended to serve as a substitute for the price references in the
Market Price Index in the event the latter price references are not available or
are "erroneous," as that term is defined in Section 4.5.
4.4 Either party may request that a price reference be added to or deleted
from the Market Price Index or Backup Price Index by providing written notice to
the other party. For a price reference to be added to the Market Price Index or
Backup Price Index, the price reference must reflect the Market Price and be
from an
7
<PAGE>
independent publication which is not controlled by a buyer, seller or broker of
gas. For a price reference to be deleted from the Market Price Index or Backup
Price Index, such price reference must no longer reflect the Market Price. If
within thirty (30) days after the date of notice by a party, the parties are
unable to agree to add or delete a price reference, then the party seeking such
addition or deletion may submit the issue to arbitration which shall be
conducted pursuant to Article 21. A price reference shall be added or deleted
effective the first day of the month after notice by the requesting party and
the price ultimately determined by negotiation or arbitration will be given
retroactive effect to take into account the period of negotiation or arbitration
with interest assessed at the rate provided in Section 6.3. Unless otherwise
agreed by the parties, in no event may either party request that a price
reference be added to or deleted from the Market Price Index or Backup Price
Index more than once during the Delivery Period.
4.5 If during any month a price reference included in the Market Price
Index is not published, the Market Price Index will exclude such price reference
from the Market Price Index for so long as such price reference is not published
and the price reference(s) from the Backup Price Index shall be substituted for
the excluded price reference. If the excluded price reference is the only price
reference in the Market Price Index and no price references in the Backup Price
Index are published, then Section 4.6 below shall apply. If an erroneous price
is published and the publisher confirms such error, then the correct price, if
available, shall be used. If the publisher does not confirm such error or if the
correct price is not available, then the price reference containing such
erroneous price shall not be included in the Market Price
8
<PAGE>
Index or Backup Price Index for such month. For purposes of Sections 4.3 and
4.5, the term "erroneous" price shall mean any price reference that varies by
more than four percent (4%) from the average of the other price references
included in the Market Price Index and Backup Price Index for such month.
4.6 If no Market Price Index and no Backup Price Index reference prices are
available or if, in the opinion of either party, there are no price references
which reasonably reflect the Market Price and the basis of such opinion is
provided in writing to the other party, then a new method to determine the
Alternate Commodity Price will be negotiated. If the parties are unable to agree
within thirty (30) days after notice by a party, then the matter of determining
whether a basis exists to invoke this provision and, if so, the determination of
a new method to determine the Alternate Commodity Price shall be submitted to
arbitration pursuant to Article 21. During a period of negotiation or
arbitration, the last applicable Commodity Price or Alternate Commodity Price
shall remain in effect and shall be adjusted at the conclusion of such
negotiation or arbitration to give retroactive effect to the result with
interest assessed at the rate provided in Section 6.3.
4.7 Alternatively, and in lieu of the price calculated pursuant to Sections
4.2 and 4.3 hereof, the parties may mutually agree to a NYMEX Price or a NYMEX
Forward Price based on the NYMEX posting for the natural gas futures contract,
calculated as follows:
(a) On or before the business day prior to the NYMEX Settlement day, Buyer
may propose that the price under this Agreement for gas nominated by
Buyer for delivery in the applicable month be the NYMEX Price, plus or minus
9
<PAGE>
the basis differentials that may be mutually agreed upon at the time of Buyer's
proposal. The NYMEX Price shall be the arithmetic average of the NYMEX
settlement price of the natural gas futures contract for the last three trading
days applicable to the month of delivery. Buyer's proposal shall designate the
volume of gas for delivery in the applicable month at the proposed price, up to
the volume nominated in accordance with Section 3.1 of this Agreement. Upon
receipt of Buyer's proposal, the parties shall confer by telephone as soon as
possible and decide whether or not to use the NYMEX Price, which decision shall
ultimately be made by Buyer and Seller no later than 11:00 a.m. Central Time on
the business day before the last trading day of the applicable natural gas
futures contract. In the event the parties agree to use the NYMEX Price and
agree on the basis differential, the parties' agreement shall be set forth in a
confirmation prepared by Buyer and transmitted by telecopy to Seller. The
parties' agreement shall be deemed conclusive upon receipt of the confirmation
(as evidence by electronic confirmation of transmission) unless Seller objects
promptly in writing following receipt of the confirmation. Either party shall
have the right to withhold agreement on any price proposed under this Section
4.7(a) at its sole discretion, in which case the price under this Agreement will
be calculated under Sections 4.2 or 4.3 hereof. If the parties are unable to
agree on the basis differentials or methodology for determining the basis, the
NYMEX Price shall be deemed to be rejected. In the event the parties agree to
use the NYMEX Price, the nominated volumes which are covered by the NYMEX Price
10
<PAGE>
shall remain in effect during the applicable month and shall not be reduced or
increased pursuant to Sections 3.2 or 3.3 of this Agreement.
(b) In addition to the NYMEX Price, Buyer shall have the right to propose
that the NYMEX Forward Price, plus or minus the basis differentials that may be
mutually agreed upon at the time of Buyer's proposal, be the price to be paid
under this Agreement during any calendar months designated by Buyer. The NYMEX
Forward Price shall be the NYMEX posting for the natural gas futures contract
applicable to the month or months selected by Buyer and prevailing at the time
Buyer's proposal is communicated to Seller by telephone and confirmed by Seller.
Buyer's proposal shall designate the volume of gas for delivery during the
designated months at the proposed price, up to the volume that can be nominated
in accordance with Section 3.1 of this Agreement. Upon receipt of Buyer's
proposal, the parties shall confer by telephone and decide whether or not to use
the NYMEX Forward Price, which decision shall be made no later THAN 11:00 a.m.
Central Time on the first business day following Seller's receipt and
confirmation of Buyer's proposal. In the event the parties agree to use THE
NYMEX FORWARD Price and agree on the basis differential or methodology for
determining the basis, the parties' agreement shall be set forth in a
confirmation prepared by Buyer and transmitted by telecopy to Seller. The
parties' agreement shall be deemed conclusive upon receipt of the confirmation
(as evidenced by electronic confirmation of transmission) unless Seller objects
promptly in writing following receipt of the confirmation. Either party shall
have the right to withhold agreement on any price proposed under this Section
11
<PAGE>
4.7(b), at its sole discretion, prior to the execution of the NYMEX transaction,
in which case the price under this Agreement will be calculated under Sections
4.2 or 4.3 hereof. If the parties are unable to agree on the basis differentials
or methodology for determining the basis, the NYMEX Forward Price shall be
deemed to be rejected. Nothing in this subsection (b) shall be construed to
prevent Buyer from proposing the NYMEX Forward Price in any designated month if
either of the parties had previously rejected the NYMEX Forward Price for that
month. In the event the parties agree to use the NYMEX Forward Price, the
nominated volumes which are covered by the NYMEX Forward Price shall remain in
effect during the designated months and shall not be decreased or increased
pursuant to Sections 3.2 or 3.3 of this Agreement. In addition, should the
parties agree to use the NYMEX Forward Price, the selection of that option shall
remain in effect during the months selected by the parties unless the parties
mutually agree to use a different pricing option.
ARTICLE 5: RESERVATION CHARGES AND SUBSTITUTE FUELS
---------------------------------------------------
5.1 If during any month, Seller sells and delivers less than one hundred
percent (100%), but greater than ninety percent (90%), of the Nominated Quantity
multiplied by the number of days in the month, except to the extent excused
under the provisions of this Agreement or due to Buyer's unexcused failure to
receive, then Buyer shall be relieved of its obligation to pay Seller the
Reservation Charge applicable to the volumes not made available and Seller shall
refund to Buyer any payments attributable to such volumes if already invoiced
and paid. If during any month Seller sells and delivers less than ninety percent
(90%) of the Nominated Quantity multiplied
12
<PAGE>
by the number of days in the month, except to the extent excused under the
provisions of this Agreement or due to Buyer's unexcused failure to receive,
then Buyer shall be relieved of its obligation to pay Seller the Reservation
Charge set forth in Section 5.2 for the entire month during which such supply
failure occurred. Under such circumstances in this Section 5.1, Seller shall
also reimburse Buyer its actual costs incurred for the purchase and/or
production and transportation of alternate supplies of fuel equal to the
undelivered volume, including but not limited to any imbalance carrying charges
and/or cash-out costs and penalties imposed by Transporter(s), PSE&G and/or
Elizabethtown, less the costs that Buyer would have otherwise incurred for the
purchase and transportation of gas under this Agreement. Buyer shall use
commercially reasonable efforts to minimize its incremental actual costs for
acquiring alternate supplies of fuel. In the exercise of its commercially
reasonable efforts, Buyer shall exercise diligent good faith efforts to purchase
least cost substitute fuel, including purchasing gas under existing agreements
with other sellers which will enable Buyer to utilize its transportation rights
used to transport gas hereunder. Because of environmental restrictions on
Buyer's use of fuels other than gas at the Facility, Buyer shall have the sole
discretion whether to purchase gas or an alternate fuel as a substitute for gas
not delivered by Seller hereunder, even where gas is more expensive. Except in
the case of Seller's willful misconduct or gross negligence and except as
described in Articles 12, 14 and 22, these are the sole and exclusive remedies
available to Buyer for any failure by Seller to deliver gas.
5.2 Buyer shall pay Seller a monthly Reservation Charge in consideration
for maintaining the capability to deliver gas up to the DCQ, assuming market and
supply
13
<PAGE>
risks, and agreeing to reimburse Buyer for any amounts pursuant to Section 5.1.
The Reservation Charge shall be the Reservation Rate multiplied by the DCQ,
multiplied by the number of days in such month. To illustrate how the
Reservation Charge would be calculated assume that the DCQ for TGPL Station 30
is 5,270 MMBtus per Day, at the Reservation Rate hereunder, the Reservation
Charge during the month of November would be: $1,897 (5,270 x $0.012 x 30).
Additionally, assume that the DCQ for Trunkline is 10,000 MMBtus per Day at the
Reservation Rate hereunder, the Reservation Charge would be: $4,500 (10,000 x
$0.015 x 30).
ARTICLE 6: PAYMENT
------------------
6.1 Seller shall render an invoice on or before the tenth (10th) day of
each month setting forth the actual quantity of gas nominated by Buyer and
delivered by Seller hereunder during the preceding month, the Commodity Price,
Alternate Commodity Price, NYMEX Price or NYMEX Forward Price, the Reservation
Charge, any amounts due under Sections 2.2 and 12.2 and the total amount due. In
the event that the actual quantity delivered, the Alternate Commodity Price or
the Reservation Charge is not known at the time the invoice is rendered, an
estimated quantity, Alternate Commodity Price and Reservation Charge, based on
the best available information, shall be used. Buyer shall pay Seller for the
amount due by wire transfer with immediately available funds to Seller's account
in accordance with instructions contained in Seller's invoice. Payment shall be
due on or before the twenty-first (21st) day of such month or ten (10) days
from the date of such invoice, whichever is later. If Con Ed fails to pay Buyer
under the Power Purchase Agreement by the twentieth (20th) day of the month,
Buyer's obligation to pay Seller shall be suspended from the
14
<PAGE>
twenty-first (21st) day of the month, or ten (10) days from the date of
Seller's invoice, until one (1) day following Buyer's receipt of Con Ed's
payment, but, in such a case, Buyer's obligation to pay Seller shall not be
suspended past the twenty-fifth (25th) day of the month. When the actual
quantity, Alternate Commodity Price or Reservation Charge becomes known and if
an adjustment is necessary, an invoice containing the adjustment for the
difference between the actual value and the estimated value will be rendered.
Payment will be made in subsequent months' payment cycles.
6.2 Buyer shall submit an invoice on or before the tenth (10th) day of the
month, if necessary, for any amount due pursuant to Sections 5.1 and 12.2.
Seller shall pay Buyer in accordance with instructions contained in Buyer's
invoice. Payment shall be due on or before the twenty-first (25th) day of such
month or ten (10) days from the date of such invoice, whichever is later.
6.3 Should either party fail to pay any amount not in dispute when due,
interest thereon shall accrue at the lesser of (i) the rate of one percent (1%)
above the prime commercial rate charged by Citibank, N.A., New York, New York,
compounded annually from the due date or (ii) the maximum lawful contract rate
permitted by applicable law, until the amount due and interest have been paid in
full. Such interest shall be in addition to any other rights and remedies the
owed party may have for the owing party's failure to pay any amount not in
dispute. Should the owing party dispute the amount invoiced, such party shall
pay the undisputed amount and notify the other party of any disputed amount by
the due date. Both parties will mutually resolve the disputed amount in a timely
manner with interest accruing from the original due date on any disputed amount
determined to be a valid amount due.
15
<PAGE>
Notwithstanding the foregoing or any other provision herein, if Buyer fails to
pay any amount within five (5) days after receiving written notice from Seller
that payment is delinquent, Seller may withhold deliveries and, should said
nonpayment continue for a period of thirty (30) days after such notice, subject
to the provisions of Article 22, Seller may terminate this Agreement upon
written notice.
6.4 Upon reasonable notice, each party shall have the right at reasonable
times to have an independent public accounting firm examine the books, records,
and charts controlled by the other party to the extent necessary to verify the
accuracy of any statement, payment, charge, or computation made pursuant to this
Agreement. In the event an error is discovered in any statement, payment,
charge, or computation, the adjusted amount shall be due within thirty (30) days
of the determination thereof provided that any statement, payment, charge, or
computation shall be final as to both parties unless objected to in writing
within twelve (12) months after payment has been made.
6.5 If either party pays any amount shown due and owing upon the invoice of
the other party, and such amount is subsequently determined by agreement,
arbitration or judgment of court not to have been due and owing when paid, the
payee will refund such amount to the paying party together with interest from
the date of payment to the date of refund at the interest rate set forth in
Section 6.3 hereof.
ARTICLE 7: TAXES
----------------
7.1 Seller shall pay, or cause to be paid, all taxes, assessments, fees or
other charges now and hereafter lawfully levied and imposed by federal, state,
or local authorities upon Seller with respect to the gas prior to the Point(s)
of Delivery. In the
16
<PAGE>
event Buyer is required to remit such taxes, assessments, fees or charges,
Seller shall reimburse Buyer for such amount. Seller shall furnish Buyer with a
copy of the exemption certificate in situations in which exemption from any such
imposition is claimed by Seller.
7.2 Buyer shall pay, or cause to be paid, all taxes, assessments, fees or
other charges (including, but not limited to, sales and value added taxes) now
and hereafter lawfully levied and imposed by federal, state, or local
authorities upon Buyer with respect to the gas at and subsequent to the Point(s)
of Delivery. In the event Seller is required to remit such taxes, assessments,
fees or charges, Buyer shall reimburse Seller for such amount. Buyer shall
furnish Seller with a copy of the exemption certificate in situations in which
exemption from any such imposition is claimed by Buyer.
ARTICLE 8: POINT(S) OF DELIVERY
-------------------------------
The "Point(s) of Delivery" shall be the point(s) on Transporter(s)'
pipeline system(s) where gas is delivered by Seller to Transporter(s) for
Buyer's account, as specified in Exhibit C attached hereto and made a part
hereof. As between the parties hereto, title, risk of loss, and liabilities
associated with delivered gas shall pass to and vest in Buyer at the Point(s) of
Delivery. Changes in the Point(s) of Delivery shall require the mutual consent
of the parties.
ARTICLE 9: PRESSURE
-------------------
Seller shall deliver gas at the Point(s) of Delivery at a pressure
sufficient to effect delivery into the receiving Transporter(s)' facilities.
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<PAGE>
ARTICLE 10: MEASUREMENT
-----------------------
All measurements of gas delivered and sold hereunder shall be in accordance
with the provisions of the receiving Transporter(s)' tariff at the Point(s) of
Delivery.
ARTICLE 11: QUALITY
-------------------
The gas delivered and sold by Seller to Buyer at the Point(s) of Delivery
shall meet the quality specifications set forth in the receiving Transporter(s)'
tariff at the Point(s) of Delivery. Buyer shall have the right to be represented
and to participate in all tests of gas delivered hereunder performed by Seller,
and to inspect any equipment used in such tests to determine the nature of the
quality of gas delivered hereunder. In the event the gas does not meet such
quality specifications, Buyer may refuse delivery of the gas. Seller's delivery
of gas refused by Buyer for failure to meet quality specifications shall not
constitute delivery for the purposes of Articles 2, 5 and 6. Buyer's sole remedy
for such failure of gas to meet quality specifications shall be to refuse
receipt of the gas and receive the remedy specified in Article 5.
ARTICLE 12: TRANSPORTATION AND IMBALANCE CHARGES
------------------------------------------------
12.1 Transporter(s)' rules, guidelines, operational procedures and
policies, as may be changed from time to time, may define and set forth the
manner in which gas delivered and sold under this Agreement is transported.
Seller and Buyer agree to provide to the other, in as prompt a manner as
reasonable, all information necessary to permit scheduling pursuant to such
requirements. Seller shall give Buyer the highest ranking given to any other
purchaser of Seller's gas in any priority queue when nominating or allocating
volumes to Transporter(s) for delivery to Buyer under this Agreement.
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<PAGE>
12.2 Each party agrees to make all reasonable efforts to cooperate with the
other in operating under this Agreement to avoid pipeline imbalance charges,
cash-out costs and penalties. Buyer shall bear any under or over delivery
charges, cash-out costs and penalties assessed by Transporter(s), PSE&G and
Elizabethtown which are caused by variances (including variances due to events
of force majeure declared by Buyer) in Buyer's receipts from the Nominated
Quantity and Seller shall bear any under or over delivery charges, cash-out
costs and penalties assessed by Transporter(s), PSE&G and Elizabethtown which
are caused by variances (including variances due to events of force majeure
declared by Seller) in Seller's deliveries from the Nominated Quantity.
12.3 Seller shall be responsible for transportation to the Point(s) of
Delivery and payment of all transportation charges relating thereto. Buyer shall
be responsible for transportation from the Point(s) of Delivery and payment of
all transportation charges relating thereto. The parties recognize that the gas
purchased hereunder may be transported by Transporter(s) whose transportation
rates and related charges such as fuel reimbursement and take-or-pay surcharges
are subject to refund. The party which pays the Transporter(s) for
transportation of gas hereunder shall be entitled to retain any refunds
associated therewith.
ARTICLE 13: TERM
----------------
This Agreement shall be effective from the date first set forth above and,
unless sooner terminated under the provisions of this Agreement, shall continue
for five (5) months from the commencement of deliveries of gas hereunder. The
commencement of deliveries of gas hereunder shall be November 1, 1997, unless
otherwise agreed by
19
<PAGE>
the parties. The term of this Agreement may be extended by mutual agreement of
the Parties.
ARTICLE 14: FORCE MAJEURE
-------------------------
14.1 If, by reason of force majeure either party is rendered unable, wholly
or in part, to carry out its obligations under this Agreement, and such party
provides written notice and full particulars of such event of force majeure as
soon as practicable after the occurrence thereof, the obligations of such
affected party shall be suspended to the extent and for the period of such event
of force majeure, except for the payment of monies in respect of obligations
that have accrued hereunder prior to such event of force majeure. The cause of
suspension other than strikes or lockouts shall be remedied so far as possible
with reasonable dispatch. Settlement of strikes and lockouts shall be wholly
within the discretion of the party having the difficulty.
14.2 The term "force majeure" shall mean any act or event which wholly or
partially prevents or delays the performance of obligations arising under this
Agreement if such act or event is not reasonably within the control of and not
caused by the fault or negligence of the party claiming force majeure" and which
by the exercise of due diligence such party is unable to prevent or overcome,
including, without limitation by the following enumeration: acts of God, the
public enemy or the elements; fire, accidents, breakdowns, shutdowns for
purposes of necessary repairs, maintenance, relocation or construction of
facilities; breakage, freezing or accidents to wells, machinery or lines of
pipe; the necessity of making repairs or alterations to machinery or lines of
pipe; inability to obtain materials, supplies, permits, or labor to perform or
comply with any obligation or condition of this Agreement; any curtailment
20
<PAGE>
of firm gas transportation service to, of electricity or steam purchases from,
or of resale service by PSE&G and Elizabethtown to, the Facility; strikes and
any other industrial, civil or public disturbances; any laws, orders, rules,
regulations, acts, restraints of any government or governmental body or
authority, civil or military which have the effect of prohibiting performance of
a party's obligations. The term "force majeure" shall also expressly include the
imposition upon Buyer of any gross receipts, franchise or other gas consumption
tax which Buyer is not obligated to pay on the date of execution of this
Agreement, which tax Buyer determines has a material economic impact on its
ability to continue to purchase gas at the prices or in the quantities set forth
herein.
14.3 Except as provided in Section 14.2, neither party may rely upon
changes in market conditions, curtailment of interruptible transportation, or
denial by a regulatory authority of the pass through of the cost of gas
purchased under this Agreement as events of force majeure. In the event of force
majeure that causes Seller to curtail its deliveries hereunder, Seller shall
treat Buyer on a pro rata basis with Seller's other firm customers and shall
give Buyer priority of service over all interruptible customers.
14.4 In the event Buyer fails to take or Seller fails to make available,
due to a declared event of force majeure, at least fifty percent (50%) of the
aggregate DCQ for a period of sixty (60) consecutive days, then the non-
declaring party may terminate this Agreement upon written notice, provided that
such notice is given prior to the date the force majeure is remedied.
21
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ARTICLE 15: NOTICE
------------------
Any notice, request, demand, statement, or bill provided for in this Agreement
shall be in writing and delivered by hand, mail, or telecopy. All such written
communications shall be effective upon receipt by the other party at the address
of the parties hereto as follows:
Buyer:
Notices & Statements
--------------------
Cogen Technologies Linden Venture, L.P.
c/o Cogen Technologies, Inc.
Suite 5000, 50th Floor
1600 Smith Street
Houston, TX 77002
Attention: Vice President - Fuel Supply
Telephone No.: (713) 951-7768
Telecopy No.: (713) 951-7803
Seller:
Columbia Energy Services Corporation
1330 Post Oak Blvd., 20th Floor
Houston, TX 77056
Notices & Statements
---------------------------------------
Attention: Mr. Walter Kromholz
Telephone No.: (713) 297-5811
Telecopy No.: (713) 621-5392
Accounting Matters:
---------------------------------------
Attention: Mary Allen
Telephone No.: (713)693-2816
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<PAGE>
Nomination Notices:
-------------------
Attention: Mr. Steve E. Locke
Telephone No.: (713) 297-5806
Telecopy No.: (713) 621-5392
Either of the parties may designate a further or different address by giving
written notice to the other party.
ARTICLE 16: LAWS, ORDERS & REGULATIONS
--------------------------------------
This Agreement, and all terms and provisions contained herein, and the
respective obligations of the parties are subject to valid laws, orders, rules,
and regulations of duly constituted authorities having jurisdiction over Buyer,
Seller, Transporter(s), PSE&G or Elizabethtown. In the event that any regulatory
or government body asserting jurisdiction over Transporter(s), PSE&G,
Elizabethtown or either party prohibits any of the transactions described in
this Agreement or any transportation or delivery agreement between
Transporter(s), PSE&G, Elizabethtown and/or Buyer covering the transportation
and delivery of the gas sold hereunder, or otherwise conditions such
transactions in a form that is unacceptable in the reasonable judgment of the
party affected thereby, then either party hereto so affected or prohibited may,
by giving one (1) month's prior written notice to the other party, terminate
this Agreement and each party shall be held harmless as a result of such
termination except for obligations which were incurred prior to termination;
provided, however, such termination shall be effective immediately where
required by law, rule or regulation.
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ARTICLE 17: APPLICABLE LAW
--------------------------
THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS.
ARTICLE 18: WAIVER
------------------
No waiver by either party of any one or more defaults in the performance of
any provision of this Agreement shall operate or be construed as a waiver of any
future default, whether of a like or a different character.
ARTICLE 19: TITLE
-----------------
Seller warrants title to, or good right to sell, all gas delivered
hereunder by Seller, and that such gas is free from liens and adverse claims of
every kind. Seller will pay, or cause to be paid, all royalties and other sums
imposed on the production, gathering, or transportation of the gas prior to its
delivery by Seller to Buyer. Seller will indemnify and save Buyer harmless
against all loss, damage, and expense of every character on account of adverse
claims to the gas delivered by it or of royalties, payments or other charges
thereon applicable before delivery to Buyer. If any adverse claim of any
character is asserted with respect to Seller's right to deliver gas hereunder,
or with respect to Seller's right to receive payment for such gas, or if
Seller's title is questioned or involved in any action, then Buyer shall
immediately notify Seller of such adverse claim and then may withhold that
portion of sums due hereunder reasonably related to such claim until such claim
is finally determined or title is clear, or until such time as Seller furnishes
a corporate undertaking conditioned to save Buyer harmless from such claim.
24
<PAGE>
ARTICLE 20: ASSIGNMENT
----------------------
Either party may, without relieving itself of its obligations under this
Agreement, assign any of its rights hereunder to an entity with which it is
affiliated, but otherwise no assignment of this Agreement or any of the rights
or obligations hereunder shall be made unless there first shall have been
obtained the consent thereto in writing of the other party, which consent shall
not be unreasonably withheld. Any successor-in-interest of Buyer or Seller shall
be entitled to the rights and shall be subject to the obligations of its
predecessor-in-interest under this Agreement. It is agreed, however, that the
restrictions on assignment contained in this paragraph shall not in any way
prevent either party to this Agreement from pledging, mortgaging or assigning
its rights hereunder as security for its indebtedness. In connection with any
such pledge, mortgage or assignment by Buyer, Seller will execute an appropriate
consent to any such pledge, mortgage or assignment as reasonably requested by
Buyer's lender. Any such consent will acknowledge, in effect, that this
Agreement has been duly authorized and is valid and enforceable against Seller
and that this Agreement is in full force and effect; that Seller will not agree
to any amendment to this Agreement without the lender's approval in writing,
which approval shall not be unreasonably withheld by the lender; that Seller
will make all payments due to Buyer hereunder in accordance with the
instructions of the lender; that Seller will not terminate this Agreement by
reason of Buyer's default or by reason of force majeure, without giving the
lender notice of default and notice of termination and the same opportunity to
cure provided to Buyer under this Agreement (plus any longer period as may be
necessary, not to exceed one (1) month, if the lender in good faith is
endeavoring to obtain
25
<PAGE>
possession of the Facility and pays Seller in accordance with the terms of this
Agreement during such period); that Seller will deliver to the lender a copy of
each notice of default and notice of termination at the same time that such
notice is delivered to Buyer; and that in the event the lender exercises its
rights under its loan documentation or partnership documentation with Buyer,
Seller will accept performance by the lender or any successor or assign thereof,
provided that the lender or any such successor or assign pays all sums then due
to Seller hereunder and is also otherwise in compliance with this Agreement.
ARTICLE 21: ARBITRATION
-----------------------
21.1 Should an issue be submitted to binding arbitration pursuant to the
provisions of this Agreement, the parties shall each appoint one (1) arbitrator
and the two (2) arbitrators so appointed will select a third arbitrator, all of
such arbitrators to be qualified by education, knowledge, and experience to
resolve the dispute or controversy. If either party fails to appoint an
arbitrator within ten (10) days after a request for such appointment is made by
the other party in writing, or if the two (2) appointed fail, within ten (110)
days after the appointment of the second, to agree on a third arbitrator, the
arbitrator or arbitrators necessary to complete a board of three (3) arbitrators
will be appointed upon application by either party therefor by the American
Arbitration Association.
21.2 The jurisdiction of the arbitrators will be limited to the single
issue or issues referred to arbitration and the arbitration shall be conducted
pursuant to the guidelines set forth by the American Arbitration Association;
provided, however, that
26
<PAGE>
should there be any conflict between such guidelines and the procedures set
forth in this Agreement, the terms of this Agreement shall control.
21.3 Within fifteen (15) days following selection of the third arbitrator,
each party shall furnish the arbitrators in writing its position and supporting
arguments regarding the issue or issues being arbitrated. The arbitrators may,
if they deem necessary, convene a hearing regarding the issue or issues being
arbitrated. All hearings shall be held at a location to be agreed upon among the
arbitrators in Houston, Harris County, Texas. Within thirty (30) days following
the later of the appointment of the third arbitrator or of the hearing, if one
is held, the arbitrators shall notify the parties in writing as to which of the
two (2) positions submitted with respect to the issue or issues in question is
most consistent with the intent of this Agreement. Such decision shall be
binding on the parties hereto until and unless changed in accordance with the
provisions of this Agreement.
21.4 Enforcement of the award may be entered in any court having
jurisdiction over the parties.
21.5 Each party will pay the expense of the arbitrator selected by or for
it, and its counsel, witnesses and employees. All other costs of arbitration
will be equally divided between the parties.
ARTICLE 22: DEFAULT
-------------------
22.1 In the event either party fails to perform any of the material
covenants or obligations imposed upon it under and by virtue of this Agreement,
the party not in default hereto, having first given thirty (30) days written
notice to the party in default stating specifically the nature of the default
and declaring it to be the intention of the
27
<PAGE>
party giving notice to cancel this Agreement (the "Cancellation Notice"), may,
at its option, cancel this Agreement in accordance with this Article 22. If
within said period of thirty (30) days the party in default remedies or removes
said default, including payment of sums due with interest at the rate set forth
in Section 6.3 hereof, or provides adequate security to fully indemnify the
party not in default for any and all direct damages of such breach, including
payment of sums due with interest at the rate set forth in Section 6.3 hereof,
then such Cancellation Notice shall be withdrawn and this Agreement shall
continue in full force and effect; provided, however, that if the default is the
failure to pay sums due hereunder, then the party not in default shall have the
right to suspend gas deliveries or takes, as the case may be, after service of
the Cancellation Notice.
22.2 If the party in default does not so remedy or remove the default or
does not provide adequate security to fully indemnify the party not in default
for any and all direct damages of such breach, and fails to represent that
further defaults shall not occur and that steps have been taken to avoid such a
recurrence, within said period of thirty (30) days, this Agreement, at the
option of the party not in default, shall be canceled upon written notice to the
defaulting party. Cancellation of this Agreement, pursuant to the provisions of
this Article 22, shall be without prejudice to any other rights and remedies the
party not in default has available to it. Further, such cancellation of this
Agreement or failure to cancel shall be without prejudice to the right of Seller
to collect any amounts then due Seller for gas delivered prior to the time of
cancellation.
28
<PAGE>
ARTICLE 23: GENERAL
-------------------
23.1 The headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement.
23.2 Any modification, revision or amendment of this Agreement made
subsequent to its execution shall be valid and effective only if and when made
in writing and duly executed by the parties hereto.
23.3 This Agreement and any Exhibit hereto shall constitute a single
agreement, superseding all prior agreements or undertakings between the parties
on the subject matter hereof. This Agreement contains the entire agreement of
the parties and, except as stated herein, there are no promises, agreements,
warranties, obligations, assurances or conditions precedent or otherwise
affecting it.
23.4 By executing this Agreement, each of the individuals so executing
warrants that (i) the individual has all necessary corporate power and authority
to enter into and execute this Agreement and (ii) this Agreement constitutes the
valid and binding obligation of the party on whose behalf it is executed,
enforceable in accordance with its terms, subject to applicable bankruptcy and
insolvency laws.
23.5 The parties shall execute such additional documents and shall cause
such additional action to be taken as may be required, or, in the reasonable
judgment of any party, as may be necessary or desirable, to effect or evidence
the provisions of this Agreement and the transactions contemplated hereby.
23.6 The parties acknowledge that each provision to this Agreement
constitutes their joint work product.
29
<PAGE>
ARTICLE 24: CONFIDENTIALITY
---------------------------
24.1 The terms of this Agreement and information disclosed pursuant to this
Agreement, including but not limited to the price paid for gas, shall be kept
confidential by Seller and Buyer, (a) except to the extent any information must
be disclosed to (i) Transporter(s), PSE&G and Elizabethtown for the purpose of
effectuating transportation and resale of the gas sold and purchased under this
Agreement, (ii) Con Ed for the purpose of complying with Article 4.6 of the
Power Purchase Agreement and (iii) Buyer's lender and (b) except as required by
law, regulation or request of governmental authority.
30
<PAGE>
IN WITNESS WHEREOF, by execution in duplicate originals, the parties hereto
have caused this Agreement to be effective as of the day and year first above
written.
"BUYER"
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
By: Cogen Technologies Linden, Ltd. (in the State of New Jersey d/b/a Cogen
Technologies Linden, Limited Partnership), a Texas limited partnership, its
general partner
By: Cogen Technologies, Inc., a
Texas corporation, its general partner
By: W. Colin Harper
------------------------------
W. Colin Harper
Vice President - Fuel Supply
Date: August 1, 1997
"SELLER"
COLUMBIA ENERGY SERVICES CORPORATION
By: D. K. HARGREAVES
------------------------------
Name: D. K. Hargreaves
Title: Vice President
Date: August 17, 1997
31
<PAGE>
EXHIBIT A
---------
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997 by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
as Buyer, and COLUMBIA ENERGY SERVICES CORPORATION, as Seller.
NOMINATION NOTICE
-----------------
Date:
Columbia Energy Services Corporation
P.O. Box 2967
Pennzoil Place
Houston, TX 77252-2967
Attention:
Reference: Firm Gas Purchase and Sale Agreement
Dated: July 1, 1997
Buyer: Cogen Technologies Linden Venture, L.P.
Seller: Columbia Energy Services Corporation
Point of Delivery: _________________________
Contract No.: _________________________
Gentlemen:
Pursuant to Section 3.1 of the subject Agreement, Cogen Technologies Linden
Venture, L.P., hereby nominates the following:
Month of Delivery:
Nominated Quantity (MMBtu/D):
Very truly yours,
- ---------------------------------
W. Colin Harper
Vice President - Fuel Supply
32
<PAGE>
EXHIBIT B
---------
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997 by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
as Buyer, and COLUMBIA ENERGY SERVICES CORPORATION, as Seller.
MARKET PRICE INDEX (TGPL STA #30)
---------------------------------
<TABLE>
<CAPTION>
Publication* Table Row Column
- ------------ ----- --- ------
<S> <C> <C> <C>
Natural Gas Week Spot Prices on Transcontinental Gas Bid Week (current
(first report in Interstate Pipeline Pipe Line Corp. month)
applicable month) Systems; Delivered to Station #30 (Wharton
Pipeline ($/MMBtu) County, TX/Zone 1)
Inside FERC's Gas Prices of Spot Gas Transcontinental Gas Index
Market Report (first Delivered to Pipelines Pipe Line Corp.
report in applicable (per MMBtu dry) Zone 1 (Wharton Co.
month) TX - Zone 1)
BACKUP PRICE INDEX (TGPL STA #30)
Publication* Table Row Column
- ------------ ----- --- ------
Natural Gas Spot Gas Prices; Pooling Points; Transco Contract Index
Intelligence - Weekly Delivered to Pipelines Station 30 (current month)
Gas Price Index (first (per MMBtu dry)
report in applicable
month)
</TABLE>
33
<PAGE>
MARKET PRICE INDEX (TRUNKLINE/SOUTH LOUISIANA)
<TABLE>
<CAPTION>
Publication* Table Row Column
- ------------ ----- --- ------
<S> <C> <C> <C>
Natural Gas Week Spot Prices on Trunkline Gas Company Bid Week
(first report in Interstate Pipeline East Louisiana (current
applicable month) Systems; Delivered to month)
Pipeline ($/MMBtu)
Inside FERC's Gas Prices of Spot Gas Trunkline Gas Company Index
Market Report (first Delivered to Pipelines Louisiana (current month)
report in applicable month) (per MMBtu dry)
BACKUP PRICE INDEX (TRUNKLINE/SOUTH LOUISIANA)
Publication* Table Row Column
- ------------ ----- --- ------
Natural Gas Spot Gas Prices; Region - East Contract Index
Intelligence Gas; Delivered to Pipelines Louisiana; Trunkline (current month)
Weekly Price Index (30 Day Supply
(first report in applicable Transactions)
month)
</TABLE>
34
<PAGE>
EXHIBIT C
---------
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
as Buyer, and COLUMBIA ENERGY SERVICES CORPORATION, as Seller.
POINT(S) OF DELIVERY
--------------------
The Point(s) of Delivery shall be:
A. TGPL Compressor Station #30 in Wharton County, Texas
B. The Trunkline point of delivery in South Louisiana
35
<PAGE>
STATE OF TEXAS )
)SS.
COUNTY OF HARRIS )
On this 1st day of August 1997, before me, Joy R. Toups, the undersigned
officer, personally appeared, W. Colin Harper, known to me to be the person
whose name is subscribed to the within instrument and acknowledged that Cogen
Technologies, Inc., as General Partner of Cogen Technologies Linden, Ltd. (D/B/A
Cogen Technologies Linden, Limited Partnership), in turn acting as General
Partner of Cogen Technologies Linden Venture, L.P. (D/B/A Cogen Technologies
Linden Venture, Limited Partnership) executed the same for the purpose therein
contained.
In witness whereof I hereunto set my hand and official seal.
/s/ JOY R. TOUPS
-----------------------------------
(SEAL) Notary Public in and for the
State of Texas
STATE OF TEXAS )
)SS.
COUNTY OF HARRIS )
On this 12th day of August, 1997, before me, Trisha S. Pollard, the
undersigned officer, personally appeared, Daniel K. Hargreaves, known to me to
be the person whose name is subscribed to the within and acknowledged that
Columbia Energy Services Corporation executed the same for the purposes therein
contained.
In witness whereof I hereunto set my hand and official seal.
TRISHA S. POLLARD
-----------------------------------
Notary Public in and for the
State of Texas
(SEAL)
36
<PAGE>
GUARANTY AGREEMENT
------------------
THIS AGREEMENT, shall be effective July 1, 1997, by and between COLUMBIA
GAS SYSTEMS CORPORATION (hereinafter referred to as "Guarantor") and COGEN
TECHNOLOGIES LINDEN VENTURE, L.P. d/b/a/ COGEN TECHNOLOGIES LINDEN VENTURE,
LIMITED PARTNERSHIP (hereinafter referred to as "Cogen").
WITNESSETH:
WHEREAS, Cogen and Columbia Energy Services Corporation (hereinafter
referred to as "CESC"), a wholly-owned subsidiary of Guarantor,
contemporaneously herewith are entering into a Firm Gas Purchase and Sale
Agreement effective July 1, 1997, as amended from time to time (the
"Agreement"), pursuant to which Cogen will purchase from CESC natural gas for a
cogeneration facility (the "Facility") located in Linden, New Jersey, in the
quantities and upon the terms and conditions that are set forth in the
Agreement; and
WHEREAS, Cogen desires assurances that Guarantor will be responsible for
obligations of CESC set forth in the Agreement in the event CESC does not
satisfy such obligations; and
WHEREAS, Guarantor desires that the Agreement be executed and, therefore,
desires to give such assurances,
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained and other valuable consideration, the adequacy and receipt of
which are hereby acknowledged, Guarantor and Cogen hereby agree as follows:
1. Guarantor hereby irrevocably and unconditionally guaranties to Cogen
the full, prompt and complete performance of the obligations of CESC set
forth in, and
<PAGE>
subject to the terms of, the Agreement. If CESC fails to perform any of its
obligations then due under the Agreement, Guarantor shell cause CESC or another
of its subsidiaries or affiliates to perform said obligation in accordance with
the terms of the Agreement. Without limiting the generality of the foregoing,
the Guarantor agrees that the occurrence of any one or more of the following
shall not effect the liability of the Guarantor hereunder: (a) at any time or
from time to time, without notice to the Guarantor, the time for any performance
of or compliance with any of the obligation's of CESC set forth in the Agreement
or such obligations shall be extended, or such performance or compliance shall
be waived, (b) any of the acts mentioned in any of the provisions of the
Agreement shall be done or omitted or (c) any right under the Agreement shall be
waived.
The Guarantor hereby expressly wolves diligence, presentment, demand of
Payment, protest and all notices whatsoever, and any requirement that Cogen or
any lender (as defined in the Agreement) exhaust any right, power at remedy or
proceed against CESC under the Agreement.
2. This Guaranty Agreement shall be assignable to the lenders as defined in
the Agreement under the same terms and conditions set forth In the Agreement.
Any other assignment shall not be permitted, In whole or in part, except with
the consent of the other party, which consent shall not be unreasonably
withheld. This Guaranty Agreement shall be binding upon the parties hereto and
their permitted successors and assigns.
3. This Guaranty Agreement is for the sole and exclusive benefit of the
parties hereto and any permitted successors and assigns. Nothing expressed or
2
<PAGE>
implied herein is intended to benefit any other person, firm or corporation not
a party hereto. None of such other persons shall have any legal or equitable
right, remedy or claim under this Guaranty Agreement or under any provisions
hereof.
4. Notwithstanding anything contained herein, if any claim or demand is
made against Guarantor pursuant to this Guaranty Agreement, Guarantor shall be
subject to all rights, set-offs, counterclaims and defenses to which CESC may be
entitled, except for defenses arising out of bankruptcy, insolvency, liquidation
or dissolution of CESQ.
5. This Guaranty Agreement shall remain in full force and effect until the
termination of all obligations under the Agreement.
6. Notwithstanding anything in this Guaranty Agreement to the contrary,
Guarantor's liability under this Guaranty Agreement and Cogen's right of
recovery under the some shall be limited to an aggregate amount of $7.7 million.
7. No delays on the part of Cogen in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Cogen of
any right or remedy shall preclude other or further exercise thereof or the
exercise of any right or remedy, No actions of Cogen permitted hereunder shall
in any way impair or affect this Guaranty Agreement.
8. WHEREVER POSSIBLE, EACH PROVISION OF THIS GUARANTY AGREEMENT SHALL BE
INTERPRETED IN SUCH MANNER TO BE EFFECTIVE AND VALID UNDER TEXAS LAW; BUT IF ANY
PROVISIONS OF THIS GUARANTY AGREEMENT SHALL BE PROHIBITED OR INVALID UNDER SUCH
LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR
3
<PAGE>
INVALIDITY WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING
PROVISIONS OF THIS GUARANTY AGREEMENT.
9. The Guarantor represents and warrants as follows;
(a) Tile Guarantor is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation,
(b) The execution, delivery and performance by the Guarantor of this,
Guaranty Agreement are within the Guarantor's corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene (i) the
Guarantor's certificate of Incorporation or by-laws or (ii) any law, rule,
regulation or order, or any restriction contained in any material agreement or
instrument, b1nding an or affecting the Guarantor.
(c) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by the Guarantor of this Guaranty
Agreement, except such as have been duly obtained or made and are in full force
and effect.
(d) This Guaranty Agreement is a legal, valid and binding obligation of
the Guarantor enforceable against the Guarantor in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceeding in equity or at law),
4
<PAGE>
(e) As of the effective date hereof, the Guarantor owns, directly or
indirectly, all the issued and outstanding capital stock of CESC.
IN WITNESS WHEREOF, this instrument is executed as of the day and year first
above written.
COLUMBIA GAS SYSTEMS
CORPORATION
(GUARANTOR)
By: /s/ ???????????
------------------------------
Its: August 20, 1997
Chief Financial Officer
The Columbia Gas System, Inc.
COGEN TECHNOLOGIES LINDEN
VENTURE, L.P.
By: Cogen Technologies Linden, Ltd.
(in the State of New Jersey
Cogen Technologies Linden, Limited
Partnership), a Texas limited
partnership, its general partner
By: Cogen Technologies, Inc., a
Texas corporation, its general partner
By: /s/ W. COLIN HARPER
---------------------------------
Vice President - Fuel Supply
Date: August 19, 1997
5
<PAGE>
EXHIBIT 10.24
FIRM GAS PURCHASE AND SALE AGREEMENT
between
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
and
SONAT MARKETING COMPANY L.P.
<PAGE>
TABLE OF CONTENTS
Page
----
TABLE OF CONTENTS i
ARTICLE 1: DEFINITIONS 1
ARTICLE 2: QUANTITIES 5
ARTICLE 3: NOMINATIONS 5
ARTICLE 4: PRICE 6
ARTICLE 5: RESERVATION CHARGES AND SUBSTITUTE FUELS 12
ARTICLE 6: PAYMENT 13
ARTICLE 7: TAXES 15
ARTICLE 8: POINT(S) OF DELIVERY 16
ARTICLE 9: PRESSURE 16
ARTICLE 10: MEASUREMENT 16
ARTICLE 11: QUALITY 16
ARTICLE 12: TRANSPORTATION AND IMBALANCE CHARGES 17
ARTICLE 13: TERM 18
ARTICLE 14: FORCE MAJEURE 18
ARTICLE 15: NOTICE 20
ARTICLE 16: LAWS, ORDERS & REGULATIONS 22
ARTICLE 17: APPLICABLE LAW 22
ARTICLE 18: WAIVER 22
ARTICLE 19: TITLE 23
i
<PAGE>
ARTICLE 20: ASSIGNMENT 23
ARTICLE 21: ARBITRATION 25
ARTICLE 22: DEFAULT 26
ARTICLE 23: GENERAL 27
ARTICLE 24: CONFIDENTIALITY 28
EXHIBIT A 30
EXHIBIT B 31
EXHIBIT C 32
ii
<PAGE>
FIRM GAS PURCHASE AND SALE AGREEMENT
This AGREEMENT ("Agreement") is made and entered into this 1st day of July,
1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P., (in the State of
New Jersey D/B/A COGEN TECHNOLOGIES LINDEN VENTURE, LIMITED PARTNERSHIP), a
Delaware limited partnership, hereinafter referred to as "Buyer," and SONAT
MARKETING COMPANY L.P., a Delaware Limited Partnership, hereinafter referred to
as "Seller;"
WHEREAS, Buyer requires a supply of gas for use in Buyer's cogeneration
facility in Linden, New Jersey; and
WHEREAS, Seller is willing to sell gas to Buyer on a firm basis to meet its
requirements.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties do hereby covenant and agree as follows:
ARTICLE 1: DEFINITIONS
----------------------
In addition to the terms "Buyer" and "Seller" which shall refer to the
parties identified above, or their duly designated agents or representatives,
the following terms shall have the specified meanings:
1.1 The term "Alternate Commodity Price" shall have the meaning set forth
in Section 4.3.
1.2 The term "Btu" shall mean the amount of heat required to raise the
temperature of one (1) pound avoirdupois pure water from fifty-eight and five-
tenths degrees (58.5 degrees) to fifty-nine and five-tenths degrees (59.5
degrees) Fahrenheit, as defined in
1
<PAGE>
the American Gas Association Gas Measurement Manual and any subsequent
revisions.
1.3 The term "Cancellation Notice" shall mean the notice described in
Section
1.4 The term "Commodity Price" shall have the meaning set forth in
Section 4.2.
1.5 The term "Con Ed" shall mean The Consolidated Edison Company of New
York, Inc.
1.6 The term "Daily Contract Quantity" or "DCQ" shall mean nine thousand
five hundred and seventy-nine (9,579) MMBtu per day plus Transporter(s)' Market
Area Fuel.
1.7 The term "day" shall mean a period of twenty-four (24) consecutive
hours, beginning and ending at the time specified in the receiving
Transporter(s)' tariff(s) at the Point of Delivery.
1.8 The term "Delivery Period" shall mean a period of five (5) consecutive
months beginning with the commencement of deliveries of gas hereunder.
1.9 The term "Elizabethtown" shall mean Elizabethtown Gas Company.
1.10 The term "Facility" shall mean the cogeneration facility owned and
operated by Buyer that is located in Linden, New Jersey.
1.11 The term "force majeure" shall have the meaning set forth in Section
14.2.
1.12 The term "Gas" or "gas" shall mean any mixture of hydrocarbons or of
hydrocarbons and non-combustible gases, in a gaseous state, consisting
essentially of methane and shall include casinghead gas produced with crude oil,
natural gas from
2
<PAGE>
gas wells, coal-bed methane gas, synthetic gas, coal gasification gas and
residue gas resulting from processing any of the foregoing.
1.13 The term "Lender" shall mean (i) any and all lenders (other than
Seller) providing the construction, interim or long-term financing or re-
financing of the Facility (including financing by way of a leveraged lease) and
any trustee or agent acting on their behalf, and (iii) any and all equity
investors or limited. partners providing any such financing or refinancing of
the Facility and any trustee or agent acting on their behalf. The Lender
initially shall be State Street Bank & Trust Company, as Trustee, and thereafter
such entity or entities as shall be designated in writing by Buyer to Seller.
1.14 The term "Market Area Fuel" shall mean the volume of gas retained by
Transporter(s) as fuel for the transportation of gas from the Point(s) of
Delivery to the Point(s) of Redelivery.
1.15 The term "Market Price" shall have the meaning set forth in Section
4.3.
1.16 The term "Minimum Quantity" shall mean one hundred percent (100%) of
the product of the DCQ and the number of days in each month of the Delivery
Period, as reduced by circumstances of force majeure.
1.17 The term "MMBtu" shall mean one million (1,000,000) Btus.
1.18 The term "month" shall mean the period commencing on the beginning of
the first day of a calendar month and ending on the beginning of the first day
of the succeeding calendar month.
1.19 The term "Nominated Quantity" shall have the meaning set forth in
Section 3.1.
3
<PAGE>
1.20 The term "Nomination Notice" shall mean the notice described in
Section 3.1 and Exhibit A to this Agreement.
1.21 The term "NYMEX" shall mean the New York Mercantile Exchange.
1.22 The term "NYMEX Forward Price" shall have the meaning set forth in
Section 4.7(b).
1.23 The term "NYMEX Price" shall have the meaning set forth in Section
4.7(a).
1.24 The term "Point(s) of Delivery" shall have the meaning set forth in
Article 8.
1.25 The term "Point(s) of Redelivery" shall mean the point or points on
Transporter(s)' pipeline system where gas is redelivered to or for the account
of Buyer, PSE&G or Elizabethtown on the PSE&G system in New Jersey.
1.26 The term "Power Purchase Agreement" shall mean Contract No. 344, dated
April 14, 1989, between Buyer and Con Ed, covering the sale of electricity from
the Facility, and any amendments thereto that may be made from time to time.
1.27 The term "PSE&G" shall mean Public Service Electric and Gas Company.
1.28 The term "Spot Market Price" shall mean the arithmetic average of the
prices reported in the weekly and bi-weekly updates of the reference pricing
reports during the month of delivery for the reference points set forth in
Exhibit "B" hereto.
1.29 The term "Texas Gas" shall mean Texas Gas Transmission Corporation.
1.30 The term "Transporter(s)" shall mean any pipeline(s) transporting gas
sold hereunder to and from the Point(s) of Delivery and to the Point(s) of
Redelivery.
4
<PAGE>
ARTICLE 2: QUANTITIES
---------------------
2.1 Buyer shall purchase and receive and Seller shall sell and deliver the
Nominated Quantity at the Point(s) of Delivery, except to the extent excused
under the provisions of this Agreement.
2.2 If during any month of the Delivery Period Buyer purchases and receives
less than the Minimum Quantity for each Point of Delivery except to the extent
excused under the provisions of this Agreement or due to Seller's unexcused
failure to deliver, then Buyer shall pay Seller an amount equal to the
difference between the price payable hereunder and the then effective Spot
Market Price of gas at the reference points set forth in Exhibit B, less $0.15
per MMBtu, multiplied by the difference between the Minimum Quantity and the
quantity of gas purchased and received by Buyer. Except in the case of Buyer's
willful misconduct or gross negligence and except as described in Articles 12,
14 and 22, this is the sole remedy available to Seller for any failure by Buyer
to purchase and receive gas.
ARTICLE 3: NOMINATIONS
----------------------
3.1 On or before the day prior to which pipeline nominations are required
to be nominated by Buyer and Seller to the applicable pipeline company(s)
referenced herein, and subject to the provisions of Sections 3.2 and 3.3, Buyer
shall notify Seller in writing by providing a Nomination Notice, substantially
in the form attached hereto as Exhibit A, specifying the daily quantity of gas,
in MMBtus, up to the DCQ, that Buyer shall purchase and receive from Seller
during the next month (hereinafter the "Nominated Quantity"). In the
alternative, Buyer may specify a standing Nominated
5
<PAGE>
Quantity to be effective until changed in writing pursuant to the first sentence
of this section.
3.2 The parties recognize that fluctuations in the production and
transportation of gas can occur on a daily basis. Buyer and Seller will attempt
to receive and deliver gas on a uniform hourly basis. Notwithstanding anything
to the contrary herein, any revisions to the Nominated Quantity shall be
implemented in accordance with Transporter(s)' nomination procedures, unless a
waiver of such procedures is received by either Buyer or Seller.
3.3 Buyer and Seller shall be responsible for nominations to their
respective Transporters and the nominations in each case shall reflect the
Nominated Quantity.
3.4 If no Nominated Quantity is submitted by Buyer in accordance with
Section 3.1, the DCQ shall be the Nominated Quantity.
ARTICLE 4: PRICE
----------------
4.1 For all gas nominated by Buyer and delivered by Seller during a month,
Buyer shall pay the Commodity Price or the Alternate Commodity Price per MMBtu,
rounded to the nearest $0.001.
4.2 The term "Commodity Price" shall mean the price of gas for each month
which shall be mutually agreed upon by the parties and subsequently confirmed in
writing prior to the date Buyer's nomination notice to Seller is due for the
month of delivery. In the event that the parties fail to reach agreement as to
the Commodity Price, the Alternate Commodity Price determined in accordance with
Section 4.3 shall apply.
6
<PAGE>
4.3 The term "Alternate Commodity Price" shall mean the arithmetic average
of the prices reported in the referenced issue of the month of delivery for the
price references included in the "Market Price Index," set forth in Exhibit B
LESS $0.12 PER MMBTU. The price references in the Market Price Index are
intended to reflect the price paid for gas delivered at the Point(s) of Delivery
under spot contracts (the "Market Price"). The price references in the "Backup
Price Index" set forth in Exhibit B are intended to serve as a substitute for
the price references in the Market Price Index in the event the latter price
references are not available or are "erroneous," as that term is defined in
Section 4.5.
4.4 Either party may request that a price reference be added to or deleted
from the Market Price Index or Backup Price Index by providing written notice to
the other party. For a price reference to be added to the Market Price Index or
Backup Price Index, the price reference must reflect the Market Price and be
from an independent publication which is not controlled by a buyer, seller or
broker of gas. For a price reference to be deleted from the Market Price Index
or Backup Price Index, such price reference must no longer reflect the Market
Price. If within thirty (30) days after the date of notice by a party, the
parties are unable to agree to add or delete a price reference, then the party
seeking such addition or deletion may submit the issue to arbitration which
shall be conducted pursuant to Article 21. A price reference shall be added or
deleted effective the first day of the month after notice by the requesting
party and the price ultimately determined by negotiation or arbitration will be
given retroactive effect to take into account the period of negotiation or
arbitration with interest assessed at the rate provided in Section 6.3. Unless
otherwise agreed by the
7
<PAGE>
parties, in no event may either party request that a price reference be added to
or deleted from the Market Price Index or Backup Price Index more than once
during the Delivery Period.
4.5 If during any month a price reference included in the Market Price
Index is not published, the Market Price Index will exclude such price reference
from the Market Price Index for so long as such price reference is not
published and the price reference(s) from the Backup Price Index shall be
substituted for the excluded price reference. If the excluded price reference is
the only price reference in the Market Price Index and no price references in
the Backup Price Index are published, then Section 4.6 below shall apply. If an
erroneous price is published and the publisher confirms such error, then the
correct price, if available, shall be used. If the publisher does not confirm
such error or if the correct price is not available, then the price reference
containing such erroneous price shall not be included in the Market Price Index
or Backup Price Index for such month. For purposes of Sections 4.3 and 4.5, the
term "erroneous" price shall mean any price reference that varies by more than
four percent (4%) from the average of the other price references included in the
Market Price Index and Backup Price Index for such Month.
4.6 If no Market Price Index and no Backup Price Index reference prices are
available or if, in the opinion of either party, there are no price references
which reasonably reflect the Market Price and the basis of such opinion is
provided in writing to the other party, then a new method to determine the
Alternate Commodity Price will be negotiated. If the parties are unable to agree
within thirty (30) days after notice by a party, then the matter of determining
whether a basis exists to invoke this provision
8
<PAGE>
and, if so, the determination of a new method to determine the Alternate
Commodity Price shall be submitted to arbitration pursuant to Article 21. During
a period of negotiation or arbitration, the last applicable Commodity Price or
Alternate Commodity Price shall remain in effect and shall be adjusted at the
conclusion of such negotiation or arbitration to give retroactive effect to the
result with interest assessed at the rate provided in Section 6.3.
4.7 Alternatively, and in lieu of the price calculated pursuant to Sections
4.2 and 4.3 hereof, the parties may mutually agree to a NYMEX Price or a NYMEX
Forward Price based on the NYMEX posting for the natural gas futures contract,
calculated as follows:
(a) On or before the business day prior to the NYMEX Settlement day,
Buyer may propose that the price under this Agreement for gas nominated by
Buyer for delivery in the applicable month be the NYMEX Price, plus or minus
the basis differentials that may be mutually agreed upon at the time of Buyer's
proposal. The NYMEX Price shall be the arithmetic average of the NYMEX
settlement price of the natural gas futures contract for the last three trading
days applicable to the month of delivery. Buyer's proposal shall designate the
volume of gas for delivery in the applicable month at the proposed price, up to
the volume nominated in accordance with Section 3.1 of this Agreement. Upon
receipt of Buyer's proposal, the parties shall confer by telephone as soon as
possible and decide whether or not to use the NYMEX Price, which decision
shall ultimately be made by Buyer and Seller no later than 11:00 a.m. Central
Time on the business day before the last trading day of the applicable natural
9
<PAGE>
gas futures contract. In the event the parties agree to use the NYMEX Price and
agree on the basis differential, the parties' agreement shall be set forth in a
confirmation prepared by Buyer and transmitted by telecopy to Seller. The
parties' agreement shall be deemed conclusive upon receipt of the confirmation
(as evidence by electronic confirmation of transmission) unless Seller objects
promptly in writing following receipt of the confirmation. Either party shall
have the right to withhold agreement on any price proposed under this Section
4.7(a) at its sole discretion, in which case the price under this Agreement will
be calculated under Sections 4.2 or 4.3 hereof If the parties are unable to
agree on the basis differentials, or methodology for determining the basis, the
NYMEX Price shall be deemed to be rejected. In the event the parties agree to
use the NYMEX Price, the nominated volumes which are covered by the NYMEX Price
shall remain in effect during the applicable month and shall not be reduced or
increased pursuant to Sections 3.2 or 3.3 of this Agreement.
(b) In addition to the NYMEX Price, Buyer shall have the right to propose
that the NYMEX Forward Price, plus or minus the basis differentials that may be
mutually agreed upon at the time of Buyer's proposal, be the price to be paid
under this Agreement during any calendar months designated by Buyer. The NYMEX
Forward Price shall be the NYMEX posting for the natural gas futures contract
applicable to the month or months selected by Buyer and prevailing at the time
Buyer's proposal is communicated to Seller by telephone and confirmed by Seller.
Buyer's proposal shall designate the volume of gas for delivery during the
designated months at the proposed price, up to the volume
10
<PAGE>
that can be nominated in accordance with Section 3.1 of this Agreement. Upon
receipt of Buyer's proposal, the parties shall confer by telephone and decide
whether or not to use the NYMEX Forward Price, which decision shall be made no
later than 11:00 a.m. Central Time on the first business day following Seller's
receipt and confirmation of Buyer's proposal. In the event the parties agree to
use. the NYMEX Forward Price and agree on the basis differential or methodology
for determining the basis, the parties' agreement shall be set forth in a
confirmation prepared by Buyer and transmitted by telecopy to Seller. The
parties' agreement shall be deemed conclusive upon receipt of the confirmation
(as evidenced by electronic confirmation of transmission) unless Seller objects
promptly in writing following receipt of the confirmation. Either party shall
have the right to withhold agreement on any price proposed under this Section
4.7(b), at its sole discretion, prior to the execution of the NYMEX transaction,
in which case the price under this Agreement will be calculated under Sections
4.2 or 4.3 hereof. If the parties are unable to agree on the basis
differentials, or methodology for determining the basis, the NYMEX Forward Price
shall be deemed to be rejected. Nothing in this subsection (b) shall be
construed to prevent Buyer from proposing the NYMEX Forward Price in any
designated month if either of the parties had previously rejected the NYMEX
Forward Price for that month. In the event the parties agree to use the NYMEX
Forward Price, the nominated volumes which are covered by the NYMEX Forward
Price shall remain in effect during the designated months and shall not be
decreased or increased pursuant to Sections 3.2 or 3.3 of this Agreement. In
addition,
11
<PAGE>
should the parties agree to use the NYMEX Forward Price, the selection of that
option shall remain in effect during the months selected by the parties unless
the parties mutually agree to use a different pricing option.
ARTICLE 5: RESERVATION CHARGES AND SUBSTITUTE FUELS
---------------------------------------------------
5.1 If during any month Seller sells and delivers less than ninety percent
(90%) of the Nominated Quantity multiplied by-the number of days in the month,
except to the extent excused under the provisions of this Agreement or due to
Buyer's unexcused failure to receive, then, Seller shall reimburse Buyer its
actual costs incurred for the purchase and/or production and transportation of
alternate supplies of fuel equal to the undelivered volume, including but not
limited to any imbalance carrying charges and/or cash-out costs and penalties
imposed by Transporter(s), PSE&G and/or Elizabethtown, less the costs that Buyer
would have otherwise incurred for the purchase and transportation of gas under
this Agreement. Buyer shall use commercially reasonable efforts to minimize its
incremental actual costs for acquiring alternate supplies of fuel. In the
exercise of its commercially reasonable efforts, Buyer shall exercise diligent
good faith efforts to purchase least cost substitute fuel, including purchasing
gas under existing agreements with other sellers which win enable Buyer to
utilize its transportation rights used to transport gas hereunder. Because of
environmental restrictions on Buyer's use of fuels other than gas at the
Facility, Buyer shall have the sole discretion whether to purchase gas or an
alternate fuel as a substitute for gas not delivered by Seller hereunder, oven
where gas is more expensive. Except in the case of Seller's willful misconduct
or gross negligence and except as
12
<PAGE>
described in Articles 12, 14 and 22, these are the sole and exclusive remedies
available to Buyer for any failure by Seller to deliver gas.
ARTICLE 6: PAYMENT
------------------
6.1 Seller shall render an invoice on or before the tenth 10th day of each
month setting forth the actual quantity of gas nominated by Buyer and delivered
by Seller hereunder during the preceding month, the Commodity Price, Alternate
Commodity Price, NYMEX Price or NYMEX Forward Price, any amounts due under
Sections 2.2 and 12.2 and the total amount due. In the event that the actual
quantity delivered, the Alternate Commodity Price is not known at the time the
invoice is rendered, an estimated quantity, and Alternate Commodity Price, based
on the best available information, shall be used. Buyer shall pay Seller for the
amount due by wire transfer with immediately available funds to Seller's account
in accordance with instructions contained in Seller's invoice. Payment shall be
due on or before the twenty-first (21st) day of such month or ten (10) days
from the date of such invoice, whichever is later. If Con Ed fails to pay Buyer
under the Power Purchase Agreement by the twentieth (20th) day of the month,
Buyer's obligation to pay Seller shall be suspended from the twenty-first (21st)
day of the month, or ten (10) days from the date of Seller's invoice, until one
(1) day following Buyer's receipt of Con Ed's payment, but, in such a case,
Buyer's obligation to pay Seller shall not be suspended past the twenty-fifth
(25th) day of the month. When the actual quantity or Alternate Commodity Price
becomes known and if an adjustment is necessary, an invoice containing the
adjustment for the difference between the actual value and the estimated value
will be rendered. Payment will be made in subsequent months' payment cycles.
13
<PAGE>
6.2 Buyer shall submit an invoice on or before the tenth (10th) day of the
month, if necessary, for any amount due pursuant to Sections 5.1 and 12.2.
Seller shall pay Buyer in accordance with instructions contained in Buyer's
invoice. Payment shall be due on or before the twenty-fifth (25th) day of such
month or ten (10) days from the date of such invoice, whichever is later.
6.3 Should either party fail. to pay any amount not in dispute when due,
interest thereon shall accrue at the lesser of (i) the rate of one percent (1%)
above the prime commercial rate charged by Citibank, N.A., New York, New York,
compounded annually from the due date or (ii) the maximum lawful contract rate
permitted by applicable law, until. the amount due and interest have been paid
in fun. Such interest shall be in addition to any other rights and remedies the
owed party may have for the owing party's failure to pay any amount not in
dispute. Should the owing party dispute the amount invoiced, such party shall
pay the undisputed amount and notify the other party of any disputed amount by
the due date. Both parties will mutually resolve the disputed amount in a timely
manner with interest accruing from the original due date on any disputed amount
determined to be a valid amount due. Notwithstanding the foregoing or any other
provision herein, if Buyer fails to pay any amount within five (5) days after
receiving written notice from Seller that payment is delinquent, Seller may
withhold deliveries and, should said nonpayment continue for a period of thirty
(30) days after such notice, subject to the provisions of Article 22, Seller may
terminate this Agreement upon written notice.
6.4 Upon reasonable notice, each party shall have the right at reasonable
times to have an independent public accounting firm examine the books, records,
and
14
<PAGE>
charts controlled by the other party to the extent necessary to verify the
accuracy of any statement, payment, charge, or computation made pursuant to this
Agreement. In the event an error is discovered in any statement, payment,
charge, or computation, the adjusted amount shall be due within thirty (30) days
of the determination thereof, provided that any statement, payment, charge, or
computation shall be final as to both parties unless objected to in writing
within twelve (12) months after payment has been made.
6.5 If either party pays any amount shown due and owing upon the invoice of
the other party, and such amount is subsequently determined by agreement,
arbitration or judgment of court not to have been due and owing when paid, the
payee will refund such amount to the paying party together with interest from
the date of payment to the date of refund at the interest rate set forth in
Section 6.3 hereof.
ARTICLE 7: TAXES
----------------
7.1 Seller shall pay, or cause to be paid, all taxes, assessments, fees or
other charges now and hereafter lawfully levied and imposed by federal, state,
or local authorities upon Seller with respect to the gas prior to the Point(s)
of Delivery. In the event Buyer is required to remit such taxes, assessments,
fees or charges, Seller shall reimburse Buyer for such amount. Seller shall
furnish Buyer with a copy of the exemption certificate in situations in which
exemption from any such imposition is claimed by Seller.
7.2 Buyer shall pay, or cause to be paid, all taxes, assessments, fees or
other charges (including, but not limited to, sales and value added taxes) now
and hereafter lawfully levied and imposed by federal, state, or local
authorities upon Buyer with
15
<PAGE>
respect to the gas at and subsequent to the Point(s) of Delivery. In the event
Seller is required to remit such taxes, assessments, fees or charges, Buyer
shall reimburse Seller for such amount. Buyer shall furnish Seller with a copy
of the exemption certificate in situations in which exemption from any such
imposition is claimed by Buyer.
ARTICLE 8: POINT(S) OF DELIVERY
-------------------------------
The "Point(s) of Delivery" shall be the point(s) on Transporter(s)'
pipeline system(s) where gas is delivered by Seller to Transporter(s) for
Buyer's account, as specified in Exhibit C attached hereto and made a part
hereof. As between the parties hereto, title, risk of loss, and liabilities
associated with delivered gas shall pass to and vest in Buyer at the Point(s) of
Delivery. Changes in the Point(s) of Delivery shall require the mutual consent
of the parties.
ARTICLE 9: PRESSURE
-------------------
Seller shall deliver gas at the Point(s) of Delivery at a pressure
sufficient to effect delivery into the receiving Transporter(s)' facilities.
ARTICLE 10: MEASUREMENT
-----------------------
All measurements of gas delivered and sold hereunder shall be in accordance
with the provisions of the receiving Transporter(s)' tariff at the Point(s) of
Delivery.
ARTICLE 11: QUALITY
-------------------
The gas delivered and sold by Seller to Buyer at the Point(s) of Delivery
shall meet the quality specifications set forth in the receiving Transporter(s)'
tariff at the Point(s) of Delivery. Buyer shall have the right to be represented
and to participate in all tests of gas delivered hereunder performed by Seller,
and to inspect any
16
<PAGE>
equipment used in such tests to determine the nature of the quality of gas
delivered hereunder. In the event the gas does not meet such quality
specifications, Buyer may refuse delivery of the gas. Seller's delivery of gas
refused by Buyer for failure to meet quality specifications shall not constitute
delivery for the purposes of Articles 2, 5 and 6. Buyer's sole remedy for such
failure of gas to meet quality specifications shall be to refuse receipt of the
gas and receive the remedy specified in Article 5.
ARTICLE 12: TRANSPORTATION AND IMBALANCE CHARGES
------------------------------------------------
12.1 Transporter(s)' rules, guidelines, operational procedures and
policies, as may be changed from time to time, may define and set forth the
manner in which gas delivered and sold under this Agreement is transported.
Seller and Buyer agree to provide to the other, in as prompt a manner as
reasonable, all information necessary to permit scheduling pursuant to such
requirements. Seller shall give Buyer the highest ranking given to any other
purchaser of Seller's gas in any priority queue when nominating or allocating
volumes to Transporter(s) for delivery to Buyer under this Agreement.
12.2 Each party agrees to make all reasonable efforts to cooperate with the
other in operating under this Agreement to avoid pipeline imbalance charges,
cash-out costs and penalties. Buyer shall bear any under or over delivery
charges, cash-out costs and penalties assessed by Transporter(s), PSE&G and
Elizabethtown which are caused by variances (including variances due to events
of force majeure declared by Buyer) in Buyer's receipts from the Nominated
Quantity and Seller shall bear any under or over delivery charges, cash-out
costs and penalties assessed by Transporter(s), PSE&G and Elizabethtown which
are caused by variances (including variances due to
17
<PAGE>
events of force majeure declared by Seller) in Seller's deliveries from the
Nominated Quantity.
12.3 Seller shall be responsible for transportation to the Point(s) of
Delivery and payment of all transportation charges relating thereto. Buyer shall
be responsible for transportation from the Point(s) of Delivery and payment of
all transportation charges relating thereto. The parties recognize that, the gas
purchased hereunder may be transported by Transporter(s) whose transportation
rates and related charges such as fuel reimbursement and take-or-pay surcharges
are subject to refund. The party which pays the Transporter(s) for
transportation of gas hereunder shall be entitled to retain any refunds
associated therewith.
ARTICLE 13: TERM
----------------
This Agreement shall be effective from the date first set forth above and,
unless sooner terminated under the provisions of this Agreement, shall continue
for five (5) months from the commencement of deliveries of gas hereunder. The
commencement of deliveries of gas hereunder shall be November 1, 1997, unless
otherwise agreed by the parties. The term of this Agreement may be extended by
mutual agreement of the Parties.
ARTICLE 14: FORCE MAJEURE
-------------------------
14.1 If, by reason of force majeure either party is rendered unable, wholly
or in part, to carry out its obligations under this Agreement, and such party
provides written notice and full particulars of such event of force majeure as
soon as practicable after the occurrence thereof, the obligations of such
affected party shall be suspended to the extent and for the period of such event
of force majeure, except for the payment
18
<PAGE>
of monies in respect of obligations that have accrued hereunder prior to such
event of force majeure. The cause of suspension other than strikes or lockouts
shall be remedied so far as possible with reasonable dispatch. Settlement of
strikes and lockouts shall be wholly within the discretion of the party having
the difficulty.
14.2 The term "force majeure" shall mean any act or event which wholly or
partially prevents or delays the performance of obligations arising under this
Agreement if such act or event is not reasonably within the control of and not
caused by the fault or negligence of the party claiming force majeure and which
by the exercise of due diligence such party is unable to prevent or overcome,
including, without limitation by the following enumeration: acts of God, the
public enemy or the elements; fire, accidents, breakdowns, shutdowns for
purposes of necessary repairs, maintenance, relocation or construction of
facilities; breakage, freezing or accidents to wells, machinery or lines of
pipe; the necessity of making repairs or alterations to machinery or lines of
pipe; inability to obtain materials, supplies, permits, or labor to perform or
comply with any obligation or condition of this Agreement; any curtailment of
firm gas transportation service to, of electricity or steam purchases from, or
of resale service by PSE&G and Elizabethtown to, the Facility; strikes and any
other industrial, civil or public disturbances; any laws, orders, rules,
regulations, acts, restraints of any government or governmental body or
authority, civil or military which have the effect of prohibiting performance of
a party's obligations. The term "force majeure" shall also expressly include the
imposition upon Buyer of any gross receipts, franchise or other gas consumption
tax which Buyer is not obligated to pay on the date of execution of
19
<PAGE>
this Agreement, which tax Buyer determines has a material economic impact on its
ability to continue to purchase gas at the prices or in the quantities set forth
herein.
14.3 Except as provided in Section 14.2, neither party may rely upon
changes in market conditions, curtailment of interruptible transportation, or
denial by a regulatory authority of the pass through of the cost of gas
purchased under this Agreement as events of force majeure. In the event of force
majeure that causes Seller to curtail its deliveries hereunder, Seller shall
treat Buyer on a pro rata basis with Seller's other firm customers and shall
give Buyer priority of service over all interruptible customers.
14.4 In the event Buyer fails to take or Seller fails to make available,
due to a declared event of force majeure, at least fifty percent (50%) of the
aggregate DCQ for period of sixty (60) consecutive days, then the non-declaring
party may terminate this Agreement upon written notice, provided that such
notice is given prior to the date the force majeure is remedied.
ARTICLE 15: NOTICE
------------------
Any notice, request, demand, statement, or bill provided for in this
Agreement shall be in writing and delivered by hand, mail, or telecopy. All such
written communications shall be effective upon receipt by the other party at the
address of the parties hereto as follows:
Buyer:
Notices & Statements
--------------------
Cogen Technologies Linden Venture, L.P.
c/o Cogen Technologies, Inc.
Suite 5000, 50th Floor
20
<PAGE>
1600 Smith Street
Houston, TX 77002
Attention: Vice President - Fuel Supply
-----------
Telephone No.: (713) 951-7768
Telecopy No.: (713) 951-7803
Seller:
Notices & Statements
--------------------
Sonat Marketing Company L.P.
4 Greenway Plaza
Houston, TX 77046
Attention: Mr. Todd Zerecheck
-----------
Telephone No.: (713) 693-6206
Telecopy No.: (713) 693-6007
Accounting Matters:
-------------------
Attention: Gas Accounting
-----------
4 Greenway Plaza
Houston, TX 77046
Telephone No.: (713) 693-6330
Nomination Notices:
-------------------
Attention: Fernando Mendiola
-----------
Texas Gas Nominations
4 Greenway Plaza
Houston, TX 77046
Telephone No.: (713) 693-6307
Telecopy No.: (713) 693-6007
Either of the parties may designate a further or different address by giving
written notice to the other party.
21
<PAGE>
ARTICLE 16: LAWS, ORDERS & REGULATIONS
--------------------------------------
This Agreement, and all terms and provisions contained herein, and the
respective obligations of the parties are subject to valid laws, orders, rules,
and regulations of duly constituted authorities having jurisdiction over Buyer,
Seller, Transporter(s), PSE&G or Elizabethtown. In the event that any regulatory
or government body asserting jurisdiction over Transporter(s), PSE&G,
Elizabethtown or either party prohibits any of the transactions described in
this Agreement or any transportation or delivery agreement between
Transporter(s), PSE&G, Elizabethtown and/or Buyer covering the transportation
and delivery of the gas sold hereunder, or otherwise conditions such
transactions in a form that is unacceptable in the reasonable judgment of the
party affected thereby, then either party hereto so affected or prohibited may,
by giving one (1) month's prior written notice to the other party, terminate
this Agreement and each party shall be held harmless as a result of such
termination except for obligations which were incurred prior to termination;
provided, however, such termination shall be effective immediately where
required by law, rule or regulation.
ARTICLE 17: APPLICABLE LAW
--------------------------
THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS.
ARTICLE 18: WAIVER
------------------
No waiver by either party of any one or more defaults in the performance of
any provision of this Agreement shall operate or be construed as a waiver of any
future default, whether of a like or a different character.
22
<PAGE>
ARTICLE 19: TITLE
-----------------
Seller warrants title to, or good right to sell, all gas delivered
hereunder by Seller, and that such gas is free from hens and adverse claims of
every kind. Seller win pay, or cause to be paid, all royalties and other sums
imposed on the production, gathering, or transportation of the gas prior to its
delivery by Seller to Buyer. Seller will indemnify and save Buyer harmless
against all loss, damage, and expense of every character on account of adverse
claims to the gas delivered by it or of royalties, payments or other charges
thereon applicable before delivery to Buyer. If any adverse claim of any
character is asserted with respect to Seller's right to deliver gas hereunder,
or with respect to Seller's right to receive payment for such gas, or if
Seller's title is questioned or involved in any action, then Buyer shall
immediately notify Seller of such adverse claim and then may withhold that
portion of sums due hereunder reasonably related to such claim until such claim
is finally determined or title is clear, or until such time as Seller furnishes
a corporate undertaking conditioned to save Buyer harmless from such claim.
ARTICLE 20: ASSIGNMENT
----------------------
Either party may, without relieving itself of its obligations under this
Agreement, assign any of its rights hereunder to an entity with which it is
affiliated, but otherwise no assignment of this Agreement or any of the rights
or obligations hereunder shall be made unless there first shall have been
obtained the consent thereto in writing of the other party, which consent shall
not be unreasonably withheld. Any successor-in-interest of Buyer or Seller shall
be entitled to the rights and shall be subject to the obligations of its
predecessor-in-interest under this
23
<PAGE>
Agreement. It is agreed, however, that the restrictions on assignment contained
in this paragraph shall not in any way prevent either party to this Agreement
from pledging, mortgaging or assigning its rights hereunder as security for its
indebtedness. In connection with any such pledge, mortgage or assignment by
Buyer, Seller will execute an appropriate consent to any such pledge, mortgage
or assignment as reasonably requested by Buyer's lender. Any such consent will
acknowledge, in effect, that this Agreement has been duly authorized and is
valid and enforceable against Seller and that this Agreement is in full force
and effect; that Seller will not agree to any amendment to this Agreement
without the lender's approval in writing, which approval shall not be
unreasonably withheld by the lender; that Seller will make all payments due to
Buyer hereunder in accordance with the instructions of the lender; that Seller
will not terminate this Agreement by reason of Buyer's default or by reason of
force majeure, without giving the lender notice of default and notice of
termination and the same opportunity to cure provided to Buyer under this
Agreement (plus any longer period as may be necessary, not to exceed one (1)
month, if the lender in good faith is endeavoring to obtain possession of the
Facility and pays Seller in accordance with the terms of this Agreement during
such period); that Seller win deliver to the lender a copy of each notice of
default and notice of termination at the same time that such notice is delivered
to Buyer; and that in the event the lender exercises its rights under its loan
documentation or partnership documentation with Buyer, Seller win accept
performance by the lender or any successor or assign thereof, provided that the
lender or any such successor or assign pays all sums then due to Seller
hereunder and is also otherwise in compliance with this Agreement.
24
<PAGE>
ARTICLE 21: ARBITRATION
-----------------------
21.1 Should an issue be submitted to binding arbitration pursuant to the
provisions of this Agreement, the parties shall each appoint one (1) arbitrator
and the two (2) arbitrators so appointed will select a third arbitrator, all of
such arbitrators to be qualified by education, knowledge, and experience to
resolve the dispute or controversy. If either party fails to appoint an
arbitrator within ten (10) days after a request for such appointment is made by
the other party in writing, or if the two (2) appointed fail, within ten (10)
days after the appointment of the second, to agree on a third arbitrator, the
arbitrator or arbitrators necessary to complete a board of three (3) arbitrators
will be appointed upon application by either party therefor by the American
Arbitration Association.
21.2 The jurisdiction of the arbitrators will be limited to the single
issue or issues referred to arbitration and the arbitration shall be conducted
pursuant to the guidelines set forth by the American Arbitration Association;
provided, however, that should there be any conflict between such guidelines and
the procedures set forth in this Agreement, the terms of this Agreement shall
control.
21.3 Within fifteen (15) days following selection of the third arbitrator,
each party shall furnish the arbitrators in writing its position and supporting
arguments regarding the issue or issues being arbitrated. The arbitrators may,
if they deem necessary, convene a hearing regarding the issue or issues being
arbitrated. All hearings shall be held at a location to be agreed upon among the
arbitrators in Houston, Harris County, Texas. Within thirty (30) days following
the later of the appointment of the third arbitrator or of the hearing, if one
is held, the arbitrators
25
<PAGE>
shall. notify the parties in writing as to which of the two (2) positions
submitted with respect to the issue or issues in question is most consistent
with the intent of this Agreement. Such decision shall be binding on the parties
hereto until and unless changed in accordance with the provisions of this
Agreement.
21.4 Enforcement of the award maybe entered in any court having
jurisdiction over the parties.
21.5 Each party will pay the expense of the arbitrator selected by or for
it, and its counsel, witnesses and employees. All other costs of arbitration
will be equally divided between the parties.
ARTICLE 22: DEFAULT
-------------------
22.1 In the event either party fails to perform any of the material
covenants or obligations imposed upon it under and by virtue of this Agreement,
the party not in default hereto, having first given thirty (30) days written
notice to the party in default stating specifically the nature of the default
and declaring it to be the intention of the party giving notice to cancel this
Agreement (the "Cancellation Notice"), may, at its option, cancel this Agreement
in accordance with this Article 22. If within said period of thirty (30) days
the party in default remedies or removes said default, including payment of sums
due with interest at the rate set forth in Section 6.3 hereof, or provides
adequate security to fully indemnify the party not in default for any and all
direct damages of such breach, including payment of sums due with interest at
the rate set forth in Section 6.3 hereof, then such Cancellation Notice shall be
withdrawn and this Agreement shall continue in full force and effect; provided,
however, that if the default is the failure to pay sums due hereunder, then the
party not in default shall
26
<PAGE>
have the right to suspend gas deliveries or takes, as the case may be, after
service of the Cancellation Notice.
22.2 If the party in default does not so remedy or remove the default or
does not provide adequate security to fully indemnify the party not in default
for any and all direct damages of such breach, and fails to represent that
further defaults shall not occur and that steps have been taken to avoid such a
recurrence, within said period of thirty (30) days, this Agreement, at the
option of the party not in default, shall be canceled upon written notice to the
defaulting party. Cancellation of this Agreement, pursuant to the provisions of
this Article 22, shall be without prejudice to any other rights and remedies the
party not in default has available to it. Further, such cancellation of this
Agreement or failure to cancel shall be without prejudice to the right of Seller
to collect any amounts then due Seller for gas delivered prior to the time of
cancellation.
ARTICLE 23: GENERAL
-------------------
23.1 The headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement.
23.2 Any modification, revision or amendment of this Agreement made
subsequent to its execution shall be valid and effective only if and when made
in writing and duly executed by the parties hereto.
23.3 This Agreement and any Exhibit hereto shall constitute a single
agreement, superseding all prior agreements or undertakings between the parties
on the subject matter hereof This Agreement contains the entire agreement of the
27
<PAGE>
parties and, except as stated herein, there are no promises, agreements,
warranties, obligations, assurances or conditions precedent or otherwise
affecting it.
23.4 By executing this Agreement, each of the individuals so executing
warrants that (i) the individual has all necessary corporate power and authority
to enter into and execute this Agreement and (ii) this Agreement constitutes the
valid and binding obligation of the party on whose behalf it is executed,
enforceable in accordance with its terms, subject to applicable bankruptcy and
insolvency laws.
23.5 The parties shall execute such additional documents and shall cause
such additional action to be taken as may be required, or, in the reasonable
judgment of any party, as may be necessary or desirable, to effect or evidence
the provisions of this Agreement and the transactions contemplated hereby.
23.6 The parties acknowledge that each provision to this Agreement
constitutes their joint work product.
ARTICLE 24: CONFIDENTIALITY
---------------------------
24.1 The terms of this Agreement and information disclosed pursuant to this
Agreement, including but not limited to the price paid for gas, shall be kept
CONFIDENTIAL BY SELLER AND BUYER, (a) except to the extent any information must
be disclosed to (i) Transporter(s), PSE&G and Elizabethtown for the purpose of
effectuating transportation and resale of the gas sold and purchased under this
Agreement, (ii) Con Ed for the purpose of complying with Article 4.6 of the
Power Purchase Agreement and (iii) Buyer's lender and (b) except as required by
law, regulation or request of governmental authority.
28
<PAGE>
IN WITNESS WHEREOF, by execution in duplicate originals, the parties hereto
have caused this Agreement to be effective as of the day and year first above
written.
"BUYER"
COGEN TECHNOLOGIES LINDEN
VENTURE, L.P.
By: Cogen Technologies Linden, Ltd.
(in the State of New Jersey d/b/a
Cogen Technologies Linden, Limited
Partnership), a Texas limited
partnership, its general partner
By: Cogen Technologies, Inc., a
Texas corporation, its general partner
By: /s/ W. COLIN HARPER
------------------------------------
W. Colin Harper
Vice President - Fuel Supply
Date: August 1, 1997
"SELLER"
SONATMA MARKETING COMPANY L.P.
By: /s/ DUNCAN RHODES
--------------------------------------
Name: Director
Title:
Date: August 8, 1997
29
<PAGE>
EXHIBIT A
---------
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
as Buyer, and SONAT MARKETING COMPANY L.P., as Seller.
NOMINATION NOTICE
-----------------
Date:
-------------
Reference: Firm Gas Purchase and Sale Agreement
Dated: July 1, 1997
Buyer: Cogen Technologies Linden Venture, L.P.
Seller: Sonat Marketing Company L.P.
Point of Delivery:
Contract No.:
Sonat Marketing Company L.P.
4 Greenway Plaza
Houston, TX 77046
Attention: Mr. Todd Zerecheck
Gentlemen:
Pursuant to Section 3.1 of the subject Agreement, Cogen Technologies Linden
Venture, L.P., hereby nominates the following:
Month of Delivery:
Nominated Quantity (MMBtu/D):
Very truly yours,
/s/ W. COLIN HARPER
- -----------------------------------------
W. Colin Harper
Vice President - Fuel Supply
30
<PAGE>
EXHIBIT B
---------
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
as Buyer, and SONAT MARKETING COMPANY L.P., as Seller.
MARKET PRICE INDEX (TEXAS GAS/CARTHAGE)
---------------------------------------
<TABLE>
<CAPTION>
Publication* Table Row Column
<S> <C> <C> <C>
Natural Gas Week Spot Prices on Texas Gas Bid Week
(first report in Interstate Pipeline Transmission Corp. (current month)
applicable month) Systems; Delivered to Zone 1, North
Pipeline ($/MMBtu) Louisiana
Inside FERC's Gas Prices of Spot Gas; Texas Gas Index
Market Report (first Delivered to Pipelines Transmission Corp.
report in applicable (per MMBtu dry) Zone 1
month)
BACKUP PRICE INDEX (TEXAS GAS/CARTHAGE)
---------------------------------------
Publication* Table Row Column
Natural Gas Spot Gas Prices; Region - East Texas; Contract Index
Intelligence - Weekly Delivered to Pipelines Texas (current month)
Gas Price Index (30 Day Supply Gas Zone 1
(first report in Transactions)
applicable month)
</TABLE>
31
<PAGE>
EXHIBIT C
---------
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
as Buyer, and SONAT MARKETING COMPANY L.P., as Seller.
POINT(S) OF DELIVERY
--------------------
The Point(s) of Delivery shall be:
A. The existing point(s) of interconnection between the facilities of
Texas Gas and the Union Pacific Resources Company Carthage Gas
Processing Plant in Panola County, Texas, at the tailgate of the
Plant.
32
<PAGE>
STATE OF TEXAS )
)SS.
COUNTY OF HARRIS )
On this 1st day of August 1997, before me, Joy R Toups, the undersigned
personally appeared, W. Colin, known to me to be the person whose name is
subscribed to the within instrument and acknowledged that Technologies, Inc., as
General Partner of Technologies Linden, Ltd. Technologies Linden, Limited
Partnership), in turn acting as General Partner of Technologies Linden Venture,
L.P. Cogen Technologies Linden Venture, Limited Partnership) executed the same
for the purpose therein contained.
In witness whereof I hereunto set my hand and official seal.
/s/ JOY R. TOUPS
(SEAL) ---------------------------------
Notary Public in and for the
State of Texas
STATE OF TEXAS )
)SS.
COUNTY OF )
On this 14th day of August, 1997, before me, Rebecca Stuart, the
undersigned officer, personally appeared, Duncan Rhodes, known to me to be the
person whose name is subscribed to the within instrument and acknowledged that
Marketing Company L.P., executed the same for the purposes therein contained.
In witness whereof I hereunto set my hand and official seal.
/s/ REBECCA B. STUART
(SEAL) ---------------------------------
Notary Public in and for the
State of Texas
33
<PAGE>
GUARANTY AGREEMENT
------------------
THIS AGREEMENT, shall be effective July 1, 1997, by and between SONAT, INC.
(hereinafter referred to as "Guarantor") and COGEN TECHNOLOGIES LINDEN VENTURE,
L.P. d/b/a/ COGEN TECHNOLOGIES LINDEN VENTURE, LIMITED PARTNERSHIP (hereinafter
referred to as "Cogen").
WITNESSETH:
WHEREAS, Cogen and Sonat Marketing Company L.P., (hereinafter referred to
as "Sonat"), a subsidiary of Guarantor, contemporaneously herewith are entering
into a Firm Gas Purchase and Sale Agreement effective July 1, 1997, as amended
from time to time (the "Agreement"), pursuant to which Cogen will purchase from
Sonat natural gas for a cogeneration facility (the "Facility") located in
Linden, New Jersey, in the quantities and upon the terms and conditions that are
set forth in the Agreement; and
WHEREAS, Cogen desires assurances that Guarantor will be responsible for
obligations of Sonat set forth in the Agreement in the event Sonat does not
satisfy such obligations; and
WHEREAS, Guarantor desires that the Agreement be executed and, therefore,
desires to give such assurances.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and other valuable consideration, the adequacy and receipt of
which are hereby acknowledged, Guarantor and Cogen hereby agree as follows:
1. Guarantor hereby irrevocably and unconditionally guarantees to Cogen the
full, prompt and complete performance of the obligations of Sonat set forth in,
and
<PAGE>
subject to the terms of, the Agreement. If Sonat fails to perform any of its
obligations then due under the Agreement, Guarantor shall cause Sonat to perform
said obligation in accordance with the terms of the Agreement. Without limiting
the generality of the foregoing, the Guarantor agrees that the occurrence of any
one or more of the following shall not affect the liability of the Guarantor
hereunder: (a) at any time or from time to time, without notice to the
Guarantor, the time for any performance of or compliance with any of the
obligations of Sonat set forth in the Agreement or such obligations shall be
extended, or such performance or compliance shall be waived, (b) any of the acts
mentioned in any of the provisions of the Agreement shall be done or omitted or
(c) any right under the Agreement shall be waived.
The Guarantor hereby expressly waives diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that Cogen or
any lender (as defined in the Agreement) exhaust any right, power or remedy or
proceed against Sonat under the Agreement.
2. This Guaranty Agreement shall be assignable to the lenders as defined in
the Agreement under the same terms and conditions set forth in the Agreement.
Any other assignment shall not be permitted, in whole or in part, except with
the consent of the other party, which consent shall not be unreasonably
withheld. This Guaranty Agreement shall be binding upon the parties hereto and
their permitted successors and assigns.
3. This Guaranty Agreement is for the sole and exclusive benefit of the
parties hereto and any permitted successors and assigns. Nothing expressed or
implied herein is intended to benefit any other person, firm or corporation not
a party
2
<PAGE>
hereto. None of such other persons shall have any legal or equitable right,
remedy or claim under this Guaranty Agreement or under any provisions hereof.
4. Notwithstanding anything contained herein, if any claim or demand is
made against Guarantor pursuant to this Guaranty Agreement, Guarantor shall be
subject to all rights, set-offs, counterclaims and defenses to which Sonat may
be entitled, except for defenses arising out of bankruptcy, insolvency,
liquidation or dissolution of Sonat.
5. This Guaranty Agreement shall remain in full force and effect until
the termination of all obligations under the Agreement.
6. Guarantor agrees to indemnify Cogen from and against any and all claims
of every nature arising from the obligations of Sonat under the Agreement,
including but not limited to damages suffered by Cogen as a result of Sonat's
non-performance, incomplete performance or other default of Sonat under the
Agreement, provided, however, notwithstanding any provisions to the contrary
herein, that Guarantor's liability hereunder shall be equal to (and neither less
than nor greater than) that of Sonat under the express terms of the Agreement,
including any modifications thereof.
7. No delays on the part of Cogen in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Cogen of
any right or remedy shall preclude other or further exercise thereof or the
exercise of any right or remedy. No actions of Cogen permitted hereunder shall
in any way impair or affect this Guaranty Agreement.
8. WHEREVER POSSIBLE, EACH PROVISION OF THIS GUARANTY AGREEMENT SHALL BE
INTERPRETED IN SUCH MANNER TO BE EFFECTIVE AND
3
<PAGE>
VALID UNDER TEXAS LAW; BUT IF ANY PROVISIONS OF THIS GUARANTY AGREEMENT SHALL BE
PROHIBITED OR INVALID UNDER SUCH LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE
EXTENT OF SUCH PROHIBITION OR INVALIDITY WITHOUT INVALIDATING THE REMAINDER OF
SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS GUARANTY AGREEMENT.
9. The Guarantor represents and warrants as follows:
(a) The Guarantor is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty Agreement are within the Guarantor's corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene (i) the
Guarantor's certificate of incorporation or by-laws or (ii) any law, rule,
regulation or order, or any restriction contained in any material agreement or
instrument, binding on or affecting the Guarantor.
(c) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by the Guarantor of this Guaranty
Agreement, except such as have been duly obtained or made and are in full force
and effect.
(d) This Guaranty Agreement is a legal, valid and binding obligation of
the Guarantor enforceable against the Guarantor in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
4
<PAGE>
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceeding in equity or at law).
(e) The Guarantor owns, directly or indirectly, all the issued and
outstanding capital stock of Sonat.
IN WITNESS WHEREOF, this instrument is executed as of the day and year
first above written.
SONAT, INC.
(GUARANTOR)
By: /s/ JAMES E. MOYLA, JR.
--------------------------
Its: Senior Vice President and
Chief Financial Officer
COGEN TECHNOLOGIES LINDEN
VENTURE, L.P.
By: Cogen Technologies Linden, Ltd.
(in the State of New Jersey d/b/a
Cogen Technologies Linden, Limited
Partnership), a Texas limited
partnership, its general partner
By: Cogen Technologies, Inc., a
Texas corporation, its general partner
By: /s/ W. COLIN HARPER
---------------------------
W. Colin Harper
Vice President - Fuel Supply
Date: August 1, 1997
5
<PAGE>
EXHIBIT 10.25
AMENDED AND RESTATED
--------------------
FIRM GAS PURCHASE AND SALE AGREEMENT
between
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
and
TEXACO NATURAL GAS INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
TABLE OF CONTENTS............................................. i
ARTICLE 1: DEFINITIONS....................................... 1
ARTICLE 2: QUANTITIES........................................ 5
ARTICLE 3: NOMINATIONS....................................... 6
ARTICLE 4: PRICE............................................. 7
ARTICLE 5: RESERVATION CHARGES AND SUBSTITUTE FUELS.......... 12
ARTICLE 6: PAYMENT........................................... 14
ARTICLE 7: TAXES............................................. 17
ARTICLE 8: POINT(S) OF DELIVERY.............................. 17
ARTICLE 9: PRESSURE.......................................... 18
ARTICLE 10: MEASUREMENT....................................... 18
ARTICLE 11: QUALITY........................................... 18
ARTICLE 12: TRANSPORTATION AND IMBALANCE CHARGES.............. 18
ARTICLE 13: TERM.............................................. 20
ARTICLE 14: FORCE MAJEURE..................................... 20
ARTICLE 15: NOTICE............................................ 22
ARTICLE 16: LAWS, ORDERS & REGULATIONS........................ 23
ARTICLE 17: APPLICABLE LAW.................................... 24
ARTICLE 18: WAIVER............................................ 24
ARTICLE 19: TITLE............................................. 25
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE 20: ASSIGNMENT......................................... 25
ARTICLE 21: ARBITRATION....................................... 27
ARTICLE 22: DEFAULT........................................... 28
ARTICLE 23: GENERAL........................................... 29
ARTICLE 24: CONFIDENTIALITY................................... 30
EXHIBIT A..................................................... 32
EXHIBIT B..................................................... 33
EXHIBIT C..................................................... 36
</TABLE>
ii
<PAGE>
AMENDED AND RESTATED
FIRM GAS PURCHASE AND SALE AGREEMENT
This AGREEMENT ("Agreement") is made and entered into this 1st day of July,
1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P., (in the State of
New Jersey D/B/A COGEN TECHNOLOGIES LINDEN VENTURE, LIMITED PARTNERSHIP), a
Delaware limited partnership, hereinafter referred to as "Buyer," and TEXACO
NATURAL GAS INC., a Delaware corporation, hereinafter referred to as "Seller;"
WHEREAS, Buyer and Seller have entered into a Firm Gas Purchase and Sale
Agreement dated July 1, 1997 which is hereby amended and restated; and
WHEREAS, Buyer requires a supply of gas for use in Buyer's cogeneration
facility in Linden, New Jersey; and
WHEREAS, Seller is willing to sell gas to Buyer on a firm basis to meet its
requirements.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties do hereby covenant and agree as follows:
ARTICLE 1: DEFINITIONS
----------------------
In addition to the terms "Buyer" and "Seller" which shall refer to the
parties identified above, or their duly designated agents or representatives,
the following terms shall have the specified meanings:
1.1 The term "Alternate Commodity Price" shall have the meaning set forth
in Section 4.3.
1
<PAGE>
1.2 The term "Btu" shall mean the amount of heat required to raise the
temperature of one (1) pound avoirdupois pure water from fifty-eight and five-
tenths degrees (58.5 degrees) to fifty-nine and five-tenths degrees
(59.5 degrees) Fahrenheit, as defined in the American Gas Association Gas
Measurement Manual and any subsequent revisions.
1.3 The term "Cancellation Notice" shall mean the notice described in
Section 22.1.
1.4 The term "Commodity Price" shall have the meaning set forth in
Section 4.2.
1.5 The term "Con Ed" shall mean The Consolidated Edison Company of New
York, Inc.
1.6 The term "Daily Contract Quantity" or "DCQ" shall mean twenty-one
thousand five hundred forty (21,540) MMBtu per day, with a maximum of nine
thousand four hundred fifty (9,450) MMBtu per day at the TXG Henry or TXG Zone
SL Point of Deliveries and twelve thousand ninety (12,090) MMBtu at the TGPL
Station No. 62 (Zone 3) Point of Delivery, plus Transporter(s)' Market Area
Fuel.
1.7 The Term "day" shall mean a period of twenty-four (24) consecutive
hours, beginning and ending at the time specified in the receiving
Transporter(s)' tariff(s) at the Point of Delivery.
1.8 The term "Delivery Period" shall mean a period of five (5) consecutive
months beginning with the commencement of deliveries of gas hereunder.
1.9 The term "Elizabethtown" shall mean Elizabethtown Gas Company.
2
<PAGE>
1.10 The term "Facility" shall mean the cogeneration facility owned and
operated by Buyer that is located in Linden, New Jersey.
1.11 The term "force majeure" shall have the meaning set forth in Section
14.2.
1.12 The term "Gas" or "gas" shall mean any mixture of hydrocarbons or of
hydrocarbons and non-combustible gases, in a gaseous state, consisting
essentially of methane and shall include casinghead gas produced with crude oil,
natural gas from gas wells, coal-bed methane gas, synthetic gas, coal
gasification gas and residue gas resulting from processing any of the foregoing.
1.13 The term "Lender" shall mean (i) any and all lenders (other than
Seller) providing the construction, interim or long-term financing or re-
financing of the Facility (including financing by way of a leveraged lease) and
any trustee or agent acting on their behalf, and (ii) any and all equity
investors or limited partners providing any such financing or re-financing of
the Facility and any trustee or agent acting on their behalf. The Lender
initially shall be State Street Bank & Trust Company, as Trustee, and thereafter
such entity or entities as shall be designated in writing by Buyer to Seller.
1.14 The term "Market Area Fuel" shall mean the volume of gas retained by
Transporter(s) as fuel for the transportation of gas from the Point(s) of
Delivery to the Point(s) of Redelivery.
1.15 The term "Market Price" shall have the meaning set forth in Section
4.3.
1.16 The term "Minimum Quantity" shall mean one hundred percent (100%) of
the product of the DCQ and the number of days in each month of the Delivery
Period, as reduced by circumstances of force majeure.
3
<PAGE>
1.17 The term MMBtu" shall mean one million (1,000,000) Btus.
1.18 The term "month" shall mean the period commencing on the beginning of
the first day of a calendar month and ending on the beginning of the first day
of the succeeding calendar month.
1.19 The term "Nominated Quantity" shall have the meaning set forth in
Section 3.1.
1.20 The term "Nomination Notice" shall mean the notice described in
Section 3.1 and Exhibit A to this Agreement.
1.21 The term "NYMEX" shall mean the New York Mercantile Exchange.
1.22 The term "NYMEX Forward Price" shall have the meaning set forth in
Section 4.7(b).
1.23 The term "NYMEX Price" shall have the meaning set forth in Section
4.7(a).
1.24 The term "Point(s) of Delivery" shall have the meaning set forth in
Article 8.
1.25 The term "Point(s) of Redelivery" shall mean the point or points on
Transporter(s)' pipeline system where gas is redelivered to or for the account
of Buyer, PSE&G or Elizabethtown on the PSE&G system in New Jersey.
1.26 The term "Power Purchase Agreement" shall mean Contract No. 344, dated
April 14, 1989, between Buyer and Con Ed, covering the sale of electricity from
the Facility, and any amendments thereto that may be made from time to time.
1.27 The term "PSE&G" shall mean Public Service Electric and Gas Company.
4
<PAGE>
1.28 The term "Reservation Charge" shall have the meaning set forth in
Section 5.2.
1.29 The term "Reservation Rate" shall mean one cent ($0.01) per MMBtu for
at the TXG Henry or Zone SL deliveries and two cents ($.02) per MMBtu for the
TGPL Station No. 62 deliveries.
1.30 The term "Spot Market Price" shall mean the arithmetic average of the
prices reported in the weekly and bi-weekly updates of the reference pricing
reports during the month of delivery for the reference points set forth in
Exhibit "B" hereto.
1.31 The term "Texas Gas" shall mean Texas Gas Transmission Corporation.
1.32 The term "TGPL" shall mean Transcontinental Gas Pipe Line Corporation.
1.33 The term "Transporter(s)" shall mean any pipeline(s) transporting gas
sold hereunder to and from the Point(s) of Delivery and to the Point(s) of
Redelivery.
ARTICLE 2: QUANTITIES
---------------------
2.1 Buyer shall purchase and receive and Seller shall sell and deliver the
Nominated Quantity at the Point(s) of Delivery, except to the extent excused
under the provisions of this Agreement.
2.2 If during any month of the Delivery Period Buyer purchases and receives
less than the Minimum Quantity for each Point of Delivery except to the extent
excused under the provisions of this Agreement or due to Seller's unexcused
failure to deliver, then Buyer shall pay Seller an amount equal to the
difference between the price payable hereunder and the then effective Spot
Market Price of gas at the reference points set forth in Exhibit B multiplied by
the difference between the
5
<PAGE>
Minimum Quantity and the quantity of gas purchased and received by Buyer. Except
as described in Articles 12, 14 and 22, this is the sole remedy available to
Seller for any failure by Buyer to purchase and receive gas.
ARTICLE 3: NOMINATIONS
----------------------
3.1 On or before the day prior to which pipeline nominations are required
to be nominated by Buyer and Seller to the applicable pipeline company(s)
referenced herein, and subject to the provisions of Sections 3.2 and 3.3, Buyer
shall notify Seller in writing by providing a Nomination Notice, substantially
in the form attached hereto as Exhibit A, specifying the daily quantity of gas,
in MMBtus, up to the DCQ, that Buyer shall purchase and receive from Seller
during the next month (hereinafter the "Nominated Quantity"). In the
alternative, Buyer may specify a standing Nominated Quantity to be effective
until changed in writing pursuant to the first sentence of this section.
3.2 The parties recognize that fluctuations in the production and
transportation of gas can occur on a daily basis. Buyer and Seller will attempt
to receive and deliver gas on a uniform hourly basis. Notwithstanding anything
to the contrary herein, any revisions to the Nominated Quantity shall be
implemented in accordance with Transporter(s)' nomination procedures, unless a
waiver of such procedures is received by either Buyer or Seller.
3.3 Buyer and Seller shall be responsible for nominations to their
respective Transporters and the nominations in each case shall reflect the
Nominated Quantity.
3.4 If no Nominated Quantity is submitted by Buyer in accordance with
Section 3.1, the DCQ shall be the Nominated Quantity.
6
<PAGE>
ARTICLE 4: PRICE
----------------
4.1 For all gas nominated by Buyer and delivered by Seller during a month,
Buyer shall pay the Commodity Price or the Alternate Commodity Price per MMBtu,
rounded to the nearest $0.001.
4.2 The term "Commodity Price" shall mean the price of gas for each month
which shall be mutually agreed upon by the parties and subsequently confirmed in
writing prior to the date Buyer's nomination notice to Seller is due for the
month of delivery. In the event that the parties fail to reach agreement as to
the Commodity Price, the Alternate Commodity Price determined in accordance with
Section 4.3 shall apply.
4.3 The term "Alternate Commodity Price" shall mean the arithmetic average
of the prices reported in the referenced issue of the month of delivery for the
price references included in the "Market Price Index," set forth in Exhibit B.
The price references in the Market Price Index are intended to reflect the price
paid for gas delivered at the Point(s) of Delivery under spot contracts (the
"Market Price"). The price references in the "Backup Price Index" set forth in
Exhibit B are intended to serve as a substitute for the price references in the
Market Price Index in the event the latter price references are not available or
are "erroneous," as that term is defined in Section 4.5.
4.4 Either party may request that a price reference be added to or deleted
from the Market Price Index or Backup Price Index by providing written notice to
the other party. For a price reference to be added to the Market Price Index or
Backup Price Index, the price reference must reflect the Market Price and be
from an
7
<PAGE>
independent publication which is not controlled by a buyer, seller or broker of
gas. For a price reference to be deleted from the Market Price Index or Backup
Price Index, such price reference must no longer reflect the Market Price. If
within thirty (30) days after the date of notice by a party, the parties are
unable to agree to add or delete a price reference, then the party seeking such
addition or deletion may submit the issue to arbitration which shall be
conducted pursuant to Article 21. A price reference shall be added or deleted
effective the first day of the month after notice by the requesting party and
the price ultimately determined by negotiation or arbitration will be given
retroactive effect to take into account the period of negotiation or arbitration
with interest assessed at the rate provided in Section 6.3. Unless otherwise
agreed by the parties, in no event may either party request that a price
reference be added to or deleted from the Market Price Index or Backup Price
Index more than once during the Delivery Period.
4.5 If during any month a price reference included in the Market Price
Index is not published, the Market Price Index will exclude such price reference
from the Market Price Index for so long as such price reference is not published
and the price reference(s) from the Backup Price Index shall be substituted for
the excluded price reference. If the excluded price reference is the only price
reference in the Market Price Index and no price references in the Backup Price
Index are published, then Section 4.6 below shall apply. If an erroneous price
is published and the publisher confirms such error, then the correct price, if
available, shall be used. If the publisher does not confirm such error or if the
correct price is not available, then the price reference containing such
erroneous price shall not be included in the Market Price
8
<PAGE>
Index or Backup Price Index for such month. For purposes of Sections 4.3 and
4.5, the term "erroneous" price shall mean any price reference that varies by
more than four percent (4%) from the average of the other price references
included in the Market Price Index and Backup Price Index for such month.
4.6 If no Market Price Index and no Backup Price Index reference prices are
available or if, in the opinion of either party, there are no price references
which reasonably reflect the Market Price and the basis of such opinion is
provided in writing to the other party, then a new method to determine the
Alternate Commodity Price will be negotiated. If the parties are unable to agree
within thirty (30) days after notice by a party, then the matter of determining
whether a basis exists to invoke this provision and, if so, the determination of
a new method to determine the Alternate Commodity Price shall be submitted to
arbitration pursuant to Article 21. During a period of negotiation or
arbitration, the last applicable Commodity Price or Alternate Commodity Price
shall remain in effect and shall be adjusted at the conclusion of such
negotiation or arbitration to give retroactive effect to the result with
interest assessed at the rate provided in Section 6.3.
4.7 Alternatively, and in lieu of the price calculated pursuant to Sections
4.2 and 4.3 hereof, the parties may mutually agree to a NYMEX Price or a NYMEX
Forward Price based on the NYMEX posting for the natural gas futures contract,
calculated as follows:
(a) On or before the business day prior to the NYMEX Settlement day, Buyer
may propose that the price under this Agreement for gas nominated by Buyer for
delivery in the applicable month be the NYMEX Price, plus or minus
9
<PAGE>
the basis differentials that may be mutually agreed upon at the time of Buyer's
proposal. The NYMEX Price shall be the arithmetic average of the NYMEX
settlement price of the natural gas futures contract for the last three trading
days applicable to the month of delivery. Buyer's proposal shall designate the
volume of gas for delivery in the applicable month at the proposed price, up to
the volume nominated in accordance with Section 3.1 of this Agreement. Upon
receipt of Buyer's proposal, the parties shall confer by telephone as soon as
possible and decide whether or not to use the NYMEX Price, which decision shall
ultimately be made by Buyer and Seller no later than 11:00 a.m. Central Time on
the business day before the last trading day of the applicable natural gas
futures contract. In the event the parties agree to use the NYMEX Price and
agree on the basis differential, the parties' agreement shall be set forth in a
confirmation prepared by Buyer and transmitted by telecopy to Seller. The
parties' agreement shall be deemed conclusive upon receipt of the confirmation
(as evidence by electronic confirmation of transmission) unless Seller objects
promptly in writing following receipt of the confirmation. Either party shall
have the right to withhold agreement on any price proposed under this Section
4.7(a) at its sole discretion, in which case the price under this Agreement will
be calculated under Sections 4.2 or 4.3 hereof. If the parties are unable to
agree on the basis differentials or methodology for determining the basis, the
NYMEX Price shall be deemed to be rejected. In the event the parties agree to
use the NYMEX Price, the nominated volumes which are covered by the NYMEX Price
10
<PAGE>
shall remain in effect during the applicable month and shall not be reduced or
increased pursuant to Sections 3.2 or 3.3 of this Agreement.
(b) In addition to the NYMEX Price, Buyer shall have the right to propose
that the NYMEX Forward Price, plus or minus the basis differentials that may be
mutually agreed upon at the time of Buyer's proposal, be the price to be paid
under this Agreement during any calendar months designated by Buyer. The NYMEX
Forward Price shall be the NYMEX posting for the natural gas futures contract
applicable to the month or months selected by Buyer and prevailing at the time
Buyer's proposal is communicated to Seller by telephone and confirmed by Seller.
Buyer's proposal shall designate the volume of gas for delivery during the
designated months at the proposed price, up to the volume that can be nominated
in accordance with Section 3.1 of this Agreement. Upon receipt of Buyer's
proposal, the parties shall confer by telephone and decide whether or not to use
the NYMEX Forward Price, which decision shall be made no later than 11:00 a.m.
Central Time on the first business day following Seller's receipt and
confirmation of Buyer's proposal. In the event the parties agree to use the
NYMEX Forward Price and agree on the basis differential or methodology for
determining the basis, the parties' agreement shall be set forth in a
confirmation prepared by Buyer and transmitted by telecopy to Seller. The
parties' agreement shall be deemed conclusive upon receipt of the confirmation
(as evidenced by electronic confirmation of transmission) unless Seller objects
promptly in writing following receipt of the confirmation. Either party shall
have the right to withhold agreement on any price proposed under this Section
11
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4.7(b), at its sole discretion, prior to the execution of the NYMEX transaction,
in which case the price under this Agreement will be calculated under Sections
4.2 or 4.3 hereof. If the parties are unable to agree on the basis differentials
or methodology for determining the basis, the NYMEX Forward Price shall be
deemed to be rejected. Nothing in this subsection (b) shall be construed to
prevent Buyer from proposing the NYMEX Forward Price in any designated month if
either of the parties had previously rejected the NYMEX Forward Price for that
month. In the event the parties agree to use the NYMEX Forward Price, the
nominated volumes which are covered by the NYMEX Forward Price shall remain in
effect during the designated months and shall not be decreased or increased
pursuant to Sections 3.2 or 3.3 of this Agreement. In addition, should the
parties agree to use the NYMEX Forward Price, the selection of that option shall
remain in effect during the months selected by the parties unless the parties
mutually agree to use a different pricing option.
4.8 The parties agree once NYMEX based pricing mechanism in section 4.7
herein is utilized, or if the Parties agree to a fixed price for a period of
longer than one month, the Parties will deliver and purchase the entire contract
volume, or pay cover costs as provided herein, even if a Party is affected by an
event of force majeure, or other situation excused by the contract.
ARTICLE 5: RESERVATION CHARGES AND SUBSTITUTE FUELS
---------------------------------------------------
5.1 If during any month, Seller sells and delivers less than one hundred
percent (100%), but greater than ninety percent (90%), of the Nominated Quantity
multiplied by the number of days in the month, except to the extent excused
under the
12
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provisions of this Agreement or due to Buyer's unexcused failure to receive,
then Buyer shall be relieved of its obligation to pay Seller the Reservation
Charge applicable to the volumes not made available and Seller shall refund to
Buyer any payments attributable to such volumes if already invoiced and paid. If
during any month Seller sells and delivers less than ninety percent (90%) of the
Nominated Quantity multiplied by the number of days in the month, except to the
extent excused under the provisions of this Agreement or due to Buyer's
unexcused failure to receive, then Buyer shall be relieved of its obligation to
pay Seller the Reservation Charge set forth in Section 5.2 for the entire month
during which such supply failure occurred. Under such circumstances in this
Section 5.1, Seller shall also reimburse Buyer its actual costs incurred for the
purchase and/or production and transportation of alternate supplies of fuel
equal to the undelivered volume, including but not limited to any imbalance
carrying charges and/or cash-out costs and penalties imposed by Transporter(s),
PSE&G and/or Elizabethtown, less the costs that Buyer would have otherwise
incurred for the purchase and transportation of gas under this Agreement. Buyer
shall use commercially reasonable efforts to minimize its incremental actual
costs for acquiring alternate supplies of fuel. In the exercise of its
commercially reasonable efforts, Buyer shall exercise diligent good faith
efforts to purchase least cost substitute fuel, including purchasing gas under
existing agreements with other sellers which will enable Buyer to utilize its
transportation rights used to transport gas hereunder. Because of environmental
restrictions on Buyer's use of fuels other than gas at the Facility, Buyer shall
have the sole discretion whether to purchase gas or an alternate fuel as a
substitute for gas not delivered by Seller hereunder, even where gas
13
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is more expensive. Except as described in Articles 12, 14 and 22, these are the
sole and exclusive remedies available to Buyer for any failure by Seller to
deliver gas.
5.2 Buyer shall pay Seller a monthly Reservation Charge in consideration
for maintaining the capability to deliver gas up to the DCQ, assuming market and
supply risks, and agreeing to reimburse Buyer for any amounts pursuant to
Section 5.1. The Reservation Charge shall be the Reservation Rate multiplied by
the DCQ, multiplied by the number of days in such month. To illustrate how the
Reservation Charge would be calculated assume that the DCQ for TXG Henry is
9,450 MMBtus per Day, at the Reservation Rate hereunder, the Reservation Charge
during the month of November would be: $2,835 (9,450 x $0.01 x 30).
Additionally, assume that the DCQ for TGPL Station No. 62 is 12,090 MMBtus per
day, at the Reservation Rate hereunder, the Reservation Charge during the month
of November would be: $7,254 (12,090 x $.02 x 30).
ARTICLE 6: PAYMENT
------------------
6.1 Seller shall render an invoice on or before the tenth (10th) day of
each month setting forth the actual quantity of gas nominated by Buyer and
delivered by Seller hereunder during the preceding month, the Commodity Price,
Alternate Commodity Price, NYMEX Price or NYMEX Forward Price, the Reservation
Charge, any amounts due under Sections 2.2 and 12.2 and the total amount due. In
the event that the actual quantity delivered, the Alternate Commodity Price or
the Reservation Charge is not known at the time the invoice is rendered, an
estimated quantity, Alternate Commodity Price and Reservation Charge, based on
the best available information, shall be used. Buyer shall pay Seller for the
amount due by wire transfer with
14
<PAGE>
immediately available funds to Seller's account in accordance with instructions
contained in Seller's invoice. Payment shall be due on or before the twenty-
first (21st) day of such month or ten (10) days from the date of such invoice,
whichever is later. If Con Ed fails to pay Buyer under the Power Purchase
Agreement by the twentieth (20th) day of the month, Buyer's obligation to pay
Seller shall be suspended from the twenty-first (21st) day of the month, or
ten (10) days from the date of Seller's invoice, until one (1) day following
Buyer's receipt of Con Ed's payment, but, in such a case, Buyer's obligation to
pay Seller shall not be suspended past the twenty-fifth (25th) day of the month.
When the actual quantity, Alternate Commodity Price or Reservation Charge
becomes known and if an adjustment is necessary, an invoice containing the
adjustment for the difference between the actual value and the estimated value
will be rendered. Payment will be made in subsequent months' payment cycles.
6.2 Buyer shall submit an invoice on or before the tenth (10th) day of the
month, if necessary, for any amount due pursuant to Sections 5.1 and 12.2.
Seller shall pay Buyer in accordance with instructions contained in Buyer's
invoice. Payment shall be due on or before the twenty-fifth (25th) day of such
month or ten (10) days from the date of such invoice, whichever is later.
6.3 Should either party fail to pay any amount not in dispute when due,
interest thereon shall accrue at the lesser of (i) the rate of one percent (1%)
above the prime commercial rate charged by Citibank, N.A., New York, New York,
compounded annually from the due date or (ii) the maximum lawful contract rate
permitted by applicable law, until the amount due and interest have been paid in
full. Such interest shall be in addition to any other rights and remedies the
owed party may have for the
15
<PAGE>
owing party's failure to pay any amount not in dispute. Should the owing party
dispute the amount invoiced, such party shall pay the undisputed amount and
notify the other party of any disputed amount by the due date. Both parties will
mutually resolve the disputed amount in a timely manner with interest accruing
from the original due date on any disputed amount determined to be a valid
amount due. Notwithstanding the foregoing or any other provision herein, if
Buyer fails to pay any amount within five (5) days after receiving written
notice from Seller that payment is delinquent, Seller may withhold deliveries
and, should said nonpayment continue for a period of thirty (30) days after such
notice, subject to the provisions of Article 22, Seller may terminate this
Agreement upon written notice.
6.4 Upon reasonable notice, each party shall have the right at reasonable
times to have an independent public accounting firm examine the books, records,
and charts controlled by the other party to the extent necessary to verify the
accuracy of any statement, payment, charge, or computation made pursuant to this
Agreement. In the event an error is discovered in any statement, payment,
charge, or computation, the adjusted amount shall be due within thirty (30) days
of the determination thereof, provided that any statement, payment, charge, or
computation shall be final as to both parties unless objected to in writing
within twelve (12) months after payment has been made.
6.5 If either party pays any amount shown due and owing upon the invoice of
the other party, and such amount is subsequently determined by agreement,
arbitration or judgment of court not to have been due and owing when paid, the
payee
16
<PAGE>
will refund such amount to the paying party together with interest from the date
of payment to the date of refund at the interest rate set forth in Section 6.3
hereof.
ARTICLE 7: TAXES
----------------
7.1 Seller shall pay, or cause to be paid, all taxes, assessments, fees or
other charges now and hereafter lawfully levied and imposed by federal, state,
or local authorities upon Seller with respect to the gas prior to the Point(s)
of Delivery. In the event Buyer is required to remit such taxes, assessments,
fees or charges, Seller shall reimburse Buyer for such amount. Seller shall
furnish Buyer with a copy of the exemption certificate in situations in which
exemption from any such imposition is claimed by Seller.
7.2 Buyer shall pay, or cause to be paid, all taxes, assessments, fees or
other charges (including, but not limited to, sales and value added taxes) now
and hereafter lawfully levied and imposed by federal, state, or local
authorities upon Buyer with respect to the gas at and subsequent to the Point(s)
of Delivery. In the event Seller is required to remit such taxes, assessments,
fees or charges, Buyer shall reimburse Seller for such amount. Buyer shall
furnish Seller with a copy of the exemption certificate in situations in which
exemption from any such imposition is claimed by Buyer.
ARTICLE 8: POINT(S) OF DELIVERY
-------------------------------
The "Point(s) of Delivery" shall be the Point(s) on Transporter(s)'
pipeline system(s) where gas is delivered by Seller to Transporter(s) for
Buyer's account, as specified in Exhibit C attached hereto and made a part
hereof. As between the parties hereto, title, risk of loss, and liabilities
associated with delivered gas shall pass to and
17
<PAGE>
vest in Buyer at the Point(s) of Delivery. Changes in the Point(s) of Delivery
shall require the mutual consent of the parties.
ARTICLE 9: PRESSURE
-------------------
Seller shall deliver gas at the Point(s) of Delivery at a pressure
sufficient to effect delivery into the receiving Transporter(s)' facilities.
ARTICLE 10: MEASUREMENT
-----------------------
All measurements of gas delivered and sold hereunder shall be in accordance
with the provisions of the receiving Transporter(s)' tariff at the Point(s) of
Delivery.
ARTICLE 11: QUALITY
-------------------
The gas delivered and sold by Seller to Buyer at the Point(s) of Delivery
shall meet the quality specifications set forth in the receiving Transporter(s)'
tariff at the Point(s) of Delivery. Buyer shall have the right to be represented
and to participate in all tests of gas delivered hereunder performed by Seller,
and to inspect any equipment used in such tests to determine the nature of the
quality of gas delivered hereunder. In the event the gas does not meet such
quality specifications, Buyer may refuse delivery of the gas. Seller's delivery
of gas refused by Buyer for failure to meet quality specifications shall not
constitute delivery for the purposes of Articles 2, 5 and 6. Buyer's sole remedy
for such failure of gas to meet quality specifications shall be to refuse
receipt of the gas and receive the remedy specified in Article 5.
ARTICLE 12: TRANSPORTATION AND IMBALANCE CHARGES
------------------------------------------------
12.1 Transporter(s)' rules, guidelines, operational procedures and
policies, as may be changed from time to time, may define and set forth the
manner in which gas delivered and sold under this Agreement is transported.
Seller and Buyer agree to
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<PAGE>
provide to the other, in as prompt a manner as reasonable, all information
necessary to permit scheduling pursuant to such requirements. Seller shall give
Buyer the highest ranking given to any other purchaser of Seller's gas in any
priority queue when nominating or allocating volumes to Transporter(s) for
delivery to Buyer under this Agreement.
12.2 Each party agrees to make all reasonable efforts to cooperate with the
other in operating under this Agreement to avoid pipeline imbalance charges,
cash-out costs and penalties. Buyer shall bear any under or over delivery
charges, cash-out costs and penalties assessed by Transporter(s) PSE&G and
Elizabethtown which are caused by variances (including variances due to events
of force majeure declared by Buyer) in Buyer's receipts from the Nominated
Quantity and Seller shall bear any under or over delivery charges, cash-out
costs and penalties assessed by Transporter(s), PSE&G and Elizabethtown which
are caused by variances (including variances due to events of force majeure
declared by Seller) in Seller's deliveries from the Nominated Quantity.
12.3 Seller shall be responsible for transportation to the Point(s) of
Delivery and payment of all transportation charges relating thereto. Buyer shall
be responsible for transportation from the Point(s) of Delivery and payment of
all transportation charges relating thereto. The parties recognize that the gas
purchased hereunder may be transported by Transporter(s) whose transportation
rates and related charges such as fuel reimbursement and take-or-pay surcharges
are subject to refund. The party which pays the Transporter(s) for
transportation of gas hereunder shall be entitled to retain any refunds
associated therewith.
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<PAGE>
ARTICLE 13: TERM
----------------
This Agreement shall be effective from the date first set forth above and,
unless sooner terminated under the provisions of this Agreement, shall continue
for five (5) months from the commencement of deliveries of gas hereunder. The
commencement of deliveries of gas hereunder shall be November 1, 1997, unless
otherwise agreed by the parties. The term of this Agreement may be extended by
mutual agreement of the Parties.
ARTICLE 14: FORCE MAJEURE
-------------------------
14.1 If, by reason of force majeure either party is rendered unable, wholly
or in part, to carry out its obligations under this Agreement, and such party
provides written notice and full particulars of such event of force majeure as
soon as practicable after the occurrence thereof, the obligations of such
affected party shall be suspended to the extent and for the period of such event
of force majeure, except for the payment of monies in respect of obligations
that have accrued hereunder prior to such event of force majeure. The cause of
suspension other than strikes or lockouts shall be remedied so far as possible
with reasonable dispatch. Settlement of strikes and lockouts shall be wholly
within the discretion of the party having the difficulty.
14.2 The term "force majeure" shall mean any act or event which wholly or
partially prevents or delays the performance of obligations arising under this
Agreement if such act or event is not reasonably within the control of and not
caused by the fault or negligence of the party claiming force majeure and which
by the exercise of due diligence such party is unable to prevent or overcome,
including, without limitation by the following enumeration: acts of God, the
public enemy or the
20
<PAGE>
elements; fire, accidents, breakdowns, shutdowns for purposes of necessary
repairs, maintenance, relocation or construction of facilities; breakage,
freezing or accidents to wells, machinery or lines of pipe; the necessity of
making repairs or alterations to machinery or lines of pipe; inability to obtain
materials, supplies, permits, or labor to perform or comply with any obligation
or condition of this Agreement; any curtailment of firm gas transportation
service to, of electricity or steam purchases from, or of resale service by
PSE&G and Elizabethtown to, the Facility; strikes and any other industrial,
civil or public disturbances; any laws, orders, rules, regulations, acts,
restraints of any government or governmental body or authority, civil or
military which have the effect of prohibiting performance of a party's
obligations. The term "force majeure" shall also expressly include the
imposition upon Seller or Buyer of any gross receipts, franchise or other gas
sales or consumption tax which Seller or Buyer is not obligated to pay on the
date of execution of this Agreement, which tax Seller or Buyer determines has a
material economic impact on its ability to continue to sell or purchase gas at
the prices or in the quantities set forth herein.
14.3 Except as provided in Section 14.2, neither party may rely upon
changes in market conditions, curtailment of interruptible transportation, or
denial by a regulatory authority of the pass through of the cost of gas
purchased under this Agreement as events of force majeure. In the event of force
majeure that causes Seller to curtail its deliveries hereunder, Seller shall
treat Buyer on a pro rata basis with Seller's other firm customers and shall
give Buyer priority of service over all interruptible customers.
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<PAGE>
14.4 In the event Buyer fails to take or Seller fails to make available,
due to a declared event of force majeure, at least fifty percent (50%) of the
aggregate DCQ for a period of sixty (60) consecutive days, then the non-
declaring party may terminate this Agreement upon written notice, provided that
such notice is given prior to the date the force majeure is remedied.
ARTICLE 15: NOTICE
------------------
Any notice, request, demand, statement, or bill provided for in this
Agreement shall be in writing and delivered by hand, mail, or telecopy. All such
written communications shall be effective upon receipt by the other party at the
address of the parties hereto as follows:
Buyer:
Notices & Statements
--------------------
Cogen Technologies Linden Venture, L.P.
c/o Cogen Technologies, Inc.
Suite 5000, 50th Floor
1600 Smith Street
Houston, TX 77002
Attention: Vice President - Fuel Supply
Telephone No.: (713) 951-7768
Telecopy No.: (713) 951-7803
Seller:
Notices & Statements
---------------------
Texaco Natural Gas Inc.
1111 Bagby St.
P. O. Box 4700
Houston, TX 77210-4700
Attention: Vice President, Long-Term Market Development
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<PAGE>
Telephone No.: (713) 752-7800
Telecopy No.: (713) 752-4026
Nomination Notices:
-------------------
Texaco Natural Gas Inc.
1111 Bagby St.
P. O. Box 4700
Houston, TX 77210-4700
Attention: Sandra Smith
Telephone No.: (713) 752-7817
Telecopy No.: (713) 752-4026
Payment:
--------
Texaco Natural Gas Inc.
P. O. Box 842306
Dallas, Texas 75284-2306
Wire Transfer - Chemical Bank, New York, New York
Acct. No. 323040780
**ABA No. 021000128
(or as subsequently updated by information on most recent invoice)
Either of the parties may designate a further or different address by giving
written notice to the other party.
ARTICLE 16: LAWS, ORDERS & REGULATIONS
--------------------------------------
This Agreement, and all terms and provisions contained herein, and the
respective obligations of the parties are subject to valid laws, orders, rules,
and regulations of duly constituted authorities having jurisdiction over Buyer,
Seller, Transporter(s), PSE&G or Elizabethtown. In the event that any regulatory
or government body asserting jurisdiction over Transporter(s), PSE&G,
Elizabethtown or
23
<PAGE>
Either party prohibits any of the transactions described in this Agreement or
any transportation or delivery agreement between Transporter(s), PSE&G,
Elizabethtown and/or Buyer covering the transportation and delivery of the gas
sold hereunder, or otherwise conditions such transactions in a form that is
unacceptable in the reasonable judgment of the party affected thereby, then
either party hereto so affected or prohibited may, by giving one (1) month's
prior written notice to the other party, terminate this Agreement and each party
shall be held harmless as a result of such termination except for obligations
which were incurred prior to termination; provided, however, such termination
shall be effective immediately where required by law, rule or regulation.
ARTICLE 17: APPLICABLE LAW
--------------------------
THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO ITS CONFLICT OF LAW PROVISIONS, AND
THE PARTIES HERETO STIPULATE THAT WITH RESPECT TO ANY AND ALL DISPUTES BETWEEN
THE PARTIES ARISING FROM OR RELATING TO THIS CONTRACT, EXCEPT DISPUTES SUBJECT
TO RESOLUTION BY ARBITRATION, VENUE SHALL LIE IN THE FEDERAL OR STATE COURTS OF
HOUSTON, HARRIS COUNTY, TEXAS.
ARTICLE 18: WAIVER
------------------
No waiver by either party of any one or more defaults in the performance of
any provision of this Agreement shall operate or be construed as a waiver of any
future default, whether of a like or a different character.
24
<PAGE>
ARTICLE 19: TITLE
-----------------
Seller warrants title to, or good right to sell, all gas delivered
hereunder by Seller, and that such gas is free from liens and adverse claims of
every kind. Seller will pay, or cause to be paid, all royalties and other sums
imposed on the production, gathering, or transportation of the gas prior to its
delivery by Seller to Buyer. Seller will indemnify and save Buyer harmless
against all loss, damage, and expense of every character on account of adverse
claims to the gas delivered by it or of royalties, payments or other charges
thereon applicable before delivery to Buyer. If any adverse claim of any
character is asserted with respect to Seller's right to deliver gas hereunder,
or with respect to Seller's right to receive payment for such gas, or if
Seller's title is questioned or involved in any action, then Buyer shall
immediately notify Seller of such adverse claim and then may withhold that
portion of sums due hereunder reasonably related to such claim until such claim
is finally determined or title is clear, or until such time as Seller furnishes
a corporate undertaking conditioned to save Buyer harmless from such claim.
ARTICLE 20: ASSIGNMENT
----------------------
Either party may, without relieving itself of its obligations under this
Agreement, assign any of its rights hereunder to an entity with which it is
affiliated, but otherwise no assignment of this Agreement or any of the rights
or obligations hereunder shall be made unless there first shall have been
obtained the consent thereto in writing of the other party, which consent shall
not be unreasonably withheld. Any successor-in-interest of Buyer or Seller shall
be entitled to the rights and shall be subject to the obligations of its
predecessor-in-interest under this Agreement. It is agreed, however,
25
<PAGE>
that the restrictions on assignment contained in this paragraph shall not in any
way prevent either party to this Agreement from pledging, mortgaging or
assigning its rights hereunder as security for its indebtedness. In connection
with any such pledge, mortgage or assignment by Buyer, Seller will execute an
appropriate consent to any such pledge, mortgage or assignment as reasonably
requested by Buyer's lender. Any such consent will acknowledge, in effect, that
this Agreement has been duly authorized and is valid and enforceable against
Seller and that this Agreement is in full force and effect; that Seller will not
agree to any amendment to this Agreement without the lender's approval in
writing, which approval shall not be unreasonably withheld by the lender; that
Seller will make all payments due to Buyer hereunder in accordance with the
instructions of the lender; that Seller will not terminate this Agreement by
reason of Buyer's default or by reason of force majeure, without giving the
lender notice of default and notice of termination and the same opportunity to
cure provided to Buyer under this Agreement (plus any longer period as may be
necessary, not to exceed one (1) month, if the lender in good faith is
endeavoring to obtain possession of the Facility and pays Seller in accordance
with the terms of this Agreement during such period); that Seller will deliver
to the lender a copy of each notice of default and notice of termination at the
same time that such notice is delivered to Buyer; and that in the event the
lender exercises its rights under its loan documentation or partnership
documentation with Buyer, Seller will accept performance by the lender or any
successor or assign thereof, provided that the lender or any such successor or
assign pays all sums then due to Seller hereunder and is also otherwise in
compliance with this Agreement.
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<PAGE>
ARTICLE 21: ARBITRATION
-----------------------
21.1 Should an issue be submitted to binding arbitration pursuant to the
provisions of this Agreement, the parties shall each appoint one (1) arbitrator
and the two (2) arbitrators so appointed will select a third arbitrator, all of
such arbitrators to be qualified by education, knowledge, and experience to
resolve the dispute or controversy. If either party fails to appoint an
arbitrator within ten (10) days after a request for such appointment is made by
the other party in writing, or if the two (2) appointed fail, within ten (10)
days after the appointment of the second, to agree on a third arbitrator, the
arbitrator or arbitrators necessary to complete a board of three (3) arbitrators
will be appointed upon application by either party therefor by the American
Arbitration Association.
21.2 The jurisdiction of the arbitrators will be limited to the single
issue or issues referred to arbitration and the arbitration shall be conducted
pursuant to the guidelines set forth by the American Arbitration Association;
provided, however, that should there be any conflict between such guidelines and
the procedures set forth in this Agreement, the terms of this Agreement shall
control.
21.3 Within fifteen (15) days following selection of the third arbitrator,
each party shall furnish the arbitrators in writing its position and supporting
arguments regarding the issue or issues being arbitrated. The arbitrators may,
if they deem necessary, convene a hearing regarding the issue or issues being
arbitrated. All hearings shall be held at a location to be agreed upon among the
arbitrators in Houston, Harris County, Texas. Within thirty (30) days following
the later of the appointment of the third arbitrator or of the hearing, if one
is held, the arbitrators shall
27
<PAGE>
notify the parties in writing as to which of the two (2) positions submitted
with respect to the issue or issues in question is most consistent with the
intent of this Agreement. Such decision shall be binding on the parties hereto
until and unless changed in accordance with the provisions of this Agreement.
21.4 Enforcement of the award may be entered in any court having
jurisdiction over the parties.
21.5 Each party will pay the expense of the arbitrator selected by or for
it, and its counsel, witnesses and employees. All other costs of arbitration
will be equally divided between the parties.
ARTICLE 22: DEFAULT
-------------------
22.1 In the event either party fails to perform any of the material
covenants or obligations imposed upon it under and by virtue of this Agreement,
the party not in default hereto, having first given thirty (30) days written
notice to the party in default stating specifically the nature of the default
and declaring it to be the intention of the party giving notice to cancel this
Agreement (the "Cancellation Notice"), may, at its option, cancel this Agreement
in accordance with this Article 22. If within said period of thirty (30) days
the party in default remedies or removes said default, including payment of sums
due with interest at the rate set forth in Section 6.3 hereof, or provides
adequate security to fully indemnify the party not in default for any and all
direct damages of such breach, including payment of sums due with interest at
the rate set forth in Section 6.3 hereof, then such Cancellation Notice shall be
withdrawn and this Agreement shall continue in full force and effect; provided,
however, that if the default is the failure to pay sums due hereunder, then the
party not in default shall
28
<PAGE>
have the right to suspend gas deliveries or takes, as the case may be, after
service of the Cancellation Notice.
22.2 If the party in default does not so remedy or remove the default or
does not provide adequate security to fully indemnify the party not in default
for any and all direct damages of such breach, and fails to represent that
further defaults shall not occur and that steps have been taken to avoid such a
recurrence, within said period of thirty (30) days, this Agreement, at the
option of the party not in default, shall be canceled upon written notice to the
defaulting party. Cancellation of this Agreement, pursuant to the provisions of
this Article 22, shall be without prejudice to any other rights and remedies the
party not in default has available to it. Further, such cancellation of this
Agreement or failure to cancel shall be without prejudice to the right of Seller
to collect any amounts then due Seller for gas delivered prior to the time of
cancellation.
ARTICLE 23: GENERAL
-------------------
23.1 The headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement.
23.2 Any modification, revision or amendment of this Agreement made
subsequent to its execution shall be valid and effective only if and when made
in writing and duly executed by the parties hereto.
23.3 This Agreement and any Exhibit hereto shall constitute a single
agreement, superseding all prior agreements or undertakings between the parties
on the subject matter hereof. This Agreement contains the entire agreement of
the
29
<PAGE>
parties and, except as stated herein, there are no promises, agreements,
warranties, obligations, assurances or conditions precedent or otherwise
affecting it.
23.4 By executing this Agreement, each of the individuals so executing
warrants that (i) the individual has all necessary corporate power and authority
to enter into and execute this Agreement and (ii) this Agreement constitutes the
valid and binding obligation of the party on whose behalf it is executed,
enforceable in accordance with its terms, subject to applicable bankruptcy and
insolvency laws.
23.5 The parties shall execute such additional documents and shall cause
such additional action to be taken as may be required, or, in the reasonable
judgment of any party, as may be necessary or desirable, to effect or evidence
the provisions of this Agreement and the transactions contemplated hereby.
23.6 The parties acknowledge that each provision to this Agreement
constitutes their joint work product.
23.7 In no event shall either party be liable to the other for punitive,
special, incidental, indirect, consequential, or other similar damages whether
such damages are claimed under breach of warranty, breach of contract, tort of
any other theory or cause of action at law or in equity.
ARTICLE 24: CONFIDENTIALITY
---------------------------
24.1 The terms of this Agreement and information disclosed pursuant to this
Agreement, including but not limited to the price paid for gas, shall be kept
confidential by Seller and Buyer, (a) except to the extent any information must
be disclosed to (i) Transporter(s), PSE&G and Elizabethtown for the purpose of
effectuating transportation and resale of the gas sold and purchased under this
Agreement, (ii) Con
30
<PAGE>
Ed for the purpose of complying with Article 4.6 of the Power Purchase Agreement
and (iii) Buyer's lender and (b) except as required by law, regulation or
request of governmental authority.
IN WITNESS WHEREOF, by execution in duplicate originals, the parties
hereto have caused this Agreement to be effective as of the day and year first
above written.
"BUYER" "SELLER"
COGEN TECHNOLOGIES LINDEN TEXACO NATURAL GAS INC.
VENTURE, L.P.
By: Cogen Technologies Linden, Ltd. By: /s/ Chad A. Landry
(in the State of New Jersey d/b/a ------------------------------
Cogen Technologies Linden, Limited Name: Chad A. Landry
Partnership), a Texas limited Title: Attorney-in-Fact
partnership, its general partner Date: 8/21/97
By: Cogen Technologies, Inc., a
Texas corporation, its general partner
By: /s/ W. Colin Harper
-----------------------------------
W. Colin Harper
Vice President - Fuel Supply
Date: August 19, 1997
31
<PAGE>
EXHIBIT A
---------
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
as Buyer, and TEXACO NATURAL GAS INC. as Seller.
NOMINATION NOTICE
-----------------
Date:
-------------
Texaco Natural Gas Inc.
1111 Bagby Street
Houston, TX 77210-4700
Attention:
---------------------
Reference : Firm Gas Purchase and Sale Agreement
Dated: July 1, 1997
Buyer: Cogen Technologies Linden Venture, L.P.
Seller: Texaco Natural Gas Inc.
Point of Delivery:
Contract No.:
- ---------
Gentlemen:
Pursuant to Section 3.1 of the subject Agreement, Cogen Technologies Linden
Venture, L.P., hereby nominates the following:
Month of Delivery:
Nominated Quantity (MMBtu/D):
Very truly yours,
W. Colin Harper
Vice President - Fuel Supply
32
<PAGE>
EXHIBIT B
---------
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
as Buyer, and TEXACO NATURAL GAS INC., as Seller.
IF DELIVERIES ARE MADE TO TEXAS GAS AT THE HENRY HUB:
<TABLE>
<CAPTION>
==============================================================================================================
MARKET PRICE INDEX (TXG/HENRY HUB)
==============================================================================================================
<S> <C> <C> <C>
Publication* Table Row Column
==============================================================================================================
Natural Gas Week Prices of Spot Gas Cash Market Hub Bid Week (for current
(first report in Delivered to Pipelines Trading; Henry Hub, month)
applicable month) (per MMBtu dry) Louisiana
==============================================================================================================
Inside FERC's Gas Prices of Spot Market Center Spot - Index
Market Report (first Gas Delivered to Gas Prices; South
report in applicable Pipelines (per MMBtu Louisiana; Henry Hub
month) dry)
==============================================================================================================
BACKUP PRICE INDEX (TXG/HENRY HUB)
==============================================================================================================
Publication* Table Row Column
==============================================================================================================
Natural Gas Spot Gas Prices; Spot Gas Prices; Contract Index
Intelligence - Weekly Delivered to Pipelines Henry Hub Index; (current month)
Gas Price Index (first (30 Day Supply Texas Gas
report in applicable Transactions))
month)
===============================================================================================================
</TABLE>
33
<PAGE>
IF DELIVERIES ARE MADE TO THE TXG ZONE-SL POOL:
<TABLE>
<CAPTION>
===============================================================================================================
MARKET PRICE INDEX (TXG/HENRY HUB)
===============================================================================================================
Publication * Table Row Column
===============================================================================================================
<S> <C> <C> <C>
Natural Gas Week Spot Prices on Texas Gas Bid Week (for current
(first report in Interstate Pipeline Transmission Corp. - month)
applicable month) Systems; Delivered to Zone SL: South
Pipeline ($/MMBtu) Louisiana
===============================================================================================================
Inside FERC's Gas Prices of Spot Texas Gas Index
Market Report (first Gas Delivered to Transmission Corp. -
report in applicable Pipelines (per MMBtu Zone SL
month) dry)
===============================================================================================================
BACKUP PRICE INDEX (TXG/HENRY HUB)
===============================================================================================================
Publication* Table Row Column
===============================================================================================================
Natural Gas Spot Gas Prices; Region - South Contract Index
Intelligence - Weekly Delivered to Pipelines Louisiana; Texas Gas (current month)
Gas Price Index (first (30 Day Supply Zone SL
report in applicable Transactions)
month)
===============================================================================================================
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
===============================================================================================================
MARKET PRICE INDEX (TGPL - STA #62)
===============================================================================================================
Publication * Table Row Column
===============================================================================================================
<S> <C> <C> <C>
Inside FERC's Gas Prices of Spot Gas Transcontinental Index
Market Report (first Delivered to Pipelines Gas Pipe Line Corp.
report in applicable (per MMBtu dry) Zone 3 - (pooling
month) points)
===============================================================================================================
Natural Gas Week Spot Gas Prices on Transcontinental Gas Bid Week; (current
(first report in Interstate Pipeline Pipe Line Corp. month)
applicable month) Systems. STA #50, 62, 65
Delivered to Pipeline (South La. - Zone 3)
($/MMBtu)
===============================================================================================================
BACKUP PRICE INDEX (TGPL - STA #62)
===============================================================================================================
Publication* Table Row Column
===============================================================================================================
Natural Gas Spot Gas Prices; Pooling Points Contract Index
Intelligence - Weekly Delivered to Pipeline; Transco Station 65 (current month)
Gas Price Index (first (30 day transactions)
report in applicable
month)
===============================================================================================================
</TABLE>
35
<PAGE>
EXHIBIT C
---------
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
as Buyer, and TEXACO NATURAL GAS INC. as Seller.
POINT(S) OF DELIVERY
--------------------
The Point(s) of Delivery shall be:
A. The existing point(s) of interconnection between Texas Gas and
the Texaco Henry Processing Plant in Vermillion Parish, Louisiana
at the tailgate of the plant; or to Texas Gas at a mutually
agreeable point in Zone SL.
B. TGPL Compressor Station No. 62 in Terrebonne Parish, Louisiana.
36
<PAGE>
STATE OF TEXAS )
) SS.
COUNTY OF HARRIS )
On this 19th day of August, 1997, before me, Joy R. Toups the
undersigned officer, personally appeared, W. Colin Harper, known to me to be the
person whose name is subscribed to the within instrument and acknowledged that
Cogen Technologies, Inc., as General Partner of Cogen Technologies Linden, Ltd.
(D/B/A Cogen Technologies Linden, Limited Partnership), in turn acting as
General Partner of Cogen Technologies Linden Venture, L.P. (D/B/A Cogen
Technologies Linden Venture, Limited Partnership) executed the same for the
purpose therein contained.
In witness whereof I hereunto set my hand and official seal.
JOY R. TOUPS
(SEAL) MY COMMISSION EXPIRES /s/ Joy R. Toups
- ------ August 13, 2001 -------------------------------------------
Notary Public in and for the State of Texas
STATE OF TEXAS )
) SS.
COUNTY OF HARRIS )
On this 21st day of August, 1997, before me, Claire Thompson, the
undersigned officer, personally appeared, Chad Landry, known to me to be the
person whose name is subscribed to the within instrument and acknowledged that
Texaco Natural Gas Inc. executed the same for the purposes therein contained.
In witness whereof I hereunto set my hand and official seal.
CLAIRE THOMPSON
(SEAL) MY COMMISSION EXPIRES /s/ Claire Thompson
- ------ March 28, 2001 -------------------------------------------
Notary Public in and for the State of Texas
37
<PAGE>
GUARANTY AGREEMENT
------------------
THIS AGREEMENT, shall be effective July 1, 1997, by and between TEXACO
EXPLORATION AND PRODUCTION INC., (hereinafter referred to as "Guarantor") and
COGEN TECHNOLOGIES LINDEN VENTURE, L.P. d/b/a/ COGEN TECHNOLOGIES LINDEN
VENTURE, LIMITED PARTNERSHIP (hereinafter referred to as "Cogen").
WITNESSETH:
WHEREAS, Cogen and Texaco Natural Gas Inc., (hereinafter referred to as
"TNGI"), a wholly-owned subsidiary of Guarantor, contemporaneously herewith are
entering into a Firm Gas Purchase and Sale Agreement effective July 1, 1997, as
amended from time to time (the "Agreement"), pursuant to which Cogen will
purchase from TNGI natural gas for a cogeneration facility (the "Facility")
located in Linden, New Jersey, in the quantities and upon the terms and
conditions that are set forth in the Agreement; and
WHEREAS, Cogen desires assurances that Guarantor will be responsible for
obligations of TNGI set forth in the Agreement in the event TNGI does not
satisfy such obligations; and
WHEREAS, Guarantor desires that the Agreement be executed and, therefore,
desires to give such assurances.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and other valuable consideration, the adequacy and receipt of
which are hereby acknowledged, Guarantor and Cogen hereby agree as follows:
1 . Guarantor hereby irrevocably and unconditionally guarantees to Cogen
the full, prompt and complete performance of the obligations of TNGI set forth
in, and
<PAGE>
subject to the terms of, the Agreement read and taken as a whole, subject to all
conditions, excuses, and releases or limitations of liability contained therein,
(including, but not limited to, the limitations of damages to Buyer's cost of
Cover. If TNGI fails to perform any of its obligations then due under the
Agreement, Guarantor shall cause TNGI or another of its subsidiaries or
affiliates to perform said obligation in accordance with the terms of the
Agreement. Without limiting the generality of the foregoing, the Guarantor
agrees that the occurrence of any one or more of the following shall not affect
the liability of the Guarantor hereunder: (a) at any time or from time to time,
without notice to the Guarantor, the time for any performance of or compliance
with any of the obligations of TNG1 set forth in the Agreement or such
obligations shall be extended, or such performance or compliance shall be
waived, (b) any of the acts mentioned in any of the provisions of the Agreement
shall be done or omitted or (c) any right under the Agreement shall be waived.
The Guarantor hereby expressly waives diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that Cogen or
any lender (as defined in the Agreement) exhaust any right, power or remedy or
proceed against TNGI under the Agreement.
Nothing in this Guaranty should be taken to imply TEPI has either: a.)
dedicated any of its specific lands, leases, reserves, or interests in the same
to the performance of the Contract, or b.) agreed to a specific performance
responsibility implying a greater overall obligation than agreed to by TNGI
under the Contract, taken as a whole.
2
<PAGE>
2. This Guaranty Agreement shall be assignable to the lenders as defined in
the Agreement under the same terms and conditions set forth in the Agreement.
Any other assignment shall not be permitted, in whole or in part, except with
the consent of the other party, which consent shall not be unreasonably
withheld. This Guaranty Agreement shall be binding upon the parties hereto and
their permitted successors and assigns.
3. This Guaranty Agreement is for the sole and exclusive benefit of the
parties hereto and any permitted successors and assigns. Nothing expressed or
implied herein is intended to benefit any other person, firm or corporation not
a party hereto. None of such other persons shall have any legal or equitable
right, remedy or claim under this Guaranty Agreement or under any provisions
hereof.
4. Notwithstanding anything contained herein, if any claim or demand is
made against Guarantor pursuant to this Guaranty Agreement, Guarantor shall be
subject to all rights, set-offs, counterclaims and defenses to which TNGI may be
entitled, except for defenses arising out of bankruptcy, insolvency, liquidation
or dissolution of TNGI.
5. This Guaranty Agreement shall remain in full force and effect until
the termination of all obligations under the Agreement.
6. Guarantor agrees to indemnify Cogen from and against any and all claims
of every nature arising from the obligations of TNGI under the Agreement,
including but not limited to damages suffered by Cogen as a result of TNGI's
non-performance, incomplete performance or other default of TNGI under the
Agreement, provided, however, notwithstanding any provisions to the contrary
herein, that Guarantor's
3
<PAGE>
liability hereunder shall be equal to (and neither less than nor greater than)
that of TNGI under the express terms of the Agreement, including any
modifications thereof.
7. No delays on the part of Cogen in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Cogen of
any right or remedy shall preclude other or further exercise thereof or the
exercise of any right or remedy. No actions of Cogen permitted hereunder shall
in any way impair or affect this Guaranty Agreement.
8. WHEREVER POSSIBLE, EACH PROVISION OF THIS GUARANTY AGREEMENT SHALL BE
INTERPRETED IN SUCH MANNER TO BE EFFECTIVE AND VALID UNDER TEXAS LAW; BUT IF ANY
PROVISIONS OF THIS GUARANTY AGREEMENT SHALL BE PROHIBITED OR INVALID UNDER SUCH
LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR
INVALIDITY WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING
PROVISIONS OF THIS GUARANTY AGREEMENT.
9. The Guarantor represents and warrants as follows:
(a) The Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation.
(b) The execution, delivery and performance by the Guarantor of
this Guaranty Agreement are within the Guarantor's corporate powers,
have been duly authorized by all necessary corporate action, and do not
contravene (i) the Guarantor's certificate of incorporation or by-laws
or (ii) any law, rule, regulation or order, or any restriction contained
in any material agreement or instrument, binding on or affecting the
Guarantor.
4
<PAGE>
(c) No authorization or approval or other action by, and
no notice or filing with, any governmental authority or regulatory body
is required for due execution, delivery and performance by the Guarantor
of this Guaranty Agreement, except such as have been duly obtained or
made and are in full force and effect.
(d) This Guaranty Agreement is a legal, valid and binding
obligation of the Guarantor enforceable against the Guarantor in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by
proceeding in equity or at law).
(e) The Guarantor owns, directly or indirectly, all the issued
outstanding capital stock of TNGI.
IN WITNESS WHEREOF, this instrument is executed as of the day and year
first above written.
TEXACO EXPLORATION COGEN TECHNOLOGIES LINDEN
AND PRODUCTION INC. VENTURE, L.P.
(GUARANTOR)
By: Cogen Technologies Linden, Ltd.
(in the State of New Jersey d/b/a
By: [SIGNATURE APPEARS HERE] Cogen Technologies Linden, Limited
---------------------------- Partnership), a Texas limited
partnership, its general partner
Its: Director
--------------------------- By: Cogen Technologies, Inc., a
Texas corporation, its general
partner
By: /s/ W. Colin Harper
--------------------------------
W. Colin Harper
Vice President - Fuel Supply
Date: August 1, 1997
5
<PAGE>
EXHIBIT 10.26
FIRM GAS PURCHASE AND SALE AGREEMENT
between
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
and
VASTAR GAS MARKETING, INC.
<PAGE>
TABLE OF CONTENTS
Page
----
TABLE OF CONTENTS............................................... i
ARTICLE 1: DEFINITIONS......................................... 1
ARTICLE 2: QUANTITIES.......................................... 5
ARTICLE 3: NOMINATIONS......................................... 6
ARTICLE 4: PRICE............................................... 7
ARTICLE 5: RESERVATION CHARGES AND SUBSTITUTE FUELS............ 12
ARTICLE 6: PAYMENT............................................. 14
ARTICLE 7: TAXES............................................... 17
ARTICLE 8: POINT(S) OF DELIVERY................................ 17
ARTICLE 9: PRESSURE............................................ 18
ARTICLE 10: MEASUREMENT......................................... 18
ARTICLE 11: QUALITY............................................. 18
ARTICLE 12: TRANSPORTATION AND IMBALANCE CHARGES................ 18
ARTICLE 13: TERM................................................ 20
ARTICLE 14: FORCE MAJEURE....................................... 20
ARTICLE 15: NOTICE.............................................. 22
ARTICLE 16: LAWS, ORDERS & REGULATIONS.......................... 23
ARTICLE 17: APPLICABLE LAW...................................... 24
ARTICLE 18: WAIVER.............................................. 24
ARTICLE 19: TITLE............................................... 24
i
<PAGE>
ARTICLE 20: ASSIGNMENT........................................... 25
ARTICLE 21: ARBITRATION.......................................... 26
ARTICLE 22: DEFAULT.............................................. 28
ARTICLE 23: GENERAL.............................................. 29
ARTICLE 24: CONFIDENTIALITY...................................... 30
EXHIBIT A........................................................ 32
EXHIBIT B........................................................ 33
EXHIBIT C........................................................ 35
ii
<PAGE>
FIRM GAS PURCHASE AND SALE AGREEMENT
This AGREEMENT ("Agreement") is made and entered into this 1st day of July,
1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P., (in the State of
New Jersey D/B/A COGEN TECHNOLOGIES LINDEN VENTURE, LIMITED PARTNERSHIP), a
Delaware limited partnership, hereinafter referred to as "Buyer," and VASTAR GAS
MARKETING, INC., a Delaware corporation, hereinafter referred to as Seller;"
WHEREAS, Buyer requires a supply of gas for use in Buyer's cogeneration
facility in Linden, New Jersey; and
WHEREAS, Seller is willing to sell gas to Buyer on a firm basis to meet its
requirements.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties do hereby covenant and agree as follows:
ARTICLE 1: DEFINITIONS
----------------------
In addition to the terms "Buyer" and "Seller" which shall refer to the
parties identified above, or their duly designated agents or representatives,
the following terms shall have the specified meanings:
1.1 The term "Alternate Commodity Price" shall have the meaning set forth
in Section 4.3.
1.2 The term "Btu" shall mean the amount of heat required to raise the
temperature of one (1) pound avoirdupois pure water from fifty-eight and five-
tenths degrees (58.5 degrees) to fifty-nine and five-tenths degrees (59.5
degrees) Fahrenheit, as defined in
1
<PAGE>
the American Gas Association Gas Measurement Manual and any subsequent
revisions.
1.3 The term "Cancellation Notice" shall mean the notice described in
Section 22.1.
1.4 The term "Commodity Price" shall have the meaning set forth in Section
4.2.
1.5 The term "Con Ed" shall mean The Consolidated Edison Company of New
York, Inc.
1.6 The term "Daily Contract Quantity" or "DCQ" shall mean a total of
thirteen thousand six hundred forty (13,640) MMBtu per day, with seven thousand
seven hundred fifty (7,750) MMBtu per day at the TGPL Station No. 45 (Zone 2)
Point of Delivery and five thousand eight hundred ninety (5,890) MMBtu per day
at the TGPL Station No. 65 (Zone 3) Point of Delivery, plus Transporter(s)'
Market Area Fuel.
1.7 The term "day" shall mean a period of twenty-four (24) consecutive
hours, beginning and ending at the time specified in the receiving
Transporter(s)' tariff(s) at the Point of Delivery.
1.8 The term "Delivery Period" shall mean a period of five (5) months
beginning with the commencement of deliveries of gas hereunder.
1.9 The term "Elizabethtown" shall mean Elizabethtown Gas Company.
1.10 The term "Facility" shall mean the cogeneration facility owned and
operated by Buyer that is located in Linden, New Jersey.
2
<PAGE>
1.11 The term "force majeure" shall have the meaning set forth in Section
14.2.
1.12 The term "Gas" or "gas" shall mean any mixture of hydrocarbons or of
hydrocarbons and non-combustible gases, in a gaseous state, consisting
essentially of methane and shall include casinghead gas produced with crude oil,
natural gas from gas wells, coal-bed methane gas, synthetic gas, coal
gasification gas and residue gas resulting from processing any of the foregoing.
1.13 The term "Lender" shall mean (i) any and all lenders (other than
Seller) providing the construction, interim or long-term financing or re-
financing of the Facility (including financing by way of a leveraged lease) and
any trustee or agent acting on their behalf, and (ii) any and all equity
investors or limited partners providing any such financing or re-financing of
the Facility and any trustee or agent acting on their behalf. The Lender
initially shall be State Street Bank & Trust Company, as Trustee, and thereafter
such entity or entities as shall be designated in writing by Buyer to Seller.
1.14 The term "Market Area Fuel" shall mean the volume of gas retained by
Transporter(s) as fuel and losses for the transportation of gas from the
Point(s) of Delivery to the Point(s) of Redelivery.
1.15 The term "Market Price" shall have the meaning set forth in Section
4.3.
1.16 The term "Minimum Quantity" shall mean with respect to each Point of
Delivery one hundred percent (100%) of the product of the DCQ for the Point of
Delivery and the number of days in each month of the Delivery Period, as reduced
by circumstances of force majeure.
1.17 The term "MMBtu" shall mean one million (1,000,000) Btus.
3
<PAGE>
1.18 The term "month" shall mean the period commencing on the beginning of
the first day of a calendar month and ending on the beginning of the first day
of the succeeding calendar month.
1.19 The term "Nominated Quantity" shall have the meaning set forth in
Section 3.1.
1.20 The term "Nomination Notice" shall mean the notice described in
Section 3.1 and Exhibit A to this Agreement.
1.21 The term "NYMEX" shall mean the New York Mercantile Exchange.
1.22 The term "NYMEX Forward Price" shall have the meaning set forth in
Section 4.7(b).
1.23 The term "NYMEX Price" shall have the meaning set forth in Section
4.7(a).
1.24 The term "Point(s) of Delivery" shall have the meaning set forth in
Article 8.
1.25 The term "Point(s) of Redelivery" shall mean the point or points on
Transporter(s)' pipeline system where gas is redelivered to or for the account
of Buyer, PSE&G or Elizabethtown on the PSE&G system in New Jersey.
1.26 The term "Power Purchase Agreement" shall mean Contract No. 344, dated
April 14, 1989, between Buyer and Con Ed, covering the sale of electricity from
the Facility, and any amendments thereto that may be made from time to time.
1.27 The term "PSE&G" shall mean Public Service Electric and Gas Company.
1.28 The term "Reservation Charge" shall have the meaning set forth in
Section 5.2.
4
<PAGE>
1.29 The term "Reservation Rate" shall mean one and one-fourth cents
($0.0125) per MMBtu for Station No. 45 deliveries and one and one-half cents
($0.015) per MMBtu for Station No. 65 deliveries.
1.30 The term "Spot Market Price" shall mean with respect to each Point of
Delivery the arithmetic average of the prices reported in the specified issues
of the referenced pricing reports during the month of delivery for the Point of
Delivery as determined by using the reference points set forth in Exhibit "B"
hereto under the heading "Market Price Index" or, if no such prices are reported
or are erroneous, pursuant to Section 4.5 herein, under the heading "Backup
Price Index".
1.31 The term "TGPL" shall mean Transcontinental Gas Pipe Line Corporation.
1.32 The term "Transporter(s)" shall mean any pipeline(s) transporting gas
sold hereunder to and from the Point(s) of Delivery and to the Point(s) of
Redelivery.
ARTICLE 2: QUANTITIES
---------------------
2.1 Buyer shall purchase and receive and Seller shall sell and deliver the
Nominated Quantity at the Point(s) of Delivery, except to the extent excused
under the provisions of this Agreement.
2.2 If during any month of the Delivery Period Buyer purchases and receives
less than the Minimum Quantity for a Point of Delivery, except to the extent
excused under the provisions of this Agreement or due to Seller's unexcused
failure to deliver, then Buyer shall pay Seller an amount equal to the
difference between the price payable hereunder for gas delivered at the Point of
Delivery and the then effective Spot Market Price of gas at the Point of
Delivery as determined by using the reference points set forth in Exhibit B
multiplied by the difference between the Minimum
5
<PAGE>
Quantity for the Point of Delivery and the quantity of gas purchased and
received by Buyer at the Point of Delivery. Except in the case of Buyer's
willful misconduct or gross negligence and except as described in Articles 12,
14 and 22, this is the sole remedy available to Seller for any failure by Buyer
to purchase and receive gas.
ARTICLE 3: NOMINATIONS
----------------------
3.1 On or before the day prior to which pipeline nominations are required
to be nominated by Buyer and Seller to the Transporter(s) referenced herein, and
subject to the provisions of Sections 3.2 and 3.3, Buyer shall notify Seller in
writing by providing a Nomination Notice, substantially in the form attached
hereto as Exhibit A, specifying the daily quantity of gas, in MMBtus, up to the
DCQ, that Buyer shall purchase and receive from Seller during the next month at
each Point of Delivery (hereinafter the "Nominated Quantity"). In the
alternative, Buyer may specify a standing Nominated Quantity to be effective
until changed in writing pursuant to the first sentence of this section.
3.2 The parties recognize that fluctuations in the production and
transportation of gas can occur on a daily basis. Buyer and Seller will attempt
to receive and deliver gas on a uniform hourly basis. Notwithstanding anything
to the contrary herein, any revisions to the Nominated Quantity shall be
implemented in accordance with Transporter(s)' nomination procedures, unless a
waiver of such procedures is received by either Buyer or Seller.
3.3 Buyer and Seller shall be responsible for nominations to their
respective Transporters and the nominations in each case shall reflect the
Nominated Quantity.
6
<PAGE>
3.4 If no Nominated Quantity is submitted by Buyer in accordance with
Section 3.1, the DCQ shall be the Nominated Quantity.
ARTICLE 4: PRICE
----------------
4.1 For all gas nominated by Buyer and delivered by Seller during a month,
Buyer shall pay the Commodity Price or the Alternate Commodity Price per MMBtu,
rounded to the nearest $0.001.
4.2 The term "Commodity Price" shall mean the price of gas for each month
for each Point of Delivery which shall be mutually agreed upon by the parties
and subsequently confirmed in writing prior to the date Buyer's nomination
notice to Seller is due for the month of delivery. In the event that the parties
fail to reach agreement as to the Commodity Price, the Alternate Commodity Price
determined in accordance with Section 4.3 shall apply.
4.3 The term "Alternate Commodity Price" shall mean with respect to each
Point of Delivery the arithmetic average of the prices reported in the
referenced issue of the month of delivery for the price references included in
the "Market Price Index," for the Point of Delivery set forth in Exhibit B. The
price references in the Market Price Index are intended to reflect the price
paid for gas delivered at the Point(s) of Delivery under spot contracts (the
"Market Price"). The price references in the "Backup Price Index" for each Point
of Delivery set forth in Exhibit B are intended to serve as a substitute for the
price references in the Market Price Index for the Point of Delivery in the
event the latter price references are not available or are "erroneous," as that
term is defined in Section 4.5.
7
<PAGE>
4.4 Either party may request that a price reference be added to or deleted
from the Market Price Index or Backup Price Index by providing written notice to
the other party. For a price reference to be added to the Market Price Index or
Backup Price Index, the price reference must reflect the Market Price and be
from an independent publication which is not controlled by a buyer, seller or
broker of gas. For a price reference to be deleted from the Market Price Index
or Backup Price Index, such price reference must no longer reflect the Market
Price. If within thirty (30) days after the date of notice by a party, the
parties are unable to agree to add or delete a price reference, then the party
seeking such addition or deletion may submit the issue to arbitration which
shall be conducted pursuant to Article 21. A price reference shall be added or
deleted effective the first day of the month after notice by the requesting
party and the price ultimately determined by negotiation or arbitration will be
given retroactive effect to take into account the period of negotiation or
arbitration with interest assessed at the rate provided in Section 6.3. Unless
otherwise agreed by the parties, in no event may either party request that a
price reference be added to or deleted from the Market Price Index or Backup
Price Index more than once during the Delivery Period.
4.5 If during any month a price reference included in the Market Price
Index is not published, the Market Price Index will exclude such price reference
from the Market Price Index for so long as such price reference is not published
and the price reference(s) from the Backup Price Index shall be substituted for
the excluded price reference. If the excluded price reference is the only price
reference in the Market Price Index and no price references in the Backup Price
Index are published, then
8
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Section 4.6 below shall apply. If an erroneous price is published and the
publisher confirms such error, then the correct price, if available, shall be
used. If the publisher does not confirm such error or if the correct price is
not available, then the price reference containing such erroneous price shall
not be included in the Market Price Index or Backup Price Index for such month.
For purposes of Sections 4.3 and 4.5, the term "erroneous" price shall mean any
price reference that varies by more than four percent (4%) from the average of
the other price references included in the Market Price Index and Backup Price
Index for such month.
4.6 If no Market Price Index and no Backup Price Index reference prices are
available or if, in the opinion of either party, there are no price references
which reasonably reflect the Market Price and the basis of such opinion is
provided in writing to the other party, then a new method to determine the
Alternate Commodity Price will be negotiated. If the parties are unable to agree
within thirty (30) days after notice by a party, then the matter of determining
whether a basis exists to invoke this provision and, if so, the determination of
a new method to determine the Alternate Commodity Price shall be submitted to
arbitration pursuant to Article 21. During a period of negotiation or
arbitration, the last applicable Commodity Price or Alternate Commodity Price
shall remain in effect and shall be adjusted at the conclusion of such
negotiation or arbitration to give retroactive effect to the result with
interest assessed at the rate provided in Section 6.3.
4.7 Alternatively, and in lieu of the price determined pursuant to Sections
4.2 and 4.3 hereof, the parties may mutually agree to a NYMEX Price or a NYMEX
9
<PAGE>
Forward Price based on the NYMEX posting for the natural gas futures contract,
calculated as follows:
(a) On or before the business day prior to the NYMEX Settlement day, Buyer
may propose that the price under this Agreement for gas nominated by Buyer for
delivery in the applicable month be the NYMEX Price, plus or minus the basis
differentials for each Point of Delivery that may be mutually agreed upon at
the time of Buyer's proposal. The NYMEX Price shall be the arithmetic average
of the NYMEX settlement price of the natural gas futures contract for the last
three trading days applicable to the month of delivery. Buyer's proposal shall
designate the volume of gas for delivery at each Point of Delivery in the
applicable month at the proposed price, up to the volume nominated in
accordance with Section 3.1 of this Agreement. Upon receipt of Buyer's
proposal, the parties shall confer by telephone as soon as possible and decide
whether or not to use the NYMEX Price, which decision shall ultimately be made
by Buyer and Seller no later than 11:00 a.m. Central Time on the business day
before the last trading day of the applicable natural gas futures contract. In
the event the parties agree to use the NYMEX Price and agree on the basis
differential, the parties' agreement shall be set forth in a confirmation
prepared by Buyer and transmitted by telecopy to Seller. The parties' agreement
shall be deemed conclusive upon receipt of the confirmation (as evidenced by
electronic confirmation of transmission) unless Seller objects promptly in
writing following receipt of the confirmation. Either party shall have the
right to withhold agreement on any price proposed under this Section 4.7(a) at
its sole discretion,
10
<PAGE>
in which case the price under this Agreement will be determined under Sections
4.2 or 4.3 hereof. If the parties are unable to agree on the basis differentials
or methodology for determining the basis, the NYMEX Price shall be deemed to be
rejected. In the event the parties agree to use the NYMEX Price, the nominated
volumes which are covered by the NYMEX Price shall remain in effect during the
applicable month and shall not be reduced or increased pursuant to Sections 3.2
or 3.3 of this Agreement.
(b) In addition to the NYMEX Price, Buyer shall have the right to
propose that the NYMEX Forward Price, plus or minus the basis differentials for
each Point of Delivery that may be mutually agreed upon at the time of Buyer's
proposal, be the price to be paid under this Agreement during any calendar
months designated by Buyer. The NYMEX Forward Price shall be the NYMEX posting
for the natural gas futures contract applicable to the month or months selected
by Buyer and prevailing at the time Buyer's proposal is communicated to Seller
by telephone and confirmed by Seller. Buyer's proposal shall designate the
volume of gas for delivery at each Point of Delivery during the designated
months at the proposed price, up to the volume that can be nominated in
accordance with Section 3.1 of this Agreement. Upon receipt of Buyer's proposal,
the parties shall confer by telephone and decide whether or not to use the NYMEX
Forward Price, which decision shall be made no later than 11:00 a.m. Central
Time on the first business day following Seller's receipt and confirmation of
Buyer's proposal. In the event the parties agree to use the NYMEX Forward Price
and agree on the basis differential or methodology for
11
<PAGE>
determining the basis, the parties' agreement shall be set forth in a
confirmation prepared by Buyer and transmitted by telecopy to Seller. The
parties' agreement shall be deemed conclusive upon receipt of the confirmation
(as evidenced by electronic confirmation of transmission) unless Seller objects
promptly in writing following receipt of the confirmation. Either party shall
have the right to withhold agreement on any price proposed under this Section
4.7(b), at its sole discretion, prior to the execution of the NYMEX
transaction, in which case the price under this Agreement will be determined
under Sections 4.2 or 4.3 hereof. If the parties are unable to agree on the
basis differentials or methodology for determining the basis, the NYMEX Forward
Price shall be deemed to be rejected. Nothing in this subsection (b) shall be
construed to prevent Buyer from proposing the NYMEX Forward Price in any
designated month if either of the parties had previously rejected the NYMEX
Forward Price for that month. In the event the parties agree to use the NYMEX
Forward Price, the nominated volumes which are covered by the NYMEX Forward
Price shall remain in effect during the designated months and shall not be
decreased or increased pursuant to Sections 3.2 or 3.3 of this Agreement. In
addition, should the parties agree to use the NYMEX Forward Price, the
selection of that option shall remain in effect during the months selected by
the parties unless the parties mutually agree to use a different pricing option.
ARTICLE 5: RESERVATION CHARGES AND SUBSTITUTE FUELS
---------------------------------------------------
5.1 If with respect to each Point of Delivery during any month, Seller
sells and delivers less than one hundred percent (100%), but greater than
ninety percent (90%),
12
<PAGE>
of the Nominated Quantity multiplied by the number of days in the month, except
to the extent excused under the provisions of this Agreement or due to Buyer's
unexcused failure to receive, then Buyer shall be relieved of its obligation to
pay Seller the Reservation Charge applicable to the volumes not made available
and Seller shall refund to Buyer any payments attributable to such volumes if
already invoiced and paid. If with respect to each Point of Delivery during any
month Seller sells and delivers less than ninety percent (90%) of the Nominated
Quantity multiplied by the number of days in the month, except to the extent
excused under the provisions of this Agreement or due to Buyer's unexcused
failure to receive, then Buyer shall be relieved of its obligation to pay Seller
the Reservation Charge for the Point of Delivery set forth in Section 5.2 for
the entire month during which such supply failure occurred. Under the
circumstances set forth in the immediately preceding sentence of this Section
5.1, Seller shall also reimburse Buyer its actual costs incurred for the
purchase and/or production and transportation of alternate supplies of fuel
equal to the undelivered volume, including but not limited to any imbalance
carrying charges and/or cash-out costs and penalties imposed by Transporter(s),
PSE&G and/or Elizabethtown, less the costs that Buyer would have otherwise
incurred for the purchase and transportation of gas under this Agreement. Buyer
shall use commercially reasonable efforts to minimize its incremental actual
costs for acquiring alternate supplies of fuel. In the exercise of its
commercially reasonable efforts, Buyer shall exercise diligent good faith
efforts to purchase least cost substitute fuel, including purchasing gas under
existing agreements with other sellers which will enable Buyer to utilize its
transportation rights used to transport gas hereunder. Because of environmental
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<PAGE>
restrictions on Buyer's use of fuels other than gas at the Facility, Buyer shall
have the sole discretion whether to purchase gas or an alternate fuel as a
substitute for gas not delivered by Seller hereunder, even where gas is more
expensive. Except in the case of Seller's willful misconduct or gross negligence
and except as described in Articles 12, 14 and 22, these are the sole and
exclusive remedies available to Buyer for any failure by Seller to deliver gas.
5.2 Buyer shall pay Seller a monthly Reservation Charge in consideration
for maintaining the capability to deliver gas up to the DCQ, assuming market and
supply risks, and agreeing to reimburse Buyer for any amounts pursuant to
Section 5.1. The Reservation Charge shall be the Reservation Rate multiplied by
the DCQ for each Point of Delivery, multiplied by the number of days in such
month. To illustrate how the Reservation Charge would be calculated assume that
the DCQ for TGPL Station 45 is 7,750 MMBtus per Day, at the Reservation Rate,
the Reservation Charge for the month of November would be $2,906.25 (7,750 x
$0.0125 x 30). Additionally, assume that the DCQ for TGPL Station 65 is 5,890
MMBtus per Day, at the Reservation Rate, the Reservation Charge for the month of
November would be $2,650.50 (5,890 x $0.015 x 30). In the foregoing examples
market area fuel has been omitted for simplicity. Market Area Fuel is included
in the DCQ in the actual calculations, however.
ARTICLE 6: PAYMENT
------------------
6.1 Seller shall render an invoice on or before the fifteenth (15th) day
of each month setting forth the actual quantity of gas nominated by Buyer and
delivered by Seller hereunder at each Point of Delivery during the preceding
month, the Commodity
14
<PAGE>
Price, Alternate Commodity Price, NYMEX Price or NYMEX Forward Price, as
applicable, the Reservation Charge, any amounts due under Sections 2.2 and 12.2
and the total amount due. In the event that the actual quantity delivered, the
Alternate Commodity Price or the Reservation Charge is not known at the time the
invoice is rendered, an estimated quantity, Alternate Commodity Price and
Reservation Charge, based on the best available information, shall be used.
Buyer shall pay Seller for the amount due by wire transfer with immediately
available funds to Seller's account in accordance with instructions contained in
Seller's invoice. Payment shall be due on or before the twenty-fifth (25th)
day of such month or ten (10) days from the date of such invoice, whichever is
later. When the actual quantity, Alternate Commodity Price or Reservation Charge
becomes known and if an adjustment is necessary, an invoice containing the
adjustment for the difference between the actual value and the estimated value
will be rendered. Payment of the amount of the adjustment will be due on the due
date for Seller's next monthly invoice.
6.2 Buyer shall submit an invoice on or before the tenth (10th) day of the
month, if necessary, for any amount due pursuant to Sections 5.1 and 12.2.
Seller shall pay Buyer in accordance with instructions contained in Buyer's
invoice. Payment shall be due on or before the twenty-fifth (25th) day of such
month or ten (10) days from the date of such invoice, whichever is later.
6.3 Should either party fail to pay any amount not in dispute when due,
interest thereon shall accrue at the lesser of (i) the rate of one percent (1%)
above the prime commercial rate charged by Citibank, N.A., New York, New York,
compounded annually from the due date or (ii) the maximum lawful contract rate
permitted by
15
<PAGE>
applicable law, until the amount due and interest have been paid in full. Such
interest shall be in addition to any other rights and remedies the owed party
may have for the owing party's failure to pay any amount not in dispute. Should
the owing party dispute the amount invoiced, such party shall pay the undisputed
amount and notify the other party of any disputed amount by the due date. Both
parties will mutually resolve the disputed amount in a timely manner with
interest at the rate set forth above accruing from the original due date on any
disputed amount determined to be a valid amount due. Notwithstanding the
foregoing or any other provision herein, if Buyer fails to pay any amount within
five (5) days after receiving written notice from Seller that payment is
delinquent, Seller may withhold deliveries and, should said nonpayment continue
for a period of thirty (30) days after such notice, subject to the provisions of
Article 22, Seller may terminate this Agreement upon written notice.
6.4 Upon reasonable notice, each party shall have the right at reasonable
times to have an independent public accounting firm examine the books, records,
and charts controlled by the other party to the extent necessary to verify the
accuracy of any statement, payment, charge, or computation made pursuant to this
Agreement. In the event an error is discovered in any statement, payment,
charge, or computation, the amount of the adjustment shall be due within thirty
(30) days of the determination thereof, provided that any statement, payment,
charge, or computation shall be final as to both parties unless objected to in
writing within twelve (12) months after payment has been made.
6.5 If either party pays any amount shown due and owing upon the invoice
of the other party, and such amount is subsequently determined by agreement,
16
<PAGE>
arbitration or judgment of court not to have been due and owing when paid, the
payee will refund such amount to the paying party together with interest from
the date of payment to the date of refund at the interest rate set forth in
Section 6.3 hereof.
ARTICLE 7: TAXES
----------------
7.1 Seller shall pay, or cause to be paid, all taxes, assessments, fees or
other charges now and hereafter lawfully levied and imposed by federal, state,
or local authorities upon or with respect to the gas prior to the Point(s) of
Delivery. In the event Buyer is required to remit such taxes, assessments, fees
or charges, Seller shall reimburse Buyer for such amount. Seller shall furnish
Buyer with a copy of the exemption certificate in situations in which exemption
from any such imposition is claimed by Seller.
7.2 Buyer shall pay, or cause to be paid, all taxes, assessments, fees or
other charges (including, but not limited to, sales and value added taxes) now
and hereafter lawfully levied and imposed by federal, state, or local
authorities upon or with respect to the gas at and subsequent to the Point(s) of
Delivery. In the event Seller is required to remit such taxes, assessments, fees
or charges, Buyer shall reimburse Seller for such amount. Buyer shall furnish
Seller with a copy of the exemption certificate in situations in which exemption
from any such imposition is claimed by Buyer.
ARTICLE 8: POINT(S) OF DELIVERY
-------------------------------
The "Point(s) of Delivery" shall be the point(s) on Transporter(s)'
pipeline system(s) where gas is delivered by Seller to Transporter(s) for
Buyer's account, as specified in Exhibit C attached hereto and made a part
hereof. As between the parties hereto, title, risk of loss, and liabilities
associated with delivered gas shall pass to and
17
<PAGE>
vest in Buyer at the Point(s) of Delivery. Changes in the Point(s) of Delivery
shall require the mutual consent of the parties.
ARTICLE 9: PRESSURE
-------------------
Seller shall deliver gas at the Point(s) of Delivery at a pressure
sufficient to effect delivery into the receiving Transporter(s)' facilities.
ARTICLE 10: MEASUREMENT
-----------------------
All measurements of gas delivered and sold hereunder shall be in accordance
with the provisions of the receiving Transporter(s)' tariff at the Point(s) of
Delivery.
ARTICLE 11: QUALITY
-------------------
The gas delivered and sold by Seller to Buyer at the Point(s) of Delivery
shall meet the quality specifications set forth in the receiving Transporter(s)'
tariff at the Point(s) of Delivery. Buyer shall have the right to be represented
and to participate in all tests of gas delivered hereunder performed by Seller,
and to inspect any equipment used in such tests to determine the nature of the
quality of gas delivered hereunder. In the event the gas does not meet such
quality specifications, Buyer may refuse delivery of the gas. Seller's delivery
of gas refused by Buyer for failure to meet quality specifications shall not
constitute delivery for the purposes of Articles 2, 5 and 6. Buyer's sole remedy
for such failure of gas to meet quality specifications shall be to refuse
receipt of the gas and receive the remedy specified in Article 5.
ARTICLE 12: TRANSPORTATION AND IMBALANCE CHARGES
------------------------------------------------
12.1 Transporter(s)' rules, guidelines, operational procedures and
policies, as may be changed from time to time, may define and set forth the
manner in which gas delivered and sold under this Agreement is transported.
Seller and Buyer agree to
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<PAGE>
provide to the other, in as prompt a manner as reasonable, all information
necessary to permit scheduling pursuant to such requirements. Seller shall give
Buyer the highest ranking given to any other purchaser of Seller's gas in any
priority queue when nominating or allocating volumes to Transporter(s) for
delivery to Buyer under this Agreement.
12.2 Each party agrees to make all reasonable efforts to cooperate with the
other in operating under this Agreement to avoid pipeline imbalance charges,
cash-out costs and penalties. Buyer shall bear any under or over delivery
charges, cash-out costs and penalties assessed by Transporter(s), PSE&G and
Elizabethtown which are caused by variances (including variances due to events
of force majeure declared by Buyer) in Buyer's receipts from the Nominated
Quantity and Seller shall bear any under or over delivery charges, cash-out
costs and penalties assessed by Transporter(s), PSE&G and Elizabethtown which
are caused by variances (including variances due to events of force majeure
declared by Seller) in Seller's deliveries from the Nominated Quantity.
12.3 Seller shall be responsible for transportation to the Point(s) of
Delivery and payment of all transportation charges relating thereto. Buyer shall
be responsible for transportation from the Point(s) of Delivery and payment of
all transportation charges relating thereto. The parties recognize that the gas
purchased hereunder may be transported by Transporter(s) whose transportation
rates and related charges such as fuel reimbursement and take-or-pay surcharges
are subject to refund. The party which pays the Transporter(s) for
transportation of gas hereunder shall be entitled to retain any refunds
associated therewith.
19
<PAGE>
ARTICLE 13: TERM
----------------
This Agreement shall be effective from the date first set forth above and,
unless sooner terminated under the provisions of this Agreement, shall continue
for five (5) months from the commencement of deliveries of gas hereunder. The
commencement of deliveries of gas hereunder shall be November 1, 1997, unless
otherwise agreed by the parties. The term of this Agreement may be extended by
mutual agreement of the Parties.
ARTICLE 14: FORCE MAJEURE
-------------------------
14.1 If, by reason of force majeure either party is rendered unable, wholly
or in part, to carry out its obligations under this Agreement, and such party
provides written notice and full particulars of such event of force majeure as
soon as practicable after the occurrence thereof, the obligations of such
affected party shall be suspended to the extent and for the period of such event
of force majeure, except for the payment of monies in respect of obligations
that have accrued hereunder. The cause of suspension other than strikes or
lockouts shall be remedied so far as possible with reasonable dispatch.
Settlement of strikes and lockouts shall be wholly within the discretion of the
party having the difficulty.
14.2 The term "force majeure" shall mean any act or event which wholly or
partially prevents or delays the performance of obligations arising under this
Agreement if such act or event is not reasonably within the control of and not
caused by the fault or negligence of the party claiming force majeure and which
by the exercise of due diligence such party is unable to prevent or overcome,
including, without limitation by the following enumeration: acts of God, the
public enemy or the
20
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elements; fire, accidents, breakdowns, shutdowns for purposes of necessary
repairs, maintenance, relocation or construction of facilities; breakage,
freezing or accidents to wells, machinery or lines of pipe; the necessity of
making repairs or alterations to machinery or lines of pipe; inability to obtain
materials, supplies, permits, or labor to perform or comply with any obligation
or condition of this Agreement; any curtailment of firm gas transportation
service to, of electricity or steam purchases from, or of resale service by
PSE&G and Elizabethtown to, the Facility; strikes and any other industrial,
civil or public disturbances; any laws, orders, rules, regulations, acts,
restraints of any government or governmental body or authority, civil or
military which have the effect of prohibiting performance of a party's
obligations. The term "force majeure" shall also expressly include the
imposition upon Seller or Buyer of any gross receipts, franchise or other gas
sales or consumption tax which Seller or Buyer is not obligated to pay on the
date of execution of this Agreement, which tax Seller or Buyer determines has a
material economic impact on its ability to continue to sell or purchase gas at
the prices or in the quantities set forth herein.
14.3 Except as provided in Section 14.2, neither party may rely upon
changes in market conditions, curtailment of interruptible transportation, or
denial by a regulatory authority of the pass through of the cost of gas
purchased under this Agreement as events of force majeure. In the event of force
majeure that causes Seller to curtail its deliveries hereunder, Seller shall
treat Buyer on a pro rata basis with Seller's other firm customers and shall
give Buyer priority of service over all interruptible customers.
21
<PAGE>
14.4 In the event Buyer fails to take or Seller fails to make available,
due to a declared event of force majeure, at least fifty percent (50%) of the
aggregate DCQ for a period of sixty (60) consecutive days, then the non-
declaring party may terminate this Agreement upon written notice, provided that
such notice is given prior to the date the force majeure is remedied.
ARTICLE 15: NOTICE
------------------
Any notice, request, demand, statement, or bill provided for in this
Agreement shall be in writing and delivered by hand, mail, or telecopy. All
such written communications shall be effective upon receipt by the other party
at the address of the parties hereto as follows:
Buyer:
Notices & Statements
--------------------
Cogen Technologies Linden Venture, L.P.
c/o Cogen Technologies, Inc.
Suite 4300
1600 Smith Street
Houston, TX 77002
Attention: Vice President - Fuel Supply
----------
Telephone No.: (713) 951-7768
Telecopy No.: (713) 951-7803
Seller: Notices & Statements
--------------------
Vastar Gas Marketing, Inc.
200 Westlake Park Blvd., Suite 200
Houston, TX 77079-2648
Telephone No.: (281) 584-3900
Telecopy No.: (281) 584-3905
22
<PAGE>
Payments:
---------
Vastar Gas Marketing, Inc.
Citibank N.A., New York
Account # 40553611
ABA # 021000089
Nomination Notices:
-------------------
Vastar Gas Marketing, Inc.
200 Westlake Park Blvd., #200
Houston, TX 77079-2648
Attention: Bobby Osoria
Telephone No.: (281) 584-3952
Telecopy No: (281) 584-3901
Either of the parties may designate a further or different address by
giving written notice to the other party.
ARTICLE 16: LAWS, ORDERS & REGULATIONS
--------------------------------------
This Agreement, and all terms and provisions contained herein, and the
respective obligations of the parties are subject to valid laws, orders, rules,
and regulations of duly constituted authorities having jurisdiction over Buyer,
Seller, Transporter(s), PSE&G or Elizabethtown. In the event that any regulatory
or government body asserting jurisdiction over Transporter(s), PSE&G,
Elizabethtown or either party prohibits any of the transactions described in
this Agreement or any transportation or delivery agreement between
Transporter(s), PSE&G, Elizabethtown or either party covering the transportation
and delivery of the gas sold hereunder, or otherwise conditions such
transactions in a form that is unacceptable in the reasonable judgment of the
party affected thereby, then either party hereto so affected or prohibited may,
by giving one (1) month's prior written notice to the other party,
23
<PAGE>
terminate this Agreement and each party shall be held harmless as a result of
such termination except for obligations which were incurred prior to
termination; provided, however, such termination shall be effective immediately
where required by law, rule or regulation.
ARTICLE 17: APPLICABLE LAW
--------------------------
THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS.
ARTICLE 18: WAIVER
------------------
No waiver by either party of any one or more defaults in the performance of
any provision of this Agreement shall operate or be construed as a waiver of any
future default, whether of a like or a different character.
ARTICLE 19: TITLE
-----------------
Seller warrants title to, or good right to sell, all gas delivered
hereunder by Seller, and that such gas is free from liens and adverse claims of
every kind. Seller will pay, or cause to be paid, all royalties and other sums
imposed on the production, gathering, or transportation of the gas prior to its
delivery by Seller to Buyer. Seller will indemnify and save Buyer harmless
against all loss, damage, and expense of every character on account of adverse
claims to the gas delivered by it or of royalties, payments or other charges
thereon applicable before delivery to Buyer. If any adverse claim of any
character is asserted with respect to Seller's right to deliver gas hereunder,
or with respect to Seller's right to receive payment for such gas, or if
Seller's title is questioned or involved in any action, then Buyer shall
immediately notify Seller of such adverse claim and then may withhold that
portion of sums due
24
<PAGE>
hereunder reasonably related to such claim until such claim is finally
determined or title is clear, or until such time as Seller furnishes a corporate
undertaking conditioned to save Buyer harmless from such claim.
ARTICLE 20: ASSIGNMENT
----------------------
Either party may, without relieving itself of its obligations under this
Agreement, assign this Agreement to an entity with which it is affiliated, or
which succeeds to all or substantially all of its business or assets, expressly
including but not limited to Southern Company Energy Marketing L.P. (a limited
partnership between Seller and Southern Energy Inc.); but otherwise no
assignment of this Agreement or any of the rights or obligations hereunder shall
be made unless there first shall have been obtained the consent thereto in
writing of the other party, which consent shall not be unreasonably withheld or
delayed. Any successor-in-interest of Buyer or Seller shall be entitled to the
rights and shall be subject to the obligations of its predecessor-in-interest
under this Agreement. It is agreed, however, that the restrictions on assignment
contained in this paragraph shall not in any way prevent either party to this
Agreement from pledging, mortgaging or assigning its rights hereunder as
security for its indebtedness. In connection with any such pledge, mortgage or
assignment by Buyer, Seller will execute an appropriate consent to any such
pledge, mortgage or assignment as reasonably requested by Buyer's lender. Any
such consent will acknowledge, in effect, that this Agreement has been duly
authorized and is valid and enforceable against Seller and that this Agreement
is in full force and effect; that Seller will not agree to any amendment to this
Agreement without the lender's approval in writing, which approval shall not be
unreasonably withheld by the lender; that Seller
25
<PAGE>
will make all payments due to Buyer hereunder in accordance with the
instructions of the lender; that Seller will not terminate this Agreement by
reason of Buyer's default or by reason of force majeure, without giving the
lender notice of default and notice of termination and the same opportunity to
cure provided to Buyer under this Agreement (plus any longer period as may be
necessary, not to exceed one (1) month, if the lender in good faith is
endeavoring to obtain possession of the Facility and pays Seller in accordance
with the terms of this Agreement during such period); that Seller will deliver
to the lender a copy of each notice of default and notice of termination at the
same time that such notice is delivered to Buyer; and that in the event the
lender exercises its rights under its loan documentation or partnership
documentation with Buyer, Seller will accept performance by the lender or any
successor or assign thereof, provided that the lender or any such successor or
assign pays all sums then due to Seller hereunder and is also otherwise in
compliance with this Agreement.
ARTICLE 21: ARBITRATION
-----------------------
21.1 Either party may, by notice to the other party, submit to binding
arbitration any dispute arising hereunder. Should an issue be submitted to
binding arbitration pursuant to the provisions of this Agreement, the parties
shall each appoint one (1) arbitrator and the two (2) arbitrators so appointed
will select a third arbitrator, all of such arbitrators to be qualified by
education, knowledge, and experience to resolve the dispute or controversy. If
either party fails to appoint an arbitrator within ten (10) days after a request
for such appointment is made by the other party in writing, or if the two (2)
appointed fail, within ten (10) days after the appointment of the second, to
agree on a third arbitrator, the arbitrator or arbitrators necessary to
26
<PAGE>
complete a board of three (3) arbitrators will be appointed upon application by
either party therefor by the American Arbitration Association.
21.2 The jurisdiction of the arbitrators will be limited to the single
issue or issues referred to arbitration and the arbitration shall be conducted
pursuant to the guidelines set forth by the American Arbitration Association;
provided, however, that should there be any conflict between such guidelines and
the procedures set forth in this Agreement, the terms of this Agreement shall
control.
21.3 Within fifteen (15) days following selection of the third arbitrator,
each party shall furnish the arbitrators in writing its position and supporting
arguments regarding the issue or issues being arbitrated. The arbitrators may,
if they deem necessary, convene a hearing regarding the issue or issues being
arbitrated. All hearings shall be held at a location to be agreed upon among the
arbitrators in Houston, Harris County, Texas. Within thirty (30) days following
the later of the appointment of the third arbitrator or of the hearing, if one
is held, the arbitrators shall notify the parties in writing as to which of the
two (2) positions submitted with respect to the issue or issues in question is
most consistent with the intent of this Agreement. Such decision shall be
binding on the parties hereto until and unless changed in accordance with the
provisions of this Agreement.
21.4 Enforcement of the award may be entered in any court having
jurisdiction over the parties.
21.5 Each party will pay the expense of the arbitrator selected by or for
it, and its counsel, witnesses and employees. All other costs of arbitration
will be equally divided between the parties.
27
<PAGE>
ARTICLE 22: DEFAULT
-------------------
22.1 In the event either party fails to perform any of the material
covenants or obligations imposed upon it under and by virtue of this Agreement,
the party not in default hereto, having first given thirty (30) days written
notice to the party in default stating specifically the nature of the default
and declaring it to be the intention of the party giving notice to cancel this
Agreement (the "Cancellation Notice"), may, at its option, cancel this Agreement
in accordance with this Article 22. If within said period of thirty (30) days
the party in default remedies or removes said default, including payment of sums
due with interest at the rate set forth in Section 6.3 hereof, or provides
adequate security to fully indemnify the party not in default for any and all
direct damages of such breach, including payment of sums due with interest at
the rate set forth in Section 6.3 hereof, then such Cancellation Notice shall be
withdrawn and this Agreement shall continue in full force and effect; provided,
however, that if the default is the failure to pay sums due hereunder, then the
party not in default shall have the right to suspend gas deliveries or takes, as
the case may be, after service of the Cancellation Notice.
22.2 If the party in default does not so remedy or remove the default or
does not provide adequate security to fully indemnify the party not in default
for any and all direct damages of such breach, and fails to represent that
further defaults shall not occur and that steps have been taken to avoid such a
recurrence, within said period of thirty (30) days, this Agreement, at the
option of the party not in default, shall be canceled upon written notice to the
defaulting party. Cancellation of this Agreement, pursuant to the provisions of
this Article 22, shall be without prejudice to any other
28
<PAGE>
rights and remedies the party not in default has available to it. Further, such
cancellation of this Agreement or failure to cancel shall be without prejudice
to the right of Seller to collect any amounts then due Seller for gas delivered
prior to the time of cancellation.
ARTICLE 23: GENERAL
-------------------
23.1 The headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement.
23.2 Any modification, revision or amendment of this Agreement made
subsequent to its execution shall be valid and effective only if and when made
in writing and duly executed by the parties hereto.
23.3 This Agreement and the Exhibits hereto shall constitute a single
agreement, superseding all prior agreements or undertakings between the parties
on the subject matter hereof. This Agreement contains the entire agreement of
the parties and, except as stated herein, there are no promises, agreements,
warranties, obligations, assurances or conditions precedent or otherwise
affecting it.
23.4 By executing this Agreement, each of the individuals so executing
warrants that (i) the individual has all necessary corporate power and authority
to enter into and execute this Agreement and (ii) this Agreement constitutes the
valid and binding obligation of the party on whose behalf it is executed,
enforceable in accordance with its terms, subject to applicable bankruptcy and
insolvency laws.
23.5 The parties shall execute such additional documents and shall cause
such additional action to be taken as may be required, or, in the reasonable
judgment of any
29
<PAGE>
party, as may be necessary or desirable, to effect or evidence the provisions of
this Agreement and the transactions contemplated hereby.
23.6 The parties acknowledge that each provision to this Agreement
constitutes their joint work product.
ARTICLE 24: CONFIDENTIALITY
---------------------------
24.1 The terms of this Agreement and information disclosed pursuant to this
Agreement, including but not limited to the price paid for gas, shall be kept
confidential by Seller and Buyer, (a) except to the extent any information must
be disclosed to (i) Transporter(s), PSE&G and Elizabethtown for the purpose of
effectuating transportation and resale of the gas sold and purchased under this
Agreement, (ii) Con Ed for the purpose of complying with Article 4.6 of the
Power Purchase Agreement and (iii) either party's lender and (b) except as
required by law, regulation or order of governmental authority.
30
<PAGE>
IN WITNESS WHEREOF, by execution in duplicate originals, the parties hereto
have caused this Agreement to be effective as of the day and year first above
written.
"BUYER" "SELLER"
COGEN TECHNOLOGIES LINDEN VASTAR GAS MARKETING, INC.
VENTURE, L.P.
By: Cogen Technologies Linden, Ltd. By: /s/ TIM DELAY
(in the State of New Jersey d/b/a ----------------------------------
Cogen Technologies Linden, Limited Tim Delay
Partnership), a Texas limited Title: Director, Gas Market Div.
partnership, its general partner Date:
By: Cogen Technologies, Inc., a
Texas corporation, its general partner
By: /s/ W. Colin Harper
---------------------------------
W. Colin Harper
Vice President - Fuel Supply
Date: August 15, 1997
31
<PAGE>
EXHIBIT A
---------
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
as Buyer, and VASTAR GAS MARKETING, INC., as Seller.
NOMINATION NOTICE
-----------------
Date:
----------------
Vastar Gas Marketing, Inc.
200 Westlake Park Blvd., #200
Houston, TX 77079-2648
Attention:
------------------
Reference Firm Gas Purchase and Sale Agreement
Dated: July 1, 1997
Buyer: Cogen Technologies Linden Venture, L.P.
Seller: Vastar Gas Marketing, Inc.
Point of Delivery:
---------------------------------------
Contract No.:
- --- ---------------------------------------
Gentlemen:
Pursuant to Section 3.1 of the subject Agreement, Cogen Technologies Linden
Venture, L.P., hereby nominates the following:
Month of Delivery:
------------------------------------
Nominated Quantity (MMBtu/D):
-------------------------
Very truly yours,
- ---------------------------------
W. Colin Harper
Vice President - Fuel Supply
32
<PAGE>
EXHIBIT B
---------
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997 and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P., as
Buyer, and VASTAR GAS MARKETING, INC., as Seller.
MARKET PRICE INDEX (TGPL - STA #45)
-----------------------------------
<TABLE>
<CAPTION>
Publication* Table Row Column
<S> <C> <C> <C>
Inside FERC's Gas Prices of Spot Gas Transcontinental Gas Index
Market Report (first Delivered to Pipelines Pipe Line Corp.
report in applicable (per MMBtu dry) Zone 2 - (pooling
month) point)
Natural Gas Spot Gas Prices; Pooling Points; Contract Index
Intelligence - Weekly Delivered to Pipeline; Transco Station 45 (current month)
Gas Price Index (first (30-day transactions)
report in applicable
month)
</TABLE>
BACKUP PRICE INDEX (TGPL - STA #45)
-----------------------------------
<TABLE>
<CAPTION>
Publication* Table Row Column
<S> <C> <C> <C>
Natural Gas Week Spot Gas Prices on Transcontinental Gas Bid Week
(first report in Interstate Pipeline Pipe Line Corp. (current month)
applicable month) Systems. Delivered STA #45 (Texas-LA
to Pipeline Border - Zone 2)
($/MMBtu)
</TABLE>
33
<PAGE>
MARKET PRICE INDEX (TGPL - STA #65)
-----------------------------------
<TABLE>
<CAPTION>
Publication* Table Row Column
<S> <C> <C> <C>
Inside FERC's Gas Prices of Spot Gas Transcontinental Gas Index
Market Report (first Delivered to Pipelines Pipe Line Corp.
report in applicable (per MMBtu dry) Zone 3 - (pooling
month) points)
Natural Gas Spot Gas Prices; Pooling Points; Contract Index
Intelligence - Weekly Delivered to Pipeline; Transco Station 65 (current month)
Gas Price Index (first (30-day transactions)
report in applicable
month)
</TABLE>
BACKUP PRICE INDEX (TGPL - STA #65)
-----------------------------------
<TABLE>
<CAPTION>
Publication* Table Row Column
<S> <C> <C> <C>
Natural Gas Week Spot Gas Prices on Transcontinental Gas Bid Week
(first report in Interstate Pipeline Pipe Line Corp. (current month)
applicable month) Systems; Delivered STA #50, 62, 65
to Pipeline (South LA - Zone 3)
($/MMBtu)
</TABLE>
34
<PAGE>
EXHIBIT C
---------
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
as Buyer, and VASTAR GAS MARKETING, INC., as Seller.
POINT(S) OF DELIVERY
--------------------
The Point(s) of Delivery shall be:
A. TGPL Compressor Station #45 in Beauregard Parish, Louisiana
B. TGPL Compressor Station #No. 65 in St. Helena Parish, Louisiana
35
<PAGE>
STATE OF TEXAS )
) SS.
COUNTY OF HARRIS )
On this 15th day of August 1997, before me, Joy R. Toups, the undersigned
officer, personally appeared, W. Colin Harper, known to me to be the person
whose name is subscribed to the within instrument and acknowledged that Cogen
Technologies, Inc., as General Partner of Cogen Technologies Linden, Ltd. (D/B/A
Cogen Technologies Linden, Limited Partnership), in turn acting as General
Partner of Cogen Technologies Linden Venture, L.P. (D/B/A Cogen Technologies
Linden Venture, Limited Partnership) executed the same for the purpose therein
contained.
In witness whereof I hereunto set my hand and official seal.
JOY R. TOUPS
MY COMMISSION EXPIRES /s/ Joy R. Toups
August 13, 2001 -------------------------------------------
Notary Public in and for the State of Texas
[SEAL]
STATE OF TEXAS )
) SS.
COUNTY OF )
On this 20th day of August 1997, before me, Sheria D. Louviere, undersigned
officer, personally appeared, Tim Delay, known to me to be the person whose name
is subscribed to the within instrument and acknowledged that Vastar Gas
Marketing, Inc. executed the same for the purposes therein contained.
In witness whereof I hereunto set my hand and official seal.
SHERIA D. LOUVIERE
NOTARY PUBLIC, STATE OF TEXAS
MY COMMISSION EXPIRES /s/ Sheria D. Louviere
AUG. 11, 1999 -------------------------------------------
Notary Public in and for the State of Texas
[SEAL]
36
<PAGE>
VASTAR RESOURCES, INC.
15375 Memorial Drive
Houston, Texas 77079
713 584-6000
July 1, 1997
Cogen Technologies Linden Venture, L.P.
1600 Smith Street, Suite 4300
Houston, Texas 77002
Attn: Mr. W. Colin Harper
Re: Guaranty of Vastar Resources, Inc.
Dear Mr. Harper:
In consideration of, and in order to induce Cogen Technologies Linden Venture,
L.P. ("Cogen") to enter into that certain Firm Natural Gas Sale and Purchase
Contract with Vastar Gas Marketing, Inc., dated July 1, 1997 ("Contract"),
Vastar Resources, Inc. ("Vastar") irrevocably guarantees the performance of all
obligations of Vastar Gas Marketing, Inc. ("VGM") arising out of said Contract,
subject only to the following terms and conditions:
1. No waiver, amendment or other change to the Contract shall release or limit
Vastar's responsibilities under this guaranty, and Vastar hereby consents
to every such contract waiver, amendment or change.
2. Upon the failure of VGM to perform any obligation arising out of the
Contract, Cogen shall give written notice of such failure to Vastar and
Vastar shall perform or cause to be performed such obligation(s), subject
to the terms, conditions and limitations set forth herein.
3. Subject to paragraph 2 above, Vastar waives notice of acceptance of this
guaranty, presentment and demand concerning the obligations of Vastar or
VGM and any right to require Cogen to seek enforcement of any obligations,
or to bring any action, against VGM or any other person prior to COGEN
exercising its rights at any time under this guaranty.
4. Vastar shall be entitled to assert all rights and defenses of VGM arising
out of the Contract, with the exception of any defenses related to the
bankruptcy, insolvency or dissolution of VGM.
<PAGE>
Cogen Technologies Linden Venture, L.P.
Re: Guaranty of Vastar Resources, Inc.
July 1, 1997
Page 2
5. The parties acknowledge that the Contract is assignable to Cogen's Lenders
(as defined in the Contract). This guarantee is not assignable, except that
if the Contract is assigned to Cogen's Lenders this guaranty may be
assigned to Cogen's Lenders. Upon performance of all the obligations
guarantied hereby, Vastar shall be subrogated to the rights of Cogen
against VGM and Cogen agrees to take, at Vastar's expense, such steps as
Vastar may reasonably request to implement such subrogation.
6. This guaranty embodies the entire agreement and understanding between
Vastar and Cogen regarding the subject matter hereof, and no terms of this
guaranty shall be amended or otherwise changed except in writing signed by
both Vastar and Cogen.
7. This guaranty constitutes a valid and legally binding obligation of Vastar
duly executed and delivered solely for the benefit of Cogen.
8. This guarantee shall remain in effect so long as VGM remains obligated
under the Contract.
9. Cogen may recover any costs incurred in enforcing this guarantee. No delay
by Cogen in exercising its rights hereunder shall constitute a waiver of or
in any way impair such rights.
10. THIS GUARANTY SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAWS.
11. Upon the assignment of the Contract by VGM to Southern Company Energy
Marketing L.P. ("SCEM"), this guaranty shall irrevocably guarantee
performance of all obligations of SCEM arising out of the Contract in
accordance with and subject to the foregoing provisions and the following
additional provision which shall become part of this guaranty upon the
effective date of such assignment without further action by Cogen or
Vastar:
Vastar shall not be obligated to incur, bear or be liable for costs in
performance of this guaranty in excess of the total amount of six
million U. S. Dollars (US $6,000,000.00), and all further performance
of this guaranty by Vastar shall be excused if the total costs
incurred or borne by Vastar hereunder or for which
<PAGE>
Cogen Technologies Linden Venture, L.P.
Re: Guaranty of Vastar Resources, Inc.
July 1, 1997
Page 3
Vastar becomes liable hereunder equal or exceed such amount. Costs
shall mean all liabilities, losses, claims, damages, debts, penalties,
purchases, fees, charges, taxes, expenses and other costs incurred,
suffered or paid by Vastar or for which Vastar becomes liable in the
performance of this guaranty, including but not limited to the value
of any natural gas supplied by Vastar from its equity production.
Upon such assignment of the Contract by VGM to SCEM, all references herein to
VGM shall mean SCEM.
Very truly yours.
VASTAR RESOURCES, INC.
By: /s/ Steven J. Shapiro
------------------------------------------
Steven J. Shapiro
Senior Vice President & Chief Financial
Officer
Accepted and Agreed to this 2nd day of September, 1997
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
By: COGEN TECHNOLOGIES LINDEN, LTD.
ITS GENERAL PARTNER
By: COGEN TECHNOLOGIES, INC.
ITS GENERAL PARTNER
By: /s/ W. Colin Harper
-------------------------------
W. Colin Harper
Vice President - Fuel Supply
<PAGE>
EXHIBIT 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
---------------------------------------------
---------------------------------------------
<PAGE>
Table of Contents
Page
----
1. Defined Terms........................................................... 2
2. Maintenance and Issuance of Letters of Credit........................... 3
3. Agreement To Repay Letter of Credit Disbursements....................... 4
4. Letter of Credit Fees................................................... 7
5. Letter of Credit Operations............................................. 7
6. Making of Payments...................................................... 7
7. Representations and Warranties of the Limited Partnership............... 7
8. Conditions Precedent.................................................... 15
9. Affirmative Covenants................................................... 17
10. Negative Covenants...................................................... 24
11. Events of Default....................................................... 26
12. Amendments and Waivers.................................................. 32
13. Notices................................................................. 32
14. No Waiver; Cumulative Remedies.......................................... 33
15. Severability............................................................ 33
16. Headings................................................................ 33
17. Counterparts............................................................ 34
18. GECC Sole Beneficiary................................................... 34
19. GOVERNING LAW........................................................... 34
20. Submission to Jurisdiction; Waivers..................................... 34
21. Indemnification......................................................... 35
22. Expenses................................................................ 35
23. Successor and Assigns; Transferees; Transferred
Interests.............................................................. 36
-i-
<PAGE>
Schedule I - Existing Letters of Credit
Exhibit A - Form of Irrevocable Letter of Credit
Exhibit B - Form of Letter of Credit Note
-ii-
<PAGE>
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT, dated as of September
17, 1992, between COGEN TECHNOLOGIES LINDEN VENTURE, L.P., a Delaware limited
partnership (the "Limited Partnership"), of which COGEN TECHNOLOGIES LINDEN,
LTD. (d/b/a COGEN TECHNOLOGIES LINDEN, LIMITED PARTNERSHIP in the State of New
Jersey), a Texas limited partnership is the general partner (the "General
Partner"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation
("GECC").
W I T N E S S E T H:
WHEREAS, pursuant to a Construction Loan Agreement, dated as of
February 15, 1990, among the Limited Partnership, the lenders from time to time
parties thereto (the "Construction Lenders") and General Electric Power Funding
Corporation, a Delaware corporation ("GEPFC"), as agent for the Construction
Lenders (in such capacity, the "Agent") (as heretofore amended, supplemented or
otherwise modified, the "Loan Agreement"), the Construction Lenders agreed to
make loans (the "Loans") to the Limited Partnership in order to finance the
costs of constructing, equipping and initially operating the Facility (as
defined in the Loan Agreement) and GEPFC agreed to issue certain letters of
credit (the "Construction Letters of Credit") for the account of the Limited
Partnership; and
WHEREAS, pursuant to an Assignment and Assumption Agreement, dated as
of March, 1990, between GECC and GEPFC, GEPFC assigned to GECC its obligation to
issue the Construction Letters of Credit and its rights to be reimbursed by the
Construction Lenders for any drawings thereunder; and
WHEREAS, upon the request of the Limited Partnership, GECC has issued
certain Construction Letters of Credit; and
WHEREAS, pursuant to the Capital Contribution Agreement, dated as of
February 15, 1990, among the Limited Partnership, the General Partner, GEPFC 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")
under the Trust Agreement (as defined herein), as assignee of GEPFC (as
heretofore amended, supplemented or otherwise modified, the "Capital
Contribution Agreement"), the Owner Trustee agreed to make certain capital
contributions to the Limited Partnership; and
WHEREAS, the Limited Partnership has requested GECC to maintain
certain of the Construction Letters of Credit and has applied to GECC for the
issuance of the Con Ed Letter of Credit (as defined herein) for the account of
the Limited Partnership,
<PAGE>
2
and GECC is willing to maintain such Construction Letters of Credit and is
willing to issue such Con Ed Letter of Credit subject to and upon the terms and
conditions herein; and
WHEREAS, it is a condition precedent to the obligations of the Owner
Trustee to make its capital contributions on the Second Capital Contribution
Date (as defined in the Capital Contribution Agreement) and of GECC to maintain
and issue such letters of credit that the Limited Partnership shall have
executed and delivered this Agreement;
NOW, THEREFORE, in consideration of the premises and to induce GECC to
maintain and issue certain letters of credit for the account of the Limited
Partnership, the Limited Partnership hereby agrees with GECC as follows:
1. Defined Terms. Unless otherwise defined herein, terms used but not
defined herein shall have their respective meanings in the Amended and Restated
Agreement of Limited Partnership of the Limited Partnership, dated as of
September 15, 1992 (the "Amended and Restated Partnership Agreement") (after
giving effect to any waiver or amendment thereof with the consent of GECC) 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):
"Agreement": this Letter of Credit and Reimbursement Agreement, as
amended, supplemented or otherwise modified from time to time.
"Con Ed Letter of Credit": as defined in Section 2.
"Default": any of the events specified in Section 11, 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.
"Event of Default": any of the events specified in Section 11;
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.
"Existing Letters of Credit": as defined in Section 2.
"Letter of Credit Commitment": the obligation of GECC to maintain and
to issue the Letters of Credit for the account of the Limited Partnership
pursuant to Section 2 in an aggregate undrawn amount at any time not to
exceed $120,700,000.
<PAGE>
3
"Letter of Credit Commitment Period": the period from and including
the date of this Agreement to but not including the Termination Date.
"Letter of Credit Fees": as defined in Section 4.
"Letters of Credit": the collective reference to the Con Ed Letter of
Credit and the Existing Letters of Credit.
"LOC Note": as defined in Section 3.
"Obligations": all the unpaid principal amount of and accrued interest
on the LOC Note and all other obligations and liabilities of the Limited
Partnership to GECC, whether direct or indirect, absolute or contingent,
due or to become due, or non-existing or hereafter incurred, which may
arise under, out of or in connection with this Agreement, the LOC Note or
the Letters of Credit, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses (including,
without limitation, all fees and disbursements of counsel to GECC) or
otherwise.
"Operative Documents": as defined in the Amended and Restated
Partnership Agreement.
"Participations": as defined in Section 23.
"Termination Date": July 1, 1993.
"Transferees": as defined in Section 23.
"Trust Agreement": the Trust Agreement, dated as of December 28, 1990,
between the Owner Trustee and Linden Owner Partnership, a Delaware general
partnership, as the same may be amended, supplemented or otherwise modified
from time to time.
"UCP": the Uniform Customs and Practice for Documentary Credits (1983
Revision), Publication No. 400 of the International Chamber of Commerce.
2. Maintenance and Issuance of Letters of Credit. (a) Subject to the
terms and conditions of this Agreement, on the Second Capital Contribution Date
(as defined in the Capital Contribution Agreement), GECC shall continue and
maintain the Construction Letters of Credit listed on Schedule 1 hereto (as
amended, extended, renewed or otherwise modified from time to time, the
"Existing Letters of Credit") in favor of Exxon Corporation and Public Service
Electric and Gas Company and Elizabethtown Gas Company. Notwithstanding the
provisions of Section 3.4 of the Loan Agreement, the parties hereto agree that,
on the date hereof, the Limited Partnership's obligations in
<PAGE>
4
respect of the Existing Letters of Credit shall be governed by the provisions of
this Agreement and shall be deemed to have been satisfied for purposes of the
Construction Loan Agreement only.
(b) Subject to the terms and conditions of this Agreement (including,
without limitation, the limitations of the Letter of Credit Commitment), during
the Letter of Credit Commitment Period, GECC shall issue an irrevocable letter
of credit (the "Con Ed Letter of Credit"), substantially in the form of Exhibit
A, in favor of Con Ed, to secure certain obligations of the Limited Partnership
to Con Ed pursuant to the Power Purchase Agreement, in a maximum face amount at
any time not to exceed the relevant amount set forth on Appendix C thereto (as
modified by the letter dated September 12, 1989, from John J. Kelliher,
Secretary of the Public Service Commission of the State of New York to Chanoch
Lubling). The Limited Partnership will give GECC at least 10 Business Days'
prior written notice of a request for the opening of the Con Ed Letter of
Credit. Such notice shall set forth the proposed issuance date of the Con Ed
Letter of Credit, which shall be a Business Day. The Limited Partnership shall
also provide such other certificates, documents and other papers and information
as GECC may reasonably request. Upon such receipt, GECC will process the form of
the Con Ed Letter of Credit and the other certificates, documents and other
papers delivered to GECC in connection therewith, in accordance with its
customary procedures, and, subject to the terms and conditions hereof, shall
promptly open the Con Ed Letter of Credit (but in no event shall GECC be
required to open the Con Ed Letter of Credit earlier than three Business Days
after receipt by GECC of the notice relating thereto) by issuing the original of
the Con Ed Letter of Credit to Con Ed and furnishing a copy thereof to the
Limited Partnership.
3. Agreement to Repay Letter of Credit Disbursements. (a) The Limited
Partnership agrees (i) to reimburse GECC for any payment made by GECC under any
Letter of Credit immediately upon the making of such payment by GECC and (ii) to
pay interest on any unreimbursed portion of any such payment from the date of
such payment until reimbursement in full thereof at a rate per annum equal to 2%
above the rate of interest declared by Bankers Trust Company, from time to time,
to be its prime rate of interest (or, if Bankers Trust Company shall cease to
exist, the rate of interest declared by Chemical Bank, from time to time, as its
prime rate of interest). The obligation of the Limited Partnership to reimburse
GECC pursuant to this Section 3(a) shall be evidenced by a promissory note of
the Limited Partnership in the form of Exhibit B hereto (the "LOC Note") in the
principal amount equal to the maximum aggregate face amount of all Letters of
Credit.
<PAGE>
5
(b) If the General Partner shall exercise its option to purchase the
Limited Partnership Interests (as defined in the Amended and Restated
Partnership Agreement) pursuant to Article XI or XIV of the Amended and Restated
Partnership Agreement, the Letter of Credit Commitment shall terminate forthwith
and the Limited Partnership shall prepay in full all obligations in respect of
the Letters of Credit and the LOC Note, all Letter of Credit Fees accrued but
unpaid to the date of prepayment and all other amounts payable hereunder. The
Limited Partnership's obligations in respect of the Letters of Credit shall be
satisfied by (i) paying or prepaying any amount due or to become due in respect
of such obligations, (ii) providing GECC with cash collateral, pursuant to
documentation in form and substance satisfactory to GECC, in an amount equal to
the aggregate undrawn face amount of the Letters of Credit or (iii) causing the
termination of the Letters of Credit prior to any drawing being made thereunder.
(c) If GECC has delivered a notice in writing to the Limited
Partnership declaring that a Declared Event of Loss has occurred, (i) the Letter
of Credit Commitment shall terminate forthwith and (ii) the Limited Partnership
shall prepay in full, without premium or penalty, all obligations (whether
matured or unmatured, contingent or noncontingent) in respect of the Letters of
Credit and the LOC Note, together with accrued interest thereon to the date of
payment and shall pay any unpaid Letter of Credit Fees and any other amounts
payable hereunder to the date of payment, on the earlier of (x) the date
occurring 90 days after the date of receipt of such notice from GECC and (y) the
date on which insurance proceeds are received by 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 GECC, insurance
proceeds sufficient to cover the amounts specified in clause (ii) above will be
received within such additional period. The Limited Partnership's obligations in
respect of the Letters of Credit shall be satisfied in any of the manners
described in the last sentence of paragraph (b) above.
(d) The Limited Partnership's obligations to prepay and repay GECC for
payments and disbursements made by GECC under, and in accordance with, any
Letter of Credit shall be absolute, unconditional and irrevocable under all
circumstances whatsoever, including, without limitation, the following
circumstances: (i) any lack of validity or enforceability of any Letter of
Credit or any agreement or instrument related thereto; (ii) any amendment or
waiver of or any consent to or departure from the terms of any Letter of Credit,
provided, that any such amendment shall have been effectuated in accordance with
Section 12 hereof; (iii) the existence of any claim, set-off, defense or other
right which the
<PAGE>
6
Limited Partnership or any other person may at any time have against any
beneficiary or any transferee of any Letter of Credit (or any persons for whom
any such beneficiary or any such transferee may be acting), GEPFC, GECC or any
other person in connection with this Agreement or any other agreement or
transaction; (iv) any draft 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;
(v) payment by GECC under any Letter of Credit against presentation of a draft
or certificate which does not comply with the terms of any Letter of Credit,
provided that such payment shall not have constituted gross negligence or
willful misconduct; or (vi) any other circumstance or event whatsoever, whether
or not similar to any of the foregoing.
(e) The Limited Partnership hereby agrees to indemnify and hold
harmless GECC from and against any and all claims, damages, losses, liabilities,
reasonable costs or expenses whatsoever which GECC may incur (or which may be
claimed against GECC 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 Limited Partnership shall
not be required to indemnify GECC for any claims, damages, losses, liabilities,
costs or expenses to the extent, but only to the extent, caused by the failure
of GECC to act in good faith or to use care in the examination of any draft or
certificate presented under any Letter of Credit in ascertaining whether on its
face it appeared to comply with the terms of such Letter of Credit. Nothing in
this Section 2(e) is intended to limit the reimbursement obligation of the
Limited Partnership contained herein.
(f) The Limited Partnership assumes all risks of the acts or omissions
of the beneficiary and any transferee of any Letter of Credit with respect to
its use of such Letter of Credit. Neither GECC nor any of its affiliates,
officers or directors shall be liable or responsible for: (i) the use which may
be made of any Letter of Credit or for any acts or omissions of the beneficiary
and any transferee in connection therewith; (ii) 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; (iii) payment by GECC against presentation of documents
which do not comply with the terms of any Letter of Credit, including failure of
any documents to bear any reference or adequate reference to such Letter of
Credit; or (iv) any other circumstances whatsoever in making or failing to make
payment under any Letter of Credit, except only that the Limited Partnership
shall have a claim against GECC, and GECC shall be liable to the Limited
Partnership, to the extent, but only to the extent, of any direct, as opposed to
consequential, damages
<PAGE>
7
suffered by the Limited Partnership which the Limited Partnership proves were
caused by the failure of GECC to act in good faith or to use care in the
examination of any draft or certificate presented under any Letter of Credit in
ascertaining whether on its face it appeared to comply with the terms of such
Letter of Credit. In furtherance and not in limitation of the foregoing, GECC
may accept documents that appear on their face to be in order, without
responsibility for further investigation.
4. Letter of Credit Fees. The Limited Partnership agrees to pay GECC,
with respect to the Letters of Credit, a letter of credit fee equal to .75% per
annum (computed on the basis of the actual number of days elapsed over a year of
360 days) on the maximum amount available to be drawn at such time under such
Letters of Credit plus, if such maximum amount, at any time, exceeds
$75,000,000, .25% per annum on such maximum amount in excess of $75,000,000. The
letter of credit fees (the "Letter of Credit Fees") referred to in the preceding
sentence shall be payable monthly in advance, commencing on the date of the
issuance of such Letter of Credit or, in the case of the Existing Letters of
Credit, the Second Capital Contribution Date.
5. Letter of Credit Operations. GECC shall within 10 Business Days
following its receipt thereof, examine all documents purporting to represent a
demand for payment under any Letter of Credit to ascertain that the same appear
on their face to be in conformity with the terms and conditions of such Letter
of Credit. Within 10 Business Days of such receipt, GECC shall give written
notification to the Limited Partnership of such demand for payment and the
determination by GECC as to whether such demand for payment was in accordance
with the terms and conditions of such Letter of Credit and whether GECC has made
or will make a disbursement thereunder; provided, however, that the failure to
give such notice shall not relieve the Limited Partnership of its obligation to
reimburse GECC for such disbursement.
6. Making of Payments. All payments by the Limited Partnership to
GECC under this Agreement or under the LOC Note shall be paid to GECC by wire
transfer 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 021 001 033 or
to such other account as GECC may from time to time specify to the Limited
Partnership in freely transferable Dollars and immediately available funds
without set-off or counterclaim.
7. Representations and Warranties of the Limited Partnership. The
Limited Partnership represents and warrants as of the date hereof and as of the
date of issuance of the Con Ed Letter of Credit:
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8
(a) Financial Statements. (i) The balance sheets of each of the
General Partner and the Limited Partnership as at the date which is one
month prior to the Second Capital Contribution Date, and the related
statements of income and partners' capital and changes in partners' capital
and cash flow for the period then ended, furnished to GEPFC prior to the
Second Capital Contribution Date and certified by a Responsible Officer of
the General Partner, are complete and correct in all material respects and
present fairly the financial position of the General Partner or the Limited
Partnership, as the case may be, on such date and the results of the 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 Limited Partnership and the
General Partner on such date required to be disclosed pursuant to GAAP are
disclosed in such balance sheets.
(ii) The most recent balance sheet of the Limited Partnership and the
General Partner and the related statements of income and partners' capital
and changes in partners' capital and cash flow for the period then ended,
heretofore furnished to GEPFC pursuant to the Loan Agreement and certified
by a Responsible Officer of the General Partner (copies of which have been
furnished to GECC), are complete and correct in all material respects and
fairly present the financial condition of the Limited Partnership and the
General Partner 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 Limited Partnership and the General Partner on such date
required to be disclosed pursuant to GAAP are disclosed in such balance
sheet.
(iii) There has been no material adverse change in (x) the properties,
business, operations, condition (financial or otherwise) or prospects of
the Limited Partnership or the General Partner since the date of the most
recent audited financial statement of the Limited Partnership and the
General Partner, in each case, delivered to GECC pursuant hereto and (y)
there has been no material adverse change in the prospects of the Limited
Partnership from those reflected in the Pro Forma Financial Statements (as
defined in the Capital Contribution Agreement) delivered to GEPFC (copies
of which have been furnished to GECC) pursuant to Section 2 of the Capital
Contribution Agreement.
(b) Partnership Existence and Business; Partners. (i) The Limited
Partnership 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
<PAGE>
9
States of New York, 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
Limited Partnership 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 Limited Partnership except those which have been duly made
or performed. Prior to the date hereof, the Limited Partnership has engaged
in no business other than the development, construction and operation of
the Project and the negotiation, execution, delivery and performance of the
Basic Documents (as defined in the Loan Agreement) and the Operative
Documents, and the Limited Partnership has no obligations or liabilities
other than those directly related to the conduct of such business. The
Limited Partnership is and will be engaged solely in the business of
constructing, owning and operating the Project and, subject to subsection
7.3(a)(i) of the Amended and Restated Partnership Agreement, the
construction, operation and maintenance of the Exxon System.
(ii) The General Partner 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 General Partner is the
sole general partner of the Limited Partnership, and is engaged solely in:
(1) the business of being the general partner of the Limited Partnership,
(2) activities permitted pursuant to the General Partner Credit Agreement
(as defined in the Loan Agreement), (3) the performance of the Limited
Partnership's obligations pursuant to the Basic Documents (as defined in
the Loan Agreement) and the Operative Documents and (4) to the extent
permitted by 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.
(iii) The only partners of the Limited Partnership on the date of
execution and delivery of this Agreement are the General Partner, as the
sole general partner, and the Owner Trustee, as the sole limited partner.
(iv) The Limited Partnership does not have any Subsidiaries. The
General Partner has one Subsidiary which is the Limited Partnership.
<PAGE>
10
(c) Compliance with Law. Each of the Limited Partnership and the
General Partner is in compliance with all Requirements of Law.
(d) Power and Authorization; Enforceable Obligations. (i) The Limited
Partnership 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 and the LOC
Note, to take all action as may be necessary to complete the transactions
contemplated hereunder and thereunder and to have the Letters of Credit
maintained and issued for its account. The Limited Partnership has taken
all necessary partnership and legal action to authorize the maintenance and
issuance of the Letters of Credit on the terms and conditions of this
Agreement and the LOC Note, and to authorize the execution, delivery and
performance of this Agreement and the LOC Note. 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
maintenance and issuance of the Letters of Credit, or with the execution,
delivery or performance by the Limited Partnership or the validity or
enforceability as to the Limited Partnership of this Agreement and the LOC
Note. Each of this Agreement and the LOC Note has been duly executed and
delivered by the Limited Partnership and constitutes a legal, valid and
binding obligation of the Limited Partnership enforceable against the
Limited Partnership 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.
(ii) 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, and to take all action as may be
necessary to complete the transactions contemplated hereunder.
(iii) The Amended and Restated Partnership Agreement has been duly
authorized, executed and delivered by the General Partner and constitutes a
valid and legally binding obligation of the General Partner 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.
(e) No Legal Bar. The execution, delivery and performance of this
Agreement and the LOC Note and the maintenance and issuance of the Letters
of Credit and the
<PAGE>
11
use of the proceeds thereof, (i) will not violate any Requirement of Law
applicable to the Limited Partnership or the General Partner, (ii) will not
violate or result in any breach of, or constitute any default under, any
Contractual Obligation of the Limited Partnership or the General Partner,
except to the extent that the failure to comply therewith could not
reasonably be expected to (1) have a material adverse effect on the
business, operations, property, condition (financial or otherwise) or
prospects of the Limited Partnership or the General Partner, as the case
may be, or (2) materially adversely affect the ability of the Limited
Partnership or the General Partner to perform its obligations under the
Operative Documents to which it is a party, and (iii) will not result in,
or require, the creation or imposition of any Lien on any of the properties
or revenues of the Limited Partnership 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 Limited Partnership or the
General Partner are required in connection with the execution, delivery and
performance by the Limited Partnership or the General Partner of this
Agreement or any other Operative 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 Proceeding or Litigation. Except as disclosed by the Limited
Partnership to GECC in writing on or prior to February 15, 1990, no
litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the best knowledge of the Limited
Partnership, threatened against the Limited Partnership or the General
Partner, or against any of their respective properties, rights, revenues or
assets, or the Project, (i) which could reasonably be expected to have a
material adverse effect on the properties, business, operations, condition
(financial or otherwise) or prospects of the Limited Partnership or the
General Partner, (ii) which could reasonably be expected to have a material
adverse effect on the ability of any Participant to perform its obligations
under any Operative Documents to which such Participant is or will be a
party, or (iii) which could reasonably be expected to have a material
adverse effect on the construction, completion or operation of the Project
as contemplated by the Operative Documents.
(g) No Default or Event of Loss. Neither the Limited Partnership nor
the General Partner is in default under or with respect to any Contractual
Obligation, including, without limitation, any Operative Document in any
respect which could reasonably be expected to (i) have a material
<PAGE>
12
adverse effect on the business, operations, property, condition (financial
or otherwise) or prospects of the Limited Partnership or the General
Partner or (ii) materially adversely affect the ability of the Limited
Partnership or the General Partner to perform its obligations under the
Operative Documents to which it is a party. No notice of default has been
given to the Limited Partnership or the General Partner under any of the
Operative 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 GECC Pursuant to Section 9(o) hereof.
(h) Ownership of Property; Liens. The Limited Partnership has good
title 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 Limited Partnership or the
General Partner is on file in any recording office, except such as
evidences Permitted Liens.
(i) Taxes. The General Partner has filed or caused to be filed all tax
returns which are required to be filed by it or by the Limited Partnership,
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 Limited
Partnership or any of its or the Limited Partnership's property and all
other taxes, fees or other charges imposed on it or the Limited Partnership
or any of its or the Limited Partnership'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
7.2(b) of the Amended and Restated Partnership Agreement.
(j) 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 Limited Partnership 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 Limited Partnership 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 Limited Partnership
nor
<PAGE>
13
any Commonly Controlled Entity would become subject to liability under
ERISA if the Limited Partnership or any Commonly Controlled Entity were to
withdraw completely from all Multiemployer Plans as of the most recent
valuation date applicable thereto. Neither the Limited Partnership nor any
Commonly Controlled Entity has received notice that any Multiemployer Plan
is in Reorganization or Insolvency nor, to the best knowledge of the
Limited Partnership, 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 Limited Partnership
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.
(k) Investment Company Act. Neither the Limited Partnership 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.
(l) Public Utility. (i) Neither GECC, the Owner Trustee nor any of
their respective Affiliates (solely by reason of the capital contributions
to the Limited Partnership made under the Capital Contribution Agreement or
any transaction contemplated hereby or by any other Operative Document)
will be deemed to be, or be subject to the regulation as, an "electric
utility", an "electric utility holding company", a "public utility", or a
"public utility holding company" or any similar entity under any existing
law, rule or regulation of any Governmental Authority; and neither GECC,
the Owner Trustee nor any of their respective Affiliates will, solely (it
being understood that solely shall mean without regard to any other
activity or operation of GECC, the Owner Trustee, any Affiliate or any
parent thereof) by reason of its ownership or operation of the Project, be
deemed to be, or to be subject to regulation as, an "electric utility", an
"electric utility holding company", a "public utility" or a "public utility
holding company", or any similar entity under any existing law, rule or
regulation of any Governmental Authority.
(ii) The Project (1) continues to meet the requirements for a
Qualifying Facility, (2) is eligible for the benefit of the exemptions
provided by 18 C.F.R. (S) 292.601, (3) continues to be certified by FERC as
a Qualifying Facility and (4) is exempt from all regulation under the
<PAGE>
14
Public Utility Holding Company Act of 1935, as amended and the Department
of Public Utilities Act of 1948, NJSA 48:1-1, et seq.
(m) Full Disclosure. No representation, warranty or other statement
made by the Limited Partnership or the General Partner in any Operative
Document or in any certificate, written statement or other document
furnished to GECC by or on behalf of the Limited Partnership 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 Limited Partnership which the
Limited Partnership has not disclosed to GECC 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 Limited
Partnership or the General Partner or the ability of the Limited
Partnership or the General Partner to perform its obligations under any
Operative Document to which it is or is to be a party.
(n) Principal Place of Business, Etc. The principal place of
business and chief executive office of the Limited Partnership, and the
office where the Limited Partnership keeps its records concerning the
Project and all contracts relating thereto, is located at 1600 Smith
Street, Suite 5000, 50th Floor, Houston, Texas.
(o) Representations and Warranties Contained in Operative Documents.
The representations and warranties of the Limited Partnership contained in
the Operative Documents (other than the Project Documents 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 Limited
Partnership hereby confirms each such representation and warranty with the
same effect as if set forth in full herein. The representations and
warranties of the Limited Partnership contained in any Project Document to
which it is a party were true and correct in all material respects 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 in all
material respects as of such earlier date) the Limited Partnership hereby
confirms each such representation and warranty with the same effect as if
set forth in full herein.
<PAGE>
15
(p) Environmental Matters. (i) (1) 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 any such property, except for such
Hazardous Materials as may be permitted to be maintained thereon 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 sum of (x) the
amount set forth in the Construction Budget (as defined in the Loan
Agreement) for Site preparation, (y) any amounts with respect to the
removal of Hazardous Materials for which Exxon is liable under the Site
Lease Agreement and (z) $2,000,000; and
(2) no Environmental Discharges have occurred at, upon, under, within
or from any such property, except for such Environmental Discharges for
which the aggregate cost of clean up will not exceed the sum of (x) the
amount set forth in the Construction Budget (as defined in the Loan
Agreement) for Site preparation, (y) any amounts with respect to the
removal of Hazardous Materials for which Exxon is liable under the Site
Lease Agreement and (z) $2,000,000.
(ii) No Environmental Notice has been received by Limited Partnership
with respect to any Adverse Environmental Event.
(iii) (1) 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;
(2) no outstanding order, judgment or decree which constitutes an
Adverse Environmental Event has been entered with respect to the Limited
Partnership, the Site or the Facility; and
(3) no other event has occurred which constitutes an Adverse
Environmental Event.
The representations set forth in this subsection (p) relating to
conditions existing on the Site prior to the Construction Conversion Date
shall be made only to the best knowledge of the Limited Partnership.
8. Conditions Precedent. GECC's obligation to maintain the Existing
Letters of Credit and to issue the Con Ed Letter of Credit hereunder is subject
to the satisfaction or waiver by GECC of the following conditions precedent on
the
<PAGE>
16
Second Capital Contribution Date, in the case of the Existing Letters of Credit,
and on the issuance date of the Con Ed Letter of Credit, as the case may be:
(a) Reimbursement Agreement. GECC shall have received a counterpart of
this Agreement, duly executed and delivered by the Limited Partnership.
(b) 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 GECC on
or prior to the Second Capital Contribution Date.
(c) Representations and Warranties. The representations and warranties
made by the Limited Partnership or the General Partner herein, or in any
other Operative Document to which it is a party, or which are contained in
any certificate, document, financial or other statement furnished by the
Limited Partnership or the General Partner hereunder or thereunder or in
connection herewith or therewith, shall be true and correct on and as of
such 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).
(d) No Default, Event of Default or Event of Loss. No Default or Event
of Default shall be in existence on such date, or shall occur after giving
effect to Letter of Credit to be issued on such date. No Declared Event of
Loss shall be in existence on such 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.
(e) Certificates. GECC shall have received from the Limited
Partnership such certificates and other documents relating to the
applicable Letter of Credit, dated the Second Capital Contribution Date or
the date of issuance, as the case may be, as GECC may reasonably request.
(f) Additional Documents. GECC shall have received such other
documents and opinions as may be reasonably requested by it.
<PAGE>
17
(g) Additional Matters. All other documents and legal matters in
connection with the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to GECC and its counsel.
9. Affirmative Covenants. So long as any amounts remain available to
be drawn under any Letter of Credit or any amount is owing to GECC hereunder,
the Limited Partnership hereby agrees that:
(a) Conduct of Business, Maintenance of Existence, Etc. The Limited
Partnership shall at all times (i) engage solely in the business of
developing, constructing, owning and operating the Project, the performance
of its obligations pursuant to the Project Documents and, to the extent
permitted by subsection 7.3(a)(i) of the Amended and Restated Partnership
Agreement, the construction, operation and maintenance of the Exxon System,
(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 York, 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 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 Limited Partnership
or (ii) materially adversely affect the Limited Partnership's ability to
perform its obligations under the Operative 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 Limited Partnership, (ii) activities
permitted pursuant to the General Partner Credit Agreement, (iii) the
performance of the Borrower's obligations pursuant to the Operative
Documents and (iv) to the extent permitted by 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. In addition, the General Partner shall preserve and maintain 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 and New York
and in each other jurisdiction in which the conduct of its business
requires such qualification.
<PAGE>
18
(b) Payment of Obligations. The Limited Partnership 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 Limited Partnership is complying
with the relevant provisions of Section 9(l) or 9(m), as applicable.
(c) Performance under Other Agreements. The Limited Partnership shall
duly perform and observe all of the covenants, agreements and conditions on
its part to be performed and observed hereunder and under the LOC Note 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 Operative Documents to which it is a party. The
Limited Partnership shall diligently enforce all of its rights under each
Project Document 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 Limited Partnership or (ii) materially
adversely affect the Limited Partnership's ability to perform its
obligations under the Operative Documents to which it is a party.
(d) Insurance Coverage. Without limiting any of the other obligations
or liabilities of the Limited Partnership under this Agreement, the Limited
Partnership shall at all times carry and maintain at its own expense the
insurance required pursuant to subsection 7.2(f) of the Amended and
Restated Partnership Agreement and the Site Lease Agreement. The Limited
Partnership shall also carry and maintain any other insurance that GECC 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 GECC.
(e) Evidence of Insurance. On each anniversary of the date hereof, the
Limited Partnership shall furnish GECC 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 Section 9(d). Upon request, the
Limited Partnership shall furnish GECC with copies of all insurance
policies, binders and cover notes or other evidence of such insurance
relating to the Facility.
<PAGE>
19
(f) Insurance Report. Concurrently with the furnishing of the
certification referred to in Section 9(e), the Limited Partnership shall
furnish GECC with an opinion of an independent 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 is in accordance with the
terms of Section 9(d). Furthermore, the Limited Partnership shall cause
such broker to advise GECC promptly in writing of any default in the
payment of any premiums or any other act or omission on the part of any
Person which might invalidate or render unenforceable, in whole or in part,
any insurance provided hereunder. GECC may at its sole option obtain such
insurance if not provided by the Limited Partnership and, in such event,
the Limited Partnership shall reimburse GECC upon demand for the cost
thereof.
(g) No Duty of GECC to Verify. No provision of this Agreement shall
impose on GECC any duty or obligation to verify the existence or adequacy
of the insurance coverage maintained by the Limited Partnership, nor shall
GECC be responsible for any representations or warranties made by or on
behalf of the Limited Partnership to any insurance company or underwriter.
(h) Inspection of Property; Books and Records. The Limited Partnership
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 Limited Partnership shall permit representatives of GECC 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 GECC may
request.
(i) Compliance with Laws. (i) The Limited Partnership 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 (x) have a
material adverse effect on the business, operations, property, condition
(financial or other) or prospects of the Limited Partnership or the rights
or interests of GECC or (y) materially adversely affect the Limited
Partnership's ability to perform its obligations under the Operative
Documents to which it is a party.
(ii) Notwithstanding the foregoing, the Limited Partnership shall cause
all Hazardous Materials on any property owned by the Limited Partnership to
be handled and
<PAGE>
20
disposed of in compliance with all Relevant Environmental Laws.
(j) Financial Statements. The Limited Partnership shall furnish or
cause to be furnished to GECC:
(i) as soon as available, but in any event within 90 days after
the end of each fiscal year of the Limited Partnership and the General
Partner, a copy of the balance sheet of each of the Limited
Partnership and the General Partner as of the end of such fiscal year
and the related statements of income and partners' capital and
statements of changes in partners' capital and cash flow of the
Limited Partnership and the General Partner 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 GECC;
(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 Limited
Partnership and the General Partner (other than the last quarterly
period of each such fiscal year), the unaudited balance sheet of each
of the Limited Partnership and the General Partner 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 Limited Partnership and the General Partner 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).
(k) Certificates; Other Information. The Limited Partnership shall
furnish or cause to be furnished to GECC:
(i) concurrently with the delivery of the financial statements
referred to in clauses (i) and (ii) of Section 9(j), a certificate of
a Responsible
<PAGE>
21
Officer of the General Partner stating that, to the best of his
knowledge after due inquiry, the Limited Partnership, 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 Operative 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 Operative 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 Limited Partnership to
remedy the same);
(ii) promptly after the same are sent, copies of all financial
statements and reports which the Limited Partnership sends to its
partners;
(iii) 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 Limited Partnership;
(iv) with respect to any Single Employer Plan adopted or amended
by the Limited Partnership or the General Partner or any Commonly
Controlled Entity on or after the first date hereof, 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;
(v) promptly after delivery or receipt thereof, a copy of each
material notice, demand or other communication delivered by or
received by the Limited Partnership pursuant to any Operative
Document; and
(vi) promptly, such additional financial and other information
with respect to the Limited Partnership, the General Partner or the
Project as GECC may from time to time reasonably request.
(l) Taxes and Claims. The Limited Partnership shall pay and discharge
all taxes, assessments and governmental charges or levies imposed on it or
on its income or profits
<PAGE>
22
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 Limited Partnership. The Limited Partnership 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 Limited Partnership diligently prosecutes such contest, (b) the
Limited Partnership establishes a cash reserve in conformity with GAAP 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 of
the Limited Partnership only if the failure to pay such tax may then become
a Lien on any part of the Project or may interfere with the operation of
the Facility, and (d) in the reasonable opinion of GECC, 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 Limited Partnership 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.
(m) Mechanics' and Materialmen's Liens. The Limited Partnership shall
protect and defend its interest in the Project against any Lien for the
performance of work or the supply of materials filed against the Project,
and shall remove any such Lien; provided, that the Limited Partnership
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: (i) the Limited Partnership diligently
prosecutes such contest, (ii) the Limited Partnership establishes a cash
reserve in conformity with GAAP with respect to such contested item, (iii)
during the period of such contest the enforcement of any contested item and
the Lien relating thereto is effectively stayed, and (iv) in the reasonable
opinion of GECC, 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 Limited Partnership 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.
(n) Maintenance of Property. The Limited Partnership, at its expense,
shall keep all property useful and necessary
<PAGE>
23
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.
(o) Notices. The Limited Partnership will promptly give notice to
GECC:
(i) of the occurrence of any Default, Event of Default, Event of
Loss or Special Event;
(ii) of the occurrence of any default or event of default under
any Operative Document other than this Agreement;
(iii) of any litigation, investigation or proceeding affecting the
Limited Partnership or the General Partner in which the amount
involved is $500,000 or more or in which injunctive or similar relief
is sought;
(iv) of the following events, as soon as possible and in any
event within 10 days after the Limited Partnership 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 Limited Partnership, any
Commonly Controlled Entity or any Multiemployer Plan with respect to
the withdrawal from, or the terminating, Reorganization or Insolvency
of, any Plan; and
(v) of the receipt by the Limited Partnership of any
Environmental Notice or of any notice of any event that creates a
material likelihood of the occurrence of an Adverse Environmental
Event.
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 Limited
Partnership proposes to take with respect thereto. For all purposes of
clause (iv) of this subsection, the Limited Partnership shall be deemed to
have all knowledge or knowledge of all facts attributable to the
administrator of such Plan.
<PAGE>
24
(p) Agent for Service of Process. The Limited Partnership shall
appoint and continuously retain CT Corporation System, or such other agent
as shall be reasonably acceptable to GECC, 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 Limited Partnership has paid all fees
necessary to retain CT Corporation System or such other agent for such
purposes for the forthcoming 12-month period.
(q) Employee Plans. For each Plan adopted by the Limited Partnership
which is an employee benefit plan as defined in Section 3(2) of ERISA, the
Limited Partnership 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.
(r) Fiscal Year. The fiscal year of the Limited Partnership shall be a
calendar year.
10. Negative Covenants. So long as any amount remains available to be
drawn under any Letter of Credit or any amount is owing to GECC hereunder, the
Limited Partnership agrees that:
(a) Merger, Sale of Assets, Purchases, Etc. The Limited Partnership
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 Limited Partnership's other assets (including, without
limitation, its leasehold interest in the Site) other than sales of
electric power and sales of steam. The Limited Partnership will not
purchase or acquire any assets other than (x) the purchase of assets in
connection with the operation and/or maintenance of the Project and (y)
Cash Equivalents.
(b) Indebtedness; Guarantee Obligations. The Limited Partnership shall
not create, incur, assume or suffer to exist any Indebtedness or Guarantee
Obligations, except Indebtedness of the Limited Partnership to GECC
pursuant to this Agreement and as otherwise permitted by the Amended and
Restated Partnership Agreement.
<PAGE>
25
(c) Distributions, Etc. The Limited Partnership shall not, without the
prior written consent of GECC, make any distributions to its partners or to
any other Person in respect of any partnership interest in the Limited
Partnership 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 Limited Partnership, or permit any Partner
to withdraw any capital from the Limited Partnership, except pursuant to
and as otherwise permitted by the Amended and Restated Partnership
Agreement.
(d) Liens. The Limited Partnership shall not create or suffer to exist
any Lien on any of its properties or assets, other than Permitted Liens.
(e) Nature of Business. The Limited Partnership shall not engage in
any business other than as permitted by the Amended and Restated
Partnership Agreement.
(f) Amendment of Contracts. Etc. The Limited Partnership will not,
without the prior written consent of GECC, agree to or permit (a) the
cancellation, suspension or termination of any Operative Document (except
upon the expiration of the stated term thereof), (b) the assignment of the
rights or obligations of any party to any Operative Document except as
permitted without the consent of the Limited Partnership by the terms of
such Operative Document, or (c) any amendment, supplement or modification
of, or waiver with respect to any of the provisions of, any Operative
Document to which the Limited Partnership or the General Partner is a party
or with respect to which the consent of the Limited Partnership or the
General Partner is required.
(g) Investments. The Limited Partnership shall not make any
investments (whether by purchase of stock, bonds, notes or other
securities, loan, advance or otherwise) other than investments in Cash
Equivalents.
(h) Change of Office. The Limited Partnership 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 Section 7(n), unless the Limited Partnership shall have given
GECC at least 30 days' prior written notice thereof.
(i) Change of Name. The Limited Partnership shall not change its name
except on at least 60 days' prior written notice to GECC.
<PAGE>
26
(j) Compliance with ERISA. The Limited Partnership 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 Limited
Partnership 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.
(k) Transactions with Affiliates and Others. The Limited Partnership
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 Limited
Partnership or the General Partner, except for (a) the transactions
contemplated by the Amended and Restated Partnership Agreement, (b) loans
to the Limited Partnership from the General Partner from the proceeds of
the Working Capital Account (as defined in the Amended and Restated Term
Loan Agreement, dated as of September __, 1992, between the General Partner
and the Owner Trustee (the "GP Term Loan Agreement")) in accordance with
the GP Term Loan Agreement and (c) transactions in the ordinary course of
business and upon fair and reasonable terms no less favorable than the
Limited Partnership could obtain, or could become entitled to, in an arm's
length transaction with a Person which is not an Affiliate.
11. Events of Default. If any of the Events of Default listed below
in this Section 11 shall occur and be continuing, GECC may, (i) by notice to the
Limited Partnership, declare the Letter of Credit Commitment to be terminated,
whereupon the same shall forthwith terminate; and/or (ii) declare all
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 Limited Partnership; and/or
<PAGE>
27
(iii) demand that the Limited Partnership 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 (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 reimbursement obligation in respect of a drawing under any
Letter of Credit shall not be paid when due; or any interest on any such
reimbursement obligation or any fee or any other amount payable to GECC
hereunder or under the LOC Note shall not be paid when due and shall remain
unpaid for five or more days; or
(b) Any representation or warranty made by the Limited Partnership
herein or by the Limited Partnership or the General Partner in any other
Operative Document (other than any Project Document) to which the Limited
Partnership or the General Partner is a party, or any representation,
warranty or statement in any certificate, financial statement or other
document furnished to GECC by or on behalf of the Limited Partnership or
the General Partner hereunder or to the Limited Partner by or on behalf of
the Limited Partnership or the General 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 Limited Partnership or the General Partner shall fail to
perform or observe any of its covenants contained in this Agreement (other
than those referred to 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 GECC to the Limited Partnership; provided, however,
that if such default is susceptible of cure, such 30 day period shall be
extended for such period of time (not to exceed 60 days) during which the
Limited Partnership or the General Partner, as the case may be, shall be
diligently using its best efforts to cure such default; or
(d) (i) The Limited Partnership 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 any Letter of Credit
<PAGE>
28
and the LOC 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 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) Either the Limited 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 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 Limited 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 Limited 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 Limited
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
<PAGE>
29
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 Limited Partnership and such
judgment or judgments shall remain in effect and unstayed and unbonded for
a period of 60 or more consecutive days; or
(h) The General Partner shall at any time cease to be the managing
general partner of the Limited Partnership, or shall transfer, sell,
assign, mortgage, pledge or otherwise dispose of its partnership interest
in the Limited Partnership without GECC's prior written consent, except as
contemplated by the General Partner Credit Agreement and the Amended and
Restated Partnership Agreement; or
(i) (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 General Partner 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 General Partner; or
(j) 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
(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 GECC,
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 General Partner or any Commonly Controlled
Entity shall, or is, in the reasonable opinion of GECC, 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
<PAGE>
30
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 Limited 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 Limited
Partnership; or
(1) At any time, (i) 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 Limited Partnership's or the 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(a)(1) of the Amended
and Restated Partnership Agreement, the Limited Partnership shall be
diligently contesting the same in accordance with, and subject to,
subsection 7.2(a)(1) of the Amended and Restated Partnership Agreement or
(ii) any right, title or interest of the Limited Partnership in and to the
Site or any beneficial ownership interest of the General Partner 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
(m) (i) Any Participant, other than the Limited Partnership, 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 Limited Partner to the Limited Partnership 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 Limited Partner or GECC) or any party
thereto (other than the Limited Partner or GECC) 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
Limited Partner or GECC) 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 (m) 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 Limited Partner to execute and deliver a document in
substitution for such Project
<PAGE>
31
Document, which plan shall be reasonably satisfactory in form and substance
to GECC, 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 GECC in its reasonable discretion and (y) which has terms and
conditions similar to, and in the reasonable opinion of GECC, at least as
favorable to the Project as, the substituted Project Document; or
(n) The dissolution and liquidation of the General Partner without the
prior written consent of GECC unless (i) an entity meeting the requirements
of subsection 10.1 of the Amended and Restated Partnership Agreement
succeeds to the General Partner's interest thereunder or (ii) the ultimate
result of such dissolution and liquidation is the incorporation of the
General Partner and the ownership provisions of such subsection 10.1 apply
to such corporation which shall be admitted as a general partner of the
Limited Partnership in accordance with subsection 10.2 of the Amended and
Restated Partnership Agreement; or
(o) The Limited Partnership shall cease to have a valid leasehold
interest in the Site or good title to the Project, in each case, free and
clear of all Liens other than Permitted Liens; or
(p) 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 (p) if the Managing General Partner complies
with the proviso to subsection 11(m) hereof with respect to the Water
Supply Commitment in such a manner as will ensure, in the reasonable
opinion of GECC, that there will be such an adequate supply of water to the
Facility; or
(q) 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) of the
Amended and Restated Partnership Agreement; or
(r) 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) of the Amended and Restated Partnership Agreement; or
<PAGE>
32
(s) A Special Event described in subsection 14.1(q) of the Amended and
Restated Partnership Agreement shall have occurred and be continuing.
Upon the occurrence of and during the continuance of any Event of
Default, all remedies available to GECC under this Agreement or by statute or by
rule of law may be exercised by GECC at any time and from time to time whether
or not any reimbursement obligations in respect of the Letters of Credit shall
be due and payable, and whether or not GECC shall have instituted any action for
the enforcement of this Agreement or the LOC Note. For the purpose of carrying
out the provisions and exercising the rights, powers and privileges granted by
this paragraph, the Limited Partnership hereby irrevocably constitutes and
appoints GECC 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 Limited Partnership. This
power of attorney is a power coupled with an interest and cannot be revoked.
12. Amendments and Waivers. No provision of this Agreement, the LOC
Note or any Letter of Credit may be amended, supplemented, modified or waived,
except in accordance with the terms of this Section 12. The Limited Partnership
and GECC may, from time to time, enter into written amendments, supplements or
modifications hereto for the purpose of adding any provisions to, or changing in
any manner the rights of GECC or of the Limited Partnership under, this
Agreement or the LOC Note or, with the consent of the beneficiary thereof, any
Letter of Credit, and GECC may execute and deliver to the Limited Partnership a
written instrument waiving, on such terms and conditions as GECC may specify in
such instrument, any of the requirements of this Agreement, the LOC Note or,
with the consent of the beneficiary thereof, any Letter of Credit, 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 Limited
Partnership, the beneficiaries of the Letters of Credit and all future holders
of the LOC Note.
13. 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 or to such other
address as may be hereafter notified by the respective parties hereto and any
future holders of the LOC Note:
<PAGE>
33
The Limited Cogen Technologies Linden Venture, L.P.
Partnership: c/o Cogen Technologies
1600 Smith Street
Suite 5000, 50th Floor
Houston, Texas 77002
Attention: Robert C. McNair
Telecopy: (713) 951-7747
GECC: General Electric Capital Corporation
TIFC
1600 Summer Street
Stamford, Connecticut 06927
Attention: Energy Project Operations
Telecopy: (203) 357-6366
with a copy to:
General Electric Power Funding Corporation
One River Road
Building Two
Schenectady, New York 12345
Attention:
Telecopy: (518) 385-3649
Except that any notice, request or demand to or upon GECC pursuant to
subsections 2(a) and 2(b) shall not be effective until received by GECC.
14. No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of GECC, 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.
15. 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.
16. 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
<PAGE>
34
not affect the meaning or construction of any provision hereof.
17. 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.
18. GECC Sole Beneficiary. All conditions of the obligations of GECC
to issue the Letters of Credit hereunder are imposed solely and exclusively for
the benefit of GECC 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 GECC will refuse to issue the 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 GECC
at any time if in its sole discretion it deems it advisable to do so. GECC is
obligated hereunder solely to maintain and issue the Letters of Credit and honor
drawings thereunder if and to the extent required by this Agreement and the
Letters of Credit.
19. GOVERNING LAW. THIS AGREEMENT, THE LOC NOTE AND THE LETTERS OF
CREDIT (TO THE EXTENT NOT INCONSISTENT WITH THE UCP) AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT, THE LETTERS OF CREDIT AND THE
LOC NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
THE LAW OF THE STATE OF NEW YORK.
20. Submission to Jurisdiction; Waivers. (A) The Limited Partnership
hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement, the Letters of Credit or the LOC
Note, 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;
<PAGE>
35
(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
Limited Partnership at its address set forth in Section 13 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 LIMITED PARTNERSHIP AND GECC HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING REFERRED
TO IN PARAGRAPH (A) ABOVE.
21. Indemnification. The Limited Partnership agrees to pay, indemnify
and hold GECC and its 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 LOC Note) 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 Operative 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
Limited Partnership 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 Transferee. The agreements in this subsection shall survive
repayment of the LOC Note and all other amounts payable hereunder.
22. Expenses. Whether or not any Letter of Credit is issued or any of
the other transactions contemplated by this Agreement are consummated, the
Limited Partnership shall pay (i) all reasonable out-of-pocket expenses incurred
by GECC with respect to the negotiation, preparation, execution and delivery of,
and the consummation of the transactions contemplated by, this Agreement, the
LOC Note, the Letters of Credit and any amendments or other modifications hereof
or
<PAGE>
36
thereof and (ii) natural and customary costs and expenses as are incurred by
GECC, from time to time, in issuing, effecting payment under or administering
any Letter of Credit (including, without limitation, amendment and transfer
fees).
23. Successor and Assigns; Transferees; Transferred Interests. (a)
This Agreement shall be binding upon and inure to the benefit of the Limited
Partnership, GECC, all future holders of the LOC Note and their respective
successors and assigns, except that the Limited Partnership may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of GECC.
(b) The Limited Partnership acknowledges that GECC may at any time
sell, assign, transfer, grant participations in, or otherwise dispose of a
portion of its right, title and interest in any Letter of Credit, the LOC Note
or in this Agreement (collectively, "Participations") to one or more Persons
(such Persons being herein called "Transferees"); provided, however, that (i)
GECC's obligations under this Agreement and the Letters of Credit shall remain
unchanged, and (ii) the Limited Partnership shall continue to deal solely and
directly with GECC in connection with GECC's rights and obligations under this
Agreement and the Letters of Credit.
(c) The Limited Partnership authorizes GECC to disclose to any
prospective Transferee pursuant to paragraph (b) of this Section 23 all
financial and other necessary information in GECC's possession concerning the
Letters of Credit, any Partner or the Project which has been delivered to GECC
by or on behalf of the Limited Partnership pursuant to this Agreement or any
other Operative Document or which has been delivered to GECC by or on behalf of
the Limited Partnership or any Affiliate of the Limited Partnership in
connection with GECC's credit evaluation of the Limited Partnership and the
Project prior to or after entering into this Agreement, provided, however, that
if any such information furnished to GECC is marked in writing as being
confidential information, GECC shall use reasonable efforts to preserve the
confidentiality of such information.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Letter of
Credit and Reimbursement Agreement to be duly executed as of the date first
above written.
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.,
By: Cogen Technologies Linden, Ltd.
(d/b/a Cogen Technologies
Linden, Limited Partnership
in the State of New Jersey),
its General Partner
By: Cogen Technologies, Inc.,
its General Partner
By: /s/ Signature Appears Here
---------------------------------
Title: Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Signature Appears Here
---------------------------------
Title: Vice President
<PAGE>
SCHEDULE 1 TO
REIMBURSEMENT AGREEMENT
EXISTING LETTERS OF CREDIT
LOC NO. BENEFICIARY MATURITY FACE AMOUNT
CT-03 Public Service July 1, 1996 4,000,000
Electric and Gas
Company and
Elizabethtown Gas
Company
CT-02 Exxon Corporation August 1, 1993 10,000,000
<PAGE>
EXHIBIT A TO
REIMBURSEMENT
AGREEMENT
[________________], 19__
[Form of Irrevocable Letter of Credit]
Consolidated Edison Company
of New York, Inc.
4 Irving Place
New York, New York 10003
Attention:
Re: Linden Cogeneration Project
Irrevocable Letter of Credit No.
Dear Ladies and Gentlemen:
At the request and on the instructions of our customer Cogen Technologies
Linden Venture L.P., a Delaware limited partnership (the "Partnership"), we
hereby establish our Irrevocable Letter of Credit No. ___ in favor of
Consolidated Edison Company of New York, Inc. ("Con Ed"), 4 Irving Place, New
York, New York 10003 and authorize you to draw on General Electric Capital
Corporation ("GECC") in an amount (the "Stated Amount") at any date not to
exceed the amount set forth on Schedule 1 which corresponds to the time period
during which any event described in paragraph 1 of a Drawing Certificate (as
defined below) occurs.
Funds under this Letter of Credit are available to you against a sight
draft accompanied by (i) a drawing certificate in the form of Exhibit A (the
"Drawing Certificate") attached hereto and (ii) the original of this Letter of
Credit.
We hereby agree with the drawers, endorsers, and bona fide holders of any
draft drawn under and in compliance with the terms of this Letter of Credit that
such draft will be duly honored by us upon presentation.
Any draft so drawn will be honored by GECC if presented to our office at
1600 Summer Street, Stamford, Connecticut 06927, prior to the close of business
on the expiration date. The expiration date of this Letter of Credit is June 30,
1998.
All payments shall be made as directed in a Drawing Certificate with
written confirmation thereof sent to Con Ed at 4 Irving Place, New York, New
York 10003, in U.S. Dollars and immediately available funds.
<PAGE>
2
Any references in this Letter of Credit or in any certificate hereto to any
other document shall not be deemed to incorporate such document in this Letter
of Credit or in any certificate hereto.
Upon payment to you of any amount demanded hereunder, we shall be fully
discharged of our obligation under this Letter of Credit with respect to such
amount, and we shall not thereafter be obligated to make any further payments
under this Letter of Credit in respect of such amount to you or to any other
person.
This Letter of Credit sets forth in full our understanding and such
understanding shall not in any way be modified, amended, amplified or limited by
reference to any document, instrument, or agreement referred to herein.
This Letter of Credit is subject to, and shall be governed by and construed
in accordance with, the Uniform Customs and Procedure for Documentary Credits
(1983 Revision), Publication No. 400 of the International Chamber of Commerce,
and, to the extent not inconsistent therewith, with the laws of the State of New
York (including, without limitation, Article 5 of the Uniform Commercial Code of
the State of New York).
Very truly yours,
General Electric Capital
Corporation
By: ______________________________
Title
<PAGE>
SCHEDULE 1
AMOUNT OF LETTER OF CREDIT
Amount
During
Time Period Time Period
----------- -----------
July 1, 1993 - June 30, 1994 $ 29,890,000
July 1, 1994 - June 30, 1995 77,210,000
July 1, 1995 - June 30, 1996 103,860,000
July 1, 1996 - June 30, 1997 110,700,000
July 1, 1997 - June 30, 1998 47,170,000
<PAGE>
EXHIBIT A to
LETTER OF CREDIT
[FORM OF DRAWING CERTIFICATE]
GENERAL ELECTRIC CAPITAL
CORPORATION
1600 Summer Street
Stamford, Connecticut 06927
Attention:
Re: Linden Cogeneration Project
Irrevocable Letter of Credit No.
Ladies and Gentlemen:
Reference is made to that certain Letter of Credit dated _______________,
19__ (the "Letter of Credit"), opened for the benefit of the undersigned by
General Electric Capital Corporation ("GECC"). Terms defined in the Letter of
Credit and not otherwise defined herein are used herein with the meanings so
defined.
The undersigned hereby certifies that:
1. (a) The Power Purchase Agreement dated as of April 14, 1989 (as
amended and in effect, the "Power Sale Agreement") between Con Ed and Cogen
Technologies, Inc., as assigned to Cogen Technologies Linden Venture, L.P. (the
"Partnership"), has been terminated by reason of the Partnership's breach of
that agreement.
OR
(b) The Power Sale Agreement has been terminated by the Partnership
pursuant to Article 12.3(B) of that agreement.
2. Pursuant to subsection 5.1(A) of the Power Sale Agreement, the
amount of the accompanying draft does not exceed the amount by which (a) the
Present Worth (as defined in the Power Sale Agreement) of payments for
Deliveries (as defined in the Power Sale Agreement) and curtailed kwh subject to
pricing under subsection 4.5 of the Power Sale Agreement exceeds (b) the sum of
(i) the Present Worth of LRAC (as defined in the Power Sale Agreement) plus (ii)
cumulative interest at the rate of 11% from the Date of Initial Commercial
operation (as defined in the Power Sale Agreement) to the date of termination of
the Power Sale Agreement on the excess of the amount in clause 2(a) above over
the amount in clause 2(b)(i) above.
<PAGE>
2
3. The amount of the accompanying draft does not exceed the amount set
forth in Schedule 1 of the Letter of Credit for the time period during which any
event specified in paragraph I above occurred.
You hereby are instructed to pay funds advanced under the Letter of Credit
pursuant to the accompanying draft by wire transfer within the United States of
immediately available funds to account number ____________ at _______________,
Attention: ____ .
IN WITNESS WHEREOF, the undersigned has caused this Drawing Certificate to
be executed and delivered by its officer thereunto duly authorized as of the
__ day of _______________, ____ .
CONSOLIDATED EDISON COMPANY OF
NEW YORK, INC.
By:
----------------------------------
Name:
Title:
<PAGE>
EXHIBIT B TO
REIMBURSEMENT
AGREEMENT
FORM OF LOC NOTE
$120,700,000 New York, New York
September 17, 1992
FOR VALUE RECEIVED, the undersigned, Cogen Technologies Linden Venture,
L.P., a Delaware limited partnership (the "Limited Partnership"), hereby
unconditionally promises to pay on demand, to the order of GENERAL ELECTRIC
CAPITAL CORPORATION ("GECC") at the office of GECC located at 1600 Summer
Street, Stamford, Connecticut 06927, in lawful money of the United States of
America and in immediately available funds, the principal amount of ONE HUNDRED
TWENTY MILLION SEVEN HUNDRED THOUSAND DOLLARS ($120,700,000) or, if less, the
aggregate unreimbursed amount of all payments made by GECC under all Letters of
Credit issued or maintained by GECC pursuant to the Reimbursement Agreement
referred to below.
The Borrower further agrees to pay interest at said office, in like money,
on the unreimbursed amount hereof on the dates and at the applicable rates per
annum specified in subsection 3(a) of the Reimbursement Agreement, until such
unreimbursed amount is paid in full.
This Note is the LOC Note referred to in the Reimbursement Agreement, dated
as of September 17, 1992 (as the same may from time to time be amended, modified
or supplemented, the "Reimbursement Agreement"), between the Limited Partnership
and GECC and is entitled to the benefits thereof.
This Note and the rights and obligations of the parties hereunder shall be
governed by, and construed and interpreted in accordance with, the law of the
State of New York.
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
By: Cogen Technologies Linden, Ltd.
(d/b/a Cogen Technologies Linden,
Limited Partnership in the State
of New Jersey), its General Partner
By: Cogen Technologies, Inc.,
its General Partner
By: /s/ Signature Appears Here
----------------------------------
Title: Vice President
<PAGE>
EXHIBIT 10.28
FIRM GAS PURCHASE AND SALE AGREEMENT
between
CAMDEN COGEN, L.P.
and
COLUMBIA ENERGY SERVICES CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C>
Page
----
<S> <C> <C>
TABLE OF CONTENTS............................................. i
ARTICLE 1: DEFINITIONS....................................... 1
ARTICLE 2: QUANTITIES........................................ 5
ARTICLE 3: NOMINATIONS....................................... 5
ARTICLE 4: PRICE............................................. 6
ARTICLE 5: RESERVATION CHARGES AND SUBSTITUTE FUELS.......... 12
ARTICLE 6: PAYMENT........................................... 13
ARTICLE 7: TAXES............................................. 16
ARTICLE 8: POINT(S) OF DELIVERY.............................. 16
ARTICLE 9: PRESSURE ......................................... 17
ARTICLE 10: MEASUREMENT ...................................... 17
ARTICLE 11: QUALITY .......................................... 17
ARTICLE 12: TRANSPORTATION AND IMBALANCE CHARGES.............. 17
ARTICLE 13: TERM ............................................. 19
ARTICLE 14: FORCE MAJEURE .................................... 19
ARTICLE 15: NOTICE ........................................... 21
ARTICLE 16: LAWS, ORDERS & REGULATIONS........................ 22
ARTICLE 17: APPLICABLE LAW.................................... 23
ARTICLE 18: WAIVER ........................................... 23
ARTICLE 19: TITLE ............................................ 23
ARTICLE 20: ASSIGNMENT........................................ 24
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 21: ARBITRATION....................................... 25
ARTICLE 22: DEFAULT........................................... 26
ARTICLE 23: GENERAL........................................... 28
ARTICLE 24: CONFIDENTIALITY................................... 29
EXHIBIT A .................................................... 30
EXHIBIT B .................................................... 31
EXHIBIT C .................................................... 32
</TABLE>
ii
<PAGE>
FIRM GAS PURCHASE AND SALE AGREEMENT
This AGREEMENT ("Agreement") is made and entered into this 1st day of July,
1997, by and between CAMDEN COGEN, L.P., a Delaware limited partnership,
hereinafter referred to as "Buyer," and COLUMBIA ENERGY SERVICES CORPORATION, a
Kentucky corporation, hereinafter referred to as "Seller;"
WHEREAS, Buyer requires a supply of gas for use in Buyer's cogeneration
facility in Camden, New Jersey; and
WHEREAS, Seller is willing to sell gas to Buyer on a firm basis to meet its
requirements.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties do hereby covenant and agree as follows:
ARTICLE 1: DEFINITIONS
In addition to the terms "Buyer" and "Seller" which shall refer to the
parties identified above, or their duly designated agents or representatives,
the following terms shall have the specified meanings:
1.1 The term "Alternate Commodity Price" shall have the meaning set forth
in Section 4.3.
1.2 The term "Btu" shall mean the amount of heat required to raise the
temperature of one (1) pound avoirdupois pure water from fifty-eight and five-
tenths degrees (58.5 degrees) to fifty-nine and five-tenths degrees (59.5
degrees) Fahrenheit, as defined in the American Gas Association Gas Measurement
Manual and any subsequent revisions.
1
<PAGE>
1.3 The term "Cancellation Notice" shall mean the notice described in
Section 22.1.
1.4 The term "Commodity Price" shall have the meaning set forth in
Section 4.2.
1.5 The term "Daily Contract Quantity" or "DCQ" shall mean five thousand
(5,000) MMBtu per day, plus Transporter(s)' Market Area Fuel.
1.6 The term "day" shall mean a period of twenty-four (24) consecutive
hours, beginning and ending at the time specified in the receiving
Transporter(s)' tariff(s) at the Point of Delivery.
1.7 The term "Delivery Period" shall mean a period of five (5) consecutive
months beginning with the commencement of deliveries of gas hereunder.
1.8 The term "Facility" shall mean the cogeneration facility owned and
operated by Buyer that is located in Camden, New Jersey.
1.9 The term "force majeure" shall have the meaning set forth in Section
14.2.
1.10 The term "Gas" or "gas" shall mean any mixture of hydrocarbons or of
hydrocarbons and non-combustible gases, in a gaseous state, consisting
essentially of methane and shall include casinghead gas produced with crude oil,
natural gas from gas wells, coal-bed methane gas, synthetic gas, coal
gasification gas and residue gas resulting from processing any of the foregoing.
1.11 The term "lender" shall mean (i) any and all lenders (other than
Seller) providing the construction, interim, or long-term financing or
refinancing of the Facility (including a leveraged lease), and any trustee or
agent acting on their behalf, and
2
<PAGE>
(ii) any and all equity investors or limited partners providing any such
financing or refinancing of the Facility, and any trustee or agent acting on
their behalf. The current lenders are Bank of Tokyo (as agent for the Traunch A
lenders) and General Electric Capital Corporation and thereafter such entity as
shall be designated to Seller in writing by the entity then recognized as the
lender hereunder.
1.12 The term "Market Area Fuel" shall mean the volume of gas retained by
Transporter(s) as fuel for the transportation of gas from the Point(s) of
Delivery to the Point(s) of Redelivery.
1.13 The term "Market Price" shall have the meaning set forth in Section
4.3.
1.14 The term "Minimum Quantity" shall mean one hundred percent (100%) of
the product of the DCQ and the number of days in each month of the Delivery
Period, as reduced by circumstances of force majeure.
1.15 The term "MMBtu" shall mean one million (1,000,000) Btus.
1.16 The term "month" shall mean the period commencing on the beginning
of the first day of a calendar month and ending on the beginning of the first
day of the succeeding calendar month.
1.17 The term "Nominated Quantity" shall have the meaning set forth in
Section 3.1.
1.18 The term "Nomination Notice" shall mean the notice described in
Section 3.1 and Exhibit A to this Agreement.
1.19 The term "NYMEX" shall mean the New York Mercantile Exchange.
1.20 The term "NYMEX Forward Price" shall have the meaning set forth in
Section 4.7(b).
3
<PAGE>
1.21 The term "NYMEX Price" shall have the meaning set forth in Section
4.7(a).
1.22 The term "Point(s) of Delivery" shall have the meaning set forth in
Article 8.
1.23 The term "Point(s) of Redelivery" shall mean the point or points on
Transporter(s)' pipeline system where gas is redelivered to or for the account
of Buyer or PSE&G on the PSE&G system in New Jersey.
1.24 The term "PPIA" or "Power Purchase and Interconnection Agreement"
shall mean the contract dated April 15, 1988, between Buyer and PSE&G, covering
the sale of electricity from the Facility, and any amendments thereto that have
been and may be made from time to time.
1.25 The term "PSE&G" shall mean Public Service Electric and Gas Company.
1.26 The term "Reservation Charge" shall have the meaning set forth in
Section 5.2.
1.27 The term "Reservation Rate" shall mean one cent ($0.01) per MMBtu.
1.28 The term "Spot Market Price" shall mean the arithmetic average of the
prices reported in the weekly and bi-weekly updates of the reference pricing
reports during the month of delivery for the reference points set forth in
Exhibit "B" hereto.
1.29 The term "TETCO" shall mean Texas Eastern Transmission Corporation.
1.30 The term "Transporter(s)" shall mean any pipeline(s) transporting gas
sold hereunder to and from the Point(s) of Delivery and to the Point(s) of
Redelivery.
4
<PAGE>
ARTICLE 2: QUANTITIES
---------------------
2.1 Buyer shall purchase and receive and Seller shall sell and deliver the
Nominated Quantity at the Point(s) of Delivery, except to the extent excused
under the provisions of this Agreement.
2.2 If during the Delivery Period Buyer purchases and receives less than
the DCQ, except to the extent excused under the provisions of this Agreement or
due to Seller's unexcused failure to deliver, then Buyer shall pay Seller an
amount equal to the difference between the price payable hereunder and the then
effective applicable Spot Market Price of gas multiplied by the difference
between the Minimum Quantity and the quantity of gas purchased and received by
Buyer. Except in the case of Buyer's willful misconduct or gross negligence and
except as described in Articles 12, 14 and 22, this is the sole remedy available
to Seller for any failure by Buyer to purchase and receive gas.
ARTICLE 3: NOMINATIONS
----------------------
3.1 On or before the day prior to which pipeline nominations are required
to be nominated by Buyer and Seller to the applicable pipeline company(s)
referenced herein, and subject to the provisions of Sections 3.2 and 3.3, Buyer
shall notify Seller in writing by providing a Nomination Notice, substantially
in the form attached hereto as Exhibit A, specifying the daily quantity of gas,
in MMBtus, up to the DCQ, that Buyer shall purchase and receive from Seller
during the next month (hereinafter the "Nominated Quantity"). In the
alternative, Buyer may specify a standing Nominated Quantity to be effective
until changed in writing pursuant to the first sentence of this section.
5
<PAGE>
3.2 The parties recognize that fluctuations in the production and
transportation of gas can occur on a daily basis. Buyer and Seller will attempt
to receive and deliver gas on a uniform hourly basis. Notwithstanding anything
to the contrary herein, any revisions to the Nominated Quantity shall be
implemented in accordance with Transporter(s)' nomination procedures, unless a
waiver of such procedures is received by either Buyer or Seller.
3.3 Buyer and Seller shall be responsible for nominations to their
respective Transporters and the nominations in each case shall reflect the
Nominated Quantity.
3.4 If no Nominated Quantity is submitted by Buyer in accordance with
Section 3.1, the DCQ shall be the Nominated Quantity.
ARTICLE 4: PRICE
----------------
4.1 For all gas nominated by Buyer and delivered by Seller during a month,
Buyer shall pay the Commodity Price or the Alternate Commodity Price per MMBtu,
rounded to the nearest $0.001.
4.2 The term "Commodity Price" shall mean the price of gas for each month
which shall be mutually agreed upon by the parties and subsequently confirmed in
writing prior to the date Buyer's nomination notice to Seller is due for the
month of delivery. In the event that the parties fail to reach agreement as to
the Commodity Price, the Alternate Commodity Price determined in accordance with
Section 4.3 shall apply.
4.3 The term "Alternate Commodity Price" shall mean the arithmetic average
of the prices reported in the referenced issue of the month of delivery for the
price references included in the "Market Price Index," set forth in Exhibit B.
The price
6
<PAGE>
references in the Market Price Index are intended to reflect the price paid for
gas delivered at the Point(s) of Delivery under spot contracts (the "Market
Price"). The price references in the "Backup Price Index" set forth in Exhibit B
are intended to serve as a substitute for the price references in the Market
Price Index in the event the latter price references are not available or are
"erroneous," as that term is defined in Section 4.5.
4.4 Either party may request that a price reference be added to or deleted
from the Market Price Index or Backup Price Index by providing written notice to
the other party. For a price reference to be added to the Market Price Index or
Backup Price Index, the price reference must reflect the Market Price and be
from an independent publication which is not controlled by a buyer, seller or
broker of gas. For a price reference to be deleted from the Market Price Index
or Backup Price Index, such price reference must no longer reflect the Market
Price. If within thirty (30) days after the date of notice by a party, the
parties are unable to agree to add or delete a price reference, then the party
seeking such addition or deletion may submit the issue to arbitration which
shall be conducted pursuant to Article 21. A price reference shall be added or
deleted effective the first day of the month after notice by the requesting
party and the price ultimately determined by negotiations or arbitration will be
given retroactive effect to take into account the period of negotiation or
arbitration with interest assessed at the rate provided in Section 6.3. Unless
otherwise agreed by the parties, in no event may either party request that a
price reference be added to or deleted from the Market Price Index or Backup
Price Index more than once during the Delivery Period.
7
<PAGE>
4.5 If during any month a price reference included in the Market Price
Index is not published, the Market Price Index will exclude such price reference
from the Market Price Index for so long as such price reference is not published
and the price reference(s) from the Backup Price Index shall be substituted for
the excluded price reference. If the excluded price reference is the only price
reference in the Market Price Index and no price references in the Backup Price
Index are published, then Section 4.6 below shall apply. If an erroneous price
is published and the publisher confirms such error, then the correct price, if
available, shall be used. If the publisher does not confirm such error or if the
correct price is not available, then the price reference containing such
erroneous price shall not be included in the Market Price Index or Backup Price
Index for such month. For purposes of Sections 4.3 and 4.5, the term "erroneous"
price shall mean any price reference that varies by more than four percent (4%)
from the average of the other price references included in the Market Price
Index and Backup Price Index for such month.
4.6 If no Market Price Index and no Backup Price Index reference prices are
available or if, in the opinion of either party, there are no price references
which reasonably reflect the Market Price and the basis of such opinion is
provided in writing to the other party, then a new method to determine the
Alternate Commodity Price will be negotiated. If the parties are unable to agree
within thirty (30) days after notice by a party, then the matter of determining
whether a basis exists to invoke this provision and, if so, the determination of
a new method to determine the Alternate Commodity Price shall be submitted to
arbitration pursuant to Article 21. During a period of negotiation or
arbitration, the last applicable Commodity Price or Alternate Commodity
8
<PAGE>
Price shall remain in effect and shall be adjusted at the conclusion of such
negotiation or arbitration to give retroactive effect to the result with
interest assessed at the rate provided in Section 6.3.
4.7 Alternatively, and in lieu of the price calculated pursuant to Sections
4.2 and 4.3 hereof, the parties may mutually agree to a NYMEX Price or NYMEX
Forward Price based on the NYMEX posting for the natural gas futures contract,
calculated as follows:
(a) On or before the business day prior to the NYMEX Settlement day,
Buyer may propose that the price under this Agreement for gas nominated by
Buyer for delivery in the applicable month be the NYMEX Price, plus or
minus the basis differentials that may be mutually agreed upon at the time
of Buyer's proposal. The NYMEX Price shall be the arithmetic average of the
NYMEX posting of the settlement price of the natural gas futures contract
for the last three trading days applicable to the month of delivery.
Buyer's proposal shall designate the volume of gas for delivery in the
applicable month at the proposed price, up to the volume nominated in
accordance with Section 3.1 of this Agreement. Upon receipt of Buyer's
proposal, the parties shall confer by telephone as soon as possible and
decide whether or not to use the NYMEX Price, which decision shall
ultimately be made by Buyer and Seller no later than 11:00 a.m. Central
Time on the business day before the last trading day of the applicable
natural gas futures contract. In the event the parties agree to use the
NYMEX Price and agree on the basis differential, the parties' agreement
shall be set forth in a confirmation prepared by Buyer and transmitted by
telecopy to
9
<PAGE>
Seller. The parties' agreement shall be deemed conclusive upon receipt of the
confirmation (as evidenced by electronic confirmation of transmission) unless
Seller objects promptly in writing following receipt of the confirmation. Either
party shall have the right to withhold agreement on any proposed price under
this Section 4.7(a) at its sole discretion prior to execution of the NYMEX
transaction, in which case the price under this Agreement will be calculated
under Sections 4.2 or 4.3 hereof. If the parties are unable to agree on the
basis differentials or methodology for determining the basis, the NYMEX Price
shall be deemed to be rejected. In the event the parties agree to use the NYMEX
Price, the nominated volumes which are covered by the NYMEX Price shall remain
in effect during the applicable month and shall not be reduced or increased
pursuant to Sections 3.2 or 3.3 of this Agreement.
(b) In addition to the NYMEX Price, Buyer shall have the right to propose
that the NYMEX Forward Price, plus or minus the basis differentials that may be
mutually agreed upon at the time of Buyer's proposal, be the price to be paid
under this Agreement during any calendar months designated by Buyer. The NYMEX
Forward Price shall be the NYMEX posting for the natural gas futures contract
applicable to the month or months selected by Buyer and prevailing at the time
Buyer's proposal is communicated to Seller by telephone and confirmed by Seller.
Buyer's proposal shall designate the volume of gas for delivery during the
designated months at the proposed price, up to the volume that can be nominated
in accordance with Section 3.1 of this Agreement. Upon receipt of Buyer's
proposal, the parties shall confer by telephone and decide
10
<PAGE>
whether or not to use the NYMEX Forward Price, which decision shall be made no
later than 11:00 a.m. Central Time on the first business day following Seller's
receipt and confirmation of Buyer's request. In the event the parties agree to
use the NYMEX Forward Price and agree on the basis differential or methodology
for determining the basis, the parties' agreement shall be set forth in a
confirmation prepared by Buyer and transmitted by telecopy to Seller. The
parties' agreement shall be deemed conclusive upon receipt of the confirmation
(as evidenced by electronic confirmation of transmission) unless Seller objects
promptly in writing following receipt of the confirmation. Either party shall
have the right to withhold agreement on any proposed price under this Section
4.7(b) at its sole discretion prior to the execution of the NYMEX transaction,
in which case the price under this Agreement will be calculated under Sections
4.2 or 4.3 hereof. If the parties are unable to agree on the basis differentials
or methodology for determining the basis, the NYMEX Forward Price shall be
deemed to be rejected. Nothing in this subsection (b) shall be construed to
prevent Buyer from proposing the NYMEX Forward Price in any designated month if
either of the parties had previously rejected the NYMEX Forward Price for that
month. In the event the parties agree to use the NYMEX Forward Price, the
nominated volumes which are covered by the NYMEX Forward Price shall remain in
effect during the designated months and shall not be decreased or increased
pursuant to Sections 3.2 or 3.3 of this Agreement. In addition, should the
parties agree to use the NYMEX Forward Price, the selection of that
11
<PAGE>
option shall remain in effect during the months selected by the parties unless
the parties mutually agree to use a different pricing option.
ARTICLE 5: RESERVATION CHARGES AND SUBSTITUTE FUELS
---------------------------------------------------
5.1 If during any month, Seller sells and delivers less than one hundred
percent (100%), but greater than ninety percent (90%), of the Nominated Quantity
multiplied by the number of days in the month, except to the extent excused
under the provisions of this Agreement or due to Buyer's unexcused failure to
receive, then Buyer shall be relieved of its obligation to pay Seller the
Reservation Charge applicable to the volumes not made available and Seller shall
refund to Buyer any payments attributable to such volumes if already invoiced
and paid. If during any month Seller sells and delivers less than ninety percent
(90%) of the Nominated Quantity multiplied by the number of days in the month,
except to the extent excused under the provisions of this Agreement or due to
Buyer's unexcused failure to receive, then Buyer shall be relieved of its
obligation to pay Seller the Reservation Charge set forth in Section 5.2 for
the entire month during which such supply failure occurred. Under such
circumstances in this Section 5.1, Seller shall also reimburse Buyer its actual
costs incurred for the purchase and/or production and transportation of
alternate supplies of fuel equal to the undelivered volume, including but not
limited to any imbalance carrying charges and/or cash-out costs and penalties
imposed by Transporter(s) and PSE&G, less the costs that Buyer would have
otherwise incurred for the purchase and transportation of gas under this
Agreement. Buyer shall use commercially reasonable efforts to minimize its
incremental actual costs for acquiring alternate supplies of fuel. In the
exercise of its commercially reasonable efforts, Buyer
12
<PAGE>
shall exercise diligent good faith efforts to purchase least cost substitute
fuel, including purchasing gas under existing agreements with other sellers
which will enable Buyer to utilize its transportation rights used to transport
gas hereunder. Because of environmental restrictions on Buyer's use of fuels
other than gas at the Facility, Buyer shall have the sole discretion whether to
purchase gas or an alternate fuel as a substitute for gas not delivered by
Seller hereunder, even where gas is more expensive. Except in the case of
Seller's willful misconduct or gross negligence and except as described in
Articles 12, 14 and 22, these are the sole and exclusive remedies available to
Buyer for any failure by Seller to deliver gas.
5.2 Buyer shall pay Seller a monthly Reservation Charge in consideration
for Seller's maintaining the capability to deliver gas up to the DCQ, assuming
market and supply risks, and agreeing to reimburse Buyer for any amounts
pursuant to Section 5.1. The Reservation Charge shall be the Reservation Rate
multiplied by the DCQ, multiplied by the number of days in such month. To
illustrate how the Reservation Charge would be calculated assume that the DCQ is
5,000 MMBtus per Day, and the Reservation Rate hereunder, the Reservation Charge
for the month of November would be: $1,500 (5,000 x $0.01 x 30).
ARTICLE 6: PAYMENT
------------------
6.1 Seller shall render an invoice on or before the fifteenth (15th) day
of each month setting forth the actual quantity of gas nominated by Buyer and
delivered by Seller hereunder during the preceding month, the Commodity Price,
Alternate Commodity Price, NYMEX Price or NYMEX Forward Price, the Reservation
Charge, any amounts due under Sections 2.2 and 12.2 and the total amount due. In
the event that
13
<PAGE>
the actual quantity delivered, the Alternate Commodity Price or the Reservation
Charge is not known at the time the invoice is rendered, an estimated quantity,
Alternate Commodity Price and Reservation Charge, based on the best available
information, shall be used. Buyer shall pay Seller for the amount due by wire
transfer with immediately available funds to Seller's account in accordance with
instructions contained in Seller's invoice. Payment shall be due on or before
the last day of such month. If PSE&G fails to pay Buyer under the PPIA by the
last day of the month Buyer's obligation to pay Seller shall be suspended from
the last day of the month, until one (1) day following Buyer's receipt of
PSE&G's payment, but, in such a case, Buyer's obligation to pay Seller shall not
be suspended past the third business day of the following month. When the actual
quantity, Alternate Commodity Price or Reservation Charge becomes known and if
an adjustment is necessary, an invoice containing the adjustment for the
difference between the actual value and the estimated value will be rendered.
Payment will be made in subsequent months' payment cycles.
6.2 Buyer shall submit an invoice on or before the fifteenth (15th) day of
the month, if necessary, for any amount due pursuant to Sections 5.1 and 12.2.
Seller shall pay Buyer in accordance with instructions contained in Buyer's
invoice. Payment shall be due on or before the last day of such month.
6.3 Should either party fail to pay any amount not in dispute when due,
interest thereon shall accrue at the lesser of (i) the rate of one percent (1%)
above the prime commercial rate charged by Citibank, N.A., New York, New York,
compounded annually from the due date or (ii) the maximum lawful contract rate
permitted by
14
<PAGE>
applicable law, until the amount due and interest have been paid in full. Such
interest shall be in addition to any other rights and remedies the owed party
may have for the owing party's failure to pay any amount not in dispute. Should
the owing party dispute the amount invoiced, such party shall pay the undisputed
amount and notify the other party of any disputed amount by the due date. Both
parties will mutually resolve the disputed amount in a timely manner with
interest accruing from the original due date on any disputed amount determined
to be a valid amount due. Notwithstanding the foregoing or any other provision
herein, if Buyer fails to pay any amount within five (5) days after receiving
written notice from Seller that payment is delinquent, Seller may withhold
deliveries and, should said nonpayment continue for a period of thirty (30) days
after such notice, subject to the provisions of Article 22, Seller may terminate
this Agreement upon written notice.
6.4 Upon reasonable notice, each party shall have the right at reasonable
times to have an independent public accounting firm examine the books, records,
and charts controlled by the other party to the extent necessary to verify the
accuracy of any statement, payment, charge, or computation made pursuant to this
Agreement. In the event an error is discovered in any statement, payment,
charge, or computation, the adjusted amount shall be due within thirty (30) days
of the determination thereof, provided that any statement, payment, charge, or
computation shall be final as to both parties unless objected to in writing
within twelve (12) months after payment has been made.
6.5 If either party pays any amount shown due and owing upon the invoice
of the other party, and such amount is subsequently determined by agreement,
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<PAGE>
arbitration or judgment of court not to have been due and owing when paid, the
payee will refund such amount to the paying party together with interest from
the date of payment to the date of refund at the interest rate set forth in
Section 6.3 hereof.
ARTICLE 7: TAXES
----------------
7.1 Seller shall pay, or cause to be paid, all taxes, assessments, fees or
other charges now and hereafter lawfully levied and imposed by federal, state,
or local authorities upon Seller with respect to the gas prior to delivery at
the Point(s) of Delivery. In the event Buyer is required to remit such taxes,
assessments, fees or charges, Seller shall reimburse Buyer for such amount.
Seller shall furnish Buyer with a copy of the exemption certificate in
situations in which exemption from any such imposition is claimed by Seller.
7.2 Buyer shall pay, or cause to be paid, all taxes, assessments, fees or
other charges (including, but not limited to, sales and value added taxes) now
and hereafter lawfully levied and imposed by federal, state, or local
authorities upon Buyer with respect to the gas at and subsequent to delivery at
the Point(s) of Delivery. In the event Seller is required to remit such taxes,
assessments, fees or charges, Buyer shall reimburse Seller for such amount.
Buyer shall furnish Seller with a copy of the exemption certificate in
situations in which exemption from any such imposition is claimed by Buyer.
ARTICLE 8: POINT(S) OF DELIVERY
-------------------------------
The "Point(s) of Delivery" shall be the point(s) on Transporter(s)'
pipeline system(s) where gas is delivered by Seller to Transporter(s) for
Buyer's account, as specified in Exhibit C attached hereto and made a part
hereof. As between the parties
16
<PAGE>
hereto, title, risk of loss, and liabilities associated with delivered gas shall
pass to and vest in Buyer at the Point(s) of Delivery. Changes in the Point(s)
of Delivery shall require the mutual consent of the parties.
ARTICLE 9: PRESSURE
-------------------
Seller shall deliver gas at the Point(s) of Delivery at a pressure
sufficient to effect delivery into the receiving Transporter(s)' facilities.
ARTICLE 10: MEASUREMENT
-----------------------
All measurement of gas delivered and sold hereunder shall be in accordance
with the provisions of the receiving Transporter(s)' tariff(s) at the Point(s)
of Delivery.
ARTICLE 11: QUALITY
-------------------
The gas delivered and sold by Seller to Buyer at the Point(s) of Delivery
shall meet the quality specifications set forth in the receiving Transporter(s)'
tariff(s) at the Point(s) of Delivery. Buyer shall have the right to be
represented and to participate in all tests of gas delivered hereunder performed
by Seller, and to inspect any equipment used in such tests to determine the
nature of the quality of gas delivered hereunder. In the event the gas does not
meet such quality specifications, Buyer may refuse delivery of the gas. Seller's
delivery of gas refused by Buyer for failure to meet quality specifications
shall not constitute delivery for the purposes of Articles 2, 5 and 6. Buyer's
sole remedy for such failure of gas to meet quality specifications shall be to
refuse receipt of the gas and receive the remedy specified in Article 5.
ARTICLE 12: TRANSPORTATION AND IMBALANCE CHARGES
------------------------------------------------
12.1 Transporter(s)' rules, guidelines, operational procedures and
policies, as may be changed from time to time, may define and set forth the
manner in which gas
17
<PAGE>
delivered and sold under this Agreement is transported. Seller and Buyer agree
to provide to the other, in as prompt a manner as reasonable, all information
necessary to permit scheduling pursuant to such requirements. Seller shall give
Buyer the highest ranking given to any other purchaser of Seller's gas in any
priority queue when nominating or allocating volumes to Transporter(s) for
delivery to Buyer under this Agreement.
12.2 Each party agrees to make all reasonable efforts to cooperate with the
other in operating under this Agreement to avoid pipeline imbalance charges,
cash-out costs and penalties. Buyer shall bear any under or over delivery
charges, cash-out costs and penalties assessed by Transporter(s) and PSE&G which
are caused by variances (including variances due to events of force majeure
declared by Buyer) in Buyer's receipts from the Nominated Quantity and Seller
shall bear any under or over delivery charges, cash-out costs and penalties
assessed by Transporter(s) and PSE&G which are caused by variances (including
variances due to events of force majeure declared by Seller) in Seller's
deliveries from the Nominated Quantity.
12.3 Seller shall be responsible for transportation to the Point(s) of
Delivery and payment of all transportation charges relating thereto. Buyer shall
be responsible for transportation from the Point(s) of Delivery and payment of
all transportation charges relating thereto. The parties recognize that the gas
purchased hereunder may be transported by Transporter(s) whose transportation
rates and related charges such as fuel reimbursement and take-or-pay surcharges
are subject to refund. The party which pays the Transporter(s) for
transportation of gas hereunder shall be entitled to retain any refunds
associated therewith.
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<PAGE>
ARTICLE 13: TERM
----------------
This Agreement shall be effective from the date first set forth above and,
unless sooner terminated under the provisions of this Agreement, shall continue
for five (5) months from the commencement of deliveries of gas hereunder. The
commencement of deliveries of gas hereunder shall be November 1, 1997, unless
otherwise agreed by the parties. The term of this Agreement may be extended by
mutual agreement of the Parties.
ARTICLE 14: FORCE MAJEURE
-------------------------
14.1 If, by reason of force majeure either party is rendered unable, wholly
or in part, to carry out its obligations under this Agreement, and such party
provides written notice and full particulars of such event of force majeure as
soon as practicable after the occurrence thereof, the obligations of such
affected party shall be suspended to the extent and for the period of such event
of force majeure, except for the payment of monies in respect of obligations
that have accrued hereunder prior to such event of force majeure. The cause of
suspension other than strikes or lockouts shall be remedied so far as possible
with reasonable dispatch. Settlement of strikes and lockouts shall be wholly
within the discretion of the party having the difficulty.
14.2 The term "force majeure" shall mean any act or event which wholly or
partially prevents or delays the performance of obligations arising under this
Agreement if such act or event is not reasonably within the control of and not
caused by the fault or negligence of the party claiming force majeure and which
by the exercise of due diligence such party is unable to prevent or overcome,
including, without limitation by the following enumeration: acts of God, the
public enemy or the
19
<PAGE>
elements; fire, accidents, breakdowns, shutdowns for purposes of necessary
repairs, maintenance, relocation or construction of facilities; breakage,
freezing or accidents to wells, machinery or lines of pipe; the necessity of
making repairs or alterations to machinery or lines of pipe; inability to obtain
materials, supplies, permits, or labor to perform or comply with any obligation
or condition of this Agreement; any curtailment of firm gas transportation
service to, of electricity or steam purchases from, or of resale service by
PSE&G to, the Facility; strikes and any other industrial, civil or public
disturbances; any laws, orders, rules, regulations, acts, restraints of any
government or governmental body or authority, civil or military which have the
effect of prohibiting performance of a party's obligations. The term "force
majeure" shall also expressly include the imposition upon Buyer of any gross
receipts, franchise or other gas consumption tax which Buyer is not obligated to
pay on the date of execution of this Agreement, which tax Buyer determines has a
material economic impact on its ability to continue to purchase gas at the
prices or in the quantities set forth herein.
14.3 Except as provided in Section 14.2, neither party may rely upon
changes in market conditions, curtailment of interruptible transportation, or
denial by a regulatory authority of the pass through of the cost of gas
purchased under this Agreement as events of force majeure. In the event of force
majeure that causes Seller to curtail its deliveries hereunder, Seller shall
treat Buyer on a pro rata basis with Seller's other firm customers and shall
give Buyer priority of service over all interruptible customers.
14.4 In the event Buyer fails to take or Seller fails to make available,
due to a declared event of force majeure, at least fifty percent (50%) of the
aggregate DCQ for
20
<PAGE>
a period of sixty (60) consecutive days, then the non-declaring party may
terminate this Agreement upon written notice, provided that such notice is given
prior to the date the force majeure is remedied.
ARTICLE 15: NOTICE
------------------
Any notice, request, demand, statement, or bill provided for in this
Agreement shall be in writing and delivered by hand, mail, or telecopy. All such
written communications shall be effective upon receipt by the other party at the
address of the parties hereto as follows:
Buyer:
Notices & Statements
--------------------
Camden Cogen, L.P.
c/o Cogen Technologies Camden, Inc.
Suite 4300
1600 Smith Street
Houston, TX 77002
Attention: Vice President - Fuel Supply
---------
Telephone No.: (713) 951-7768
Telecopy No.: (713) 951-7803
Seller:
Columbia Energy Services Corporation
1330 Post Oak Blvd., 20th Floor
Houston, TX 77056
Notices & Statements
--------------------
Attention: Mr. Walter Kromholz
---------
Telephone No.: (713) 693-2811
Telecopy No.: (713) 621-5392
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<PAGE>
Accounting Matters:
------------------
Attention: Mary Allen
Telephone No.: (713) 693-2816
Nomination Notices:
------------------
Attention: Mr. David Scott
Telephone No.: (713) 693-2581
Telecopy No.: (713) 621-5392
Either of the parties may designate a further or different address by giving
written notice to the other party.
ARTICLE 16: LAWS, ORDERS & REGULATIONS
--------------------------------------
This Agreement, and all terms and provisions contained herein, and the
respective obligations of the parties are subject to valid laws, orders, rules,
and regulations of duly constituted authorities having jurisdiction over Buyer,
Seller, Transporter(s) or PSE&G. In the event that any regulatory or government
body asserting jurisdiction over Transporter(s), PSE&G, Buyer or Seller
prohibits any of the transactions described in this Agreement or any
transportation or delivery agreement between Transporter(s), PSE&G, Seller
and/or Buyer covering the transportation and delivery of the gas sold hereunder,
or otherwise conditions such transactions in a form that is unacceptable in the
reasonable judgment of the party affected thereby, then either party hereto so
affected or prohibited may, by giving one (1) month prior written notice to the
other party, terminate this Agreement and each party shall be held harmless as a
result of such termination except for obligations which were
22
<PAGE>
incurred prior to termination; provided, however, such termination shall be
effective immediately where required by law, rule or regulation.
ARTICLE 17: APPLICABLE LAW
--------------------------
THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS.
ARTICLE 18: WAIVER
------------------
No waiver by either party of any one or more defaults in the performance of
any provision of this Agreement shall operate or be construed as a waiver of any
future default, whether of a like or a different character.
ARTICLE 19: TITLE
-----------------
Seller warrants title to, or good right to sell, all gas delivered
hereunder by Seller, and that such gas is free from liens and adverse claims of
every kind. Seller will pay, or cause to be paid, all royalties and other sums
imposed on the production, gathering, or transportation of the gas prior to its
delivery by Seller to Buyer. Seller will indemnify and save Buyer harmless
against all loss, damage, and expense of every character on account of adverse
claims to the gas delivered by it or of royalties, payments or other charges
thereon applicable before delivery to Buyer. If any adverse claim of any
character is asserted with respect to Seller's right to deliver gas hereunder,
or with respect to Seller's right to receive payment for such gas, or if
Seller's title is questioned or involved in any action, then Buyer shall
immediately notify Seller of such adverse claim and then may withhold that
portion of sums due hereunder reasonably related to such claim until such claim
is finally determined or title
23
<PAGE>
is clear, or until such time as Seller furnishes a corporate undertaking
conditioned to save Buyer harmless from such claim.
ARTICLE 20: ASSIGNMENT
----------------------
Either party may, without relieving itself of its obligations under this
Agreement, assign any of its rights hereunder to an entity with which it is
affiliated, but otherwise no assignment of this Agreement or any of the rights
or obligations hereunder shall be made unless there first shall have been
obtained the consent thereto in writing of the other party, which consent shall
not be unreasonably withheld. Any successor-in-interest of Buyer or Seller
shall be entitled to the rights and shall be subject to the obligations of its
predecessor-in-interest under this Agreement. It is agreed, however, that the
restrictions on assignment contained in this paragraph shall not in any way
prevent either party to this Agreement from pledging, mortgaging or assigning
its rights hereunder as security for its indebtedness. In connection with any
such pledge, mortgage or assignment by Buyer, Seller will execute an appropriate
consent to any such pledge, mortgage or assignment as reasonably requested by
Buyer's lender. Any such consent will acknowledge, in effect, that this
Agreement has been duly authorized and is valid and enforceable against Seller
and that this Agreement is in full force and effect; that Seller will not agree
to any amendment to this Agreement without the lender's approval in writing,
which approval shall not be unreasonably withheld by the lender that Seller will
make all payments due to Buyer hereunder in accordance with the instructions of
the lender; that Seller will not terminate this Agreement by reason of Buyer's
default or by reason of force majeure, without giving the lender notice of
default and notice of termination and the same opportunity to cure
24
<PAGE>
provided to Buyer under this Agreement (plus any longer period as may be
necessary, not to exceed one (1) month, if the lender in good faith is
endeavoring to obtain possession of the Facility and pays Seller in accordance
with the terms of this Agreement during such period); that Seller will deliver
to the lender a copy of each notice of default and notice of termination at the
same time that such notice is delivered to Buyer; and that in the event the
lender exercises its rights under its loan documentation or partnership
documentation with Buyer, Seller will accept performance by the lender or any
successor or assign thereof, provided that the lender or any such successor or
assign pays all sums then due to Seller hereunder and is also otherwise in
compliance with this Agreement.
ARTICLE 21: ARBITRATION
-----------------------
21.1 Any issue not resolved by agreement between the parties shall be
submitted to binding arbitration pursuant to the provisions of this Agreement
The parties shall each appoint one (1) arbitrator and the two (2) arbitrators so
appointed will select a third arbitrator, all of such arbitrators to be
qualified by education, knowledge, and experience to resolve the dispute or
controversy. If either party fails to appoint an arbitrator within ten (10) days
after a request for such appointment is made by the other party in writing, or
if the two (2) appointed fail, within ten (10) days after the appointment of the
second, to agree on a third arbitrator, the arbitrator or arbitrators necessary
to complete a board of three (3) arbitrators will be appointed upon application
by either party therefor to the American Arbitration Association.
21.2 The jurisdiction of the arbitrators will be limited to the single
issue or issues referred to arbitration and the arbitration shall be conducted
pursuant to the
25
<PAGE>
guidelines set forth by the American Arbitration Association; provided, however,
that should there be any conflict between such guidelines and the procedures set
forth in this Agreement, the terms of this Agreement shall control.
21.3 Within fifteen (15) days following selection of the third arbitrator,
each party shall furnish the arbitrators in writing its position and supporting
arguments regarding the issue or issues being arbitrated. The arbitrators may,
if they deem necessary, convene a hearing regarding the issue or issues being
arbitrated. All hearings shall be held at a location to be agreed upon among the
arbitrators in Houston, Harris County, Texas. Within thirty (30) days following
the later of the appointment of the third arbitrator or of the hearing, if one
is held, the arbitrators shall notify the parties in writing as to which of the
two (2) positions submitted with respect to the issue or issues in question is
most consistent with the intent of this Agreement. Such decision shall be
binding on the parties hereto until and unless changed in accordance with the
provisions of this Agreement.
21.4 Enforcement of the award may be entered in any court having
jurisdiction over the parties.
21.5 Each party will pay the expense of the arbitrator selected by or for
it, and its counsel, witnesses and employees. All other costs of arbitration
will be equally divided between the parties.
ARTICLE 22: DEFAULT
-------------------
22.1 In the event either party fails to perform any of the material
covenants or obligations imposed upon it under and by virtue of this Agreement,
the party not in default hereto, having first given thirty (30) days written
notice to the party in default
26
<PAGE>
stating specifically the nature of the default and declaring it to be the
intention of the party giving notice to cancel this Agreement (the "Cancellation
Notice"), may, at its option, cancel this Agreement in accordance with this
Article 22. If within said period of thirty (30) days the party in default
remedies or removes said default, including payment of sums due with interest at
the rate set forth in Section 6.3 hereof, or provides adequate security to fully
indemnify the party not in default for any and all direct damages of such
breach, including payment of sums due with interest at the rate set forth in
Section 6.3 hereof, then such Cancellation Notice shall be withdrawn and this
Agreement shall continue in full force and effect; provided, however, that if
the default is the failure to pay sums due hereunder, then the party not in
default shall have the right to suspend gas deliveries or takes, as the case may
be, after service of the Cancellation Notice.
22.2 If the party in default does not so remedy or remove the default or
does not provide adequate security to fully indemnify the party not in default
for any and all direct damages of such breach, and fails to represent that
further defaults shall not occur and that steps have been taken to avoid such a
recurrence, within said period of thirty (30) days, this Agreement, at the
option of the party not in default, shall be canceled upon written notice to the
defaulting party. Cancellation of this Agreement, pursuant to the provisions of
this Article 22, shall be without prejudice to any other rights and remedies the
party not in default has available to it. Further, such cancellation of this
Agreement or failure to cancel shall be without prejudice to the right of Seller
to collect any amounts then due Seller for gas delivered prior to the time of
cancellation.
27
<PAGE>
ARTICLE 23: GENERAL
-------------------
23.1 The headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement.
23.2 Any modification, revision or amendment of this Agreement made
subsequent to its execution shall be valid and effective only if and when made
in writing and duly executed by the parties hereto.
23.3 This Agreement and any Exhibit hereto shall constitute a single
agreement, superseding all prior agreements or undertakings between the parties
on the subject matter hereof. This Agreement contains the entire agreement of
the parties and, except as stated herein, there are no promises, agreements,
warranties, obligations, assurances or conditions precedent or otherwise
affecting it.
23.4 By executing this Agreement, each of the individuals so executing
warrants that (i) the individual has all necessary corporate power and authority
to enter into and execute this Agreement and (ii) this Agreement constitutes the
valid and binding obligation of the party on whose behalf it is executed,
enforceable in accordance with its terms, subject to applicable bankruptcy and
insolvency laws.
23.5 The parties shall execute such additional documents and shall cause
such additional action to be taken as may be required, or, in the reasonable
judgment of any party, as may be necessary or desirable, to effect or evidence
the provisions of this Agreement and the transactions contemplated hereby.
23.6 The parties acknowledge that each provision to this Agreement
constitutes their joint work product.
28
<PAGE>
ARTICLE 24: CONFIDENTIALITY
---------------------------
24.1 The terms of this Agreement and information disclosed pursuant to this
Agreement, including but not limited to the price paid for gas, shall be kept
confidential by Seller and Buyer, (a) except to the extent any information must
be disclosed to (i) Transporter(s) and PSE&G for the purpose of effectuating
transportation and resale of the gas sold and purchased under this Agreement,
(ii) PSE&G for the purpose of complying with the PPIA and (iii) Buyer's lender
and (b) except as required by law, regulation or request of governmental
authority.
IN WITNESS WHEREOF, by execution in duplicate originals, the parties hereto
have caused this Agreement to be effective as of the day and year first above
written.
"BUYER" "SELLER"
CAMDEN COGEN, L.P. COLUMBIA ENERGY SERVICES
CORPORATION
By: Cogen Technologies Camden GP By: /s/ D.K. HARGREAVES
Limited Partnership, a Delaware ___________________________
limited partnership, its general Name: D.K. Hargreaves
partner Title: Vice President
Date: August
By: Cogen Technologies Camden, Inc., a
Texas corporation, its general partner
By: /s/ W. COLIN HARPER
_________________________________
W. Colin Harper
Vice President - Fuel Supply
Date: August 1, 1997
________________________________
29
<PAGE>
EXHIBIT A
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between CAMDEN COGEN, L.P., as Buyer, and
COLUMBIA ENERGY SERVICES CORPORATION, as Seller.
NOMINATION NOTICE
Date: __________________________
Columbia Energy Services Corporation
1330 Post Oak Blvd., 20th Floor
Houston, TX 77056
Attention: Mr. Walter Kromholz
Reference: Firm Gas Purchase and Sale Agreement
Dated: July 1, 1997
Buyer: Camden Cogen, L.P.
Seller: Columbia Energy Services
Corporation
Point of Delivery: TETCO - E. TX
Contract No.: ____________________
Gentlemen:
Pursuant to Section 3.1 of the subject Agreement, Camden Cogen, L.P., hereby
nominates the following:
Month of Delivery: ______________________
Nominated Quantity (MMBtu/D): ____________
Very truly yours,
____________________________
W. Colin Harper
Vice President - Fuel Supply
30
<PAGE>
EXHIBIT B
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between CAMDEN COGEN, L.P., as Buyer, and
COLUMBIA ENERGY SERVICES CORPORATION, as Seller.
================================================================================
MARKET PRICE INDEX
(TETCO/EAST TEXAS)
================================================================================
PUBLICATION* TABLE ROW COLUMN
================================================================================
Inside FERC's Gas Prices of Spot Gas Texas Eastern; East Index
Market Report (first Delivered to Texas
report in applicable Pipelines (per
month) MMBtu dry)
- --------------------------------------------------------------------------------
Natural Gas Week Spot Prices on Texas Eastern; East Bid Week
(first report in Interstate Pipeline Texas (current
applicable month Systems Delivered month)
to Pipline ($/MMBtu)
================================================================================
================================================================================
BACKUP PRICE INDEX
(TETCO/EAST TEXAS)
================================================================================
PUBLICATION* TABLE ROW COLUMN
================================================================================
Natural Gas Spot Gas Prices; Region - East Texas; Contract
Intelligence - Delivered to Texas Eastern Index
Weekly Pipelines (30 Day (current
Gas Price Index Supply Transactions) month)
(first report in
applicable month)
================================================================================
31
<PAGE>
EXHIBIT C
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between CAMDEN COGEN, L.P., as Buyer, and
COLUMBIA ENERGY SERVICES CORPORATION, as Seller.
POINT(S) OF DELIVERY
--------------------
The Point(s) of Delivery shall be:
The existing point(s) of receipt on TETCO in East Texas.
32
<PAGE>
STATE OF TEXAS )
) SS.
COUNTY OF HARRIS )
On this 1st day of August 1997, before me, Joy R. Toups, the undersigned
officer, personally appeared, W. Colin Harper, known to me to be the person
whose name is subscribed to the within instrument and acknowledged that Cogen
Technologies Camden, Inc., as General Partner of Cogen Technologies Camden GP
Limited Partnership, in turn acting as General Partner of Camden Cogen, L.P.,
executed the same for the purpose therein contained.
In witness whereof I hereunto set my hand and official seal.
/s/ JOY R. Toups
JOY R. TOUPS --------------------------------------
MY Commission expires Notary Public in and for the State of Texas
August 13, 2001
(SEAL)
======
STATE OF TEXAS )
) SS.
COUNTY OF HARRIS)
On this 12th day of August, 1997, before me, Trisha S. Pollard the
undersigned officer, personally appeared, Daniel K. Hargreaves, known to me to
be the person whose name is subscribed to the within instrument and
acknowledged that Columbia Energy Services Corporation executed the same for the
purpose therein contained.
In witness whereof I hereunto set my hand and official seal.
/s/ TRISHA S. POLLARD
(SEAL) _______________________________
====== Notary public in and for the State of Texas
TRISHA S. POLLARD
NOTARY PUBLIC
State of Texas
Commission. Exp. 05-23-2000
33
<PAGE>
GUARANTY AGREEMENT
------------------
THIS AGREEMENT, shall be effective July 1, 1997, by and between
COLUMBIA GAS SYSTEMS CORPORATION (hereinafter referred to as "Guarantor")
and CAMDEN COGEN, L,P,, (hereinafter referred to as "Cogen").
WITNESSETH:
WHEREAS, Cogen and Columbia Energy Service Corporation hereinafter
referred to as "CESC"), a wholly-owned subsidiary of Guarantor,
contemporaneously herewith are entering into a Firm Gas Purchase and Sale
Agreement effective July 1, 1997, as amended from time to time (the
"Agreement"), pursuant to which Cogen will purchase from CESC natural gas for a
cogeneration facility (the "Facility") located in Camden, Now Jersey, in the
quantities and upon the terms and conditions that are set forth in the
Agreement; and
WHEREAS, Cogen desires assurances that Guarantor will be responsible for
obligations of CESC set forth in the Agreement in the event CESC does not
satisfy such obligations; and
WHEREAS, Guarantor desires that the Agreement be executed and, therefore,
desires to give such assurances.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and other valuable consideration, the adequacy and receipt of
which are hereby acknowledged, Guarantor and Cogen hereby agree as follows:
1. Guarantor hereby irrevocably and unconditionally guarantees to Cogen the
full, prompt and complete performance of the obligations of CESC set forth in,
and subject to the terms of, the Agreement. If CESC fails to perform any of its
obligations
<PAGE>
then due under the Agreement, Guarantor shall cause CESC or another of its
subsidiaries or affiliates to perform said obligation in accordance with the
terms of the Agreement. Without limiting the generality of the foregoing, the
Guarantor agrees that the occurrence of any one or more of the following shall
not affect the liability of the Guarantor hereunder: (a) at any time or from
time to time, without notice to the Guarantor, the time for any performance of
or compliance with any of the obligations of CESC set forth in the Agreement or
such obligations shall be extended, or such performance or compliance shall be
waived, (b) any of the acts mentioned in any of the provisions of the Agreement
shall be done or omitted or (c) any right under the Agreement shall be waived.
The Guarantor hereby expressly waives diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that Cogen or
any lender (so defined in the Agreement) exhaust any right, power or remedy or
proceed against CESC under the Agreement.
2. This Guaranty Agreement shall be assignable to the lenders as defined in
the Agreement under the same terms and conditions set forth in the Agreement.
Any other assignment shall not be permitted, in whole or in part, except with
the consent of the other party, which consent shall not be unreasonably
withheld. This Guaranty Agreement shall be binding upon the parties hereto and
their permitted successors and assigns.
3. This Guaranty Agreement is for the sole and exclusive benefit of the
parties hereto and any permitted successors and assigns. Nothing expressed or
implied herein is intended to benefit any other person, firm or corporation not
a party
2
<PAGE>
hereto. None of such other persons shall have any legal or equitable right,
remedy or claim under this Guaranty Agreement or under any provisions hereof.
4. Notwithstanding anything contained herein, if any claim or demand is
made against Guarantor pursuant to this Guaranty Agreement, Guarantor shall be
subject to all rights, set-offs, counterclaims and defenses to which CESC may
be entitled, except for defenses arising out of bankruptcy, insolvency,
liquidation or dissolution of CESC.
5. This Guaranty Agreement shall remain in full force and effect until the
termination of all obligations under the Agreement.
6. Notwithstanding anything in this Guaranty Agreement to the contrary,
Guarantor's liability under this Guaranty Agreement and Cogen's right of
recovery under the same shall be limited to an aggregate amount of $2.5 million.
7. No delays on the part of Cogen in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Cogen of
any right or remedy shall preclude other or further exercise thereof or the
exercise of any right or remedy. No actions of Cogen permitted hereunder shall
in any way impair or affect this Guaranty Agreement.
8. WHEREVER POSSIBLE, EACH PROVISION OF THIS GUARANTY AGREEMENT SHALL BE
INTERPRETED IN SUCH MANNER TO BE EFFECTIVE AND VALID UNDER TEXAS LAW, BUT IF ANY
PROVISIONS OF THIS GUARANTY AGREEMENT SHALL BE PROHIBITED OR INVALID UNDER SUCH
LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR
3
<PAGE>
INVALIDITY WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING
PROVISIONS OF THIS GUARANTY AGREEMENT.
9. The Guarantor represents and warrants as follows:
(a) The Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty Agreement are within the Guarantor's corporate powers, have been
duly authorized by all necessary corporate action, and do not contravene (i)
the Guarantor's certificate of incorporation or by-laws or (ii) any law,
rule, regulation or order, or any restriction contained in any material
agreement or instrument, binding on or affecting the Guarantor.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by the Guarantor of this
Guaranty Agreement, except such as have been duly obtained or made and are
in full force and effect.
(d) This Guaranty Agreement is a legal, valid and binding obligation
of the Guarantor enforceable against the Guarantor in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles (whether enforcement is sought by proceeding in equity or at
law).
4
<PAGE>
(e) As of the effective date hereof, the Guarantor owns, directly or
indirectly, all the issued and outstanding capital stock of CESC,
IN WITNESS WHEREOF, this instrument is executed as of the day and year first
above written.
COLUMBIA GAS SYSTEMS CAMDEN COGEN, L.P.
CORPORATION
(GUARANTOR)
By: Cogen Technologies Camden GP
By: /s/ Limited Partnership, a Delaware
------------------------------ limited partnership, its general
Date: August 20, 1997 partner
------------------------------
Chief Financial Officer By: Cogen Technologies
The Columbia Gas System, Inc. Camden, Inc., a Texas corporation,
its general partner
By: /s/ W. Colin Harper
----------------------------
W. Colin Harper
Vice President - Fuel Supply
Date: August 19, 1997
____________________________
5
<PAGE>
Exhibit 10.29
FIRM GAS PURCHASE AND SALE AGREEMENT
between
CAMDEN COGEN, L.P.
and
TEXACO NATURAL GAS INC
<PAGE>
TABLE OF CONTENTS
Page
----
TABLE OF CONTENTS..................................................... i
ARTICLE 1: DEFINITIONS.......................................... 1
ARTICLE 2: QUANTITIES........................................... 5
ARTICLE 3: NOMINATIONS.......................................... 5
ARTICLE 4: PRICE................................................ 6
ARTICLE 5: RESERVATION CHARGES AND SUBSTITUTE FUELS............. 12
ARTICLE 6: PAYMENT.............................................. 14
ARTICLE 7: TAXES................................................ 16
ARTICLE 8: POINT(S) OF DELIVERY................................. 17
ARTICLE 9: PRESSURE............................................. 18
ARTICLE 10: MEASUREMENT.......................................... 18
ARTICLE 11: QUALITY.............................................. 18
ARTICLE 12: TRANSPORTATION AND IMBALANCE CHARGES................. 18
ARTICLE 13: TERM................................................. 20
ARTICLE 14: FORCE MAJEURE........................................ 20
ARTICLE 15: NOTICE............................................... 22
ARTICLE 16: LAWS, ORDERS & REGULATIONS........................... 24
ARTICLE 17: APPLICABLE LAW....................................... 24
ARTICLE 18: WAIVER............................................... 25
ARTICLE 19: TITLE................................................ 25
i
<PAGE>
ARTICLE 20: ASSIGNMENT........................................... 26
ARTICLE 21: ARBITRATION.......................................... 27
ARTICLE 22: DEFAULT.............................................. 28
ARTICLE 23: GENERAL.............................................. 30
ARTICLE 24: CONFIDENTIALITY...................................... 31
EXHIBIT A ............................................................ 33
EXHIBIT B ............................................................ 34
EXHIBIT C ............................................................ 35
ii
<PAGE>
FIRM GAS PURCHASE AND SALE AGREEMENT
This AGREEMENT ("Agreement") is made and entered into this 1st day of July,
1997, by and between CAMDEN COGEN, L.P., a Delaware limited partnership,
hereinafter referred to as "Buyer," and TEXACO NATURAL GAS INC., a Delaware
corporation, hereinafter referred to as "Seller;"
WHEREAS, Buyer requires a supply of gas for use in Buyer's co-generation
facility in Camden, New Jersey; and
WHEREAS, Seller is willing to sell gas to Buyer on a firm basis to meet its
requirements.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties do hereby covenant and agree as follows:
ARTICLE 1: DEFINITIONS
In addition to the terms "Buyer" and "Seller" which shall refer to the
parties identified above, or their duly designated agents or representatives,
the following terms shall have the specified meanings:
1.1 The term "Alternate Commodity Price" shall have the meaning set forth
in Section 4.3.
1.2 The term "Btu" shall mean the amount of heat required to raise the
temperature of one (1) pound avoirdupois pure water from fifty-eight and five-
tenths degrees (58.5 degrees) to fifty-nine and five-tenths degrees (59.5
degrees) Fahrenheit, as defined in the American Gas Association Gas Measurement
Manual and any subsequent revisions.
1
<PAGE>
1.3 The term "Cancellation Notice" shall mean the notice described in
Section 22.1.
1.4 The term "Commodity Price" shall have the meaning set forth in Section
4.2.
1.5 The term "Daily Contract Quantity" or "DCQ" shall mean ten thousand
(10,000) MMBtu per day, plus Transporter(s)' Market Area Fuel.
1.6 The term "day" shall mean a period of twenty-four (24) consecutive
hours, beginning and ending at the time specified in the receiving
Transporter(s)' tariff(s) at the Point of Delivery.
1.7 The term "Delivery Period" shall mean a period of five (5) consecutive
months beginning with the commencement of deliveries of gas hereunder.
1.8 The term "Facility" shall mean the co-generation facility owned and
operated by Buyer that is located in Camden, New Jersey.
1.9 The term "force majeure" shall have the meaning set forth in Section
14.2.
1.10 The term "Gas" or "gas" shall mean any mixture of hydrocarbons or of
hydrocarbons and non-combustible gases, in a gaseous state, consisting
essentially of methane and shall include casinghead gas produced with crude oil,
natural gas from gas wells, coal-bed methane gas, synthetic gas, coal
gasification gas and residue gas resulting from processing any of the foregoing.
1.11 The term "lender" shall mean (i) any and all lenders (other than
Seller) providing the construction, interim, or long-term financing or
refinancing of the Facility
2
<PAGE>
(including a leveraged lease), and any trustee or agent acting on their behalf,
and (ii) any and all equity investors or limited partners providing any such
financing or refinancing of the Facility, and any trustee or agent acting on
their behalf. The current lenders are Bank of Tokyo (as agent for the Traunch A
lenders) and General Electric Capital Corporation and hereafter such entity as
is designated to Seller in writing by the entity then recognized as the lender
hereunder.
1.12 The term "Market Area Fuel" shall mean the volume of gas retained by
Transporter(s) as fuel for the transportation of gas from the Point(s) of
Delivery to the Point(s) of Redelivery.
1.13 The term "Market Price" shall have the meaning set forth in Section
4.3.
1.14 The term "Minimum Quantity" shall mean one hundred percent (100%) of
the product of the DCQ and the number of days in each month of the Delivery
Period, as reduced by circumstances of force majeure.
1.15 The term MMBtu" shall mean one million (1,000,000) Btus.
1.16 The term "month" shall mean the period commencing on the beginning
of the first day of a calendar month and ending on the beginning of the first
day of the succeeding calendar month.
1.17 The term "Nominated Quantity" shall have the meaning set forth in
Section 3.1.
1.18 The term "Nomination Notice" shall mean the notice described in
Section 3.1 and Exhibit A to this Agreement.
1.19 The term "NYMEX" shall mean the New York Mercantile Exchange.
3
<PAGE>
1.20 The term "NYMEX Forward Price" shall have the meaning set forth in
Section 4.7(b).
1.21 The term "NYMEX Price" shall have the meaning set forth in Section
4.7(a).
1.22 The term "Point(s) of Delivery" shall have the meaning set forth in
Article 8.
1.23 The term "Point(s) of Redelivery" shall mean the point or points on
Transporter(s)' pipeline system where gas is redelivered to or for the account
of Buyer or PSE&G on the PSE&G system in New Jersey.
1.24 The term "PPIA" or "Power Purchase and Interconnection Agreement"
shall mean the contract dated April 15, 1988, between Buyer and PSE&G, covering
the sale of electricity from the Facility, and any amendments thereto that have
been and may be made from time to time.
1.25 The term "PSE&G" shall mean Public Service Electric and Gas Company.
1.26 The term "Reservation Charge" shall have the meaning set forth in
Section 5.2.
1.27 The term "Reservation Rate" shall mean one and three-fourth cents
($0.0175) per MMBtu.
1.28 The term "Spot Market Price" shall mean the arithmetic average of the
prices reported in the weekly and BI-weekly updates of the reference pricing
reports during the month of delivery for the reference points set forth in
Exhibit "B" hereto.
1.29 The term "TETCO" shall mean Texas Eastern Transmission Corporation.
4
<PAGE>
1.30 The term "Transporter(s)" shall mean any pipeline(s) transporting gas
sold hereunder to and from the Point(s) of Delivery and to the Point(s) of
Redelivery.
ARTICLE 2: QUANTITIES
2.1 Buyer shall purchase and receive and Seller shall sell and deliver the
Nominated Quantity at the Point(s) of Delivery, except to the extent excused
under the provisions of this Agreement.
2.2 If during the Delivery Period Buyer purchases and receives less than
the DCQ, except to the extent excused under the provisions of this Agreement or
due to Seller's unexcused failure to deliver, then Buyer shall pay Seller an
amount equal to the difference between the price payable hereunder and the then
effective applicable Spot Market Price of gas multiplied by the difference
between the Minimum Quantity and the quantity of gas purchased and received by
Buyer. Except as described in Articles 12, 14 and 22, this is the sole remedy
available to Seller for any failure by Buyer to purchase and receive gas.
ARTICLE 3: NOMINATIONS
3.1 On or before the day prior to which pipeline nominations are required
to be nominated by Buyer and Seller to the applicable pipeline company(s)
referenced herein, and subject to the provisions of Sections 3.2 and 3.3, Buyer
shall notify Seller in writing by providing a Nomination Notice, substantially
in the form attached hereto as Exhibit A, specifying the daily quantity of gas,
in MMBtus, up to the DCQ, that Buyer shall purchase and receive from Seller
during the next month (hereinafter the "Nominated Quantity"). In the
alternative, Buyer may specify a standing Nominated
5
<PAGE>
Quantity to be effective until changed in writing pursuant to the first sentence
of this section.
3.2 The parties recognize that fluctuations in the production and
transportation of gas can occur on a daily basis. Buyer and Seller will attempt
to receive and deliver gas on a uniform hourly basis. Notwithstanding anything
to the contrary herein, any revisions to the Nominated Quantity shall be
implemented in accordance with Transporter(s)' nomination procedures, unless a
waiver of such procedures is received by either Buyer or Seller.
3.3 Buyer and Seller shall be responsible for nominations to their
respective Transporters and the nominations in each case shall reflect the
Nominated Quantity.
3.4 If no Nominated Quantity is submitted by Buyer in accordance with
Section 3.1, the DCQ shall be the Nominated Quantity.
ARTICLE 4: PRICE
4.1 For all gas nominated by Buyer and delivered by Seller during a month,
Buyer shall pay the Commodity Price or the Alternate Commodity Price per MMBtu,
rounded to the nearest $0.001.
4.2 The term "Commodity Price" shall mean the price of gas for each month
which shall be mutually agreed upon by the parties and subsequently confirmed in
writing prior to the date Buyer's nomination notice to Seller is due for the
month of delivery. In the event that the parties fail to reach agreement as to
the Commodity Price, the Alternate Commodity Price determined in accordance with
Section 4.3 shall apply.
6
<PAGE>
4.3 The term "Alternate Commodity Price" shall mean the arithmetic average
of the prices reported in the referenced issue of the month of delivery for the
price references included in the "Market Price Index," set forth in Exhibit B.
The price references in the Market Price Index are intended to reflect the price
paid for gas delivered at the Point(s) of Delivery under spot contracts (the
"Market Price"). The price references in the "Backup Price Index" set forth in
Exhibit B are intended to serve as a substitute for the price references in the
Market Price Index in the event the latter price references are not available or
are "erroneous," as that term is defined in Section 4.5.
4.4 Either party may request that a price reference be added to or deleted
from the Market Price Index or Backup Price Index by providing written notice to
the other party. For a price reference to be added to the Market Price Index or
Backup Price Index, the price reference must reflect the Market Price and be
from an independent publication which is not controlled by a buyer, seller or
broker of gas. For a price reference to be deleted from the Market Price Index
or Backup Price Index, such price reference must no longer reflect the Market
Price. If within thirty (30) days after the date of notice by a party, the
parties are unable to agree to add or delete a price reference, then the party
seeking such addition or deletion may submit the issue to arbitration which
shall be conducted pursuant to Article 21. A price reference shall be added or
deleted effective the first day of the month after notice by the requesting
party and the price ultimately determined by negotiation or arbitration will be
given retroactive effect to take into account the period of negotiation or
arbitration with
7
<PAGE>
interest assessed at the rate provided in Section 6.3. Unless otherwise agreed
by the parties, in no event may either party request that a price reference be
added to or deleted from the Market Price Index or Backup Price Index more than
once during the Delivery Period.
4.5 If during any month a price reference included in the Market Price
Index is not published, the Market Price Index will exclude such price reference
from the Market Price Index for so long as such price reference is not
published and the price reference(s) from the Backup Price Index shall be
substituted for the excluded price reference. If the excluded price reference is
the only price reference in the Market Price Index and no price references in
the Backup Price Index are published, then Section 4.6 below shall apply. If an
erroneous price is published and the publisher confirms such error, then the
correct price, if available, shall be used. If the publisher does not confirm
such error or if the correct price is not available, then the price reference
containing such erroneous price shall not be included in the Market Price Index
or Backup Price Index for such month. For purposes of Sections 4.3 and 4.5, the
term "erroneous" price shall mean any price reference that varies by more than
four percent (4%) from the average of the other price references included in the
Market Price Index and Backup Price Index for such month.
4.6 If no Market Price Index and no Backup Price Index reference prices are
available or if, in the opinion of either party, there are no price references
which reasonably reflect the Market Price and the basis of such opinion is
provided in writing to the other party, then a new method to determine the
Alternate Commodity Price will
8
<PAGE>
be negotiated. If the parties are unable to agree within thirty (30) days after
notice by a party, then the matter of determining whether a basis exists to
invoke this provision and, if so, the determination of a new method to determine
the Alternate Commodity Price shall be submitted to arbitration pursuant to
Article 21. During a period of negotiation or arbitration, the last applicable
Commodity Price or Alternate Commodity Price shall remain in effect and shall be
adjusted at the conclusion of such negotiation or arbitration to give
retroactive effect to the result with interest assessed at the rate provided in
Section 6.3.
4.7 Alternatively, and in lieu of the price calculated pursuant to Sections
4.2 and 4.3 hereof, the parties may mutually agree to a NYMEX Price or NYMEX
Forward Price based on the NYMEX posting for the natural gas futures contract,
calculated as follows:
(a) On or before the business day prior to the NYMEX Settlement day,
Buyer may propose that the price under this Agreement for gas nominated by
Buyer for delivery in the applicable month be the NYMEX Price, plus or
minus the basis differentials that may be mutually agreed upon at the time
of Buyer's proposal. The NYMEX Price shall be the arithmetic average of the
NYMEX posting of the settlement price of the natural gas futures contract
for the last three trading days applicable to the month of delivery.
Buyer's proposal shall designate the volume of gas for delivery in the
applicable month at the proposed price, up to the volume nominated in
accordance with Section 3.1 of this Agreement. Upon receipt of Buyer's
proposal, the parties shall confer by
9
<PAGE>
telephone as soon as possible and decide whether or not to use the NYMEX Price,
which decision shall ultimately be made by Buyer and Seller no later than 11:00
a.m. Central Time on the business day before the last trading day of the
applicable natural gas futures contract. In the event the parties agree to use
the NYMEX Price and agree on the basis differential, the parties' agreement
shall be set forth in a confirmation prepared by Buyer and transmitted by
telecopy to Seller. The parties' agreement shall be deemed conclusive upon
receipt of the confirmation (as evidenced by electronic confirmation of
transmission) unless Seller objects promptly in writing following receipt of the
confirmation. Either party shall have the right to withhold agreement on any
proposed price under this Section 4.7(a) at its sole discretion prior to
execution of the NYMEX transaction, in which case the price under this Agreement
will be calculated under Sections 4.2 or 4.3 hereof. If the parties are unable
to agree on the basis differentials or methodology for determining the basis,
the NYMEX Price shall be deemed to be rejected. In the event the parties agree
to use the NYMEX Price, the nominated volumes which are covered by the NYMEX
Price shall remain in effect during the applicable month and shall not be
reduced or increased pursuant to Sections 3.2 or 3.3 of this Agreement.
(b) In addition to the NYMEX Price, Buyer shall have the right to propose
that the NYMEX Forward Price, plus or minus the basis differentials that may be
mutually agreed upon at the time of Buyer's proposal, be the price to be paid
under this Agreement during any calendar months designated by
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Buyer. The NYMEX Forward Price shall be the NYMEX posting for the natural gas
futures contract applicable to the month or months selected by Buyer and
prevailing at the time Buyer's proposal is communicated to Seller by telephone
and confirmed by Seller. Buyer's proposal shall designate the volume of gas for
delivery during the designated months at the proposed price, up to the volume
that can be nominated in accordance with Section 3.1 of this Agreement. Upon
receipt of Buyer's proposal, the parties shall confer by telephone and decide
whether or not to use the NYMEX Forward Price, which decision shall be made no
later than 11:00 a.m. Central Time on the first business day following Seller's
receipt and confirmation of Buyer's request. In the event the parties agree to
use the NYMEX Forward Price and agree on the basis differential or methodology
for determining the basis, the parties' agreement shall be set forth in a
confirmation prepared by Buyer and transmitted by telecopy to Seller. The
parties' agreement shall be deemed conclusive upon receipt of the confirmation
(as evidenced by electronic confirmation of transmission) unless Seller objects
promptly in writing following receipt of the confirmation. Either party shall
have the right to withhold agreement on any proposed price under this Section
4.7(b) at its sole discretion prior to the execution of the NYMEX transaction,
in which case the price under this Agreement will be calculated under Sections
4.2 or 4.3 hereof. If the parties are unable to agree on the basis differentials
or methodology for determining the basis, the NYMEX Forward Price shall be
deemed to be rejected. Nothing in this subsection M shall be construed to
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prevent Buyer from proposing the NYMEX Forward Price in any designated
month if either of the parties had previously rejected the NYMEX Forward
Price for that month. In the event the parties agree to use the NYMEX
Forward Price, the nominated volumes which are covered by the NYMEX Forward
Price shall remain in effect during the designated months and shall not be
decreased or increased pursuant to Sections 3.2 or 3.3 of this Agreement.
In addition, should the parties agree to use the NYMEX Forward Price, the
selection of that option shall remain in effect during the months selected
by the parties unless the parties mutually agree to use a different pricing
option.
4.8. The parties agree once the NYMEX based pricing mechanism in section
4.7 herein is utilized, or if the Parties agree to a fixed price for a period of
longer than one month, the Parties will deliver and purchase the entire contract
volume, or pay cover costs as provided herein, even if a Party is affected by an
event of force majeure, or other situation excused by the contract.
ARTICLE 5: RESERVATION CHARGES AND SUBSTITUTE FUELS
5.1 If during any month, Seller sells and delivers less than one hundred
percent (100%), but greater than ninety percent (90%), of the Nominated Quantity
multiplied by the number of days in the month, except to the extent excused
under the provisions of this Agreement or due to Buyer's unexcused failure to
receive, then Buyer shall be relieved of its obligation to pay Seller the
Reservation Charge applicable to the volumes not made available and Seller shall
refund to Buyer any payments attributable to such volumes if already invoiced
and paid. If during any month Seller
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sells and delivers less than ninety percent (90%) of the Nominated Quantity
multiplied by the number of days in the month, except to the extent excused
under the provisions of this Agreement or due to Buyer's unexcused failure to
receive, then Buyer shall be relieved of its obligation to pay Seller the
Reservation Charge set forth in Section 5.2 for the entire month during which
such supply failure occurred. Under such circumstances in this Section 5.1,
Seller shall also reimburse Buyer its actual costs incurred for the purchase
and/or production and transportation of alternate supplies of fuel equal to the
undelivered volume, including but not limited to any imbalance carrying charges
and/or cash-out costs and penalties imposed by Transporter(s) and PSE&G, less
the costs that Buyer would have otherwise incurred for the purchase and
transportation of gas under this Agreement. Buyer shall use commercially
reasonable efforts to minimize its incremental actual costs for acquiring
alternate supplies of fuel. In the exercise of its commercially reasonable
efforts, Buyer shall exercise diligent good faith efforts to purchase least cost
substitute fuel, including purchasing gas under existing agreements with other
sellers which will enable Buyer to utilize its transportation rights used to
transport gas hereunder. Because of environmental restrictions on Buyer's use of
fuels other than gas at the Facility, Buyer shall have the sole discretion
whether to purchase gas or an alternate fuel as a substitute for gas not
delivered by Seller hereunder, even where gas is more expensive. Except as
described in Articles 12, 14 and 22, these are the sole and exclusive remedies
available to Buyer for any failure by Seller to deliver gas.
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5.2 Buyer shall pay Seller a monthly Reservation Charge in consideration
for Seller's maintaining the capability to deliver gas up to the DCQ, assuming
market and supply risks, and agreeing to reimburse Buyer for any amounts
pursuant to Section 5. 1. The Reservation Charge shall be the Reservation Rate
multiplied by the DCQ, multiplied by the number of days in such month. To
illustrate how the Reservation Charge would be calculated assume that the DCQ is
10,000 MMBtus per Day, at the Reservation Rate hereunder, the Reservation Charge
for the month of November would be: $5,250 (10,000 x $.0175 x 30).
ARTICLE 6: PAYMENT
6.1 Seller shall render an invoice on or before the fifteenth (15th) day
of each month setting forth the actual quantity of gas nominated by Buyer and
delivered by Seller hereunder during the preceding month, the Commodity Price,
Alternate Commodity Price, NYMEX Price or NYMEX Forward Price, the Reservation
Charge, any amounts due under Sections 2.2 and 12.2 and the total amount due. In
the event that the actual quantity delivered, the Alternate Commodity Price or
the Reservation Charge is not known at the time the invoice is rendered, an
estimated quantity, Alternate Commodity Price and Reservation Charge, based on
the best available information, shall be used. Buyer shall pay Seller for the
amount due by wire transfer with immediately available funds to Seller's account
in accordance with instructions contained in Seller's invoice. Payment shall be
due on or before the last day of such month. If PSE&G fails to pay Buyer under
the PPIA by the last day of the month, Buyer's obligation to pay Seller shall be
suspended from the last day of the month,
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until one (1) day following Buyer's receipt of PSE&G's payment, but, in such a
case, Buyer's obligation to pay Seller shall not be suspended past the third
business day of the following month. When the actual quantity, Alternate
Commodity Price or Reservation Charge becomes known and if an adjustment is
necessary, an invoice containing the adjustment for the difference between the
actual value and the estimated value will be rendered. Payment will be made in
subsequent months' payment cycles.
6.2 Buyer shall submit an invoice on or before the fifteenth 15th) day of
the month, if necessary, for any amount due pursuant to Sections 5.1 and 12.2.
Seller shall pay Buyer in accordance with instructions contained in Buyer's
invoice. Payment shall be due on or before the last day of such month.
6.3 Should either party fail to pay any amount not in dispute when due,
interest thereon shall accrue at the lesser of (i) the rate of one percent (1%)
above the prime commercial rate charged by Citibank, N.A., New York, New
York, compounded annually from the due date or (ii) the maximum lawful contract
rate permitted by applicable law, until the amount due and interest have been
paid in full. Such interest shall be in addition to any other rights and
remedies the owed party may have for the owing party's failure to pay any amount
not in dispute. Should the owing party dispute the amount invoiced, such party
shall pay the undisputed amount and notify the other party of any disputed
amount by the due date. Both parties will mutually resolve the disputed amount
in a timely manner with interest accruing from the original due date on any
disputed amount determined to be a valid amount due.
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Notwithstanding the foregoing or any other provision herein, if Buyer fails to
pay any amount within five (5) days after receiving written notice from Seller
that payment is delinquent, Seller may withhold deliveries and, should said
nonpayment continue for a period of thirty (30) days after such notice, subject
to the provisions of Article 22, Seller may terminate this Agreement upon
written notice.
6.4 Upon reasonable notice, each party shall have the right,at reasonable
times to have an independent public accounting firm examine the books, records,
and charts controlled by the other party to the extent necessary to verify the
accuracy of any statement, payment, charge, or computation made pursuant to this
Agreement. In the event an error is discovered in any statement, payment,
charge, or computation, the adjusted amount shall be due within thirty (30) days
of the determination thereof, provided that any statement, payment, charge, or
computation shall be final as to both parties unless objected to in writing
within twelve (12) months after payment has been made.
6.5 If either party pays any amount shown due and owing upon the invoice of
the other party, and such amount is subsequently determined by agreement,
arbitration or judgment of court not to have been due and owing when paid, the
payee will refund such amount to the paying party together with interest from
the date of payment to the date of refund at the interest rate set forth in
Section 6.3 hereof.
ARTICLE 7: TAXES
7.1 Seller shall pay, or cause to be paid, all taxes, assessments, fees or
other charges now and hereafter lawfully levied and imposed by federal, state,
or local
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authorities upon Seller with respect to the gas prior to delivery at the
Point(s) of Delivery. In the event Buyer is required to remit such taxes,
assessments, fees or charges, Seller shall reimburse Buyer for such amount.
Seller shall furnish Buyer with a copy of the exemption certificate in
situations in which exemption from any such imposition is claimed by Seller.
7.2 Buyer shall pay, or cause to be paid, all taxes, assessments, fees or
other charges (including, but not limited to, sales and value added taxes) now
and hereafter lawfully levied and imposed by federal, state, or local
authorities upon Buyer with respect to the gas at and subsequent to delivery at
the Point(s) of Delivery. In the event Seller is required to remit such taxes,
assessments, fees or charges, Buyer shall reimburse Seller for such amount.
Buyer shall furnish Seller with a copy of the exemption certificate in
situations in which exemption from any such imposition is claimed by Buyer.
ARTICLE 8: POINT(S) OF DELIVERY
The "Point(s) of Delivery" shall be the point(s) on Transporter(s)'
pipeline system(s) where gas is delivered by Seller to Transporter(s) for
Buyer's account, as specified in Exhibit C attached hereto and made a part
hereof. As between the parties hereto, title, risk of loss, and liabilities
associated with delivered gas shall pass to and vest in Buyer at the Point(s) of
Delivery. Changes in the Point(s) of Delivery shall require the mutual consent
of the parties.
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ARTICLE 9: PRESSURE
Seller shall deliver gas at the Point(s) of Delivery at a pressure
sufficient to effect delivery into the receiving Transporter(s)' facilities.
ARTICLE 10: MEASUREMENT
All measurement of gas delivered and sold hereunder shall be in accordance
with the provisions of the receiving Transporter(s)' tariff (s) at the Point(s)
of Delivery.
ARTICLE 11: QUALITY
The gas delivered and sold by Seller to Buyer at the Point(s) of Delivery
shall meet the quality specifications set forth in the receiving Transporter(s)'
tariff(s) at the Point(s) of Delivery. Buyer shall have the right to be
represented and to participate in all tests of gas delivered hereunder performed
by Seller, and to inspect any equipment used in such tests to determine the
nature of the quality of gas delivered hereunder. In the event the gas does not
meet such quality specifications, Buyer may refuse delivery of the gas. Seller's
delivery of gas refused by Buyer for failure to meet quality specifications
shall not constitute delivery for the purposes of Articles 2, 5 and 6. Buyer's
sole remedy for such failure of gas to meet quality specifications shall be to
refuse receipt of the gas and receive the remedy specified in Article 5.
ARTICLE 12: TRANSPORTATION AND IMBALANCE CHARGES
12.1 Transporter(s)' rules, guidelines, operational procedures and
policies, as may be changed from time to time, may define and set forth the
manner in which gas delivered and sold under this Agreement is transported.
Seller and Buyer agree to provide to the other, in as prompt a manner as
reasonable, all information necessary
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to permit scheduling pursuant to such requirements. Seller shall give Buyer the
highest ranking given to any other purchaser of Seller's gas in any priority
queue when nominating or allocating volumes to Transporter(s) for delivery to
Buyer under this Agreement.
12.2 Each party agrees to make all reasonable efforts to cooperate with the
other in operating under this Agreement to avoid pipeline imbalance charges,
cash-out costs and penalties. Buyer shall bear any under or over delivery
charges, cash-out costs and penalties assessed by Transporter(s) and PSE&G which
are caused by variances (including variances due to events of force majeure
declared by Buyer) in Buyer's receipts from the Nominated Quantity and Seller
shall bear any under or over delivery charges, cash-out costs and penalties
assessed by Transporter(s) and PSE&G which are caused by variances (including
variances due to events of force majeure declared by Seller) in Seller's
deliveries from the Nominated Quantity.
12.3 Seller shall be responsible for transportation to the Point(s) of
Delivery and payment of all transportation charges relating thereto. Buyer
shall be responsible for transportation from the Point(s) of Delivery and
payment of all transportation charges relating thereto. The parties recognize
that the gas purchased hereunder may be transported by Transporter(s) whose
transportation rates and related charges such as fuel reimbursement and take-or-
pay surcharges are subject to refund. The party which pays the Transporter(s)
for transportation of gas hereunder shall be entitled to retain any refunds
associated therewith.
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ARTICLE 13: TERM
This Agreement shall be effective from the date first set forth above and,
unless sooner terminated under the provisions of this Agreement, shall continue
for five (5) months from the commencement of deliveries of gas hereunder. The
commencement of deliveries of gas hereunder shall be November 1, 1997, unless
otherwise agreed by the parties. The term of this Agreement may be extended by
mutual agreement of the Parties.
ARTICLE 14: FORCE MAJEURE
14.1 If, by reason of force majeure either party is rendered unable, wholly
or in part, to carry out its obligations under this Agreement, and such party
provides written notice and full particulars of such event of force majeure as
soon as practicable after the occurrence thereof, the obligations of such
affected party shall be suspended to the extent and for the period of such event
of force majeure, except for the payment of monies in respect of obligations
that have accrued hereunder prior to such event of force majeure. The cause of
suspension other than strikes or lockouts shall be remedied so far as possible
with reasonable dispatch. Settlement of strikes and lockouts shall be wholly
within the discretion of the party having the difficulty.
14.2 The term "force majeure" shall mean any act or event which wholly or
partially prevents or delays the performance of obligations arising under this
Agreement if such act or event is not reasonably within the control of and not
caused by the fault or negligence of the party claiming force majeure and which
by the exercise of due diligence such party is unable to prevent or overcome,
including,
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without limitation by the following enumeration: acts of God, the public enemy
or the elements; fire, accidents, breakdowns, shutdowns for purposes of
necessary repairs, maintenance, relocation or construction of facilities;
breakage, freezing or accidents to wells, machinery or lines of pipe; the
necessity of making repairs or alterations to machinery or lines of pipe;
inability to obtain materials, supplies, permits, or labor to perform or comply
with any obligation or condition of this Agreement; any curtailment of firm gas
transportation service to, of electricity or steam purchases from, or of resale
service by PSE&G to, the Facility; strikes and any other industrial, civil or
public disturbances; any laws, orders, rules, regulations, acts, restraints of
any government or governmental body or authority, civil or military which have
the effect of prohibiting performance of a party's obligations. The term "force
majeure" shall also expressly include the imposition upon Seller or Buyer of any
gross receipts, franchise or other gas sales or consumption tax which Seller or
Buyer is not obligated to pay on the date of execution of this Agreement, which
tax Seller or Buyer determines has a material economic impact on its ability to
continue to sell or purchase gas at the prices or in the quantities set forth
herein.
14.3 Except as provided in Section 14.2, neither party may rely upon
changes in market conditions, curtailment of interruptible transportation, or
denial by a regulatory authority of the pass through of the cost of gas
purchased under this Agreement as events of force majeure. In the event of force
majeure that causes Seller to curtail its deliveries hereunder, Seller shall
treat Buyer on a pro rata basis with
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Seller's other firm customers and shall give Buyer priority of service over all
interruptible customers.
14.4 In the event Buyer fails to take or Seller fails to make available,
due to a declared event of force majeure, at least fifty percent (50%) of the
aggregate DCQ for a period of sixty (60) consecutive days, then the non-
declaring party may terminate this Agreement upon written notice, provided that
such notice is given prior to the date the force majeure is remedied.
ARTICLE 15: NOTICE
Any notice, request, demand, statement, or bill provided for in this
Agreement shall be in writing and delivered by hand, mail, or telecopy. All such
written communications shall be effective upon receipt by the other party at the
address of the parties hereto as follows:
Buyer:
Notices & Statements
Camden Cogen, L.P.
c/o Cogen Technologies Camden, Inc.
Suite 5000, 50th Floor
1600 Smith Street
Houston, TX 77002
Attention: Vice President - Fuel Supply
Telephone No.: (713) 951-7768
Telecopy No.: (713) 951-7803
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Seller:
Notices & Statements
Texaco Natural Gas Inc.
1111 Bagby St.
P. 0. Box 4700
Houston, TX 77210-4700
Attention: Vice President, Long-Term Market Development
Telephone No.: (713) 752-7800
Telecopy No.: (713) 752-4026
Nomination Notices:
Texaco Natural Gas Inc.
1111 Bagby St.
P. 0. Box 4700
Houston, TX 77210-4700
Attention: Sandra Smith
Telephone No.: (713) 752-7817
Telecopy No.: (713) 752-4026
Payment:
Texaco Natural Gas Inc.
P. 0. Box 842306
Dallas, Texas 75284-2306
Wire Transfer - Chemical Bank, New York, New York
Acct. No. 323040780
**ABA No. 021000128
(or as subsequently updated by information
on most recent invoice)
Either of the parties may designate a further or different address by giving
written notice to the other party.
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ARTICLE 16: LAWS, ORDERS & REGULATIONS
This Agreement, and all terms and provisions contained herein, and the
respective obligations of the parties are subject to valid laws, orders, rules,
and regulations of duly constituted authorities having jurisdiction over Buyer,
Seller, Transporter(s) or PSE&G. In the event that any regulatory or government
body asserting jurisdiction over Transporter(s), PSE&G, Buyer or Seller
prohibits any of the transactions described in this Agreement or any
transportation or delivery agreement between Transporter(s), PSE&G, Seller
and/or Buyer covering the transportation and delivery of the gas sold hereunder,
or otherwise conditions such transactions in a form that is unacceptable in the
reasonable judgment of the party affected thereby, then either party hereto so
affected or prohibited may, by giving one (1) month prior written notice to the
other party, terminate this Agreement and each party shall be held harmless as a
result of such termination except for obligations which were incurred prior to
termination; provided, however, such termination shall be effective immediately
where required by law, rule or regulation.
ARTICLE 17: APPLICABLE LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO ITS CONFLICT OF LAW PROVISIONS, AND
THE PARTIES HERETO STIPULATE THAT WITH RESPECT TO ANY AND ALL DISPUTES BETWEEN
THE PARTIES ARISING FROM OR RELATING TO THIS CONTRACT, EXCEPT DISPUTES SUBJECT
TO
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RESOLUTION BY ARBITRATION, VENUE SHALL LIE IN THE FEDERAL OR STATE COURTS OF
HOUSTON, HARRIS COUNTY, TEXAS.
ARTICLE 18: WAIVER
No waiver by either party of any one or more defaults in the performance of
any provision of this Agreement shall operate or be construed as a waiver of any
future default, whether of a like or a different character.
ARTICLE 19: TITLE
Seller warrants title to, or good right to sell, all gas delivered
hereunder by Seller, and that such gas is free from liens and adverse claims of
every kind. Seller will pay, or cause to be paid, all royalties and other sums
imposed on the production, gathering, or transportation of the gas prior to its
delivery by Seller to Buyer. Seller will indemnify and save Buyer harmless
against all loss, damage, and expense of every character on account of adverse
claims to the gas delivered by it or of royalties, payments or other charges
thereon applicable before delivery to Buyer. If any adverse claim of any
character is asserted with respect to Seller's right to deliver gas hereunder,
or with respect to Seller's right to receive payment for such gas, or if
Seller's title is questioned or involved in any action, then Buyer shall
immediately notify Seller of such adverse claim and then may withhold that
portion of sums due hereunder reasonably related to such claim until such claim
is finally determined or title is clear, or until such time as Seller furnishes
a corporate undertaking conditioned to save Buyer harmless from such claim.
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ARTICLE 20: ASSIGNMENT
Either party may, without relieving itself of its obligations under this
Agreement, assign any of its rights hereunder to an entity with which it is
affiliated, but otherwise no assignment of this Agreement or any of the rights
or obligations hereunder shall be made unless there first shall have been
obtained the consent thereto in writing of the other party, which consent shall
not be unreasonably withheld. Any successor-in-interest of Buyer or Seller shall
be entitled to the rights and shall be subject to the obligations of its
predecessor-in-interest under this Agreement. It is agreed, however, that the
restrictions on assignment contained in this paragraph shall not in any way
prevent either party to this Agreement from pledging, mortgaging or assigning
its rights hereunder as security for its indebtedness. In connection with any
such pledge, mortgage or assignment by Buyer, Seller will execute an appropriate
consent to any such pledge, mortgage or assignment as reasonably requested by
Buyer's lender. Any such consent will acknowledge, in effect, that this
Agreement has been duly authorized and is valid and enforceable against Seller
and that this Agreement is in full force and effect; that Seller will not agree
to any amendment to this Agreement without the lender's approval in writing,
which approval shall not be unreasonably withheld by the lender; that Seller
will make all payments due to Buyer hereunder in accordance with the
instructions of the lender; that Seller will not terminate this Agreement by
reason of Buyer's default or by reason of force majeure, without giving the
lender notice of default and notice of termination and the same opportunity to
cure provided to Buyer under this Agreement (plus any longer period as may be
necessary,
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not to exceed one (1) month, if the lender in good faith is endeavoring to
obtain possession of the Facility and pays Seller in accordance with the terms
of this Agreement during such period); that Seller will deliver to the lender a
copy of each notice of default and notice of termination at the same time that
such notice is delivered to Buyer; and that in the event the lender exercises
its rights under its loan documentation or partnership documentation with Buyer,
Seller will accept performance by the lender or any successor or assign thereof,
provided that the lender or any such successor or assign pays all sums then due
to Seller hereunder and is also otherwise in compliance with this Agreement.
ARTICLE 21: ARBITRATION
21.1 Any issue not resolved by agreement between the parties shall be
submitted to binding arbitration pursuant to the provisions of this Agreement.
The parties shall each appoint one (1) arbitrator and the two (2) arbitrators so
appointed will select a third arbitrator, all of such arbitrators to be
qualified by education, knowledge, and experience to resolve the dispute or
controversy. If either party fails to appoint an arbitrator within ten (10) days
after a request for such appointment is made by the other party in writing, or
if the two (2) appointed fail, within ten (10) days after the appointment of the
second, to agree on a third arbitrator, the arbitrator or arbitrators necessary
to complete a board of three (3) arbitrators will be appointed upon application
by either party therefor to the American Arbitration Association.
21.2 The jurisdiction of the arbitrators will be limited to the single
issue or issues referred to arbitration and the arbitration shall be conducted
pursuant to the
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guidelines set forth by the American Arbitration Association; provided, however,
that should there be any conflict between such guidelines and the procedures set
forth in this Agreement, the terms of this Agreement shall control.
21.3 Within fifteen (15) days following selection of the third arbitrator,
each party shall furnish the arbitrators in writing its position and supporting
arguments regarding the issue or issues being arbitrated. The arbitrators may,
if they deem necessary, convene a hearing regarding the issue or issues being
arbitrated. All hearings shall be held at a location to be agreed upon among the
arbitrators in Houston, Harris County, Texas. Within thirty (30) days following
the later of the appointment of the third arbitrator or of the hearing, if one
is held, the arbitrators shall notify the parties in writing as to which of the
two (2) positions submitted with respect to the issue or issues in question is
most consistent with the intent of this Agreement. Such decision shall be
binding on the parties hereto until and unless changed in accordance with the
provisions of this Agreement.
21.4 Enforcement of the award may be entered in any court having
jurisdiction over the parties.
21.5 Each party will pay the expense of the arbitrator selected by or for
it, and its counsel, witnesses and employees. All other costs of arbitration
will be equally divided between the parties.
ARTICLE 22: DEFAULT
22.1 In the event either party fails to perform any of the material
covenants or obligations imposed upon it under and by virtue of this Agreement,
the party not in
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default hereto, having first given thirty (30) days written notice to the party
in default stating specifically the nature of the default and declaring it to be
the intention of the party giving notice to cancel this Agreement (the
"Cancellation Notice"), may, at its option, cancel this Agreement in accordance
with this Article 22. If within said period of thirty (30) days the party in
default remedies or removes said default, including payment of sums due with
interest at the rate set forth in Section 6.3 hereof, or provides adequate
security to fully indemnify the party not in default for any and all direct
damages of such breach, including payment of sums due with interest at the rate
set forth in Section 6.3 hereof, then such Cancellation Notice shall be
withdrawn and this Agreement shall continue in full force and effect; provided,
however, that if the default is the failure to pay sums due hereunder, then the
party not in default shall have the right to suspend gas deliveries or takes, as
the case may be, after service of the Cancellation Notice.
22.2 If the party in default does not so remedy or remove the default or
does not provide adequate security to fully indemnify the party not in default
for any and all direct damages of such breach, and fails to represent that
further defaults shall not occur and that steps have been taken to avoid such a
recurrence, within said period of thirty (30) days, this Agreement, at the
option of the party not in default, shall be canceled upon written notice to the
defaulting party. Cancellation of this Agreement, pursuant to the provisions of
this Article 22, shall be without prejudice to any other rights and remedies the
party not in default has available to it. Further, such cancellation of this
Agreement or failure to cancel shall be without prejudice to the
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right of Seller to collect any amounts then due Seller for gas delivered prior
to the time of cancellation.
ARTICLE 23: GENERAL
23.1 The headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement.
23.2 Any modification, revision or amendment of this Agreement made
subsequent to its execution shall be valid and effective only if and when made
in writing and duly executed by the parties hereto.
23.3 This Agreement and any Exhibit hereto shall constitute a single
agreement, superseding all prior agreements or undertakings between the parties
on the subject matter hereof. This Agreement contains the entire agreement of
the parties and, except as stated herein, there are no promises, agreements,
warranties, obligations, assurances or conditions precedent or otherwise
affecting it.
23.4 By executing this Agreement, each of the individuals so executing
warrants that (i) the individual has all necessary corporate power and authority
to enter into and execute this Agreement and (ii) this Agreement constitutes the
valid and binding obligation of the party on whose behalf it is executed,
enforceable in accordance with its terms, subject to applicable bankruptcy and
insolvency laws.
23.5 The parties shall execute such additional documents and shall cause
such additional action to be taken as may be required, or, in the reasonable
judgment of any party, as may be necessary or desirable, to effect or evidence
the provisions of this Agreement and the transactions contemplated hereby.
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23.6 The parties acknowledge that each provision to this Agreement
constitutes their joint work product.
23.7 In no event shall either party be liable to the other for punitive,
special, incidental, indirect, consequential, or other similar damages whether
such damages are claimed under breach of warranty, breach of contract, tort of
any other theory or cause of action at law or in equity.
ARTICLE 24: CONFIDENTIALITY
24.1 The terms of this Agreement and information disclosed pursuant to this
Agreement, including but not limited to the price paid for gas, shall be kept
confidential by Seller and Buyer, (a) except to the extent any information must
be disclosed to (i) Transporter(s) and PSE&G for the purpose of effectuating
transportation and resale of the gas sold and purchased under this Agreement,
(ii) PSE&G for the purpose of complying with the PPIA and (iii) Buyer's lender
and (b) except as required by law, regulation or request of governmental
authority.
31
<PAGE>
IN WITNESS WHEREOF, by execution in duplicate originals, the parties hereto
have caused this Agreement to be effective as of the day and year first above
written.
"BUYER" "SELLER"
CAMDEN COGEN, L.P. TEXACO NATURAL GAS INC.
By: Cogen Technologies Camden GP By: /s/ James C. Burgess
Limited Partnership, a Delaware --------------------------------
limited partnership, its general Name: James C. Burgess
partner Title: Attorney-in-Fact
Date: 8-14-97
By: Cogen Technologies Camden, Inc., a
Texas corporation, its general partner
By: /s/ W. Colin Harper
---------------------------------
W. Colin Harper
Vice President - Fuel Supply
Date: August 1, 1997
32
<PAGE>
EXHIBIT A
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1,1997, by and between CAMDEN COGEN, L.P., as Buyer, and TEXACO
NATURAL GAS INC., as Seller.
NOMINATION NOTICE
Date:
----------------
Texaco Natural Gas Inc.
1111 Bagby Street
Houston, TX 77210-4700
Attention:
-----------------------
Reference: Firm Gas Purchase and Sale Agreement
Dated: July 1, 1997
Buyer: Camden Cogen, L.P.
Seller: Texaco Natural Gas Inc.
Point of Delivery: Koch/Carthage to Tetco/Kosi
____Contract No.: ___________________________
Gentlemen:
Pursuant to Section 3.1 of the subject Agreement, Camden Cogen, L.P., hereby
nominates the following:
Month of Delivery:
Nominated Quantity:
Very truly yours,
- ------------------------------
W. Colin Harper
Vice President - Fuel Supply
33
<PAGE>
EXHIBIT B
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between CAMDEN COGEN, L.P., as Buyer, and TEXACO
NATURAL GAS INC., as Seller.
MARKET PRICE INDEX
(KOCH/CARTHAGE)
Publication* Table Row Column
Inside FERC' Gas Prices of Spot Gas Texas Eastern Index
Market Report (first Delivered to Pipelines Transmission Corp.
report in applicable (per MMBtu dry) East Texas
month)
Natural Gas Week Spot Prices on Texas Eastern Bid Week
(first report in Interstate Pipeline Transmission Corp.; (current
applicable month) Systems Delivered to East Texas month)
Pipeline ($/MMBtu)
BACKUP PRICE INDEX
(KOCH/CARTHAGE)
Publication* Table Row Column
Natural Gas Spot Gas Prices; Region-East Texas; Contract
Intelligence - Weekly Delivered To Texas Eastern Index
Gas Price Index Pipelines; (30 Day (Current
Supply Transactions)) Month)
34
<PAGE>
EXHIBIT C
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between CAMDEN COGEN, L.P., as Buyer, and TEXACO
NATURAL GAS INC., as Seller.
POINT(S) OF DELIVERY
The Point(s) of Delivery shall be:
A. The existing Point of Delivery to Koch Gateway Pipeline at the tailgate of
the Union Pacific Resources Carthage Gas Processing Plant in Panola County,
Texas
35
<PAGE>
STATE OF TEXAS )
) SS.
COUNTY OF HARRIS )
On this 1st day of August, 1997, before me, Joy R. Toups, the undersigned
officer, personally appeared, W. Colin Harper known to me to be the person whose
name is subscribed to the within instrument and acknowledged that Cogen
Technologies Camden, Inc., as General Partner of Cogen Technologies Camden GP
Limited Partnership, in turn acting as General Partner of Camden Cogen, L.P.,
executed the same for the purpose therein contained.
In witness whereof I hereunto set my hand and official seal.
[NOTARY PUBLIC SEAL APPEARS HERE] /s/ JOY R. TOUPS
----------------------------
Notary Public in and for the
State of Texas
STATE OF TEXAS )
) SS.
COUNTY OF HARRIS)
On this 14th day of August 1997, before me, Claire Thompson, the
undersigned officer, personally appeared, James Burgess, known to me to be the
person whose name is subscribed to the within instrument and acknowledged that
Texaco Natural Gas Inc. executed the same for the purpose therein contained.
In witness whereof I hereunto set my hand and official seal.
[NOTARY PUBLIC SEAL APPEARS HERE] /s/ CLAIRE THOMPSON
----------------------------
Notary Public in and for the
State of Texas
36
<PAGE>
GUARANTY AGREEMENT
THIS AGREEMENT, shall be effective July 1, 1997, by and between TEXACO
EXPLORATION AND PRODUCTION INC., (hereinafter referred to as "Guarantor") and
CAMDEN COGEN, L.P., (hereinafter referred to as "Cogen").
WITNESSETH:
WHEREAS, Cogen and Texaco Natural Gas Inc. (hereinafter referred to as
"TNGI"), a wholly-owned subsidiary of Guarantor, contemporaneously herewith are
entering into a Firm Gas Purchase and Sale Agreement effective July 1, 1997, as
amended from time to time (the "Agreement"), pursuant to which Cogen will
purchase from TNGI natural gas for a co-generation facility (the "Facility")
located in Camden, New Jersey, in the quantities and upon the terms and
conditions that are set forth in the Agreement; and
WHEREAS, Cogen desires assurances that Guarantor will be responsible for
obligations of TNGI set forth in the Agreement in the event TNGI does not
satisfy such obligations; and
WHEREAS, Guarantor desires that the Agreement be executed and, therefore,
desires to give such assurances.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and other valuable consideration, the adequacy and receipt of
which are hereby acknowledged, Guarantor and Cogen hereby agree as follows:
1. Guarantor hereby irrevocably and unconditionally guarantees to Cogen the
full, prompt and complete performance of the obligations of TNGI set forth in,
and subject to the terms of, the Agreement read and taken as a whole, subject to
all
<PAGE>
conditions, excuses, and releases or limitations of liability contained therein,
(including, but not limited to, the limitations of damages to Buyer's cost of
Cover). If TNGI fails to perform any of its obligations then due under the
Agreement, Guarantor shall cause TNGI or another of its subsidiaries or
affiliates to perform said obligation in accordance with the terms of the
Agreement. Without limiting the generality of the foregoing, the Guarantor
agrees that the occurrence of anyone or more of the following shall not affect
the liability of the Guarantor hereunder: (a) at any time or from time to time,
without notice to the Guarantor, the time for any performance of or compliance
with any of the obligations of TNGI set forth in the Agreement or such
obligations shall be extended, or such performance or compliance shall be
waived, (b) any of the acts mentioned in any of the provisions of the Agreement
shall be done or omitted or (c) any right under the Agreement shall be waived.
The Guarantor hereby expressly waives diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that Cogen or
any lender (as defined in the Agreement) exhaust any right, power or remedy or
proceed against TNGI under the Agreement.
Nothing in this Guaranty should be taken to imply TEPI has either: a.)
dedicated any of its specific lands, leases, reserves, or interests in the same
to the performance of the Contract, or b.) agreed to a specific performance
responsibility implying a greater overall obligation than agreed to by TNG I
under the Contract, taken as a whole.
2. This Guaranty Agreement shall be assignable to the lenders as defined in
the Agreement under the same terms and conditions set forth in the Agreement.
Any other assignment shall not be permitted, in whole or in part, except with
the consent
2
<PAGE>
of the other party, which consent shall not be unreasonably withheld. This
Guaranty Agreement shall be binding upon the parties hereto and their permitted
successors and assigns.
3. This Guaranty Agreement is for the sole and exclusive benefit of the
parties hereto and any permitted successors and assigns. Nothing expressed or
implied herein is intended to benefit any other person, firm or corporation not
a party hereto. None of such other persons shall have any legal or equitable
right, remedy or claim under this Guaranty Agreement or under any provisions
hereof.
4. Notwithstanding anything contained herein, if any claim or demand is
made against Guarantor pursuant to this Guaranty Agreement, Guarantor shall be
subject to all rights, set-offs, counterclaims and defenses to which TNGI may be
entitled, except for defenses arising out of bankruptcy, insolvency, liquidation
or dissolution of TNGL
5. This Guaranty Agreement shall remain in full force and effect until the
termination of all obligations under the Agreement.
6. Guarantor agrees to indemnify Cogen from and against any and all claims
of every nature arising from the obligations of TNGI under the Agreement,
including but not limited to damages suffered by Cogen as a result of TNGI's
non-performance, incomplete performance or other default of TNGI under the
Agreement, provided, however, notwithstanding any provisions to the contrary
herein, that Guarantor's liability hereunder shall be equal to (and neither less
than nor greater than) that of TNGI under the express terms of the Agreement,
including any modifications thereof.
3
<PAGE>
7. No delays on the part of Cogen in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Cogen of
any right or remedy shall preclude other or further exercise thereof or the
exercise of any right or remedy. No actions of Cogen permitted hereunder shall
in any way impair or affect this Guaranty Agreement.
8. WHEREVER POSSIBLE, EACH PROVISION OF THIS GUARANTY AGREEMENT SHALL BE
INTERPRETED IN SUCH MANNER TO BE EFFECTIVE AND VALID UNDER TEXAS LAW; BUT IF ANY
PROVISIONS OF THIS GUARANTY AGREEMENT SHALL BE PROHIBITED OR INVALID UNDER SUCH
LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR
INVALIDITY WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING
PROVISIONS OF THIS GUARANTY AGREEMENT.
9. The Guarantor represents and warrants as follows:
(a) The Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty Agreement are within the Guarantor's corporate powers, have been
duly authorized by all necessary corporate action, and do not contravene
(i) the Guarantor's certificate of incorporation or by-laws or (ii) any
law, rule, regulation or order, or any restriction contained in any
material agreement or instrument, binding on or affecting the Guarantor.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required
for the
4
<PAGE>
due execution, delivery and performance by the Guarantor of this Agreement,
except such as have been duly obtained or made and force and effect.
(d) This Guaranty Agreement is a legal, valid and binding o the
Guarantor enforceable against the Guarantor in accordance with its terms
except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles enforcement is sought by proceeding in equity or at law).
(e) The Guarantor owns, directly or indirectly, all the issued
outstanding capital stock of TNGI.
IN WITNESS WHEREOF, this instrument is executed as of the day an above
written.
TEXACO EXPLORATION AND CAMDEN COGEN, L.P.
AND PRODUCTION INC.
(GUARANTOR) By: Cogen Technologies Camden GP
Limited Partnership, a Delaware
By: /s/ SIGNATURE APPEARS HERE limited partnership, its general
-------------------------- partner
Its: Director
By: Cogen Technologies
Camden, Inc., a Texas corporation,
its general partner
By: /s/ W. COLIN HARPER
--------------------------------
W. Colin Harper
Vice President
Date: August 1, 1997
5
<PAGE>
EXHIBIT 10.46
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MORTGAGE
from
CAMDEN COGEN L.P.,
Mortgagor
to
GENERAL ELECTRIC CAPITAL CORPORATION, as Agent,
Mortgagee
Dated as of February 4, 1992
THIS MORTGAGE ALSO CONSTITUTES A SECURITY
AGREEMENT UNDER THE UNIFORM COMMERCIAL CODE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
After recording return to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: Mark J. Eagan
This Instrument Prepared by the Undersigned
in consultation with: Messrs. McCarter & English
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4096
Signature /s/ MARDI R. MERJIAN
-------------------------
Mardi R. Merjian
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Warranty of Title...................................................... 5
2. Payment of Indebtedness................................................ 5
3. Proper Care and Use; Inspection........................................ 6
4. Requirements........................................................... 7
5. Payment of Impositions................................................. 7
6. Insurance.............................................................. 9
7. Condemnation/Eminent Domain............................................ 11
8. Limitation on Disposition and Priority of
Lien, Utilities........................................................ 11
9. Estoppel Certificates.................................................. 12
10. Expenses............................................................... 12
11. Mortgagee's Right to Perform........................................... 13
12. Further Assurances..................................................... 13
13. Assignment of Rents.................................................... 13
14. Events of Default...................................................... 14
15. Remedies............................................................... 14
16. Remedies Cumulative and Concurrent..................................... 16
17. Discontinuance of Proceedings.......................................... 17
18. Application of Proceeds................................................ 17
19. Successor Mortgagor.................................................... 17
20. Security Agreement Under Uniform Commercial Code....................... 18
21. Indemnification; Waiver of Claim....................................... 18
22. No Waivers, Etc........................................................ 19
23. Waiver by Mortgagor.................................................... 19
24. Trust Funds............................................................ 20
-1-
<PAGE>
Page
----
25. Notices................................................................ 20
26. Taxes on Mortgagee..................................................... 21
27. No Modification; Binding Obligations................................... 21
28. Miscellaneous.......................................................... 21
29. Captions............................................................... 22
30. Successors and Assigns................................................. 22
31. Enforceability......................................................... 22
32. RECEIPT OF COPY........................................................ 22
33. Loan Agreement......................................................... 22
34. Limitation of Liability................................................ 23
-ii-
<PAGE>
MORTGAGE
--------
THIS MORTGAGE dated as of February 4, 1992 from CAMDEN COGEN L.P., a
Delaware limited partnership, ("Mortgagor"), having an office at c/o Cogen
Technologies, 1600 Smith Street, Suite 5000, 50th Floor, Houston, Texas 77002,
to GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation ("Mortgagee"),
as agent for the lenders (the "Lenders") parties to the Loan Agreement (as
defined below), having an office at 1600 Summer Street, Stamford, Connecticut
06927. Unless otherwise defined herein, all capitalized terms used herein shall
have their respective meanings set forth in the Loan Agreement.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Mortgagor is the owner in fee simple of certain tracts of
land located in Camden, Camden County, New Jersey and more particularly
described in Exhibit A attached hereto and made a part hereof (the "Land"); and
WHEREAS, pursuant to the Construction and Term Loan Agreement dated as
of even date herewith among Mortgagor, the Lenders and Mortgagee (as the same
may be amended, supplemented or otherwise modified from time to time, the "Loan
Agreement"), Lenders have agreed, subject to the terms and conditions set forth
therein, to make construction loans (collectively, the "Loans") to, and
Mortgagee has agreed to issue letters of credit (together with any application
therefor, the "Letters of Credit") for the account of, Mortgagor in an aggregate
principal and drawable amount not to exceed $149,000,000, such Loans to be
evidenced by the promissory notes of Mortgagor issued thereunder (as amended,
supplemented or modified from time to time, together with any substitute
therefor or replacement thereof, the "Notes"); and
WHEREAS, Mortgagor and Mortgagee have agreed that all indebtedness,
obligations and liabilities of Mortgagor evidenced by, arising out of, or in
connection with the Loan Agreement, the Notes, the Letters of Credit, the
Collateral Security Documents and other Loan Documents (as defined below) shall
be secured by a first lien on the Mortgaged Property, as defined below;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged, Mortgagor hereby agrees as follows:
<PAGE>
2
TO SECURE:
(a) (i) repayment of all amounts advanced and to be advanced under the
Notes, the terms of which are hereby made a part of this Mortgage, (ii)
payment of all reimbursement obligations in respect of the Letters of
Credit, (iii) payment of all interest (including interest on principal
after default), fees and expenses payable on the Notes or under the Loan
Agreement and the Letters of Credit as provided in the Loan Agreement and
(iv) payment of any and all fees, costs and expenses, including, without
limitation, attorney's fees, incurred by Mortgagee in enforcing rights and
remedies of Mortgagee hereunder and under the Loan Agreement, the Notes and
the Collateral Security Documents (the items set forth in clauses (i),
(ii), (iii) and (iv) being referred to collectively as the "Indebtedness");
and
(b) performance of all covenants, agreements, obligations and
liabilities of Mortgagor (the "Obligations") under or pursuant to the
provisions of the Loan Agreement, the Letters of Credit, the Notes, this
Mortgage and the other Loan Documents (as defined below) and any
extensions, renewals, restatements, replacements or modifications of any of
the foregoing (the Loan Agreement, the Notes, the Letters of Credit, this
Mortgage and the other Collateral Security Documents and all other
documents and instruments from time to time evidencing, securing or
guaranteeing the payment of the Indebtedness or performance of the
Obligations are collectively referred to as the "Loan Documents));
Mortgagor hereby grants a security interest in, and hereby mortgages, conveys,
assigns, bargains, transfers and sets over to Mortgagee, the following property
and rights and interests in property (collectively, the "Mortgaged Property"):
A. the Land;
B. all right, title and interest of Mortgagor in and to any and all
buildings and improvements now or hereafter erected on the Land (the
"Improvements"; the Land, together with the Improvements, are hereinafter
collectively referred to as the "Real Estate));
C. all right, title and interest of Mortgagor, now owned or hereafter
acquired, in and to all streets, the land lying in the bed of any streets, roads
or avenues, opened or proposed, in front of, adjoining, or abutting the Real
Estate to the center line thereof and strips and gores within or adjoining the
Real Estate, the air space and right to use said air space above the Real
Estate, all rights of way, privileges, liberties, hereditaments, all easements
now or hereafter affecting or benefitting the Real Estate, all royalties and all
rights appertaining to the use and enjoyment of said Real Estate, including,
without limitation, all alley, vault, drainage, mineral, water, oil and gas
rights;
<PAGE>
3
D. all and singular, the tenements, hereditaments and appurtenances
belonging or in anywise appertaining to the Real Estate, and the reversion or
reversions, remainder or remainders, rents, issues, profits and revenue thereof;
and also all the estate, right, title, interest, dower and right of dower,
curtesy and rights of curtesy, property, possession, claim and demand
whatsoever, both in law and equity, of Mortgagor, of, in and to the Real Estate
and of, in and to every part and parcel thereof, with the appurtenances, at any
time belonging or in anywise appertaining thereto;
E. all of the legal fixtures of every kind and nature whatsoever
currently owned or hereafter acquired by Mortgagor, and all appurtenances and
additions thereto and substitutions or replacements thereof, now or hereafter
attached to, or intended to be attached to (through not attached thereto) the
Real Estate or placed on any part thereof (said legal fixtures of every kind and
nature whatsoever, and all appurtenances and additions thereto and substitutions
or replacements thereof, are hereinafter collectively referred to as the
"Equipment"), including, but without limiting the generality of the foregoing,
all fixtures and equipment as defined in the Uniform Commercial Code and
including, but without limiting the generality of the foregoing, all furnaces,
turbines, generators, plumbing, ventilating, air conditioning and air-cooling
apparatus, refrigerating, incinerating, and escalator, elevator, power, loading
and unloading equipment and systems, sprinkler systems and other fire prevention
and extinguishing apparatus and pipes, pumps, tanks, conduits, fittings and
fixtures; it being understood and agreed that all Equipment is appropriated to
the use of the Real Estate and, whether affixed or annexed or not, for the
purposes of this Mortgage shall be deemend conclusively to be Real Estate and
mortgaged hereby; and Mortgagor hereby agrees to execute and deliver, from time
to time, such further instruments (including security agreements), as may be
requested by Mortgagee to confirm the lien of this Mortgage on the Equipment;
F. all unearned premiums, accrued, accruing or to accrue under
insurance policies now or hereafter obtained by Mortgagor and Mortgagor's
interest in and to all proceeds of the conversion and the interest payable
thereon, voluntary or involuntary, relating to the Mortgaged Property, or any
part thereof, into cash or liquidated claims, including, without limiting the
generality of the foregoing, proceeds of casualty insurance, title insurance or
any other insurance maintained on the Real Estate and the Equipment, and the
right to collect and receive the same, and all awards and/or other compensation
including the interest payable thereon and the right to collect and receive the
same (in the alternative and collectively, "Awards"), heretofore and hereafter
made to the present and all subsequent owners of the Real Estate and the
Equipment by the United States, the State of New Jersey or any political
subdivision thereof, or any agency, department, bureau, board, commission, or
instrumentality of any of them, now existing or
<PAGE>
4
hereafter created (collectively, "Governmental Authority") for the taking by
eminent domain, condemnation or otherwise, of all or any part of the Real Estate
and Equipment or any easement or other right therein, including, without
limiting the generality of the foregoing, Awards for any change or changes of
grade or the widening of streets, roads or avenues affecting the Real Estate, to
the extent of all amounts which may be secured by this Mortgage as of the date
of receipt, notwithstanding the fact that the amount thereof may not then be due
and payable, and to the extent of attorneys' fees, costs and disbursements
incurred by Mortgagee in connection with the collection of such Awards.
Mortgagor hereby assigns to Mortgagee, and Mortgagee is hereby authorized to
collect and receive such Awards, and to give proper receipts and acquittance
therefor and, subject to the other provisions hereof and the provisions of the
Security Deposit Agreement, to apply the same toward the Indebtedness,
notwithstanding the fact that the full amount thereof may not then be due and
payable; Mortgagor hereby agrees, upon demand of Mortgagee, to make, execute and
deliver, from time to time, such further instruments as may be reasonably
requested by Mortgagee to confirm such assignment of said Awards to Mortgagee,
free and clear and discharged of any encumbrances of any kind or nature
whatsoever;
G. all extensions, improvements, betterments, renewals, substitutes
and replacements of, and all additions and appurtenances to, the Real Estate and
the Equipment, hereafter acquired by or released to Mortgagor (other than by the
Mortgagee) or constructed, assembled or placed by Mortgagor on the Real Estate
(other than the "Modifications)) referred to in Section 15 of the "Capital
Contribution Agreement", as defined in the Loan Agreement), and all conversions
of the security constituted thereby, immediately upon such acquisition,
release, construction, assembling, placement or conversion, as the case may be,
and in each such case, without any further mortgage, conveyance, assignment or
other act by Mortgagor, shall become subject to the lien of this Mortgage as
fully and completely, and with the same effect, as though now owned by Mortgagor
and specifically described herein;
H. all right, title and interest of Mortgagor in, to and under all
leases, subleases, underlettings, concession agreements and licenses of the Real
Estate and Equipment, or any part thereof, now existing or hereafter entered
into by Mortgagor (collectively, "Leases"), and all rights of Mortgagor in
respect of cash and securities deposited thereunder and the right to receive and
collect the benefits, revenues, income, rents, issues and profits thereof;
I. all right, title and interest of Mortgagor, to the extent permitted
by law, in, to and under (i) all consents, licenses and building permits
required for the construction, completion, occupancy and operation of the Real
Estate; (ii) all plans and specifications for the construction of the Real
Estate, including, without limitation, installations of curbs, sidewalks,
<PAGE>
5
gutters, landscaping, utility connections and all fixtures and equipment
necessary for the construction, operation and occupancy of the Improvements; and
(iii) all contracts from time to time executed by Mortgagor relating to the
ownership, construction, maintenance, operation or occupancy of the Real Estate
together with all rights of Mortgagor to compel performance of the terms of such
contracts;
J. any and all monies now or hereafter on deposit for the payment of
real estate taxes or special assessments against the Real Estate or for the
payment of premiums on policies of fire and other hazard insurance covering the
Mortgaged Property; and
K. all rights of Mortgagor under or arising out of the contracts
described on Schedule 1 and all Additional Contracts, as any of the same may be
amended, supplemented or otherwise modified from time to time
L. all proceeds, both cash and noncash, and products of the foregoing,
including, without limitation, all proceeds and products as defined in the
Uniform Commercial Code of the State of New Jersey, which may be realized upon
any sale or other disposition of any of the foregoing or produced therefrom;
TO HAVE AND TO HOLD the Mortgaged Property and the rights and
privileges hereby mortgaged or intended to be, unto Mortgagee, its successors
and assigns for the uses and purposes herein set forth, until the Indebtedness
is fully paid and the Obligations are fully paid or fully performed, as the case
may be.
Mortgagor represents, warrants, covenants and agrees as follows:
1. Warranty of Title. Mortgagor warrants that it has and owns good
and marketable title to the Real Estate and has the right to mortgage the same;
and Mortgagor warrants that this Mortgage is a valid and enforceable first lien
on the Mortgaged Property subject only to Permitted Liens. Mortgagor hereby
covenants that it shall preserve such title and the validity and priority of the
lien hereof and shall forever warrant and defend the same to Mortgagee against
the claims of all and every person or persons, corporation or corporations and
parties whomsoever claiming or threatening to claim the same or any part
thereof.
2. Payment of Indebtedness. Mortgagor shall pay the Indebtedness and
shall perform all of the Obligations in accordance with the terms of the Loan
Documents.
<PAGE>
6
3. Proper Care and Use: Inspection. (a) Mortgagor shall:
(i) not abandon the Mortgaged Property,
(ii) maintain the Facility in good working order and condition,
(iii) make all repairs, renewals and replacements to the Facility and
additions and betterments thereto which are necessary for the Facility to
operate in compliance with the terms of the Basic Documents, and in
compliance with all Legal Requirements (as hereinafter defined) affecting
the Mortgaged Property and all requirements of the appropriate Board of
Fire Underwriters or other similar body acting in and for the locality in
which the Mortgaged Property is located, 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
Mortgagor or the Mortgaged Property or on the ability of Mortgagor to
perform its obligations under the Basic Documents to which it is a party,
(iv) not commit or suffer waste with respect to the Mortgaged Property,
(v) refrain from impairing or diminishing the value or integrity of
the Mortgaged Property or the security value of this Mortgage,
(vi) not remove, demolish or in any material respect alter any of the
Improvements, and
(vii) not make, suffer or permit any nuisance to exist on any of the
Mortgaged Property (the construction and operation of the Improvements
being deemed not to constitute a nuisance).
(b) Mortgages and any persons authorized by Mortgagee shall have the
right to enter and inspect the Mortgaged Property and the right to inspect all
work done, labor performed and materials furnished in and about the Improvements
and the right to inspect and make copies of all books, contracts and records of
Mortgagor relating to the Mortgaged Property, all at such reasonable times
during business hours and at such intervals as Mortgagor relating to the
Mortgaged Property, all at such reasonable times during business hours and at
such intervals as Mortgagee may request. Mortgagor authorized Mortgagee to
communicate directly with its accountants and with any other entity keeping its
books and records. If an Event of Default (as hereinafter defined) shall have
occurred and be continuing, Mortgagee and any persons authorized by Mortgagee
may (without being obligated to do so) enter or cause entry to be made upon
the Real Estate and inspect, repair and/or maintain the same as Mortgagee may
deem necessary or advisable, and may (without being
<PAGE>
7
obligated to do so) make such expenditures and outlays of money as Mortgages may
deem appropriate for the preservation of the Mortgaged Property, provided, that
Mortgagee shall give Mortgagor three Business Days' prior written notice in the
event that Mortgagee intends to enter upon the Real Estate for the purpose of
constructing, equipping and completing the Project in accordance with Section 9
of the Loan Agreement. All expenditures and outlays of money made by Mortgagee
pursuant hereto shall be added to the Indebtedness and shall be secured hereby
and shall be payable on demand together with interest at an interest rate equal
to the lower of (i) the highest rate allowed by applicable law and (ii) an
interest rate per annum equal to 2% plus the Base Rate (such lower rate, the
"Default Rate:) from the date of the expenditure or outlay until paid.
4. Requirements. Mortgagor, at Mortgagor's sole cost and expense,
shall promptly comply with, or cause to be complied with, and conform to all
present and future laws, statutes, codes, ordinances, orders, judgements,
decrees, injunctions, rules, regulations and requirements pertaining to the
Mortgaged Property, including any applicable environmental, zoning or building,
use and land use laws, ordinances, rules or regulations and all covenants,
restrictions and conditions now or hereafter of record which may be applicable
to it or to any of the Mortgaged Property, or to the use, manner of use,
occupancy, possession, operation, maintenance, alteration, repair or
reconstruction of any of the Mortgaged Property (collectively, the "Legal
Requirements"), except any Legal Requirements (other than Relevant Environmental
Laws), 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 Mortgagor or the rights or interests of
Mortgagee or (ii) materially adversely affect Mortgagor's ability to perform its
obligations under the Basic Documents to which it is a party.
5. Payment of Impositions. (a) Mortgagor shall pay and discharge all
taxes, assessments and governmental charges or levies imposed on it or its
income or profit or on any of its property, including the Mortgaged Property,
prior to the date on which penalties attach thereto, and all lawful claims
which, if unpaid, might become a lien upon the property, including the Mortgaged
Property (all of the foregoing are hereinafter collectively referred to as the
"Impositions"). Mortgagor shall have the right, at Mortgagor's sole cost and
expense, to contest in good faith the amount or validity of any such Imposition
by proper proceedings timely instituted, and may permit the Impositions so
contested to remain unpaid during the period of such contest if (i) Mortgagor
has given prior written notice to Mortgagee or Mortgagor's intent so to contest
or object to an Imposition, (ii) Mortgagor diligently prosecutes such contest,
(iii) such contested Imposition (other than any such Imposition which Mortgagor,
with the consent of the Required Lenders (not to be unreasonably withheld),
deems to be unmerited an not to require the setting aside of any reserves) is
included as an
<PAGE>
8
expense in the Construction 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 Construction Budget to complete the Facility in
accordance with section 7.1 of the Loan Agreement, (iv) during the period of
such contest the enforcement of any contested Imposition is effectively stayed;
provided, however, that this clause (iv) shall apply to contested income taxes
of a Partner only if the failure to pay such tax may then become a lien on the
Mortgaged Property or may interfere with the operation of the Facility and (v)
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
Mortgaged Property, title thereto or any interest therein and does not interfere
with the operation of the Facility. Mortgagor will promptly pay or cause to be
paid any valid, final judgement enforcing any such Imposition and cause the same
to be satisfied of record. Subject to the foregoing right of Mortgagor to
contest any Imposition, within thirty (30) days after the date when an
Imposition is due and payable, Mortgagor shall deliver to Mortgagee evidence
acceptable to Mortgagee showing payment of such Imposition. If by law any
Imposition at Mortgagor's option may be paid in installments (whether or not
interest shall accrue on the unpaid balance of such Imposition), Mortgagor may
elect to pay such Imposition in such installments and shall be responsible for
the payment of such installments with interest, if any.
(b) Expect for the foregoing right of Mortgagor to contest any
Imposition, nothing herein otherwise shall affect any right or remedy of
Mortgagee under this Mortgage or otherwise, without notice or demand to
Mortgagor, to pay any Imposition after the date such Imposition shall have
become due and to add to the Indebtedness the amount so paid, together with
interest thereon from the date of such payment at the Default Rate. Any sums
paid by Mortgagee in discharge of any Imposition shall be (i) a lien on the real
Estate secured hereby prior to any right or title to, interest in, or claim upon
the Real Estate subordinate to the lien of this Mortgage, and (ii) payable on
demand together with interest as set forth above.
(c) Mortgagor shall not claim, demand or be entitled to receive any
credit or credits towards the satisfaction of this Mortgage or on any interest
payable thereon for any taxes assessed against the Mortgaged Property or any
part thereof, and Mortgagor shall not claim any deduction from the taxable value
of the Mortgaged Property by reason of this Mortgage.
(d) Upon the occurrence and during the continuance of an Event of
default hereunder, Mortgagee shall be entitled upon notice to Mortgagor to
require Mortgagor to pay to Mortgagee on a specified day each month an amount
equal to one-twelfth of the annual Impositions reasonably estimated by Mortgages
so that Mortgagee shall have sufficient funds to pay the Impositions on the
first day of the month preceding the month in which they become due. In such
event, Mortgagor agrees to cause all bills,
<PAGE>
9
statements or other documents relating to Impositions to bent or mailed directly
to Mortgagee. Upon receipt of such bills, statements or other documents, and
providing Mortgagor has deposited sufficient funds with Mortgagee pursuant to
this paragraph, Mortgagee shall pay such amounts as may be due thereunder out of
the funds so deposited with Mortgagee. If at any time and for any reason the
funds deposited with Mortgagee are or will be insufficient to pay such amounts
as may then or subsequently be due, Mortgagee shall notify Mortgagor and
Mortgagor shall immediately deposit an amount equal to such deficiency with
Mortgagee. Notwithstanding the foregoing, nothing contained herein shall cause
Mortgagee to be deemed a trustee of said funds or to be obligated to pay any
amounts in excess of the amount of funds deposited with Mortgagee pursuant to
this paragraph or constitute any limitation on the rights of Mortgagee upon the
occurrence of such Event of Default. Mortgagor shall not be entitled to receive
interest on said funds. If amounts collected by Mortgagee under this paragraph
exceed amounts necessary in order to pay Impositions, Mortgagee may impound or
reserve for future payment of Impositions such portion of such excess payments
as Mortgagee in its absolute discretion may deem proper. Should Mortgagor fail
to deposit with Mortgagee sums sufficient to pay such Impositions in full at
least thirty (30) days before delinquency thereof, Mortgagee may, at Mortgagee's
election, but without any obligation so to do, advance any amounts required to
make up the deficiency, which advances, if any, shall be added to the
Indebtedness and shall be secured hereby and shall be repayable to Mortgagee
with interest at the Default Rate or at the option of Mortgagee the latter may,
without making any advance whatsoever, apply any sums held by it upon any
obligation of Mortgagor secured hereby.
6. Insurance. (a) Mortgagor shall comply in all respects with the
terms and provisions contained in subsection 7.5 of the Loan Agreement, which
terms and provisions are hereby incorporated in their entirety into this
Mortgage by reference thereto, as though expressly stated in this Mortgage.
(b) If Mortgagor is in default of its obligations to insure or deliver
any prepaid insurance policy or policies, then Mortgagee, at its option and
without notice, may effect such insurance from year to year, and pay the premium
or premiums therefor, and Mortgagor shall pay to Mortgagee such premium or
premium so paid by Mortgagee with interest from the time of payment at the
Default Rate, on demand, and the same shall be deemed to be secured by this
Mortgage and shall be collectible in the same manner as the Indebtedness secured
by this Mortgage.
(c) Mortgagor promptly shall comply with and conform to (i) all
provisions of each insurance policy, and (ii) all requirements of the insurers
applicable to Mortgagor or to any of the Mortgaged Property or to the use,
manner of use, occupancy, possession, operation, maintenance, alteration or
repair of any of the Mortgaged Property. Mortgagor shall not use the Mortgaged
Property, or conduct any activities on the Premises, if such use
<PAGE>
10
or activities would permit any insurer to cancel any insurance policy required
to be maintained by the Loan Agreement.
(d) If the Mortgaged Property or any part thereof is damaged or
destroyed by fire or any other cause, Mortgagor shall give prompt notice to
Mortgagee and all insurance proceeds shall be paid as provided in the Security
Deposit Agreement.
(e) In the event of foreclosure of this Mortgage or other transfer of
title to the Mortgaged Property in extinguishment of the Indebtedness, all
right, title and interest of Mortgagor in and to any insurance policies then in
force shall pass to the purchaser or grantee and Mortgagor hereby appoints
Mortgagee its attorney-in-fact, in Mortgagor's name, to assign and transfer all
such policies and proceeds to such purchaser or grantee.
(f) Upon the occurrence and during the continuance of an Event of
Default hereunder, Mortgagee shall be entitled upon notice to Mortgagor to
require Mortgagor to pay monthly in advance to Mortgagee the equivalent of
1/12th of the estimated annual premiums due on such insurance. In such event,
Mortgagor shall cause all bills, statements or other documents relating to the
insurance premiums to be sent or mailed directly to Mortgagee. Upon receipt of
such bills, statements or other documents, and providing Mortgagor has deposited
sufficient funds with Mortgagee pursuant to this paragraph, Mortgagee shall pay
such amounts as may be due thereunder out of the funds so deposited with
Mortgagee. If at any time and for any reason the funds deposited with Mortgagee
are or will be insufficient to pay such amounts as may then or subsequently be
due, Mortgagee shall notify Mortgagor and Mortgagor shall immediately deposit an
amount equal to such deficiency with Mortgagee. Notwithstanding the foregoing,
nothing contained herein shall cause Mortgagee to be deemed a trustee of said
funds or to be obligated to pay any amounts in excess of the amount of funds
deposited with Mortgagee pursuant to this paragraph or constitute any limitation
on the rights of Mortgagee upon the occurrence of such Event of Default.
Mortgagor shall not be entitled to receive interest on said funds. If amounts
collected by Mortgagee under this paragraph exceed amounts necessary in order to
pay such premiums, Mortgagee may impound or reserve for future payment of
insurance premiums such portion of such excess payments as Mortgagee in its
absolute discretion may deem proper. Should Mortgagor fail to deposit with
Mortgagee sums sufficient to pay in full such insurance premiums at least 30
days before delinquency thereof, Mortgagee may, at Mortgagee's election, but
without any obligation so to do, advance any amounts required to make up the
deficiency, which advances, if any, shall be payable on demand by Mortgagor with
interest thereon at the Default Rate, or at the option of Mortgagee the latter
may, without making any advance whatsoever, apply any sums held by it upon any
obligation of Mortgagor secured hereby.
<PAGE>
11
7. Condemnation/Eminent Domain. Immediately upon obtaining knowledge
of the institution of any proceedings for the condemnation of the Mortgaged
Property, or any portion thereof, Mortgagor will notify Mortgagee of the
pendency of such proceedings. Mortgagee, at Mortgagor's option and in
Mortgagee's sole discretion, shall have the right to commence, appear in and
prosecute, jointly with Mortgagor, any action or proceeding relating to any
condemnation of the Mortgaged Property, or any portion thereof at its sole cost
and expense. Mortgagor shall not, without Mortgagee's written consent, settle or
compromise any claim in connection with such condemnation. If Mortgagee elects
not to participate in such condemnation proceeding, then Mortgagor shall, at its
expense, diligently prosecute any such proceeding and shall consult with
Mortgagee, its attorneys and experts and cooperate with them in any defense of
any such proceedings. All awards and proceeds of condemnation shall be assigned
to Mortgagee to be applied as provided in the Security Deposit Agreement.
Mortgagor agrees to execute any such assignments of all such awards as Mortgagee
may request.
8. Limitation on Disposition and Priority of Lien, Utilities. (a)
Except as permitted under the Loan Agreement, without the prior written consent
of Mortgagee in each instance, Mortgagor shall not sell, assign, convey or
otherwise transfer or dispose of the Mortgaged Property or any part thereof or
interest therein, either voluntarily or involuntarily, by operation of law or
otherwise, and Mortgagor shall not contract to do any of the foregoing. Except
for Permitted Liens and except as permitted in Article 5 of this Mortgage and in
the next following sentence, Mortgagor shall not create, consent to or suffer
the creation or existence of any liens, charges or encumbrances (each, a
"Prohibited Lien") on any of the Mortgaged Property, whether or not such
Prohibited Lien is superior or subordinate to this Mortgage. Mortgagor shall pay
when due all lawful claims and demands of mechanics, materialmen, laborers and
others which, if unpaid, might result in, or permit the creation of a Prohibited
Lien; provided that Mortgagor shall have the right to contest in good faith any
such Prohibited Lien by proper proceedings timely instituted, and may permit
such Prohibited Lien to exist during the period of such contest if: (i)
Mortgagor diligently prosecutes such contest, (ii) such contested item (other
than any such item which Mortgagor 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 Construction
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
Construction Budget to complete the Facility in accordance with subsection 7.1
of the Loan Agreement, (iii) during the period of such contest the enforcement
of any contested item and the Prohibited Lien relating thereto is effectively
stayed, and (iv) 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 Mortgaged Property, title thereto or any interest therein and
<PAGE>
12
does not interfere with the operation of the Facility. Mortgagor will promptly
pay or cause to be paid any valid, final judgement enforcing any such item,
cause the Prohibited Lien relating thereto to be removed and otherwise cause
such item to be satisfied of record.
(b) Mortgagor shall pay when due all utility charges which are
incurred by it for gas, electricity, water or sewer services and all other
assessments or charges of a similar nature, whether public or private and
whether or not such assessments or charges are liens on the Mortgaged Property.
(c) All Leases of the Mortgaged Property or any part thereof shall be
subordinate to the lien of this Mortgage.
9. Estoppel Certificates. Mortgagor, within ten (10) business days
upon request, shall deliver a written statement, duly acknowledged, setting
forth the amount of the Indebtedness, and whether any offsets, claims,
counterclaims or defenses exist against the Indebtedness secured by this
Mortgage.
10. Expenses. Mortgagor shall pay all out-of-pocket expenses
reasonably incurred by Mortgagee with respect to any and all transactions
contemplated herein and the preparation of any document reasonably required
hereunder including (without limiting the generality of the foregoing) all title
and conveyancing charges, recording and filing fees and taxes, mortgage taxes,
intangible personal property taxes, escrow fees, revenue and tax stamp expenses,
insurance premiums (including title insurance premiums), brokerage commissions,
finders' fees, placement fees, surveyors', appraisers' and the attorneys' fees
contained in subsection 11.5 of the Loan Agreement), and will reimburse to
Mortgagee all of the foregoing expenses paid by Mortgagee which have been or may
be reasonably incurred by Mortgagee with respect to any and all of the
transactions contemplated herein. In addition to the foregoing, if any action or
proceeding be commenced (including but not limited to any action to foreclose
this Mortgage or to collect the Indebtedness), to which action or proceeding
Mortgagee is made a party, or in which it becomes necessary to defend or uphold
the lien of this Mortgage, or in which Mortgagee is served with any legal
process, discovery notice or subpoena relating to Mortgagee's lending to
Mortgagor or accepting a guaranty from a guarantor of the Indebtedness or of any
of the Obligations, Mortgagor will reimburse Mortgagee for all of the
obligations, Mortgagor will reimburse Mortgagee for all of the foregoing
expenses which have been or may be reasonably incurred by Mortgagee with respect
to the foregoing. All sums paid by Mortgagee for the expense of any litigation
to prosecute or defend the rights and lien created by this Mortgage or to appear
or to take action in response to any such legal process, discovery notice or
subpoena (including counsel fees and disbursements) shall be paid by Mortgagor,
together with interest thereon at the Default Rate, and any such sum and the
interest thereon shall be a lien on the Mortgaged Property, prior to any
<PAGE>
13
right, or title to, interest in or claim upon the Mortgaged Property attaching
or accruing subsequent to the lien of this Mortgage, and shall be deemed to be
secured by this Mortgage. In any action to foreclose this Mortgage, or to
recover or collect the Indebtedness, the provisions of this Article with respect
to the recovery of costs, disbursements and allowances shall prevail unaffected
by the provisions of any law with respect to the same to the extent that the
provisions of this Article are not inconsistent therewith or violative thereof.
11. Mortgagee's Right to Perform. Upon the occurrence and during the
continuance of an Event of Default, Mortgagee, without waiving, or releasing
Mortgagor from, any Event of Default under this Mortgage, may (but shall be
under no obligation to), at any time perform any of the covenants or agreements
of Mortgagor hereunder, and the cost thereof, with interest at the Default Rate,
shall immediately be due from Mortgagor to Mortgagee, and the same shall be
secured by this Mortgage and shall be a lien on the Mortgaged Property prior to
any right, title to, interest in or claim upon the Mortgaged Property attaching
subsequent to the lien of this Mortgage. No payment or advance of money by
Mortgagee under this Article shall be deemed or construed to cure Mortgagor's
default or waive any right or remedy of Mortgagee hereunder.
12. Further Assurances. Mortgagor agrees, upon demand of Mortgagee, to
do any act or execute any additional documents (including, but not limited to,
security agreements on any personalty included or to be included in the
Mortgaged Property) as may be reasonably required by Mortgagor to confirm the
lien of this Mortgage.
13. Assignment of Rents. All of the rents, royalties, issues, profits,
revenue, income and other benefits of the Mortgaged property arising from the
use and enjoyment by Mortgagor of all or any portion thereof or from any Lease
(the "Rents and Profits") are hereby absolutely and unconditionally assigned,
transferred, conveyed and set over to Mortgagee to be applied in accordance with
the terms of the Security Deposit Agreement, and Mortgagor grants to Mortgagee
the right to enter the Mortgaged Property for the purpose of collecting the same
and to let the Mortgaged Property or any part thereof, and to apply the Rents
and Profits in accordance with the Security Deposit Agreement. The foregoing
assignment and grant shall continue in effect until the Indebtedness is paid in
full, but Mortgagee hereby waives the right to enter the Mortgaged Property for
the purpose of collecting the Rents and Profits and Mortgagor shall be entitled
to collect, receive, use and retain the Rents and Profits until the occurrence
of an Event of Default under this Mortgage; such right of Mortgagor to collect,
receive, use and retain the Rents and Profits may be revoked by Mortgagee
upon the occurrence of any Event of Default by giving not less than five days'
written notice of such revocation to Mortgagor; in the event such notice is
given, Mortgagor shall pay over to Mortgagee, or to any receiver appointed to
collect the Rents and
<PAGE>
14
Profits, any lease security deposits which security deposits shall be held in
trust and not co-mingled with Mortgagee's other funds), and shall pay monthly in
advance to Mortgagee, or to any such receiver, the fair and reasonable rental
value for the use and occupancy of the Mortgaged Property of such part thereof
as may be in the possession of Mortgagor, and upon default in any such payment
will vacate and surrender the possession of the Mortgaged Property to Mortgagee
or to such receiver, and in default thereof may be evicted by summary
proceedings. Mortgagor shall not accept prepayments of installments of Rent and
Profits to become due for a period of more than one month in advance (except for
security deposits and estimated payments of percentage rent, if any).
14. Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" by Mortgagor hereunder:
(a) the occurrence of any event which would constitute an event of
default under the Loan Agreement;
(b) if Mortgagor sells, transfers, assigns or conveys the Mortgaged
Property or any part thereof or interest therein (by operation of law or
otherwise) or if Mortgagor further mortgages, pledges or otherwise
encumbers the Mortgaged Property or any part thereof or any interest
therein or creates or suffers to exist any lien, charge or other
encumbrance on the Mortgaged Property or any part thereof, whether superior
or subordinate to the lien of this Mortgage, whether recourse or
nonrecourse, except for Permitted Liens; or
(c) a failure to (i) keep in force the insurance required by the Loan
Agreement or (ii) comply with and conform to all provisions and
requirements of the insurance policies and the insurers thereunder which
would affect the Mortgagor's ability to keep in force the insurance
required by the Loan Agreement or to collect any proceeds therefrom; or
(d) upon default, ten days after request, either in assigning and
delivering the policy or policies of insurance described in the Loan
Agreement or in reimbursing Mortgagee for premiums paid on such insurance,
together with interest thereon, as provided herein; or
(e) the holder of any other mortgage lien on the Real Estate shall
commence any action to foreclose such lien or to otherwise enforce any of
its rights under its mortgage.
15. Remedies. Upon the occurrence of an Event of Default hereunder,
(i) if such event is an Event of Default specified in paragraph (f) or (g) of
Section 9 of the Loan Agreement, automatically and without notice the
Indebtedness and all amounts owing under this Mortgage shall immediately become
<PAGE>
15
due and payable, and (ii) if such event is an Event of Default other than those
specified in paragraph (f) or (g) of Section 9 of the Loan Agreement, then
during the continuance of such an Event of Default, Mortgagee may and upon
written request of the Required Lenders shall declare the Indebtedness and all
amounts owing under this Mortgage to be immediately due and payable without
presentment, demand, protest or notice of any kind, and Mortgagee personally, or
by its agents or attorneys, may take such action, without notice or demand, as
it deems advisable to protect and enforce Mortgagee's rights against Mortgagor
in and to the Mortgaged Property, including, but not limited to, the following
actions:
(a) enter upon and take possession of the Mortgaged Property, and
lease and let the Mortgaged Property, or any part thereof, and receive all
the Rents and Profits thereof which are overdue, due or to become due, and
apply the same, after payment of all reasonably necessary charges and
expenses, on account of the amounts hereby secured, and the Mortgagee is
hereby given and granted full power and authority to do any act or thing
which Mortgagor might or could do in connection with the management and
operation of the Mortgaged Property. This covenant becomes effective either
with or without any action brought to foreclose this Mortgage and without
applying at any time for a receiver of such rents;
(b) institute an action of mortgage foreclosure, or take other action
as the law may allow, at law or in equity, for the enforcement of this
mortgage, and proceed thereon to final judgement and execution of the
entire unpaid balance of the Indebtedness including costs of suit, interest
and reasonable attorneys' fees. In case of any sale of the Mortgaged
Property by virtue of judicial proceedings, the Mortgaged Property may be
sold in one parcel and as an entirety or in such parcels, manner or order
as the Mortgagee in its sole discretion may elect;
(c) institute partial foreclosure proceedings with respect to the
portion of the Indebtedness so in default, as if under a full foreclosure,
and without declaring the entire Indebtedness due, provided that if
foreclosure sale is made because of default of a part of the Indebtedness,
such sale may be made subject to the continuing lien of this Mortgage for
the unmatured part of the Indebtedness; and it is agreed that such sale
pursuant to a partial foreclosure, if so made, shall not in any manner
affect the unmatured part of this Mortgage and the lien thereof shall
remain in full force and effect just as though no foreclosure sale had been
made under the provisions of this subsection. Notwithstanding the filing of
any partial foreclosure or entry of a decree of sale therein, Mortgagee may
elect at any time prior to a foreclosure sale pursuant to such decree, to
discontinue such partial foreclosure and to accelerate the Indebtedness by
reason of any uncured default
<PAGE>
16
or defaults upon which such partial foreclosure was predicated or by reason
of any other defaults, and proceed with full foreclosure proceedings. It is
further agreed that several foreclosure sales may be made pursuant to
partial foreclosures without exhausting the right of full or partial
foreclosure sale for any unmatured part of the Indebtedness, it being the
purpose to provide for a partial foreclosure sale of the secured
Indebtedness of any matured portion of the secured Indebtedness without
exhausting the power to foreclose and to sell the Mortgaged Property
pursuant to any such partial foreclosure for any other part of the secured
Indebtedness whether matured at the time or subsequently maturing; and
without exhausting any right of acceleration and full foreclosure;
(d) appoint a receiver of the Rents and Profits of the Mortgaged
Property without the necessity of proving either the depreciation or the
inadequacy of the value of the security or the insolvency of Mortgagor or
any person who may be legally or equitably liable to pay moneys secured
hereby and Mortgagor and each such person waives such proof and hereby
consents to the appointment of a receiver;
(e) institute an action for specific performance of any covenant
contained herein or in aid of the execution of any power herein granted;
(f) if Mortgagor is occupying the Mortgaged Property, or any part
thereof, it is hereby agreed that the said occupants shall pay such
reasonable rental monthly in advance as the Mortgagee shall demand for the
Mortgaged Property, or the part so occupied, and for the use of Equipment
covered by this Mortgage;
(g) apply on account of the unpaid Indebtedness and the interest
thereon or on account of any arrearages of interest thereon, or on account
of any balance due to the foreclosure sale of the Mortgaged Property, or
any part thereof, any unexpended moneys still retained by the Mortgagee
that were paid by Mortgagor to the Mortgagee pursuant to Article 6(d)
hereof;
(h) exercise any and all other rights and remedies granted under this
Mortgage or now or hereafter existing in equity, at law, by virtue of
statute or otherwise.
16. Remedies Cumulative and Concurrent. Mortgagee shall be entitled
to enforce payment and performance of any Indebtedness or Obligations secured
hereby and to exercise all rights and powers under this Mortgage or other
agreement or any laws now or hereafter in force, notwithstanding some or all of
the Indebtedness and Obligations may now or hereafter be otherwise secured,
whether by mortgage, deed of trust, pledge, lien, assignment or otherwise.
Neither the acceptance of this Mortgage nor its enforcement, whether by court
action or pursuant
<PAGE>
17
to the power of sale or other powers herein contained, shall prejudice or in any
manner affect Mortgagee's right to realize upon or enforce any other securities
now or hereafter held by Mortgagee, it being agreed that Mortgagee shall be
entitled to enforce this Mortgage and any other security now or hereafter held
by Mortgagee in such order and manner as Mortgagee may in its absolute
discretion determine. No remedy herein conferred upon or reserved to Mortgagee
is intended to be exclusive of any other remedy herein or by law provided or
permitted, but each shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute. Every power or remedy given to Mortgagee or to which Mortgagee may be
otherwise entitled, may be exercised, concurrently or independently against each
Mortgagor or against the Mortgaged Property, or either of them, from time to
time and as often as may be deemed expedient by Mortgagee. The failure to
exercise any such power or remedy will not be construed as a waiver or release
of that power or remedy.
17. Discontinuance of Proceedings. If Mortgagee has proceeded to
enforce any right under the Note, the Loan Agreement, or this Mortgage and such
proceedings have been discontinued or abandoned for any reason, then in every
such case, Mortgagor and Mortgagee will be restored to their former positions
and the rights, remedies and powers of Mortgagee will continue as if no such
proceedings had been taken.
18. Application of Proceeds. The proceeds of any sale of all or any
portion of the Mortgaged Property upon foreclosure and the earnings of any
holding, leasing, operation or other use of the Mortgaged Property following any
Event of Default will be applied by Mortgagee as follows:
First: To the payment of the costs and expenses of any such sale or
of any such holding, leasing, operation or other use and of any judicial
proceeding wherein any sale may be made, and all expenses, advances,
liabilities and sums made or furnished or incurred by Mortgagee, including,
without limitation, receiver's, accountants' and attorneys' fees and all
taxes, assessments or other charges, except any taxes, assessments or other
charges, except any taxes, assessments or other charges subject to which
the Mortgaged Property shall have been sold.
Second: To the payment of the Indebtedness secured hereby.
Third: To the payment of any other sums required to be paid pursuant
to any provision of this Mortgage, the Note or the Loan Agreement.
Fourth: The balance, if any, to whomsoever may be lawfully entitled
to receive the same.
19. Successor Mortgagor. In the event ownership of the Mortgaged
Property or any portion thereof becomes vested in a
<PAGE>
18
person other than the Mortgagor herein named, Mortgagee may, without notice to
the Mortgagor herein named, whether or not Mortgagee has given written consent
to such change in ownership, deal with such successor or successors in interest
with reference to this Mortgage and the indebtedness secured hereby, and in the
same manner as with the Mortgagor herein named, without in any way vitiating or
discharging the Mortgagor's liability hereunder or under the Indebtedness.
20. Security Agreement Under Uniform Commercial Code. Mortgagor and
Mortgagee agree that this Mortgage shall constitute a Security Agreement within
the meaning of the Uniform Commercial Code of the State of New Jersey
(hereinafter in this paragraph referred to as the "Code") with respect to (i)
any and all sums at any time on deposit or held by Mortgagee pursuant to any of
the provisions of this Mortgage ("Deposits") and (ii) with respect to any goods
or property included in the definition of the term "Mortgaged Property", which
goods or property may not be deemed to form a part of the Real Estate described
in Exhibit A hereto or may not constitute a "fixture" (within the meaning of
Section 9-313 of the Code), and all replacements of such property, substitutions
for such property, additions to such property, and the proceeds thereof (all of
said property and the replacements, substitutions, and additions thereto and the
proceeds thereof being sometimes hereinafter collectively referred to as the
"Collateral"), and that a security interest in and to the Collateral is herby
granted to Mortgagee, and the Collateral and all of Mortgagor's right, title and
interest therein are hereby assigned to Mortgagee, to secure the Indebtedness
and Obligations. Upon the occurrence and during the continuance of an Event of
Default under this Mortgage, Mortgagee, pursuant to the appropriate provisions
of the Code, shall have the option of proceeding with respect to the Collateral
as to both real and personal property in accordance with its rights and remedies
with respect to the real property, in which event the default provisions of the
Code shall not apply. The parties agree that, in the event Mortgagee shall
elect to proceed with respect to the collateral separately from the real
property, ten (10) days' notice of the sale of the Collateral shall be
reasonable notice. The expenses of retaking, holding, preparing for sale,
selling and the like incurred by Mortgagee shall include, but not be limited
to, attorneys' fees and expenses incurred by Mortgagee. Mortgagor agrees that,
without the written consent of Mortgagee, Mortgagor will not remove or permit to
be removed from the Real Estate any of the Collateral. Mortgagor shall, from
time to time, on request of Mortgagee, deliver to Mortgagee an inventory of the
Collateral in reasonable detail. Mortgagor covenants and represents that all
Collateral now is, and that all replacements thereof, substitutions therefor or
additions thereto, will be, free and clear of liens, encumbrances, or the
security interest of others, other than Permitted Liens.
21. Indemnification; Waiver of Claim. (a) If Mortgagee is made a
party defendant to any litigation concerning
<PAGE>
19
this Mortgage or the Mortgaged Property or any part thereof or interest therein,
or the occupancy thereof by Mortgagor, then Mortgagor shall indemnify, defend
and hold Mortgagee harmless from all liability by reason of said litigation
(other than that arising solely from Mortgagee's own willful misconduct or gross
negligence), including attorneys' fees and expenses incurred by Mortgagee in any
such litigation, whether or not any such litigation is prosecuted to judgment.
If Mortgagee commences an action against Mortgagor to enforce any of the terms
hereof or because of the breach by Mortgagor of any of the terms hereof, or for
the recovery of any sum secured hereby, Mortgagor shall pay to Mortgagee
attorneys' fees and expenses, together with interest thereon at the Default Rate
from the date the same are paid by Mortgagee to the date of reimbursement by
Mortgagor, and the right to such attorneys' fees and expenses shall be deemed to
have accrued on the commencement of such action, and shall be enforceable
whether or not such action, and shall be enforceable whether or not such action
is prosecuted to judgment. If an Event of Default shall have occurred, Mortgagee
may engage an attorney or attorneys to protect its rights hereunder, and in the
event of such engagement, Mortgagor shall pay Mortgagee attorneys' fees and
expenses incurred by Mortgagee, whether or not an action is actually commenced
against Mortgagor by reason of breach.
(b) Mortgagor waives any and all right to claim or recover against
Mortgagee, its officers, employees, agents and representatives, for loss of or
damage to Mortgagor, the Mortgaged Property, Mortgagor's property or the
property of others under Mortgagor's control from any cause whatsoever, except
for the willful misconduct or gross negligence of Mortgagee, its officers,
employees, agents or representatives.
22. No Waivers, Etc. Any failure by Mortgagee to insist upon the
strict performance by Mortgagor of any of the terms and provisions of this
mortgage shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Mortgagee, notwithstanding any such failure, shall have the right
thereafter to insist upon the strict performance by Mortgage to be performed by
Mortgagor; Mortgagee may release, regardless of consideration and without the
necessity for any notice to or consent by the holder of any subordinate lien on
the Mortgaged Property, any part of the security held for the obligations
secured by this Mortgage without, as to the remainder of the security, in
anywise impairing or affecting the lien of this Mortgage or the priority of such
lien over any subordinate lien. Mortgagee may resort for the payment of the
Indebtedness secured by this Mortgage to any other security therefor held by
Mortgagee in such order and manner as Mortgagee may elect.
23. Waivers by Mortgagor. Mortgagor hereby waives, to the fullest
extend permitted by applicable law, all errors and imperfections in any
proceedings instituted by Mortgagee under this Mortgage and all benefit of any
present or future statute of limitations or moratorium law or any other present
or future law,
<PAGE>
20
regulation or judicial decision, nor shall Mortgagor at any time insist upon or
plead, or in any manner whatever claim or take any benefit or advantage of such
statute, law, regulation or judicial decision which (a) exempts any of the
Mortgaged Property or any other property, real or personal, or any part of
the proceeds arising from any sale thereof from attachment, levy or sale under
execution, (b) provides for any stay of execution, moratorium, marshalling of
assets, exemption from civil process, redemption, extension of time for payment
or valuation or appraisement of any of the Mortgaged Property, (c) requires
Mortgagee to institute proceedings in mortgage foreclosure against the Mortgaged
Property before exercising any other remedy afforded Mortgagee hereunder upon
the occurrence of an Event of Default, or (d) conflicts with or may affect,
adverse to Mortgagee, any provision, covenant or term of this Mortgage.
24. Trust Funds. All lease security deposits of the Real Estate shall
be treated as trust funds not to be commingled with any other funds of
Mortgagor. Within 10 days after request by Mortgagee, Mortgagor shall furnish
Mortgagee satisfactory evidence of compliance with this paragraph, together with
a statement of all lease security deposits by lessees and copies of all Leases
not theretofore delivered to Mortgagee, which statement shall be certified by
Mortgagor.
25. 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, or to such other
address as may be hereafter notified by the respective parties hereto and any
future holders of the Notes:
Mortgagor: Camden Cogen L.P.
c/o Cogen Technologies, Inc.
1600 Smith Street
Suite 5000, 50th Floor
Houston, Texas 77002
Attention: Robert C. McNair
Telecopy: (713) 951-7747
Mortgagee: General Electric Capital Corporation
1600 Summer Street
Stanford, Connecticut 06927
Attention: Project Financing
Investments - Transportation and
Industrial Financing Division
Telecopy: (203) 357-6366
<PAGE>
21
26. Taxes on Mortgagee. In the event of the passage after the date of
this Mortgage of any law of the jurisdiction which the Real Estate is located
deducting from the value of the Real Estate for the purposes of taxation any
lien thereon or changing in any way the laws for the taxation of mortgages or
debts secured by mortgages for state or local purposes or the manner of the
collection of any such taxes and imposing a tax, either directly or indirectly,
on this Mortgage, Mortgagee shall have the right to declare all sums outstanding
secured by this Mortgage immediately due and payable, provided, however, that
such election shall be ineffective if Mortgagor is exempt from such tax or, if
not exempt from such tax, is permitted by law to pay the whole of such tax (or
to provide funds to Mortgagee to pay such tax or reimburses Mortgagee for
payment of such tax) when the same is due and payable and agrees in writing to
pay such tax when thereafter levied or assessed against the Real Estate.
27. No Modification; Binding Obligations. This Mortgage is subject to
modification or amendment by a writing executed by Mortgagor and Mortgagee which
shall be recorded in the land records of the County of Camden, New Jersey.
Pursuant to N.J.S.A. 46:9-8.2, such modification or amendment shall not affect
the priority of this Mortgage. The covenants of this Mortgage shall run with the
land and bind Mortgagor, and its distributee, personal representatives,
successors and assigns, and all present and subsequent encumbrancers, lessees
and sublessee of any of the Mortgaged Property, and shall inure to the benefit
of Mortgagee and its successors, assigns and endorsees.
28. Miscellaneous. As used in this Mortgage, the singular shall
include the plural as the context requires and the following words and phrases
shall have the following meanings: (a) "including" shall mean "including but not
limited to"; (b) "provisions" shall mean "provisions, terms, covenants and/or
conditions"; (c) "lien" shall mean "lien, charge, encumbrance, security
interest, mortgage and/or deed of trust"; (d) "obligation" shall mean
"obligation, duty, covenant and/or condition"; and (e) "any of the Mortgaged
Property" shall mean "the Mortgaged Property or any part thereof or interest
therein." Any act which Mortgagee is permitted to perform hereunder may be
performed at any time and from time to time by Mortgagee or any person or entity
designated by Mortgagee. Any act which is prohibited to Mortgagor hereunder is
also prohibited to all lessees of any of the Mortgaged Property. Each
appointment of Mortgagee as attorney-in-fact for Mortgagor under the Mortgage is
irrevocable and coupled with an interest. Mortgagee has the right to reasonably
refuse to grant its consent, approval or acceptance or to indicate its
satisfaction, whenever such consent, approval, acceptance or satisfaction is
required hereunder.
<PAGE>
22
29. Captions. The captions or headings at the beginning of each
Article hereof are for the convenience of the parties and are not a part of this
Mortgage.
30. Successors and Assigns. The covenants contained herein shall run
with the land and bind Mortgagor, its successors and assigns, and all subsequent
owners, encumbrancers and tenants of the Mortgaged Property, and shall inure to
the benefit of the Mortgagee.
31. Enforceability. (a) This Mortgage, the validity and enforceability
of this Mortgage and all transactions and questions arising hereunder, shall be
governed by and construed and interpreted in accordance with the laws of the
State of New Jersey. Whenever possible, each provision of this Mortgage shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Mortgage shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remaining provisions of this
Mortgage. Nothing in this Mortgage shall require Mortgagor to pay, or Mortgagee
to accept, interest in an amount which would subject Mortgagee to penalty under
applicable law. In the event that the payment of any interest due hereunder
would subject Mortgagee to penalty under applicable law, then ipso facto the
obligation of Mortgagor to make such payment shall be reduced to the highest
rate authorized under applicable law without penalty.
(b) Mortgagor hereby irrevocably agrees that any legal action, suit,
or proceeding against it with respect to its obligations, liabilities or any
other matter under or arising out of or in connection with this Mortgage or for
recognition or enforcement of any judgement rendered in any such action, suit or
proceeding may be brought in the United States Courts for the Southern District
of New York, or in the courts of the State of New Jersey, as Mortgage, Mortgagor
may elect, and, by execution and delivery of this Mortgage, Mortgagor hereby
irrevocably accepts and submits to the non-exclusive jurisdiction of each of the
aforesaid courts in personam, generally and unconditionally with respect to any
such action, suit or proceeding for itself and in respect of its property.
Mortgagor further agrees that final judgement against it in any action, suit, or
proceeding referred to herein shall be conclusive and may be enforced in any
other jurisdiction, by suit on the judgement, a certified or exemplified copy of
which shall be conclusive evidence of the fact and of the amount of its
indebtedness. Mortgagor and Mortgagee each hereby waives trial by jury.
32. RECEIPT OF COPY. MORTGAGOR ACKNOWLEDGES THAT IT HAS RECEIVED
WITHOUT CHARGE A TRUE COPY OF THIS MORTGAGE.
33. Loan Agreement. This Mortgage has been executed and delivered
pursuant to the Loan Agreement and is entitled to the benefits thereof.
<PAGE>
23
34. Limitation of Liability. Mortgagee and the Lenders agree that the
liability of Mortgagor under this Mortgage, the Loan Agreement, the Notes and
the other Obligations shall be limited to the Mortgaged Property and the rights
and remedies of Mortgagee and the Lenders against the Mortgaged Property
pursuant to this Mortgage and the other Collateral Security Documents, and in no
event shall Mortgagor 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 Mortgagee and the Lenders to the
Mortgaged Property pursuant to this Mortgage and the other 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.
IN WITNESS WHEREOF, the undersigned has caused this Mortgage to be
duly executed under seal the day and year first above written.
CAMDEN COGEN L.P.
(Corporate Seal) By: Cogen Technologies Camden GP
Limited Partnership, its general
[CORPORATE SEAL APPEARS HERE] partner
Attest: By: Cogen Technologies Camden,
Inc., its general partner
/s/ MARY ANN MCLENDON
- ----------------------------- By: /s/ LAWRENCE THOMAS
Mary Ann McLendon ----------------------------
Assistant Secretary Name: Lawrence Thomas
Title: V.P. - Finance
<PAGE>
Schedule 1
----------
CONTRACTS
---------
Capital Contribution Agreement, dated as of the Conformed Agreement
Date, among the General Partner, GE Capital, the Agent and the Borrower.
Equipment Contact, dated February 3, 1992, by and between the Borrower
and General Electric.
Power Purchase Agreement, dated April 15, 1988, between PSE&G and the
Borrower.
Energy Purchase Agreement, dated December 18, 1989, between the Steam
Host and the Borrower.
Gas Service Agreement, dated May 15, 1991, between PSE&G and the
Borrower, as amended by the First Amendment thereto dated November 1, 1991.
Engineering, Procurement and Construction Contract, dated as of
February 3, 1992, by and between Camden Cogen L.P. and Ebasco Constructors Inc.
Operation and Maintenance Agreement
<PAGE>
STATE OF Texas (S)
----- (S) SS.:
COUNTY OF Harris (S)
------
BE IT REMEMBERED, that on this 27th day of January, 1992, in the
County and State aforesaid, before me, the subscriber, a Notary Public of Harris
County, Texas authorized to take acknowledgments and proofs in said County and
State, personally appeared Lawrence Thomas and Mary Ann McLendon, who I am
satisfied, are the persons who signed the within, instrument as V.P. - Finance
and Asst. Secretary, respectively, of Cogen Technologies Camden, Inc., the
corporation named therein, and they thereupon acknowledged that the within
instrument signed by the corporation and sealed with its corporate seal, was
signed, by the corporation and sealed with its corporate seal, was signed,
sealed with the corporate seal and delivered by them as such officers and is the
voluntary act and deed of the corporation, made by virtue of authority from its
Board of Directors, as a general partner on behalf of Cogen Technologies Camden
GP Limited Partnership, a Delaware limited partnership, as a general partner on
behalf of CAMDEN COGEN L.P., a Delaware limited partnership the partnership
which executed the within instrument.
Signature /s/ ELAINE A. CAMPBELL
---------------------------
_________________________________ Printed Elaine A. Campbell
| ELAINE A. CAMPBELL | -----------------------------
| NOTARY PUBLIC, STATE OF TEXAS | Notary Public
| MY COMMISSION EXPIRES |
| JUL 27, 1993 | My commission expires: ______________
_________________________________
<PAGE>
EXHIBIT A
---------
ALL THAT CERTAIN land or premises situate, lying and being in the City of
Camden, County of Camden and State of New Jersey. The legal description being
more particularly bounded and described as follows:
BEGINNING at a point in the Southeasterly corner of Broadway (66 feet wide)
and Chelton Avenue (60 feet wide); thence
(1) South 88 degrees 33 minutes 00 seconds East along the Southerly line of
Chelton Avenue, a distance of 450 feet to the Westerly line of Sixth Street (50
feet wide); thence
(2) South 01 degrees 20 minutes 45 seconds West along the Westerly line of
Sixth Street, a distance of 400 feet to a point; thence
(3) North 88 degrees 33 minutes 00 seconds West, a distance of 210 feet to
a point in the center line of Fillmore Street (now vacated); thence
(4) North 01 degrees 20 minutes 45 seconds East and along the center line
of Fillmore Street (now vacated) 20 feet to a point; thence
(5) North 88 degrees 33 minutes 00 seconds West, a distance of 115 feet to
a point in the center line of Hedley Street (now vacated); thence
(6) North 01 degrees 20 minutes 45 seconds East along the center line of
Hedley Street (now vacated), a distance of 20 feet to a point; thence
(7) North 88 degrees 33 minutes 00 seconds West, a distance of 125 feet to
a point in the Easterly line of Broadway; thence
(8) North 01 degrees 20 minutes 45 seconds East along the Easterly line of
Broadway, a distance of 360 feet to point and place of beginning.
BEING Lot 1, Block 506, Tax Map.
<PAGE>
RECORDED-CAMDEN COUNTY
92FEB-4 PM 3:28
/s/ Susan R. Rose
REGISTER
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FIRST AMENDMENT TO MORTGAGE
from
CAMDEN COGEN L.P.,
Mortgagor
to
GENERAL ELECTRIC CAPITAL CORPORATION, as Agent,
Mortgagee
Dated as of April 19, 1993
THE MORTGAGE AMENDED BY THIS AMENDMENT
ALSO CONSTITUTES A SECURITY
AGREEMENT UNDER THE UNIFORM COMMERCIAL CODE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
This Instrument was prepared by and
after recording should be returned to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: Mark J. Eagan, Esq.
Signature /s/ Mark J. Eagan
------------------
Mark J. Eagan
<PAGE>
FIRST AMENDMENT TO MORTGAGE
---------------------------
THIS FIRST AMENDMENT TO MORTGAGE dated as of April 19, 1993 by and between
CAMDEN COGEN L.P., a Delaware limited partnership, ("Mortgagor"), having an
office at c/o Cogen Technologies, 1600 Smith Street, Suite 5000, 50th Floor,
Houston, Texas 77002 and GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation ("Mortgagee"), as agent for the lenders (the "Lenders") parties to
the Amendment and Restatement dated as of April 1, 1993 of the Construction and
Term Loan Agreement dated as of February 4, 1992 among Mortgagor, the Lenders
and Mortgagee (the "Restated Loan Agreement"), having an office at 1600 Summer
Street, Stamford, Connecticut 06927. Unless otherwise defined herein, all
capitalized terms used herein shall have their respective meanings set forth in
the original Mortgage (as defined below).
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Mortgagor is the owner in fee simple of certain tracts of land
located in Camden, Camden County, New Jersey and more particularly described in
Exhibit A attached hereto and made a part hereof (the "LAND"); and
WHEREAS, Mortgagor has previously executed and delivered that certain
Mortgage dated as of February 4, 1992 made by Mortgagor to Mortgagee, as agent,
and recorded in the Office of the Register of Deeds of Camden County, New Jersey
on February 4, 1992 as Document No. 549114, Mortgage Book 3742 page 1 (the
"Original Mortgage") encumbering the Land and certain other property of
Mortgagor; and
WHEREAS, Mortgagor has acquired certain easement and other rights in and to
certain additional parcels of real property appurtenant to the Land; and
WHEREAS, pursuant to the Restated Loan Agreement, Mortgagor has agreed to
amend the Original Mortgage to spread the lien of the Original Mortgage to such
additional real property interests of Mortgagor;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, Mortgagor hereby agrees as follows:
1. The Original Mortgage is hereby amended by inserting the phrase
"Interest Rate Hedging Agreement" on page 2 at the end of the third line of
paragraph (b) following the phrase "Loan Agreement,".
<PAGE>
2
2. The Original Mortgage is hereby amended by inserting the following
paragraph A-1 immediately following paragraph A on page 2:
" A-1. all right, title and interest of Mortgagor in and to the
following:
(1) the License Agreement for Wire, Pipe and Cable Transverse
Crossings and Longitudinal Occupations dated August 21, 1992 between
Consolidated Rail Corporation ("ConRail") and Mortgagor (the "ConRail Easement")
recorded on March 23, 1993 as Docket Number 652905, pursuant to which ConRail
has granted to Mortgagor certain rights in the real property more particularly
described in Exhibit B attached hereto and made a part hereof (the "ConRail
Parcel");
(2) the Easement Agreement dated as of December 18, 1992 between
MacAndrews & Forbes Company ("M&F") and Mortgagor (the "M&F Easement"), recorded
on January 14, 1993 in Book 4600 page 0768, as amended by the Amendment to
Easement Agreement dated March 22, 1993, recorded on March 26, 1993 as Docket
Number 653974, pursuant to which M&F has granted to Mortgagor certain rights in
the real property more particularly described in Exhibit C attached hereto and
made a part hereof (the "M&F Parcel");
(3) the Easement Agreement dated as of February 22, 1993 between
Camden Paperboard Corporation ("Paperboard") and Mortgagor (the "Paperboard
Easement"), recorded on March 22, 1993 as Docket Number 652650, pursuant to
which Paperboard has granted to Mortgagor certain rights in the real property
more particularly described in Exhibit D attached hereto and made a part hereof
(the "Paperboard Parcel"); and
(4) the Easement Agreement dated as of February 22, 1993 between
Cogen Technologies P.B., Inc. ("PBI") and Mortgagor (the "PBI Easement"),
recorded on March 9, 1993 in Book 4609 page 0308, pursuant to which PBI has
granted to Mortgagor certain rights in the real property more particularly
described in Exhibit E attached hereto and made a part hereof (the "PBI
Parcel"); and
(5) the Deed Granting Easement dated as of November 13, 1992 between
the City of Camden, New Jersey ("Camden") and Cogen Technologies, recorded on
November 17, 1992 in Deed Book 4589 page 729, as amended by the Deed Granting
Easement dated as of January 21, 1993, recorded on March 23, 1993, as docket
Number 652904 (the "Camden Easement"' the ConRail Easement, the M&F Easement,
the Paperboard Easement,
<PAGE>
3
the PBI Easement and the Camden Easement collectively, the "Easement"),
pursuant to which Camden has granted to Mortgagor certain rights in the real
property more particularly described in Exhibit F attached hereto and made a
part hereof (the "Camden Parcel"; the ConRail Parcel, the M&F Parcel, the
Paperboard Parcel, the PBI Parcel and the Camden Parcel collectively, the
"Easement Parcels")."
3. Paragraph B on page 2 of the Original Mortgage is hereby amended and
restated in its entirety as follows:
" B. all right, title and interest of Mortgagor in and to any and
all buildings, pipes, appurtenant facilities and other improvements now or
hereafter erected on or under the Land or the Easement Parcels (the
"Improvements"' the Land and the Easements, together with the Improvements,
are hereinafter collectively refereed to as the "Real Estate");"
4. The second "WHEREAS" clause on page 1 of the Original Mortgage is
hereby amended by deleting from the sixth line of such clause the word
"construction" and replacing it with the word "certain".
5. Paragraph 18 of the Original Mortgage is hereby amended and restated
in its entirety as follows:
" 18. Application of Proceeds. The proceeds of any sale of all or any
portion of the Mortgaged Property upon foreclosure and the earnings of any
holdings, leasing, operation or other use of the Mortgaged Property
following any Event of Default will be applied by Mortgagee as provided for
in the Intercreditor Agreement."
6. The following Section 35 is added to the Original Mortgage immediately
following Section 34:
" 35. Additional Covenants. Mortgagor promptly shall perform all
covenants and obligations to be performed by Mortgagor under the Easements
and, from time to time on request from Mortgagee, shall deliver to
Mortgagee evidence satisfactory to Mortgagee of such performance. Mortgagor
promptly shall provide to Mortgagee copies of all notes, notices or other
correspondence delivered to or received from one or more of the grantors of
the Easements or their respective successors or assigns, along with all
other notes, notices or correspondence sent to Mortgagor by any other
Person or sent by any other Person to Mortgagor, arising out of or in
connection with the Easements, the Easement Parcels or the Improvements
located on or under the Easement Parcels."
<PAGE>
4
7. All references in the Original Mortgage (as amended by this Amendment)
to "Loan Agreement" shall be deemed to refer to the Restated Loan Agreement.
8. All representations and warranties of Mortgagor under the Original
Mortgage (as amended by this Amendment) are deemed repeated as of the date of
this Agreement.
9. Exhibit A to the Original Mortgage is deleted and replaced by the
Exhibit A attached to this Amendment.
10. Exhibit B, Exhibit C, Exhibit D, Exhibit E and Exhibit F, attached to
this Agreement, are hereby deemed attached to the end of the Original Mortgage.
IN WITNESS WHEREOF, Mortgagor and Mortgagee have caused this Mortgage to be
duly executed under seal the day and year first above written.
CAMDEN COGEN L.P.
By: Cogen Technologies Camden GP
Limited Partnership, its general
partner
By: /s/ Lawrence P. Thomas
----------------------
Name: Lawrence P. Thomas
Title: Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ M. J. Tzougrakis
--------------------
Name: M. J. Tzougrakis
Title: Manager - Operations
<PAGE>
STATE OF )
: ss.:
COUNTY OF )
BE IT REMEMBERED, that on this 19th day of April, 1993, in the county and
State aforesaid, before me, the subscriber, a Notary Public of the State of New
York authorized to take acknowledgments and proofs in said State, personally
appeared Lawrence D. Thomas, who, I am satisfied, is the person who signed the
within instrument as Vice President of Cogen Technologies Camden, Inc., the
corporation named therein, and he thereupon acknowledged that the within
instrument signed by the corporation was signed and delivered by him as such
officer and is the voluntary act and deed of the corporation, made by virture of
authority from its Board of Directors, as a general partner on behalf of
Delaware limited partnership, as a general partner on behalf of CAMDEN COGEN
L.P., a Delaware limited partnership the partnership which executed the within
instrument.
Signature /s/ John C. Broderick
---------------------
Printed John C. Broderick
-----------------------
Notary Public
My commission expires: 1/13/94
--------
STATE OF CONNECTICUT )
: ss.:
COUNTY OF FAIRFIELD )
BE IT REMEMBERED, that on this 13th day of April, 1993, in the county and
State aforesaid, before me, the subscriber, a Notary Public of the State of
Connecticut authorized to take acknowledgments and proofs in said State,
personally appeared M. J. Tzougrakis, who, I am satisfied, is the person who
signed the within instrument as Manager - Operations of General Electric Capital
Corporation the corporation named therein, and he thereupon acknowledged that
the within instrument signed by the corporation was signed and delivered by him
as such officer and is the voluntary act and deed of the corporation, made by
virture of authority from its Board of Directors.
Signature /s/ Margaret M. Fraioli
-----------------------
Printed Margaret M. Fraioli
-------------------------
Notary Public
My commission expires:
----------
MARGARET M. FRAIOLI
NOTARY PUBLIC
MY COMMISSION EXPIRES DEC. 31, 1995
<PAGE>
EXHIBIT A
---------
- -------------------------------------------------------------------------------
LEGAL DESCRIPTION
SITE
-----------------
BEING COMMONLY KNOWN AS LOT 1 BLOCK 506 AS SHOWN ON THE OFFICIAL TAX MAP OF THE
CITY OF CAMDEN, COUNTY OF CAMDEN, NEW JERSEY AND SHOWN ON A MAP ENTITLED "PLAN
OF LAND PREPARED FOR COGEN TECHNOLOGIES" PREPARED BY GEOD CORPORATION AND DATED
DECEMBER 31, 1992, AND BEING FURTHER DESCRIBED AS FOLLOWS;
BEGINNING at the intersection of the Southerly right-of-way line of Chelton
Avenue (60' wide) with the Easterly right-of-way line of Broadway (66' wide);
thence,
1) Along the Southerly line of Chelton Avenue S88 degrees-33'-00"E 450.00' to
a point; thence,
2) Still along the Southerly line of Chelton Avenue S88 degrees-39'-15"E
25.00' to a point on the dividing line between Cogen Technologies P.B. on the
East and Camden Cogen L.P. on the West, said dividing line also being the
centerline of vacated Sixth Street; thence,
3) Along said dividing line S01 degrees-20'-45"W 335.00' to a point; thence,
4) S01 degrees-20'45W 54.06' to a point being lands belonging to
Conrail-Penn-Reading Railroad; thence,
5) Along lands of said railroad and leaving said centerline of said Sixth
Street S67 degrees-42'-59"W 27.29' to a point on the Northerly right-of-way line
of Bulson Street (80' wide) now vacated; thence,
6) Still along lands of said railroad and the Northerly line of said Bulson
Street N88 degrees-33'-00"W 210.00' to a point on the centerline of Fillmore
Street (40' wide) now vacated; thence,
7) Still along lands of said railroad and the centerline of said Fillmore
Street N01 degrees-20'-45"E 20.00' to a point; thence,
8) Still along lands of said railroad and leaving the centerline of said
Fillmore Street N88 degrees-33'-00"W 115.00' to a point in the centerline of
Hedley Street (20' wide) now vacated; thence,
9) Still along lands of said railroad and the centerline of said Hedley street
N01 degrees-20'-45"E 20.00' to a point; thence,
10) Still along lands of said railroad and leaving the centerline of said
Hedley Street N88 degrees-33'00"W 125.00' to a point on the Easterly
right-of-way line of Broadway; thence,
11) Along the Easterly line of Broadway and leaving lands of said railroad N01
degrees-20'-45"E 360.00' to the point and place of BEGINNING.
<PAGE>
EXHIBIT B
---------
LEGAL DESCRIPTION
CONRAIL PARCEL
-----------------
through the lands and under and across and
along the roadway and tracks of the Bulson Street Yard (off the
Beesleys Point Secondary) of Railroad, Line code 10-9902, between
Valuation Station 67 plus 30 plus or minus and Valuation Station 51
plus 60 plus or minus, with a crossing under the tracks at Valuation
Station 51 plus 60 plus or minus together with two (2) manholes, all
of which is located between 120 feet north of and 1450 feet south of
Mile Post 1 (M.P. 0.98 - 1.27) in the City of Camden, Camden County,
New Jersey,
<PAGE>
EXHIBIT C; 1 of 2
-----------------
LEGAL DESCRIPTION
M & F PARCEL
-----------------
BEGINNING at a point being in the Westerly line of Ancona Street (40' wide) said
point having coordinate values of N395,702.46 E1.872,049.00 in the New Jersey
State Plane Coordinate System, said point being the following course S01
degrees-22'-31"W 201.65' from the intersection of the Westerly line of Ancona
Street (40' wide) with the Southerly line of Jefferson Avenue (60' wide) and
running from said beginning point; thence,
1) S01 degrees-22'-25"W 21.63' along the Westerly line of Ancona Street to a
point; thence,
2) N26 degrees-09'-43"W 207.88' through lands of Mac Andrews & Forbes to a
point; thence,
3) On a curve to the right, having a radius of 1368.00' for an arc length of
41.84' with a central angle of 01 degrees-45'-08" and having a chord of N20
degrees-03'-56"W 41.83' along the Easterly line of lands of Conrail to a point;
thence,
4) S88 degrees-37'29"E 16.40' along the Southerly line of Jefferson Avenue to
a point; thence,
5) S01 degrees-22'-31"W 19.44' through the lands of Mac Andrews & Forbes to a
point; thence,
6) S26 degrees-09'-43"E 62.38' through the same to a point; thence,
7) N63 degrees-50'-17"E 21.90' through the same to a point; thence,
8) S26 degrees-09'-43"E 32.31' through the same to a point; thence,
9) S63 degrees-50'-17"-W 21.90' through the same to a point; thence,
10) S26 degrees-09'-43"-E 111.14' through the same to the point and place of
BEGINNING.
Said easement contains 0.072 acres of land.
<PAGE>
EXHIBIT C; 2 of 2
-----------------
LEGAL DESCRIPTION
M & F PARCEL (CONTINUED)
------------------------
BEGINNING at the point being in the Easterly line of Ancona Street (40' wide)
said point having coordinate values of N395,634.84 E1,872,087.38 in the New
Jersey State Plane Coordinate System, said point being the following course S01
degrees-22'-31"W 268.26' from the intersection of the Easterly line of Ancona
Street (40' wide) with the Southerly line of Jefferson Avenue (60' wide) and
running from said beginning point; thence,
1) S33 degrees-50'-39"E 46.03' through lands of Mac Andrews & Forbes to a
point; thence,
2) N46 degrees-22'-31"E 26.80' through the same to a point; thence,
3) S43 degrees-56'-56"E 29.54' through the same to a point; thence,
4) S46 degrees-22'-31"W 27.40' through the same to a point; thence,
5) S43 degrees-37'-29"E 103.06' through the same to a point; thence,
6) N88 degrees-37'-29"W 14.14' along the Northerly line of Chelton Street (60'
wide) to a point; thence,
7) N43 degrees-37'-29"W 120.71 through lands of Mac Andrews & Forbes to a
point; thence,
8) N33 degrees-50'-39"W 35.55' through the same to a point; thence,
9) N01 degrees-22'-31"E 17.27' along the aforementioned Easterly line of
Ancona Street to the point and place of BEGINNING.
Said easement contains 0.056 acres of land.
<PAGE>
EXHIBIT D
---------
LEGAL DESCRIPTION
PAPERBOARD PARCEL
-----------------
BEGINNING at a point in the Westerly line of Third Street (60' wide), said point
having values of N396,160.79 E1,871,814.93 in the New Jersey Plane Coordinate
System, said point being located S01 degrees-22'-31"W 29.07' from the
intersection of the Northerly sideline of Winslow Street (30' wide) with the
Westerly sideline of said Third Street; thence,
1) S01 degrees-22'-31"W 10.00' along the Westerly line of said Third Street
and the Easterly line of said Paperboard Company; thence,
2) N88 degrees-42'18"W 25.94' to a point on the Camden Paperboard Building as
located by an aerial survey; thence,
3) N01 degrees-15'39"E 10.00' along said building to a point; thence,
4) S88 degrees-42'18"E 25.96' to the point and place of BEGINNING.
Said easement contains 0.006 acres of land.
<PAGE>
EXHIBIT E
---------
LEGAL DESCRIPTION
PBI PARCEL
----------
BEGINNING at a point in the Southerly line of Chelton Avenue (60' wide), said
point having values of N395,409.27 E1,873,455.84 in the New Jersey State Plane
Coordinate System, said point being located N88 degrees-30'-38"W 130.00' from
the Northeast corner of lands of Cogen Technologies P.B. Inc.; thence,
1) S01 degrees-20'-45"W 15.00' through lands of Cogen Technologies P.B. Inc.
to a point; thence,
2) N88 degrees-30'-38"W 10.00' through the same to a point; thence,
3) S01 degrees-20'-45"W 85.35' through the same to a point; thence,
4) Continuing through the same on a curve to the right having a radius of
55.00' for an arc length of 45.16' and a delta angle of 47 degrees-02'-33"-
with a chord of S24 degrees-52'-02"W 43.90' to a point; thence,
5) N01 degrees-20'-45"-E 140.58' along the dividing line between Cogen
Technologies P.B. on the East and Camden Cogen L.P. on the West to a point;
thence.
6) S88 degrees-39'-15"E 25.00' along the Southerly line of Chelton Avenue to a
point; thence,
7) S88 degrees-30'-38"E 2.52' still along the same to the point and place of
BEGINNING.
Said easement contains 0.052 acres of land.
<PAGE>
EXHIBIT F
---------
LEGAL DESCRIPTION
CAMDEN PARCEL
-----------------
Starting at the Northeasterly corner of Block 695 Lot 2 being the intersection
of the Westerly line of Fourth Street (60 feet wide) with the Southerly line of
Jefferson Avenue (60 feet wide), said point having a coordinate of W 395898.30 E
1872293.77 in the New Jersey State Plane Coordinate System; thence, the
following one course to the point of beginning N88 degrees-37'-29"W 335.00 feet,
1) Along the Southerly line of Jefferson Avenue (60 feet wide) N88
degrees-37'-39"W for a distance of 10.00 feet to a point, thence,
2) Continuing through Jefferson Avenue, the following three courses N01
degrees-22'-31"E for a distance of 50.00 feet to a point, thence,
3) N88 degrees-37'-29"W for a distance of 38.33 feet to a point, thence,
4) N13 degrees-01'-32"W for a distance of 10.32 feet to a point in the
Northerly line of Jefferson Avenue,
5) Continuing along the above mentioned S35 degrees-37'-29"E for a
distance of 13.55 feet to a point in the Southwesterly corner of Block
494 Lot 3, thence,
6) Continuing along the above mentioned S33 degrees-37'-29"E for a
distance of 37.31 feet to a point being the Southeasterly corner of
Block 494, Lot 3, thence,
7) Through Jefferson Avenue S01 degrees-22'-31"W for a distance of 60.00
feet to the point and place of beginning.
<PAGE>
BEGINNING at a point being the intersection of the Westerly line of Fourth
Street (60' wide) said point having coordinate values of N395,418.44
E1,872,282.24 in the New Jersey State Plane Coordinate System, said point being
the following course S01 degrees-22'-31"W 20.00' from the intersection of the
Westerly line of Fourth Street (60' wide) and running from said beginning point;
thence,
1) S43 degrees-37'-29"E 10.58' through Fourth Street to a point; thence,
2) N46 degrees-22'-31"E 30.00' through the same to a point; thence,
3) S43 degrees-37'-29"E 25.00' through the same to a point; thence,
4) S46 degrees-22'-31"W 30.11' through the same to a point; thence,
5) S42 degrees-20'-15"E 50.53' through the same to a point; thence,
6) S01 degrees-22'-31"W 14.47' along the Easterly line of Fourth Street
to a point; thence,
7) N42 degrees-38'-37"W 86.34' through the same to a point; thence,
8) N01 degrees-22'-31"E 14.14' along the aforementioned Westerly line of
Fourth Street to the point and place of BEGINNING.
BEGINNING at a point being in the Southerly line of Chelton Avenue (60' wide)
said point having coordinate values of N395,438.91 E1,872,262.73 in the New
Jersey State Plane Coordinate System, said point being the following course N88
degrees-37'-29"W 20.00' from the intersection of the Southerly line of Chelton
Avenue (60' wide) with the Westerly line of Fourth Street (60' wide) and running
from said beginning point; thence,
1) N88 degrees-37'-29"W 14.14' along the Southerly line of Chelton Avenue
to a point; thence,
2) N43 degrees-37'-29"W 84.85' through Chelton Avenue to a point; thence,
3) S88 degrees-37'-29"E 14.14' along the Northerly line of Chelton Avenue
to a point; thence,
4) S43 degrees-37'-29"E 84.85' through Chelton Avenue to the point and
place of BEGINNING.
<PAGE>
BEGINNING at a point being in the Westerly line of Ancona Street (40' wide) said
point having coordinate values of N395,702.46 E1,872,049.00 in the New Jersey
State Plane Coordinate System, said point being the following course S01
degrees-22'-31"W 201.65' from the intersection of the Westerly line of Ancona
Street (40' wide) with the Southerly line of Jefferson Street (60' wide) running
from said beginning point; thence,
1) S26 degrees-09'-43"E 43.25' through Ancona Street to a point; thence,
2) S33 degrees-50'-39"E 34.68' through Ancona Street to a point; thence,
3) S01 degrees-22'-31"W 17.27' along the Easterly line of Ancona Street
to a point; thence,
4) N33 degrees-50'-39"W 49.76' through Ancona Street to a point; thence,
5) N26 degrees-09'-43"W 24.44' through Ancona Street to a point; thence,
6) N01 degrees-22'-25"E 21.63' along the aforementioned Westerly line of
Ancona Street to the point and place of BEGINNING.
BEGINNING at a point being the intersection of the Easterly line of Third Street
(60' wide) with the Southerly line of Winslow Street (40' wide) said point
having coordinate values of N395,148.43 E1,871,874.65 in the New Jersey State
Plane Coordinate System, and running from said beginning point; thence,
1) S01 degrees-22'-31"W 27.78' along the Easterly line of Third Street to
a point; thence,
2) N13 degrees-01'-54"W 26.65' through Third Street to a point; thence,
3) S88 degrees-37'-29"E 7.14' along the Westerly line of the Southerly
line of Winslow Street to the point and place of BEGINNING.
<PAGE>
STARTING at the Northeasterly corner of Block 496 Lot 2 being the intersection
of the Westerly line of Fourth Street (60' wide) with the Southerly line of
Jefferson Avenue (60' wide), said point having coordinate values of N395,898.30
E1, 872,293.77 in the New Jersey State Plane Coordinate System; thence, the
following two courses to the point of beginning:
A) NO88 degrees-37'-29"W 335.00' along the Southerly line of Jefferson Avenue;
and,
B) NO1 degrees-22'-31"E 5.00' through Jefferson Avenue; thence,
1) S88 degrees-37'-29"E 100.00' in the road, and 5.00' parallel to the
Southerly line of Jefferson Avenue to a point in the intersection of
Jefferson Avenue and Ancona Street (40' wide); thence,
2) SO1 degrees-22'-31"W 216.23' in the road and 5.00' parallel to the
Westerly line of Ancona Street; thence,
3) S26 degrees-09'-43"E 21.63' through a portion of Ancona Street to a
point; thence,
4) NO1 degrees-22'-31"E 245.41' in the road, 15.00' parallel to the
Westerly line of Ancona Street and parallel to the above secord
course, to a point in the intersection of Ancona Street and Jefferson
Avenue; thence,
5) N88 degrees-37'-29"W 110.00' in the road, 15.00' parallel to the
Southerly line of Jefferson Avenue and parallel to the above first
course, to a point; thence,
6) SO1 degrees-22'-31"W 10.00' through a portion of Jefferson Avenue to a
point and place of BEGINNING.
<PAGE>
===============================================================================
ASSIGNMENT OF MORTGAGE
by
GENERAL ELECTRIC CAPITAL CORPORATION, as Agent
to
THE TORONTO-DOMINION BANK TRUST COMPANY, as Successor Agent
Dated as of December 22, 1993
===============================================================================
After recording, this Instrument
should be returned to:
Chadbourne & Parke
30 Rockefeller Plaza
New York, NY 10112-0127
Attn: Andrew Coronios, Esq.
This Instrument was prepared by:
Mark Eagan, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
/s/ Mark Eagan
--------------------------
<PAGE>
ASSIGNMENT OF MORTGAGE
----------------------
ASSIGNMENT OF MORTGAGE dated as of December 22, 1993 made by GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation having an address at 1600
Summer Street, Stamford, Connecticut 06927, as agent ("Assignor") to THE
TORONTO-DOMINION BANK TRUST COMPANY, a New York trust company having an address
at 31 West 52nd Street, New York 10019, as successor agent ("Assignee").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Assignor is the mortgagee under that certain Mortgage dated as of
February 4, 1992 made by Camden Cogen L.P ("Mortgagor") to Assignor and recorded
in the offices of the Register of Deeds of Camden County, New Jersey on February
4, 1992 in Mortgage Book 3742, page 1 as amended by the First Amendment to
Mortgage by and between Mortgagor and Assignor dated as of April 19, 1993 and
recorded in the offices of the Register of Deeds of Camden County, New Jersey on
April 20, 1993 in Mortgage Book 3964, page 668 (collectively, the "Mortgage")
encumbering the real property more particularly described on Exhibit A; and
WHEREAS, pursuant to the Successor Agency Agreement dated as of even date
with this Assignment among Assignee, The Toronto-Dominion Bank, Assignor, The
Bank of Tokyo Trust Company and Mortgagor (the "Successor Agency Agreement"),
Assignee has been appointed as successor agent to Assignor and has succeeded to
all of Assignor's right, title and interest as agent;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, Assignor hereby assigns to Assignee, without recourse or
representation (except as is provided for in the Successor Agency Agreement and
the Assignment and Acceptance dated as of even date with this Assignment among
General Electric Capital Corporation, The Bank of Tokyo Trust Company and The
Toronto-Dominion Bank) all of Assignor's right, title and interest as
"Mortgagee" under the Mortgage, together with all instruments and other
documents evidencing the "Indebtedness", as defined in the Mortgage.
<PAGE>
2
IN WITNESS WHEREOF, Assignor has caused this instrument to be executed in
its name and on its behalf by its duly authorized officer as of the day and year
first written above.
GENERAL ELECTRIC CAPITAL CORPORATION,
as agent
By: /s/ Michael J. Tzougrakis
--------------------------------
Name:
Title:
<PAGE>
STATE OF )
: ss.:
COUNTY OF )
BE IT REMEMBERED, that on this ____ day of _____, 1993, in the County and
State aforesaid, before me, the subscriber, a Notary Public of the State of
___________ authorized to take acknowledgments and proofs in said State,
personally appeared __________________, who, I am satisfied, is the person who
signed the within instrument as ______________ of Cogen Technologies Camden,
Inc., the corporation named therein, and he thereupon acknowledged that the
within instrument signed by the corporation was signed and delivered by him as
such officer and is the voluntary act and deed of the corporation, made by
virtue of authority from its Board of Directors, as a general partner on behalf
of Cogen Technologies Camden GP Limited Partnership, a Delaware limited
partnership, as a general partner on behalf of CAMDEN COGEN L.P., a Delaware
limited partnership, the partnership which executed the within instrument.
Signature
---------------------
Printed
-----------------------
Notary Public
My commission expires:
--------
STATE OF CONNECTICUT )
: ss.:
COUNTY OF FAIRFIELD )
BE IT REMEMBERED, that on this 20th day of December, 1993, in the county
and State aforesaid, before me, the subscriber, a Notary Public of the State of
Connecticut authorized to take acknowledgments and proofs in said State,
personally appeared M. J. Tzougrakis, who, I am satisfied, is the person who
signed the within instrument as Manager - Operations of General Electric Capital
Corporation, the corporation named therein, and he thereupon acknowledged that
the within instrument signed by the corporation was signed and delivered by him
as such officer and is the voluntary act and deed of the corporation, made by
virtue of authority from its Board of Directors.
Signature /s/ Margaret M. Fraioli
-----------------------
Printed Margaret M. Fraioli
-------------------------
Notary Public
My commission expires:
----------
MARGARET M. FRAIOLI
NOTARY PUBLIC
MY COMMISSION EXPIRES DEC. 31, 1995
<PAGE>
EXHIBIT A
---------
Real Property Description
-------------------------
ALL THAT CERTAIN land or premises situate, lying and being in the City of
Camden, County of Camden and State of New Jersey, the legal description being
more particularly bounded and described as follows:
BEGINNING at a point in the Southeasterly corner of Broadway (66 feet wide)
and Chelton Avenue (60 feet wide); thence
1) South 88 degrees 33 minutes 00 seconds East along the Southerly line
of Chelton Avenue, a distance of 450 feet to the Westerly line of Sixth Street
(50 feet wide); thence
2) South 01 degrees 20 minutes 45 seconds West along the Westerly line of
Sixth Street a distance of 400 feet to a point; thence
3) North 88 degrees 33 minutes 00 seconds West a distance of 210 feet to
a point in the center line of Fillmore Street (now vacated); thence
4) North 01 degrees 20 minutes 45 seconds East and along the center line
of Fillmore Street (now vacated) 20 feet to a point; thence
5) North 88 degrees 33 minutes 00 seconds West, a distance of 115 feet to
a point in the center line of Hedley Street (now vacated); thence
6) North 01 degrees 20 minutes 45 seconds East along the center line of
Hedley Street (now vacated), a distance of 20 feet to a point; thence
7) North 88 degrees 33 minutes 00 seconds West, a distance of 125 feet to
a point in the Easterly line of Broadway; thence
8) North 01 degrees 20 minutes 45 seconds East along the Easterly line of
Broadway, a distance of 360 feet to the point and place of beginning.
BEING Lot 1, Block 506, Tax Map.
<PAGE>
EXHIBIT 10.47
================================================================================
SECOND AMENDED AND RESTATED SECURITY DEPOSIT AGREEMENT
dated as of December 22, 1993
among
THE BANK OF TOKYO TRUST COMPANY, as Senior Tranche Agent
THE TORONTO-DOMINION BANK TRUST COMPANY, as Tranche A Co-Agent,
Agent and Security Agent,
THE TRANCHE A LENDERS PARTY TO THE LOAN AGREEMENT,
THE TRANCHE B LENDERS PARTY TO THE LOAN AGREEMENT,
CAMDEN COGEN L.P.,
a Delaware Limited Partnership,
GENERAL ELECTRIC CAPITAL CORPORATION,
as Junior Tranche Agent, Project Letter 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, General Partner Term Lender,
Counterparty and Limited Partner
and
COGEN TECHNOLOGIES CAMDEN GP LIMITED PARTNERSHIP,
as General Partner
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions............................... 3
ARTICLE II
Appointment of Security Agent;
Establishment of Accounts..................................... 9
SECTION 2.01. Appointment of Security Agent................................. 9
SECTION 2.02. Creation of Accounts.......................................... 10
SECTION 2.03. Security Interest............................................. 10
ARTICLE III
Deposits into Accounts...................................... 12
SECTION 3.01. Deposits on Second Capital Contribution
Date......................................................... 12
SECTION 3.02. Revenues...................................................... 12
SECTION 3.03. Information to Accompany Amounts
Delivered to Security Agent;
Deposits Irrevocable......................................... 12
SECTION 3.04. Books of Account; Statements.................................. 12
SECTION 3.05. Deposits into Debt Service Reserve
Account...................................................... 13
SECTION 3.06. Deposits into Senior Debt Service
Account, Completion Account and
Junior Debt Service Account.................................. 13
ARTICLE IV
Payments from Accounts....................................... 14
SECTION 4.01. Revenue Account--Monthly Transfers with
Respect to Project Expenses.................................. 14
SECTION 4.02. Revenue Account--Monthly Transfers............................ 15
SECTION 4.03. Senior Debt Service Account................................... 20
SECTION 4.04. Junior Debt Service Account................................... 20
SECTION 4.05. Debt Service Reserve Account.................................. 21
SECTION 4.06. Events of Default............................................. 21
SECTION 4.07. Completion Account............................................ 22
SECTION 4.08. Special Payment Account....................................... 22
SECTION 4.09. Insurance and Condemnation Proceeds
Account.................................................... 22
SECTION 4.10. Defaults...................................................... 25
SECTION 4.11. Wind-up Account............................................... 25
-i-
<PAGE>
Page
----
SECTION 4.12. Delivery of Officer's Certificates;
Timing of Payments......................................... 26
SECTION 4.13. Partnership Required Payments Reserve
Account.................................................... 26
SECTION 4.14. General Partner Required Payments
Reserve Account............................................ 27
ARTICLE V
Investment.................................... 28
ARTICLE VI
Security Agent.................................. 29
SECTION 6.01. Rights, Duties, etc........................................... 29
SECTION 6.02. Resignation or Removal........................................ 30
ARTICLE VII
Determinations.................................. 31
SECTION 7.01. Value......................................................... 31
SECTION 7.02. Other Determinations.......................................... 31
SECTION 7.03. Cash Available................................................ 31
ARTICLE VIII
Representations and Warranties........................ 32
SECTION 8.01. Representations............................................... 32
SECTION 8.02. Indemnification............................................... 32
ARTICLE IX
Miscellaneous............................. 32
SECTION 9.01. Intentionally omitted......................................... 32
SECTION 9.02. Fees and Indemnification of Security
Agent........................................................ 32
SECTION 9.03. Termination................................................... 33
SECTION 9.04. Severability.................................................. 33
SECTION 9.05. Counterparts.................................................. 33
SECTION 9.06. Amendments.................................................... 33
SECTION 9.07. Applicable Law................................................ 33
SECTION 9.08. Notices....................................................... 33
SECTION 9.09. Benefit of Agreement.......................................... 34
SCHEDULE I Information for Transfers
-ii-
<PAGE>
SECOND AMENDED AND RESTATED SECURITY DEPOSIT AGREEMENT
SECOND AMENDED AND RESTATED SECURITY DEPOSIT AGREEMENT, dated as of
December 22, 1993 among (a) Camden Cogen L.P., a Delaware limited partnership
(the "Partnership" or the "Borrower") of which Cogen Technologies Camden GP
Limited Partnership, a Delaware limited partnership, is the general partner (the
"General Partner"), (b) The Toronto-Dominion Bank Trust Company, a New York
trust company ("TD"), as agent and collateral agent (in such capacity, the
"Agent") (x) under 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, supplemented or otherwise modified), hereinafter referred to, among (i)
the Partnership, (ii) the Agent, (iii) The Bank of Tokyo Trust Company
("BOTT"), as Senior Tranche Agent for the Tranche A Lenders (in such capacity,
the "Senior Tranche Agent"), (iv) General Electric Capital Corporation, a New
York corporation ("GE Capital"), as Junior Tranche Agent for the Tranche B
Lenders (in such capacity, the "Junior Tranche Agent"), (v) the lenders from
time to time parties thereto (the "Lenders") and (vi) GE Capital, as Letter of
Credit Issuer (the "Letter of Credit Issuer") and (y) with respect to the
Collateral Security Documents (as defined in the Loan Agreement), (c) the
General Partner, (d) GE Capital, as the limited partner of the Partnership (the
"Limited Partner"), (e) GE Capital, as lender (the "General Partner Term
Lender") under the General Partner Term Loan Agreement hereinafter referred to,
(f) GE Capital, as Counterparty under the Interest Rate Hedging Agreement (in
such capacity, the "Counterparty"), (g) GE Capital, as Junior Debt Service
Letter of Credit Issuer (the "Junior Debt Service Letter of Credit Issuer"), (h)
GE Capital, as Senior Debt Service Letter of Credit Issuer (the "Senior Debt
Service Letter of Credit Issuer"), (i) GE Capital, as PSE&G Gas Letter of Credit
Issuer (as defined in the Loan Agreement, hereinafter referred to as the
"Project Letter of Credit Issuer"), (j) GE Capital, as Senior Debt Service
Reserve Letter of Credit Issuer (the "Senior Debt Service Reserve Letter of
Credit Issuer"), (k) TD, as Tranche A Co-Agent (in such capacity, the "Tranche A
Co-Agent"), (1) TD, as Security Agent under this Security Deposit Agreement (in
such capacity, the "Security Agent") and (m) the Lenders.
W I T N E S S E T H :
-------------------
WHEREAS, in order to finance the costs of developing, constructing
and equipping the Facility (as defined in the Construction Loan Agreement
hereinafter referred to) the Partnership had entered into a Construction and
Term Loan Agreement, dated as of February 4, 1992 with the Lenders and the Agent
(as the same was amended, supplemented or modified from time to time, the
"Original Loan Agreement");
WHEREAS, the Partnership has entered into the Amendment and
Restatement of the Original Loan Agreement, dated as of
<PAGE>
2
April 1, 1993, with the Lenders, the Agent (as defined therein), the Letter of
Credit Issuer (as defined therein), the Senior Tranche Agent (as defined
therein) and the Junior Tranche Agent (as the same may be amended, supplemented
or otherwise modified from time to time, the "Loan Agreement"), pursuant to
which the Lenders agreed to make term loans (the "Loans") to, and GE Capital has
agreed to issue letters of credit for the account of, the Partnership;
WHEREAS, the obligations of the Partnership under the Loan Agreement,
including its obligation to repay the Loans with interest thereon, are secured
by a first assignment of and prior perfected security interest in, among other
things, all of the revenues of the Partnership pursuant to the terms and
provisions of a Security Agreement, dated as of the Conformed Agreement Date,
between the Partnership and the Agent (as amended, supplemented or otherwise
modified from time to time, the "Security Agreement");
WHEREAS, in order to give effect to said assignment, and security
interest, the Partnership, GE Capital and the Security Agent entered into the
Security Deposit Agreement, dated as of the Conformed Agreement Date (as
amended, supplemented or otherwise modified from time to time, the "Original
Security Deposit Agreement") pursuant to which the Partnership agreed that
certain of its revenues shall be paid directly to the Security Agent, as agent
for the Agent, GE Capital and the Lenders, held by the Security Agent in trust
as collateral security for the obligations referred to in the preceding recital,
and distributed by the Security Agent as provided herein;
WHEREAS, pursuant to the Capital Contribution Agreement, dated as of
the Conformed Agreement Date (as amended, supplemented or otherwise modified
from time to time, the "Capital Contribution Agreement"), among the General
Partner, the Limited Partner and the Agent (as hereinafter defined), the Limited
Partner agreed, subject to the satisfaction of certain conditions precedent, to
make capital contributions to the Partnership on the Initial Capital
Contribution Date (as defined in the Capital Contribution Agreement) in exchange
for a limited partnership interest in the Partnership and, subject to the
satisfaction of certain other conditions precedent, to make additional capital
contributions to the Partnership on or prior to the Second Capital Contribution
Date (as defined in the Capital Contribution Agreement);
WHEREAS, it was a condition precedent to the making by the Limited
Partner of its capital contributions on the Initial Capital Contribution Date
that the Partnership, Robert C. McNair ("McNair") and the Limited Partner shall
have executed and delivered the Amended and Restated Agreement of Limited
Partnership in the form of Exhibit A thereto (the "Partnership Agreement");
WHEREAS, it was a condition precedent to the making by the Limited
Partner of its capital contributions on the Second
<PAGE>
3
Capital Contribution Date that, among other things, the parties hereto shall
have executed and delivered the Amended and Restated Security Deposit Agreement,
dated as of April 1, 1993 (the "Amended Security Deposit Agreement"), which
provides for the deposit, investment and disbursement of revenues, cash,
payments, insurance and condemnation proceeds, securities, investments and other
amounts during the term of the Partnership;
WHEREAS, the General Partner Term Lender and the General Partner are
parties to a Term Loan Agreement, dated as of the Conformed Agreement Date (as
amended, supplemented or otherwise modified from time to time, the "General
Partner Term Loan Agreement"), pursuant to which the General Partner Term Lender
has agreed to make term loans (the "General Partner Term Loans") to the General
Partner;
WHEREAS, the Security Agent has agreed to act as security agent for
the Project Letter of Credit Issuer, the Senior Debt Service Reserve Letter of
Credit Issuer, the Senior Tranche Agent, the Junior Tranche Agent, the
Counterparty, the General Partner Term Lender and the Lenders pursuant to the
terms of this Agreement;
WHEREAS, in connection with the syndication of the Loan Agreement
certain modifications (including, without limitation, replacement of Midlantic
National Bank as Security Agent and GE Capital, as Agent) are required to be
made to the Amended Security Deposit Agreement;
WHEREAS, the parties to the Amended Security Deposit Agreement have
entered into the Successor Security Deposit Agent Agreement dated as of the date
hereof; and
WHEREAS, the parties hereto agree to amend and restate the Amended
Security Deposit Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto hereby agree as follows:
ARTICLE I
Definitions
-----------
Unless the context shall otherwise require, the capitalized terms used
herein (and not otherwise defined herein) shall have the meanings assigned to
them in the Loan Agreement (such definitions to be equally applicable to the
singular and plural forms of the terms defined).
In addition, the following terms when used herein shall have the
following meanings:
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4
"Accounts": the collective reference to the Revenue Account, the Junior
Debt Service Account, the Senior Debt Service Account, the Debt Service Reserve
Account, Partnership Required Payments Reserve Account, General Partner Required
Payments Reserve Account, Insurance and Condemnation Proceeds Account, Special
Payment Account, Completion Account, the Maintenance Reserve Account and the
Windup Account.
"Agreement", "hereto", "hereunder" and words of similar import: this
Security Deposit Agreement, as the same may from time to time be amended,
supplemented or otherwise modified in accordance with the provisions hereof.
"Capital Spares Expenditures": costs incurred for the purchase of capital
spares for the Project.
"Cash Equivalents": (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) United States
Treasury Funds, (c) 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, (d) 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, (e)
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 (f) 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.
"Certified Costs": such costs and expenses in connection with the
construction, operation and maintenance of the Facility as are agreed to by the
Partnership and the Required Lenders.
"Completion Account": the special account designated by that name
established by the Security Agent pursuant to Section 2.02.
<PAGE>
5
"Debt Service Reserve Account": the special account designated by that name
established by the Security Agent pursuant to Section 2.02.
"Distributable Cash": as defined in the Partnership Agreement.
"General Partner Required Payments Reserve Account": the special account
designated by that name established by the Security Agent pursuant to Section
2.02.
"General Partner Term Loan Fixed Charge Coverage Ratio": the "Fixed Charge
Coverage Ratio" as defined in the General Partner Term Loan Agreement.
"Insurance and Condemnation Proceeds Account": the special account
designated by that name established by the Security Agent pursuant to Section
2.02.
"Insurance and Condemnation Proceeds Deposits": as defined in Section
4.09(b).
"Junior Debt Service Account": the special account designated by that name
established by the Security Agent pursuant to Section 2.02.
"Junior Debt Service Letter of Credit": a letter of credit to the Senior
Tranche Agent, for the ratable benefit of the Tranche A Lenders and Tranche B
Lenders in accordance with Section 4.04 and for the account of a Person other
than the Borrower or the General Partner in a form acceptable to the Co-Agents
in their reasonable discretion, in a stated amount equal to the amount that,
pursuant to the provisions of Section 4.02, is required to be transferred to the
Junior Debt Service Account on such Transfer Date and which will be drawn by the
Senior Tranche Agent for payment in accordance with Sections 4.02(d), (e) and
4.04 on each Installment Payment Date that immediately follows the delivery of
such Junior Debt Service Letter of Credit of, to the extent of the face amount
of each such Junior Debt Service Letter of Credit to be applied to the principal
of and interest on the Tranche B Term Loans due, respectively and as applicable,
on such Installment Payment Date.
"Junior Debt Service Letter of Credit Issuer": GE Capital, so long as it
maintains a Standard and Poor's credit rating of "A" or better, and in the event
that it does not maintain such rating, GE Capital until a successor which is a
financial institution with a Standard and Poor's credit rating of "A" or better
issues a Junior Debt Service Letter of Credit, in either case as issuer of the
Junior Debt Service Letter of Credit, it being understood that the Junior Debt
Service Letter of Credit Issuer shall be an entity that maintains at all times a
Standard and Poor's credit rating of
<PAGE>
6
"A" or better and if the Junior Debt Service Letter of Credit Issuer is no
longer rated "A" or better by Standard & Poor's, it will be replaced by an
entity with a Standard & Poor's credit rating of "A" or better.
"Loan Instruments": the collective reference to the Loan Agreement and the
Notes.
"Maintenance Reserve Account": the special account designated by that name
established by the Security Agent pursuant to Section 2.02.
"Maintenance Reserve Required Contribution": (i) with respect to the
Transfer Date occurring in February, 1994 $215,000 and (ii) with respect to any
Transfer Date occurring in the months of February (except February of 1994),
March, April, August, September, October and November an amount equal to
$165,000 plus any amounts not paid in such prior months (such contributions to
be adjusted annually, if necessary, in connection with the approval of the
Operating Budget).
"Management Fee": as defined in the Partnership Agreement.
"Partnership Required Payments Reserve Account": the special account
designated by that name established by the Security Agent pursuant to Section
2.02.
"Partnership Term Loan Fixed Charge Coverage Ratio": the "Fixed Charge
Coverage Ratio" as defined in the Loan Agreement.
"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, (d) United
States Treasury Funds, (e) 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, and (f) money market funds invested in
instruments that meet the criteria above.
<PAGE>
7
"Project Expenses": for any period, the sum (without duplication) of the
following expenses for the Partnership and which are reasonably related to the
Project and are due and owing or have actually been paid by the Partnership: the
expenses for operating, maintaining and improving the Facility, taxes (other
than income taxes) and payments in lieu of taxes, insurance premiums, 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 and agents, legal fees
and expenses, costs incurred in connection with the procurement of gas and
secondary fuels for the Facility, reimbursement of all amounts of expenses
incurred by the Senior Tranche Agent and the Co-Agents under the Basic Documents
to the extent entitled to such reimbursement under the terms of the Basic
Documents, reimbursement of the Tranche A Lender and the Tranche B Lender for
the reasonable cost of curing Events of Default (other than Events of Default
with respect to payments of principal, interest or other amounts due under the
Loan Agreement) and other reasonable expenses incurred in connection with the
Project; provided, however, without the prior written consent of the Co-Agents
and the Limited Partner, total year-to-date "Project Expenses" for a fiscal year
shall not exceed, in any given month, the year-to-date Project Expenses budgeted
for such year-to-date period in the Operating Budget by an amount in excess of
10%. Project Expenses shall not include Capital Spares Expenditures.
"Required Debt Service Reserve Amount" shall mean an amount equal to
$4,835,552.00.
"Revenue Account": the special account designated by that name established
by the Security Agent pursuant to Section 2.02.
"Revenues": all revenues and all other payments at any time received by or
on behalf of the Partnership (other than (i) the proceeds of capital
contributions received from any partner of the Partnership and (ii) the proceeds
of insurance or of a Taking payable into the Insurance and Condemnation Proceeds
Account pursuant to Section 4.09), including, without limitation, all interest
and other income on funds on deposit in the Accounts, all payments received by
the Partnership under the Power Purchase Agreement and the Steam Supply
Agreement, all other payments received by the Partnership from the sale of
electricity, heat and/or steam produced by the Facility, Counterparty payments,
proceeds from business interruption or other insurance proceeds not covered by
clause (ii) above and all payments received from any other source whatsoever.
"Secured Parties": the collective reference to the Agent, the Senior
Tranche Agent, the Junior Tranche Agent,
<PAGE>
8
the Lenders, the Project Letter of Credit Issuer, the Counterparty, the Tranche
A Co-Agent and the General Partner Term Lender.
"Senior Debt Service Account" the special account designated by that name
established by the Security Agent pursuant to Section 2.02.
"Senior Debt Service Letter of Credit": a letter of credit to the Senior
Tranche Agent, for the ratable benefit of the Tranche A Lenders and for the
account of a Person other than the Borrower or the General Partner in a form
reasonably acceptable to the Co-Agents, in a stated amount equal to the amount
that, pursuant to the provisions of Section 4.02, is required to be transferred
to the Senior Debt Service Account on such Transfer Date and which will be drawn
by the Senior Tranche Agent for payment on each Installment Payment Date that
immediately follows the delivery of such Senior Debt Service Letter of Credit
of, to the extent of the face amount of each such Senior Debt Service Letter of
Credit, the principal of and interest on the Tranche A Term Loans due on such
Installment Payment Date.
"Senior Debt Service Letter of Credit Issuer": GE Capital, so long as it
maintains a Standard and Poor's credit rating of "A" or better and in the event
that it does not maintain such rating, GE Capital until a successor which is a
financial institution with a Standard and Poor's credit rating of "A" or
better issues a Senior Debt Service Letter of Credit, in either case as issuer
of the Senior Debt Service Letter of Credit, it being understood that the Senior
Debt Service Letter of Credit Issuer shall be an entity that maintains at all
times a Standard and Poor's credit rating of "A" or better and if the Debt
Service Letter of Credit Issuer is no longer rated "A" or better by Standard &
Poor's, it will be replaced by an entity with a Standard & Poor's credit rating
of "A" or better.
"Senior Debt Service Reserve Letter of Credit Issuer": GE Capital, so long
as it maintains a Standard and Poor's credit rating of "A" or better and in the
event that it does not maintain such rating, GE Capital until a successor which
is a financial institution with a Standard and Poor's credit rating of "A" or
better issues a Senior Debt Service Reserve Letter of Credit, in either case as
issuer of the Senior Debt Service Reserve Letter of Credit, it being understood
that the Senior Debt Service Reserve Letter of Credit Issuer shall be an entity
that maintains at all times a Standard and Poor's credit rating of "A" or better
and if the Debt Service Letter of Credit Issuer is no longer rated "A" or better
by Standard & Poor's, it will be replaced by an entity with a Standard & Poor's
credit rating of "A" or better.
<PAGE>
9
"Special Payment Account": the special account designated by that name
established by the Security Agent pursuant to Section 2.02.
"Special Payments": all liquidated damage payments made by any contractor
(including, without limitation, an EPC Contractor) to the Partnership pursuant
to any Assigned Contract (including, without limitation, an EPC Contract)
relating to the engineering of, procurement of services, equipment, supplies or
other materials for, or the construction of, the Facility.
"Taking": a taking of title to, or use or occupancy of, all or any part of
the Project as a result of the exercise of the right of condemnation or power of
eminent domain or similar power or the exercise by a governmental body of a non-
contractual right to purchase all or any part of the Project, or a sale or other
transfer of all or any part of the Project in lieu of condemnation or exercise
of power of eminent domain.
"Transaction Documents": as defined in the General Partner Term Loan
Agreement.
"Transfer Date": as defined in Section 4.01(a).
"Value": as described in Section 7.01.
"Wind-up Account": the special account designated by that name established
by the Security Agent pursuant to Section 2.02.
ARTICLE II
Appointment of Security Agent;
Establishment of Accounts
-------------------------
SECTION 2.01. Appointment of Security Agent. TD is hereby appointed by the
Secured Parties as security agent hereunder, and the Security Agent hereby
agrees to act as such and to accept all revenues, cash, payments, other
properties, insurance and condemnation proceeds, other amounts, Cash Equivalents
and Permitted Investments to be delivered to or held by the Security Agent
pursuant to the terms of this Agreement. The Security Agent shall hold and
safeguard the Accounts (and the revenues, cash, other properties, payments,
insurance and condemnation proceeds, instruments, securities and other amounts
on deposit therein) during the term of this Agreement and shall treat the
revenues, cash, payments, other properties, insurance and condemnation proceeds,
instruments, securities and other amounts in the Accounts as funds, instruments,
securities and other properties pledged by (i) the Partnership to the Security
Agent for the ratable benefit of the Secured Parties and (ii) to
<PAGE>
10
the extent of the interest of the General Partner therein, by the General
Partner in favor of the General Partner Term Lender, to be held by the Security
Agent, as agent for the Secured Parties, in trust in accordance with the
provisions hereof.
SECTION 2.02. Creation of Accounts. The Security Agent hereby establishes
the following eleven special, segregated and irrevocable cash collateral
accounts which (i) in the case of the Accounts listed in (1) (2) (3), (4), (7),
(8), (9), (10) and (11), shall be maintained at all times until the termination
of this Agreement and (ii) in the case of the Accounts listed in (5) and (6),
shall be maintained at all times until all funds deposited therein have been
distributed as provided in Section 4.07 or 4.08, as the case may be, and the
Partnership (with the consent of the Co-Agents) shall have instructed the
Security Agent to close such Accounts:
(1) Revenue Account,
(2) Senior Debt Service Account,
(3) Junior Debt Service Account,
(4) Insurance and Condemnation Proceeds Account,
(5) Special Payment Account,
(6) Completion Account,
(7) Partnership Required Payments Reserve Account,
(8) General Partner Required Payments Reserve Account,
(9) Debt Service Reserve Account,
(10) Wind-up Account, and
(11) Maintenance Reserve Account.
All moneys, investments and securities at any time on deposit in any of the
Accounts shall constitute trust funds to be held in the custody of the Security
Agent for the purposes and on the terms set forth in this Agreement.
SECTION 2.03. Security Interest. (a) In order to secure the performance by
the Partnership of all of its covenants, agreements and obligations under the
Loan Instruments, the existing Interest Rate Hedging Agreement, the Collateral
Security Documents and the payment by the Partnership of all obligations
thereunder, this Agreement is intended to create, and the Partnership hereby
pledges to, and creates in favor of, the Security Agent for the ratable benefit
of the Secured Parties (other than the General Partner Term Lender), a security
interest in and to, the Accounts (other than the General Partner Required
Payments Reserve Account), all cash, cash equivalents, instruments, investments
and other securities at any time on deposit in such Accounts, all present and
future accounts, chattel paper, documents, general intangibles and instruments
(each as defined in the New York Uniform Commercial Code) of the Partnership,
all other rights of the Partnership to receive the payment of money due and to
become due to the Partnership under the Power Purchase Agreement and any other
Assigned Contract, all moneys payable under any insurance policies or as a
result of any Taking, all moneys payable upon the sale or other disposition of
<PAGE>
11
any other Collateral and all proceeds of any of the foregoing. All moneys, cash
equivalents, instruments, investments and securities at any time on deposit in
any of such Accounts shall constitute collateral security for the payment by the
Partnership of the obligations under the Loan Instruments and the Collateral
Security Documents and the performance and observance by the Partnership of all
the covenants and conditions contained herein and in the Loan Instruments, the
existing Interest Rate Hedging Agreement, and the other Basic Documents and,
shall at all times be subject to the control of the Security Agent, and shall be
held in the custody of the Security Agent in trust for the purposes of, and on
the terms set forth in, this Agreement. For the purpose of perfecting the
security interest of the Security Agent for the equal and ratable benefit of the
Secured Parties (other than the General Partner Term Lender) in and to such
Accounts and all cash, investments and securities at any time on deposit in such
Accounts, the Security Agent shall be deemed to be the agent of the Secured
Parties (other than the General Partner Term Lender).
(b) In order to secure the performance by the General Partner of all
of its covenants, agreements and obligations under the General Partner Term Loan
Agreement and the Transaction Documents, and the payment by the General Partner
of all obligations thereunder, this Agreement is intended to create, and the
General Partner hereby pledges to, and creates in favor of the General Partner
Term Lender, a security interest in and to, the General Partner Required
Payments Reserve Account and all cash, cash equivalents, instruments,
investments and other securities at any time on deposit in such Account. All
moneys, cash equivalents, instruments, investments and securities at any time on
deposit in such Account shall constitute collateral security for the payment by
the General Partner of the obligations and the performance and observance by the
General Partner of all the covenants and conditions contained herein and in the
General Partner Term Loan Agreement, and the other Transaction Documents, and
shall at all times be subject to the control of the Security Agent, and shall be
held in the custody of the Security Agent in trust for the purposes of, and on
the terms set forth in, this Agreement. For the purpose of perfecting the
security interest of the Security Agent for the benefit of the General Partner
Term Lender in and to the General Partner Required Payments Reserve Account,
Security Agent shall be deemed to be the agent of the General Partner Term
Lender.
(c) The Partnership shall not have any rights or powers with respect
to any amounts in the Accounts or any part thereof except as provided in
accordance with the provisions hereof.
<PAGE>
12
ARTICLE III
Deposits into Accounts
----------------------
SECTION 3.01. Deposits on Second Capital Contribution Date. (a)
Subject to Section 3.06, promptly after the Second Capital Contribution Date,
after making all payments required to be made on such date pursuant to Sections
4.02(a) and 4.03(a) of the Original Security Deposit Agreement, the original
Security Agent transferred all remaining amounts on deposit in the Accounts
maintained pursuant to the Original Security Deposit Agreement to the Revenue
Account.
(b) Promptly after the Second Capital Contribution Date, the Lender
transferred to the original Security Agent for deposit in the Completion
Account, the amount referred to in Section 2(a)(ii)(A)(x)(1)(b) of the Capital
Contribution Agreement.
SECTION 3.02. Revenues. Except as provided in Section 3.06, the
Partnership shall instruct each other Person from whom it receives any Revenues
to pay such Revenues directly to the Security Agent for deposit in the Revenue
Account, and if the General Partner shall receive any Revenues it shall deliver
such Revenues in the exact form received (but with the Partnership's or the
General Partner's endorsement, if necessary) to the Security Agent for deposit
in the Revenue Account not later than the second Business Day after the
Partnership's or the General Partner's receipt thereof. The Security Agent may
also deliver such instructions and shall be the Partnership's attorney-in-fact
for such purpose. The Security Agent shall have the right to receive all
Revenues directly from the Persons owing the same. All Revenues received by the
Security Agent shall be deposited in the Revenue Account.
SECTION 3.03. Information to Accompany Amounts Delivered to Security
Agent; Deposits Irrevocable. (a) All amounts delivered to the Security Agent
shall be accompanied by information in reasonable detail specifying the source
of the amounts and the Account or Accounts into which such amounts are to be
deposited.
(b) Any deposit made into any Account hereunder shall be irrevocable
and the amount of such deposit and any instrument or security held in such
Account hereunder and all interest thereon shall be held in trust by the
Security Agent and applied solely as provided herein.
SECTION 3.04. Books of Account; Statements. (a) The Security Agent
shall maintain books of account for the Partnership, the General Partner and the
Agent on a cash basis and record therein all deposits into and transfers to and
from the Accounts and all investment transactions effected by the Security Agent
pursuant to Article V. The Security Agent shall make such
<PAGE>
13
books of account available during normal business hours with reasonable advance
notice for inspection and audit by the Partnership or the Co-Agents and their
representatives.
(b) Not later than the fifteenth Business Day of each month, the
Security Agent shall deliver to the Partnership and the Co-Agents, a statement
setting forth the transactions in each Account during the preceding month and
specifying the Revenues, Special Payments, Insurance and Condemnation Proceeds
Deposits, Permitted Investments and other amounts held in each Account at the
close of business on the last Business Day of the preceding month and the Value
thereof at such time.
SECTION 3.05. Deposits into Debt Service Reserve Account. (a) In the
sole discretion of the Limited Partner (and without any obligation of the
Partnership or the General Partner) and in lieu of establishing and maintaining
the Senior Debt Service Reserve Letter of Credit in favor of the Senior Tranche
Agent for the ratable benefit of the Tranche A Lenders as required pursuant to
Section 3.1(b) of the Loan Agreement, the Limited Partner may cause to be
deposited into the Debt Service Reserve Account, an amount equal to the Required
Debt Service Reserve Amount.
(b) Any amounts drawn under the Senior Debt Service Reserve Letter of
Credit, if any, shall be deposited upon receipt into the Debt Service Reserve
Account.
SECTION 3.06. Deposits into Senior Debt Service Account, Completion
Account and Junior Debt Service Account. (a) Any payments made by the
Counterparty under the Interest Rate Hedging Agreement shall be deposited into
the Senior Debt Service Account.
(b) Notwithstanding the provisions of Section 3.02, any amounts
received (and in whatever form received) from PSE&G in respect of a refund of
amounts previously paid to PSE&G in connection with the construction by PSE&G of
the interconnection facilities pursuant to the Power Purchase Agreement shall be
deposited directly into the Completion Account or, if deposited in the Revenue
Account, promptly transferred to the Completion Account.
(c) Notwithstanding the provisions of Section 3.02 and 4.02, on each
Transfer Date, an amount equal to the amount credited by the City of Camden
against the Partnership's water bill for the month preceding such Transfer Date
shall be transferred to the Completion Account.
(d) Any amounts drawn under the Senior Debt Service Letter of Credit,
if any, shall be deposited upon receipt into the Senior Debt Service Account.
<PAGE>
14
(e) Any amounts drawn under the Junior Debt Service Letter of Credit,
if any, shall be deposited upon receipt into the Junior Debt Service Account.
ARTICLE IV
Payments from Accounts
----------------------
SECTION 4.01. Revenue Account--Monthly Transfers with Respect to
Project Expenses. (a) Except as provided in paragraph (b) below and subject to
Sections 4.06 and 4.10 and to the extent cash is available, upon (i) the first
Business Day of each calendar month (a "Transfer Date"; provided, that with
respect to the month of December, if there is cash available on the December
Transfer Date (as defined below) after making all required prior payments, to
make payments pursuant to Section 4.02(g) as if the payments were made on the
first Business Day of January, there shall be a second Transfer Date (the
"December Transfer Date") on the last Business Day of December on account of all
payments which would otherwise be required under Section 4.01 and 4.02 to be
made on the first Business Day of January and in such case there shall be no
Transfer Date in the month of January) or prior to the fifth Business Day after
such Transfer Date and (ii) the delivery to the Security Agent by the Borrower
of a certificate of a Responsible Officer of the General Partner for the
Transfer Dates occurring on the first Business Day of the month, of April, July,
October and January with respect to the four quarter period applicable to each
such Transfer Date (and for the four quarter period ending on December 31 with
respect to the December Transfer Date) to the effect that, for the four quarter
period applicable to such Transfer Date, the Fixed Charge Coverage Ratio was
equal to or greater than 1.2 to 1.0, the Security Agent shall transfer, from the
cash available in the Revenue Account, to the General Partner on behalf of the
Partnership the amount, certified in a certificate of a Responsible Officer of
the General Partner and accompanied by an accounting of the cumulative draws
hereunder for the current month (or for the December Transfer Date, for
January), and year-to-date as compared to the Operating Budget on an absolute
and percentage basis for both monthly and year-to-date totals and a certificate
of such Responsible Officer to the effect that no Special Event (as defined in
the Partnership Agreement) or Event of Default has occurred and is continuing,
to be equal to the excess of (A) the sum of (1) the Partnership's actual, or,
where actual is unavailable, reasonably estimated, Project Expenses payable for
such month (other than in respect of expenses provided for in Section 4.07) and
(2) so long as no Event of Default (as defined in the General Partner Term Loan
Agreement) shall have occurred and be continuing, the Management Fee for the
preceding calendar month over (B) the sum of the amount of (1) any funds
previously transferred to the General Partner pursuant to this Section 4.01 that
remain unspent and (2) the amount of interest and other income on funds
previously transferred to the General Partner pursuant to this Section 4.01.
Payments to the Partnership which were payable on or prior to December 31 but
are
<PAGE>
15
received by the Partnership after a December Transfer Date and on or prior to
the sixth Business Day of the following January "Stub Payments") shall be
distributed in the payment made with respect to the Transfer Date to be made in
the February of such year, provided that all such Stub Payments shall be applied
as provided in Section 4.02(g).
(b) If, as of the end of any calendar quarter, as determined prior to
the next succeeding Installment Payment Date, the General Partner Term Loan
Fixed Charge Coverage Ratio is, during the period from the Second Capital
Contribution Date through the third anniversary thereof, less than 1.25 to 1.0
and thereafter is less than 1.35 to 1.0 or, if projections provided by the
Partnership during the course of any calendar year show that the General Partner
Term Loan Fixed Charge Coverage Ratio for any quarter will, during the period
from the Second Capital Contribution Date through the third anniversary thereof,
be less than 1.25 to 1.0 or thereafter will be less than 1.35 to 1.0, the
Security Agent, on the Transfer Date for each succeeding calendar month (unless
the last sentence of this paragraph (b) shall be applicable) or on or prior to
the fifth Business Day after such Transfer Date, upon receipt from the Limited
Partner of a certificate to such effect, shall distribute on behalf of the
Partnership, from the cash available in the Revenue Account, to the Persons
entitled thereto and in the respective amounts and to the respective addresses
as certified in writing by the General Partner, the Project Expenses then due
and owing by the Partnership. Upon receipt by the Security Agent of a
certificate from the Limited Partner to the effect that (i) during the period
from the Second Capital Contribution Date to the third anniversary thereof,
the General Partner Term Loan Fixed Charge Coverage Ratio for the quarter then
ended was equal to or greater than 1.25 to 1.0 and revised projections show that
the General Partner Term Loan Fixed Charge Coverage Ratio for each of the
remaining quarters in the current year will be equal to or greater than 1.25 to
1.0, or (ii) from and after the third anniversary of the Second Capital
Contribution Date, the General Partner Term Loan Fixed Charge Coverage Ratio for
the quarter than ended was equal to or greater than 1.35 to 1.0 and revised
projections show that the Fixed Charge Coverage Ratio for each of the remaining
quarters in the calendar year will be equal to or greater than 1.35 to 1.0, the
Security Agent shall thereafter comply with the provisions of paragraph (a) of
this Section 4.01.
SECTION 4.02. Revenue Account--Monthly Transfers. Subject to Sections
4.06 and 4.10, on or within five Business Days after each Transfer Date
commencing January 1, 1994, the Security Agent shall distribute, at the
instruction of the Partnership, such instruction to be delivered in accordance
with the terms of this Agreement, from the cash available in the Revenue Account
(after making all transfers required by Sections 4.01), the following amounts in
the following order of priority:
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16
(a) first, pro rata to (i) the Senior Debt Service Account, an amount equal
to one-third of the interest on all outstanding Tranche A Term Loans which is
due and payable on the next succeeding Installment Payment Date (together with
any deficiency in accumulation of such amount during any preceding month or
months since the last Installment Payment Date) minus one-third of the amount,
if any, payable by the Counterparty to the Borrower under any Interest Rate
Hedging Agreement (unless the Counterparty is in default under the Interest Rate
Hedging Agreement) on the next succeeding Installment Payment Date, unless with
respect only to the first and second Transfer Dates of the three month period
ending on the next Installment Payment Date (A) the Security Agent shall have
received a certificate signed by the Limited Partner certifying (y) that the
Senior Debt Service Letter of Credit Issuer has issued and delivered to the
Senior Tranche Agent, for the ratable benefit of the Tranche A Lenders, a Senior
Debt Service Letter of Credit in the form attached as Exhibit A in a stated
amount not less than the amount referred to above in this clause first and (z)
expiring not earlier than the tenth Business Day following the next Installment
Payment Date, and (B) the Security Agent shall not have received a certificate
from either the Senior Debt Service Letter of Credit Issuer or the Senior
Tranche Agent that such a Senior Debt Service Letter of Credit has not been so
issued and delivered, in which case such amount will be distributed to the
Limited Partner upon the receipt by the Security Agent of a certificate from the
Limited Partner and the Senior Tranche Agent directing the Security Agent to
distribute such amount to the Limited Partner, (ii) to the Project Letter of
Credit Issuer, all amounts of Letter of Credit Fees due and payable by the
Borrower, (iii) to the Senior Tranche Agent, all amounts of Administrative
Agency Fees due and payable by the Borrower, (iv) to the Security Agent, all
amounts of Security Agency fees due and payable by the Borrower, (v) to the
Counterparty, an amount equal to all Interest Rate Hedging Obligations then due
and owing to the Counterparty (other than amounts payable under Section 6(e) of
the Interest Rate Hedging Agreement), and (vi) to the Maintenance Reserve
Account, an amount equal to the Maintenance Reserve Required Contribution then
due;
(b) second, pro rata to (i) the Senior Debt Service Account, an amount
equal to:
(x) one-third of the aggregate scheduled principal amount of the
Tranche A Term Loans which is due and payable on the next succeeding
Installment Payment Date (together with any deficiency in accumulation of
such amount during any preceding month or months since the last Installment
Payment Date); less
(y) any increase in the Value of the Senior Debt Service Account which
occurred during the preceding
<PAGE>
17
month as a result of earnings on the amounts on deposit therein;
unless with respect to the first and second Transfer Dates of the three month
period ending on the next Installment Payment Date (A) the Security Agent shall
have received a certificate signed by the Limited Partner certifying (1) that
the Senior Debt Service Letter of Credit Issuer has issued and delivered to the
Senior Tranche Agent, for the ratable benefit of the Tranche A Lenders, a Senior
Debt Service Letter of Credit in the form attached as Exhibit A in a stated
amount not less than the amount referred to above in this clause second and (2)
expiring not earlier than the tenth Business Day following the next Installment
Payment Date, and (B) the Security Agent shall not have received a certificate
from either the Senior Debt Service Letter of Credit Issuer or the Senior
Tranche Agent that such a Senior Debt Service Letter of Credit has not been so
issued and delivered, in which case such amounts will be distributed to the
Limited Partner upon the receipt by the Security Agent of a certificate from the
Limited Partner and the Senior Tranche Agent directing the Security Agent to
distribute such amounts to the Limited Partner; (ii) to the Senior Debt Service
Account, an amount equal to any prepayments on the Tranche A Term Loans, (iii)
to the Counterparty, all amounts due and payable pursuant to Section 6(e) of the
Interest Rate Hedging Agreement and (iv) any other amount owed to the Senior
Tranche Agent, the Security Agent, the Counterparty and the Tranche A Lenders by
the Borrower under any Basic Document;
(c) third, (1), to the Debt Service Reserve Account, the amount equal to
the excess of the (i) Required Debt Service Reserve Amount, over (ii) the sum of
(x) the balance on such date in the Debt Service Reserve Account and (y) the
undrawn face amount (or if a reimbursement is to be made pursuant to clause (2)
below, the undrawn face amount as increased by such reimbursement) of any
outstanding Senior Debt Service Reserve Letter of Credit issued by a Senior Debt
Service Reserve Letter of Credit Issuer; and (2), to the Senior Debt Service
Reserve Letter of Credit Issuer if the Senior Debt Service Reserve Letter of
Credit is outstanding and there has been an unreimbursed drawing thereunder, the
amount necessary to reimburse such drawing due and payable; provided, demand has
been made for payment;
(d) fourth, pro rata to (i) the Junior Debt Service Account, an amount
equal to one-third of the interest on all outstanding Tranche B Term Loans which
is due and payable on the next succeeding Installment Payment Date (together
with any deficiency in accumulation of such amount during any preceding month or
months since the last Installment Payment Date) unless with respect to the first
and second Transfer Dates of the three month period ending on the next
Installment Payment Date (A) the Security Agent shall have
<PAGE>
18
received a certificate signed by the Limited Partner certifying (y) that the
Junior Debt Service Letter of Credit Issuer has issued and delivered to the
Senior Tranche Agent, for the ratable benefit of the Tranche A Lenders and
Tranche B Lenders in accordance with Section 4.04 and the terms of such Junior
Debt Service Letter of Credit in the form of Exhibit B, a Junior Debt Service
Letter of Credit in a stated amount not less than the amount referred to above
in this clause fourth and (z) in which case such amounts will be distributed to
the Limited Partner upon the receipt by the Security Agent of a certificate from
the Limited Partner and the Senior Tranche Agent directing the Security Agent to
distribute such amounts to the Limited Partner, (ii) to the Junior Tranche
Agent, any amounts on account of the Yield Maintenance Premium due and payable
by the Borrower and (iii) to the Junior Tranche Agent, reimbursement of all
amounts of expenses incurred by the Junior Tranche Agent in enforcing any of the
Basic Documents;
(e) fifth, pro rata to (i) the Junior Debt Service Account, an amount equal
to:
(x) one-third of the aggregate scheduled principal amount of the
Tranche B Term Loans which is due and payable on the next succeeding
Installment Payment Date (together with any deficiency in accumulation of
such amount during any preceding month or months since the last
Installment Payment Date); less
(y) any increase in the Value of the Junior Debt Service Account which
occurred during such month as a result of earnings on the amounts on
deposit therein;
unless with respect to the first and second Transfer Dates of the three month
period ending on the next Installment Payment Date (A) the Security Agent shall
have received a certificate signed by the Limited Partner certifying (1) that
Junior Debt Service Letter of Credit Issuer has issued and delivered to the
Senior Tranche Agent, for the ratable benefit of the Tranche A Lenders and
Tranche B Lenders in accordance with Section 4.04 and the terms of such Junior
Debt Service Letter of Credit in the form of Exhibit B, a Junior Debt Service
Letter of Credit in a stated amount not less than the amount referred to above
in this clause fifth and (2) expiring not earlier than the tenth Business Day
following the next Installment Payment Date, and (B) the Security Agent shall
not have received a certificate from either the Junior Debt Service Letter of
Credit Issuer or the Senior Tranche Agent that such a Junior Debt Service Letter
of Credit has not been so issued and delivered, in which case such amounts will
be distributed to the Limited Partner upon the receipt by the Security Agent of
a certificate from the Limited Partner, the Senior Tranche Agent and the Junior
Tranche Agent directing the Security Agent to distribute such amounts to the
Limited
<PAGE>
19
Partner; and (ii) to the Junior Debt Service Account, an amount equal to any
prepayments on the Tranche B Term Loans;
(f) sixth, if the Partnership Term Loan Fixed Charge Coverage Ratio as of
the four calendar quarters of the Partnership most recently ended (or in the
case of a second Transfer Date occurring in December, as of the four quarters
ending on December 31) is less than 1.2 to 1.0, as certified in writing by the
Agent or the Borrower in the certificate delivered pursuant to Section
4.01(a)(ii), the Security Agent shall transfer the remainder of the cash in the
Revenue Account to the Partnership Required Payments Reserve Account; provided,
that if the Co-Agents shall have notified the Security Agent that a Default or
Event of Default under the Loan Agreement shall have occurred and be continuing
all such amounts shall be transferred to the Agent; and
(g) seventh, to the General Partner and the Limited Partner, the
Distributable Cash of the Partnership in such amounts and in such order of
priority (and in the case of distributions pursuant to Section 4.3(a) of the
Partnership Agreement, subject to the proviso thereto) as are specified in the
Partnership Agreement and as are certified in a certificate of a Responsible
Officer of the General Partner, accompanied by a certificate of such Responsible
Officer to the effect that no Special Event has occurred and is continuing;
provided, however, that the amount to be distributed to the General Partner
pursuant to Sections 4.3(a), 4.3(b) and 4.5 of the Partnership Agreement, in
each case as certified in such certificate of such Responsible Officer, shall be
reduced by the amounts specified in clauses first and second below and such
amounts shall be transferred by the Security Agent to the General Partner Term
Lender; provided, further, that if the General Partner Term Lender shall have
notified the Security Agent that the General Partner Term Loan Fixed Charge
Coverage Ratio as of the end of the previous calendar quarter shall be less than
1.2 to 1.0, all amounts required to be distributed to the General Partner
pursuant to this Section 4.02(g) in excess of the amount to be transferred
pursuant to clauses first and second below shall be transferred to the General
Partner Required Payments Reserve Account; and provided, further,
notwithstanding the foregoing provisos, if the General Partner Term Lender shall
have notified the Security Agent that a Default or Event of Default under the
General Partner Term Loan Agreement shall have occurred and be continuing, all
amounts required to be distributed to the General Partner pursuant to this
Section 4.02(g) shall be transferred to the General Partner Term Lender:
(i) first, the amount of interest which is then due and payable with
respect to the General Partner Term Loan (together with any deficiency in
accumulation of
<PAGE>
20
such amount during any preceding month or months since the last Interest
Payment Date); and
(ii) second, the principal amount of the General Partner Term Loans
which is then due and payable (together with any deficiency in accumulation
of such amount during any preceding month or months since the last
Installment Payment Date).
SECTION 4.03. Senior Debt Service Account. (a) On each Installment
Payment Date or any other date on which any interest on or principal of the
outstanding Tranche A Term Loans becomes due and payable pursuant to the Loan
Agreement or the Notes, the Security Agent shall distribute to the Senior
Tranche Agent for payment of such principal or interest, from the cash available
in the Senior Debt Service Account, an amount equal to (i) the amount of such
interest and principal then due and payable minus (ii) the aggregate undrawn
available face amount of all outstanding Senior Debt Service Letters of Credit
for which the Security Agent has received certification since the date of the
next preceding Installment Payment Date, as set forth in a certificate of the
Senior Tranche Agent delivered to the Security Agent pursuant to Section 4.02(a)
in the case of payment of interest or Section 4.02(b) in the case of payment of
principal.
(b) On each Installment Payment Date on which any prepayment of the
outstanding Tranche A Term Loans becomes due and payable pursuant to the Loan
Agreement or the Notes, the Security Agent shall distribute to the Senior
Tranche Agent for payment of such amounts of prepayment, from the cash available
in the Senior Debt Service Account, after payments pursuant to (a) above, an
amount equal to such prepayment then due and payable, as set forth in a
certificate of the Senior Tranche Agent delivered to the Security Agent.
SECTION 4.04. Junior Debt Service Account. (a) Subject to the Intercreditor
Agreement (as between the parties thereto) and Sections 4.06 and 4.10, on each
Installment Payment Date or any other date on which any interest or principal of
the outstanding Tranche B Term Loans becomes due and payable pursuant to the
Loan Agreement or the Notes, the Security Agent shall distribute to the Junior
Tranche Agent for payment of such principal or interest, from the cash available
in the Junior Debt Service Account, an amount equal to (i) the amount of such
interest and principal then due and payable minus (ii) the aggregate undrawn
available amount of all Junior Debt Service Letters of Credit for which the
Security Agent has received certifications since the date of the next preceding
Installment Payment Date, as set forth in a certificate of the Junior Tranche
Agent (confirmed by the Senior Tranche Agent) delivered to the Security Agent
pursuant to Section 4.02(d) or (e); provided, however, that if all payments
pursuant to Sections 4.02(a) and (b) have not been made, the amounts in such
accounts shall be distributed to the Senior Tranche Agent for application
thereto.
<PAGE>
21
On the date of any drawing under a Junior Debt Service Letter of Credit, all
funds from such drawing remaining after the application of the proceeds of such
drawing for the payment of principal and interest due and owing on the Tranche A
Term Loans in accordance with the terms thereof shall be paid to the Junior
Tranche Agent for the payment of principal and interest due and owing on the
Tranche B Term Loans on the date thereof.
(b) Subject to the Intercreditor Agreement (as between the parties
thereto) and Sections 4.06 and 4.10, on each Installment Payment Date on which
any prepayment of the outstanding Tranche B Term Loans becomes due and payable
pursuant to the Loan Agreement or the Notes, the Security Agent shall distribute
to the Junior Tranche Agent for payment of such amounts of prepayment, from the
cash available in the Junior Debt Service Account, after payments pursuant to
(a) above, an amount equal to such prepayment then due and payable, as set forth
in a certificate of the Junior Tranche Agent delivered to the Security Agent.
SECTION 4.05. Debt Service Reserve Account. In the event that, on any
date on which a payment of interest on or principal of the outstanding Tranche A
Term Loans is due pursuant to the Loan Agreement, or the Notes (x) there shall
be insufficient cash available in the Senior Debt Service Account and the Junior
Debt Service Account to make such payment, (y) either a Senior Debt Service
Reserve Letter of Credit has not been issued or has been issued but there
remains undrawn an amount less than the amount of such deficiency, and (z) there
is cash available in the Debt Service Reserve Account, the Security Agent shall
distribute to the Senior Tranche Agent, from the Debt Service Reserve Account,
an amount equal to the lesser of the cash available in the Debt Service Reserve
Account and the amount required to make such payment of interest and principal
in full, as set forth in a certificate of the Senior Tranche Agent delivered to
the Security Agent. In addition, upon receipt of a certificate signed by the
Senior Tranche Agent stating that all principal and interest in respect of the
Tranche A Term Loans and all other amounts owing to the Tranche A Lenders, the
Counterparty and the Senior Debt Service Reserve Letter of Credit Issuer have
been paid in full, the Security Agent shall pay all amounts then on deposit in
the Debt Service Reserve Account to the Person designated by Limited Partner.
SECTION 4.06. Events of Default.
(a) Upon the written request of the Co-Agents stating that an Event of
Default under the Loan Instruments shall have occurred and be continuing, the
Security Agent shall promptly withdraw amounts on deposit in the Accounts (other
than the General Partner Required Payments Reserve Account) and deliver the same
to the Senior Tranche Agent to be applied by the Senior Tranche Agent to the
payment of the obligations of the Partnership under the Loan Instruments and the
Collateral Security Documents
<PAGE>
22
in accordance with the provisions of the Loan Agreement, the Intercreditor
Agreement and the Collateral Security Documents.
(b) Upon written request of the General Partner Term Lender stating
that an Event of Default under the General Partner Term Loan Agreement shall
have occurred and be continuing, the Security Agent shall, subject to the
immediately preceding sentence, promptly withdraw amounts on deposit in the
General Partner Required Payments Reserve Account and deliver the same to the
General Partner Term Lender to be applied by the General Partner Term Lender to
the payment of the obligations of the General Partner under the General Partner
Term Loan Agreement and the Transaction Documents in accordance with the
provisions of the General Partner Term Loan Agreement and the Transaction
Documents.
SECTION 4.07. Completion Account. On a Transfer Date, the Security
Agent shall transfer, from the cash available in the Completion Account, to the
General Partner, an amount, certified in a certificate of a Responsible Officer
of the General Partner (which shall be delivered to the Agent and the General
Partner Term Lender, together with copies of any invoices or other evidence of
any such amounts so certified) and accompanied by a certificate of such
Responsible Officer of the General Partner to the effect that no Special Event
or Event of Default has occurred and is continuing, equal to the excess of (i)
the Partnership's estimated amounts payable pursuant to any category set forth
in the Completion Budget, over (ii) the amount of any funds previously
transferred to the General Partner pursuant to this Section 4.07 in respect of
such category that remain unspent. On the date of completion of the Facility,
unless a Special Event or an Event of Default shall have occurred and be
continuing, as certified by a certificate of a Responsible Officer of the
General Partner, if there shall be any funds remaining unspent in the Completion
Account, such funds shall be applied by the General Partner to pay for capital
expenditures set forth in the Operating Budget as certified by a certificate of
a Responsible Officer of the General Partner.
SECTION 4.08. Special Payment Account. All Special Payments deposited
in the Special Payment Account shall be distributed by the Security Agent to the
Agent within two Business Days after the date of such deposit for application to
the prepayment of the then outstanding Loans in accordance with the provisions
of the Loan Agreement and the Intercreditor Agreement and the Collateral
Security Documents.
SECTION 4.09. Insurance and Condemnation Proceeds Account. (a) Each of
the Partnership and the General Partner shall deposit in the Insurance and
Condemnation Proceeds Account (i) all payments received by it from any insurer
pursuant to the insurance maintained by the Partnership under Section 7.2(f) of
the Partnership Agreement, Section 7.5(a) of the Loan Agreement and Section
6.5(a) of the General Partner Term Loan Agreement and
<PAGE>
23
(ii) all awards and proceeds of a Taking with respect to the Project.
(b) All cash, cash equivalents, instruments, investments and
securities at any time on deposit in the Insurance and Condemnation Proceeds
Account, are herein called the "Insurance and Condemnation Proceeds Deposits".
(c) The Insurance and Condemnation Proceeds Deposits shall be
accumulated in the Insurance and Condemnation Proceeds Account and held therein
until paid to or upon the order of the Partnership as provided in paragraph (d)
of this Section 4.09, or paid to the Agent as provided in paragraph (e) or (f)
of this Section 4.09, or applied as provided in Section 9.03.
(d) Subject to the provisions of paragraphs (e) and (f) of this
Section 4.09 and Sections 4.06 and 4.10, Insurance and Condemnation Proceeds
Deposits shall be paid over to or upon the order of the Partnership to reimburse
it for, or to pay, the cost of renewing, repairing, rebuilding or otherwise
replacing the damaged or destroyed or lost property in respect of which such
moneys were received, upon the receipt by the Security Agent of a certificate of
a Responsible Officer of the General Partner, countersigned by the Co-Agents and
the Limited Partner, (i) describing in reasonable detail the work done and
materials purchased by way of the renewal, repair, rebuilding or other
replacement of the damaged or destroyed or lost property, (ii) stating the
specific amount requested to be paid over to or upon the order of the
Partnership, that such amount is requested to reimburse the Partnership for, or
to pay, the costs of such renewal, repair, rebuilding or other replacement and
that such amount, together with amounts remaining in the Insurance and
Condemnation Proceeds Account for such purpose and other funds of the
Partnership available for such purpose, are sufficient to pay in full the cost
of such renewal, repair, rebuilding or other replacement, (iii) stating that no
Special Event or Default or Event of Default has occurred and is continuing,
(iv) representing that all Governmental Approvals, if any, required in
connection with such repairing, rebuilding, or other replacement described above
have been obtained and are in full force and effect, (v) representing that the
Liens created by the Collateral Security Agreements are in full force and effect
and (vi) certifying that all lien waivers, if any, reasonably requested by the
Co-Agents with respect to such repairing, rebuilding or other replacement
described above have been obtained. The Co-Agents and the Limited Partner agree
to countersign each such certificate presented to it by the Partnership which is
in compliance with the requirements of this Section 4.09(d), unless the Co-
Agents or the Limited Partner questions the correctness of the statements made
therein (stating its reasons therefor). Subject to the provisions of paragraphs
(e) and (f) of this Section 4.09 and Sections 4.06 and 4.10, in the event that
Insurance and Condemnation Proceeds Deposits shall remain in the Insurance and
Condemnation Proceeds Account after application thereof in accordance with the
first sentence of this
<PAGE>
24
paragraph (d), and upon receipt by the security agent of a certificate of a
Responsible Officer of the General Partner and countersigned by the Co-Agents
and Limited Partner, certifying that no additional costs are to be incurred in
connection with such repairing, rebuilding or other replacement described above,
the Security Agent shall transfer the same to the General Partner to be applied
in accordance with Section 4.7 of the Partnership Agreement. The Co-Agents and
the Limited Partner agree to countersign each such certificate presented to it
by the Partnership which is in compliance with the requirements of this Section
4.09(d), unless the Co-Agents or the Limited Partner questions the correctness
of the statements made therein (stating its reasons therefor).
(e) If the Co-Agents shall at any time notify the Security Agent that
a Declared Event of Loss has occurred, the Security Agent shall withdraw the
Insurance and Condemnation Proceeds Deposits from the Insurance and Condemnation
Proceeds Account and deliver the same first, to the Agent to be applied to the
payment of the obligations of the Partnership under the Loan Instruments and
Interest Rate Hedging Agreement in accordance with the provisions of the Loan
Instruments and Interest Rate Hedging Agreement, the Intercreditor Agreement and
the Collateral Security Documents and second, to the extent funds are remaining,
to the General Partner Term Lender to be applied to the payment of the
obligations of the General Partner under the General Partner Term Loan Agreement
and the Transaction Documents in accordance with the provisions thereof.
(f) (i) If the Co-Agents shall at any time notify the Security Agent
that an Event of Default under the Loan Instruments has occurred and is
continuing, the Security Agent shall, if and to the extent requested by the Co-
Agents, promptly withdraw the Insurance and Condemnation Proceeds Deposits from
the Insurance and Condemnation Proceeds Account and deliver the same to the
Agent, to be held by the Agent and applied to the payment of the obligations
under the Loan Instruments, Interest Rate Hedging Agreement, the Intercreditor
Agreement and the Collateral Security Documents as they become due in such order
as the Agent may determine.
(ii) Subject to the immediately preceding paragraph, and assuming the
payment in full of all principal, interest and other amounts owed to the Lenders
and the Counterparty, if the General Partner Term Lender shall at any time
notify the Security Agent that an Event of Default under the General Partner
Term Loan Agreement has occurred and is continuing, the Security Agent shall, if
and to the extent requested by the General Partner Term Lender, promptly
withdraw the Insurance and Condemnation Proceeds Deposits from the Insurance and
Condemnation Proceeds Account and deliver the same to the General Partner Term
Lender, to be held by the General Partner Term Lender and applied to the payment
of the obligations under the General Partner Term Loan Agreement and the
<PAGE>
25
Transaction Documents as they become due in such order as the General Partner
Term Lender may determine.
SECTION 4.10. Defaults. (a) Subject to Section 4.06 but
notwithstanding any other provision contained in this Agreement, upon receipt by
the Security Agent of written notice from the Co-Agents stating that a Default
or an Event of Default under the Loan Instruments has occurred and is
continuing, the Security Agent shall thereafter distribute cash from the
Accounts only upon the express written instructions of the Co-Agents until
notified in writing by the Co-Agents that such Default or Event of Default has
been waived by the Co-Agents or cured. The Co-Agents shall give such notice of
waiver or cure promptly after the granting of such waiver or receiving evidence
satisfactory to the Co-Agents that such Default or Event of Default has been
cured.
(b) Subject to the immediately preceding paragraph, but
notwithstanding any other provision contained in this Agreement, upon receipt by
the Security Agent of written notice from the General Partner Term Lender
stating that a Default or an Event of Default under the General Partner Term
Loan Agreement has occurred and is continuing, the Security Agent shall
thereafter distribute cash from the General Partner Required Payments Reserve
Account and pursuant to clause seventh of Section 4.02, only upon the express
written instructions of the General Partner Term Lender until notified in
writing by the General Partner Term Lender that such Default or Event of Default
has been waived by the General Partner Term Lender or cured. The General Partner
Term Lender shall give such notice of waiver or cure promptly after the granting
of such waiver or receiving evidence satisfactory to the General Partner Term
Lender that such Default or Event of Default has been cured.
(c) So long as the obligations of the Partnership under the Loan
Instruments shall remain outstanding, if the Security Agent shall receive
inconsistent instructions from the Co-Agents and the General Partner Term
Lender, the Security Agent may rely on the instructions of the Co-Agents.
SECTION 4.11. Wind-up Account. (a) Subject to the provisions of
Sections 4.06 and 4.10 and to the satisfaction of all obligations under the Loan
Instruments, Collateral Security Documents and hereunder, but notwithstanding
any other provision of this Agreement, upon receipt of notice from the Limited
Partner that the Partnership shall be dissolved in accordance with the terms of
the Partnership Agreement, the Security Agent shall transfer to the Wind-up
Account all amounts in all the Accounts and all amounts subsequently received by
the Security Agent.
(b) On any date specified in a certificate of a Responsible Officer of
the Limited Partner (which date shall not be earlier than five Business Days
following the date of receipt by the Security Agent of the certificate of a
Responsible Officer of the Limited Partner specified in Section 4.11(a) (the
"Wind-up
<PAGE>
26
Date")), the Security Agent shall transfer, from and to the extent of cash
available in the Windup Account, to the Limited Partner and the General Partner
such amounts, certified in such certificate, as are required to be distributed
pursuant to Section 14.4(c) of the Partnership Agreement.
SECTION 4.12. Delivery of Officer's Certificates; Timing of Payments.
(a) Each of the certificates of a Responsible Officer required to be delivered
hereunder shall be delivered not later than 12:00 p.m., New York City time, on
the day prior to the day on which the Security Agent is required to make
transfers hereunder. Any certificate of a Responsible Officer delivered later
than the time specified herein shall nevertheless be considered valid and shall
be honored by the Security Agent on or as promptly after the date otherwise
specified herein for payment as is practicable, subject to the availability of
cash in the applicable Account.
(b) Subject to (i) the timely receipt of a certificate of a
Responsible Officer as prescribed in paragraph (a) above, (ii) the availability
of cash in the applicable Account and (iii) other circumstances beyond the
control of the Security Agent, the Security Agent shall make any payment
hereunder required (except for transfers between Accounts) by means of wire
transfer of immediately available funds, to the address of the payee set forth
on Schedule I hereto, to be received prior to 1:00 p.m., New York City time, on
the date specified herein for such payment (provided, that an additional
Business Day shall be provided in the event of payments made pursuant to the
first sentence of Section 4.02(b)), or by such other means of payment, to such
other address or at such later time as shall be specified in the certificate of
a Responsible Officer of such payee.
(c) Each Partner shall deliver to the other Partners, simultaneously
with the delivery thereof to the Security Agent, a true copy of any certificate
of a Responsible Officer delivered by such Partner pursuant to this Agreement.
SECTION 4.13. Partnership Required Payments Reserve Account. (a) Upon
request of the Co-Agents, if, as of the end of any two consecutive calendar
quarters, the Partnership Term Loan Fixed Charge Coverage Ratio is less than 1.2
to 1.0, the Security Agent shall promptly withdraw amounts on deposit in the
Partnership Required Payments Reserve Account and deliver the same to the Agent
to be applied by the Agent to the payment of the obligations of the Partnership
under, and in accordance with, the provisions of the Loan Instruments and the
Intercreditor Agreement and the Collateral Security Documents.
(b) Upon request of the General Partner, (i) if, as of the end of the
immediately preceding two consecutive calendar quarters, the Partnership Term
Loan Fixed Charge Coverage Ratio shall be equal to or greater than 1.2 to 1.0,
and (ii) no Default or Event of Default under the Loan Agreement shall have
occurred
<PAGE>
27
and be continuing, all as certified in writing by the General Partner and
confirmed in writing by the Co-Agents, the Security Agent shall promptly
withdraw amounts on deposit in the Partnership Required Payments Reserve
Account, including without limitation all interest and other income from the
funds on deposit therein, and deposit the same in the Revenue Account.
SECTION 4.14. General Partner Required Payments Reserve Account. (a)
Upon request of the General Partner Term Lender, if, as of the end of any two
consecutive calendar quarters, the General Partner Term Loan Fixed Charge
Coverage Ratio is less than 1.2 to 1.0, the Security Agent shall promptly
withdraw amounts on deposit in the General Partner Required Payments Reserve
Account and deliver the same to the General Partner Term Lender to be applied by
the General Partner Term Lender to the payment of the obligations of the General
Partner under, and in accordance with, the provisions of the General Partner
Term Loan Agreement.
(b) Upon request of the General Partner, (i) if, as of the end of any
two consecutive calendar quarters, the General Partner Term Loan Fixed Charge
Coverage Ratio shall be equal to or greater than 1.2 to 1.0, and (ii) no Default
or Event of Default under the General Partner Term Loan Agreement shall have
occurred and be continuing, all as certified in writing by the General Partner
and confirmed in writing by the General Partner Term Lender, the Security Agent
shall promptly withdraw amounts on deposit in the General Partner Required
Payments Reserve Account, including without limitation all interest and other
income from the funds on deposit therein, and deliver the same to the General
Partner.
(c) Upon the written request of the General Partner, the Security
Agent shall transfer to the General Partner Term Lender such amounts from the
cash available in the General Partner Required Payments Reserve Account as may
be requested by the General Partner to be applied in accordance with Section
3.2(b)(ii) of the General Partner Term Loan Agreement.
SECTION 4.15. Maintenance Reserve Account. The Security Agent shall,
from and to the extent of the cash available in the Maintenance Reserve Account,
pay the Capital Spares Expenditures identified in the certificate delivered to
the Security Agent pursuant to Section 4.01, directly to the persons designated
in such certificate provided, that the Borrower shall deliver to the Senior
Tranche Agent (i) prior to the making of any Capital Spares Expenditures, a
certificate describing the capital spare to be purchased and indicating where
such equipment is budgeted for in the capital expenditures budget in the
Operating Budget and setting forth any other details reasonably requested by the
Security Agent and (ii) an annual certificate delivered in the first week of
each fiscal year to the Senior Tranche Agent setting forth the status of
equipment purchased as Capital Spares Expenditures.
<PAGE>
28
ARTICLE V
Investment
----------
(a) Any cash held by the Security Agent in any Account (other than the
Partnership Required Payments Reserve Account and the General Partner Required
Payments Reserve Account) shall be invested by the Security Agent from time to
time as directed in writing by the General Partner (or, if the Security Agent
shall have been notified by the Limited Partner that a Special Event has
occurred and is continuing, by the substitute General Partner appointed pursuant
to Section 14.2 of the Partnership Agreement) or, in the absence of
instructions, by the Co-Agents, in Cash Equivalents which mature at least one
Business Day prior to the next following Transfer Date. Any income or gain
realized as a result of any such investment shall be held as part of the
applicable Account and reinvested as provided herein until such income or gain
is required to be transferred from such Account pursuant to Sections 4.06, 4.10,
4.13 or any other applicable provision of this Agreement.
(b) Any cash held by the Security Agent in the Partnership Required
Payments Reserve Account or the General Partner Required Payments Reserve
Account shall be invested by the Security Agent from time to time as directed in
writing by the General Partner (or, if the Co-Agents shall have notified the
Security Agent that a Default or an Event of Default shall have occurred and be
continuing under the Loan Agreement or the General Partner Term Lender shall
have notified the Security Agent that a Default or Event of Default under the
General Partner Term Loan Agreement has occurred and is continuing, by the Co-
Agents or the General Partner Term Loan Lender, as the case may be) or, in the
absence of instructions, by the Co-Agents, in Permitted Investments. Any income
or gain realized as a result of any such investment shall be held as part of the
Partnership Required Payments Reserve or the General Partner Required Payments
Reserve and reinvested as provided herein until such income or gain is required
to be transferred from such Account pursuant to Sections 4.06, 4.10, 4.13 or any
other applicable provision of this Agreement.
(c) The Security Agent shall have no liability for any loss resulting
from any such investment or sale thereof other than by reason of its willful
misconduct or gross negligence. Any such investment may be sold (without regard
to maturity date) by the Security Agent whenever necessary to make any
distribution required by this Agreement.
<PAGE>
29
ARTICLE VI
Security Agent
--------------
SECTION 6.01. Rights, Duties, etc. The acceptance by the Security Agent of
its duties hereunder is subject to the following terms and conditions which the
parties to this Agreement hereby agree shall govern and control with respect to
its rights, duties, liabilities and immunities:
(a) it shall act hereunder as an agent only and shall not be responsible or
liable in any manner whatever for soliciting any funds or for the sufficiency,
correctness, genuineness or validity of any funds, securities or other amounts
deposited with or held by it;
(b) it shall be protected in acting or refraining from acting upon any
written notice, certificate, instruction, request or other paper or document, as
to the due execution thereof and the validity and effectiveness of the
provisions thereof and as to the truth of any information therein contained,
which the Security Agent in good faith believes to be genuine;
(c) it shall not be liable for any error of judgment or for any act done or
step taken or omitted except in the case of its gross negligence, willful
misconduct or bad faith;
(d) it may consult with and obtain advice from counsel of its own choice in
the event of any dispute or question as to the construction of any provision
hereof;
(e) it shall have no duties as Security Agent except those which are
expressly set forth herein and in any modification or amendment hereof;
provided, however, that no such modification or amendment hereof shall affect
its duties unless it shall have given its prior written consent thereto;
(f) it may execute or perform any duties hereunder either directly or
(other than the holding of the Accounts) through agents or attorneys;
(g) it may engage or be interested in any financial or other transactions
with any party hereto and may act on, or as depositary, trustee or agent for,
any committee or body of holders of obligations of such Persons as freely as if
it were not Security Agent hereunder;
(h) it shall not be obligated to take any action which in its reasonable
judgment would involve it in expense or liability unless it has been furnished
with reasonable indemnity;
<PAGE>
30
(i) it shall not be obligated to ascertain or inquire as to the observance
or performance of any of the agreements contained in this Agreement or the Loan
Instruments, or to inspect the properties, books or records of the Partnership;
and
(j) it shall not be responsible for any representations, warranties or
other statements made by the Partnership in this Agreement or the Loan
Instruments or in any certificate, report, statement or other document received
by the Security Agent in connection with this Agreement or the Loan Instruments.
SECTION 6.02. Resignation or Removal. (a) The Security Agent may at
any time resign by giving notice to each other party to this Agreement, such
resignation to be effective upon the appointment of a successor Security Agent
as hereinafter provided.
(b) The Agent may remove the Security Agent at any time by giving notice to
each other party to this Agreement, such removal to be effective upon the
appointment of a successor Security Agent as hereinafter provided.
(c) In the event of any resignation or removal of the Security Agent, a
successor Security Agent, which (i) shall be a bank or trust company organized
under the laws of the United States of America or of the State of New York, the
State of New Jersey or the State of Connecticut, having a capital and surplus of
not less than $100,000,000 and (ii) shall be acceptable to the Co-Agents and the
Required Lenders, shall be selected by the Partnership (or, if a Default or
Event of Default shall have occurred and be continuing, by the Co-Agents) and
appointed by the Co-Agents on behalf of the Co-Agents and the Required Lenders.
If a successor Security Agent shall not have been appointed and accepted its
appointment as Security Agent hereunder within 45 days after such notice of
resignation of the Security Agent or such notice of removal of the Security
Agent, the Security Agent or the Co-Agents may apply to any court of competent
jurisdiction to appoint a successor Security Agent to act until such time, if
any, as a successor Security Agent shall have accepted its appointment as above
provided. Any successor Security Agent so appointed by such court shall
immediately and without further act be superseded by any successor Security
Agent appointed by the Co-Agents on behalf of itself and the Required Lenders as
above provided. Any such successor Security Agent shall deliver to each party to
this Agreement a written instrument accepting such appointment hereunder and
thereupon such successor Security Agent shall succeed to all the rights and
duties of the Security Agent hereunder and shall be entitled to receive the
Accounts from the predecessor Security Agent.
<PAGE>
31
ARTICLE VII
Determinations
--------------
SECTION 7.01. Value. Cash, Cash Equivalents and Permitted Investments
on deposit from time to time in the Accounts shall be valued by the Security
Agent as follows:
(a) cash shall be valued at the face amount thereof;
and
(b) Cash Equivalents and Permitted Investments shall be valued at the
amount which the Security Agent would have received at such time if the
Security Agent had liquidated such Cash Equivalents or Permitted Investments
(at then prevailing market prices less costs of liquidation).
SECTION 7.02. Other Determinations. The Partnership, the Agent, the
Senior Tranche Agent, the Junior Tranche Agent, the General Partner Term Lender
and the Security Agent may establish procedures not inconsistent with this
Agreement pursuant to which the Security Agent may conclusively determine, for
purposes of this Agreement, the amounts from time to time to be distributed or
paid by the Security Agent from cash available in the Accounts. In the event of
any dispute as to any such amount, the Security Agent is authorized and directed
to retain in its possession without liability to anyone all or any part of the
cash available in the Accounts until such dispute shall have been settled by
mutual agreement of the Partnership, the Partners, the Agent, the Senior Tranche
Agent, the Junior Tranche Agent, the Counterparty and the General Partner Term
Lender or by a final order, decree or judgment of a Federal or State court of
competent jurisdiction located in the State of New York, and time for an appeal
has expired and no appeal has been perfected, but the Security Agent shall be
under no duty whatsoever to institute or defend any such proceedings.
SECTION 7.03. Cash Available. In determining the amount of cash
available in any Account at any time, in addition to any cash then on deposit in
such Account, the Security Agent shall treat as cash available the amount which
the Security Agent would have received on such day if the Security Agent had
liquidated all the Cash Equivalents or Permitted Investments (at then prevailing
market prices less costs of liquidation) then on deposit in such Account. The
Security Agent will use its best efforts to sell Permitted Investments and Cash
Equivalents such that actual cash is available on each date on which each
distribution is to be made pursuant to this Agreement so that the Security Agent
can make such distribution in cash on such date.
<PAGE>
32
ARTICLE VIII
Representations and Warranties
------------------------------
Section 8.01. Representations. Each Partner represents and warrants,
for the benefit of each other Partner, the Agent, the Senior Tranche Agent, the
Junior Tranche Agent, the Lenders, the Counterparty and the General Partner Term
Lender, that each certificate of a Responsible Officer delivered by such Partner
in connection with this Agreement shall be true and correct in all material
respects and that the amounts of money certified thereby shall be the proper
amounts to be set forth in such certificate of a Responsible Officer.
Section 8.02. Indemnification. Subject to the provisions of Section
7.5 of the Partnership Agreement (with respect only to Partners (as defined
therein)), the General Partner hereby undertakes to indemnify and hold harmless
each Partner, the Agent, the Senior Tranche Agent, the Tranche A Co-Agent, the
Junior Tranche Agent, the Lenders, the Counterparty and the General Partner Term
Lender from and against any and all expenses imposed on, incurred by or asserted
against such party in any way relating to or arising out of any inaccuracy in
any certificate of a Responsible Officer delivered by the General Partner.
ARTICLE IX
Miscellaneous
-------------
SECTION 9.01. Intentionally omitted.
SECTION 9.02. Fees and Indemnification of Security Agent. The
Partnership agrees to pay to the Security Agent the Security Agency Fees as
compensation for its services under this Agreement. In addition, the Partnership
assumes liability for, and agrees to indemnify, protect, save and keep harmless
the Security Agent and its officers, employees, successors, assigns, agents and
servants from and against, any and all claims, liabilities, obligations, losses,
damages, penalties, costs and expenses that may be imposed on, incurred by, or
asserted against, at any time, the Security Agent or its officers and employees
and in any way relating to or arising out of the execution and delivery of this
Agreement, the establishment of the Accounts, the acceptance of deposits, the
purchase or sale of Cash Equivalents or Permitted Investments, the retention of
cash, Cash Equivalents and Permitted Investments or the proceeds thereof and any
payment, transfer or other application of cash, Cash Equivalents or Permitted
Investments by the Security Agent in accordance with the provisions of this
Agreement, or as may arise by reason of any act, omission or error of the
Security Agent made in good faith in the conduct of its duties; except that the
Partnership shall not be required to indemnify, protect, save and keep harmless
the
<PAGE>
33
Security Agent against its own gross negligence, active or passive, or willful
misconduct. The indemnities contained in this Section 9.02 shall survive the
termination of this Agreement.
SECTION 9.03. Termination. This Agreement shall terminate upon written
notice by the General Partner, the Agent, the Senior Tranche Agent, the Junior
Tranche Agent, the Tranche A Co-Agent, the Counterparty and the General Partner
Term Lender to the Security Agent. Upon termination of this Agreement in
accordance with the preceding sentence, except following a transfer pursuant to
Section 4.11, the Security Agent shall transfer any remaining amounts, together
with any interest thereon, on deposit in the Accounts to the party or parties
specified in such notice. Any liability or obligation hereunder arising prior to
the termination of this Agreement shall survive such termination.
SECTION 9.04. Severability. If any one or more of the covenants or
agreements provided in this Agreement on the part of the parties hereto to be
performed should be determined by a court of competent jurisdiction to be
contrary to law, such covenant or agreement shall be deemed and construed to be
severable from the remaining covenants and agreements herein contained and shall
in no way affect the validity of the remaining provisions of this Agreement.
SECTION 9.05. 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.
SECTION 9.06. Amendments. This Agreement may not be modified or
amended without the prior written consent of each of the parties hereto.
SECTION 9.07. Applicable Law. This Agreement shall in all respects be
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 9.08. Notices. Unless otherwise specifically provided herein,
all notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person shall be in writing and shall become effective, if mailed, five Business
Days after being deposited in the United States, mail, proper postage for first-
class mail affixed thereto or, if delivered by hand or courier service or in the
form of a telex, telecopy or telegram, when received, and shall be directed to
the address, telecopy or telex number of such Person designated pursuant to the
Loan Agreement, the General Partner Term Loan Agreement or the Partnership
Agreement, as the case may be, or in the case of the Security Agent, to The
Toronto-Dominion Bank Trust Company, c/o Toronto Dominion Bank, 909 Fannin, 17th
Floor, Houston, Texas 77010, Attention: Manager, Credit Administration or to
such other
<PAGE>
34
address, telecopy or telex number as may be specified from time to time by such
Person or the Security Agent.
SECTION 9.09. Benefit of Agreement. This Agreement shall inure to the
benefit of, and be enforceable by, the parties hereto and their respective
successors and permitted assigns, and no other Person shall be entitled to any
of the benefits of this Agreement.
<PAGE>
35
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement
to be duly executed by their duly authorized officers, all as of the day and
year first above written.
CAMDEN COGEN L.P., a Delaware
limited partnership
By: Cogen Technologies Camden GP
Limited Partnership, its General
Partner
By: Cogen Technologies Camden,
Inc., its general partner
By: [SIGNATURE APPEARS HERE]
________________________________________
Title: Vice President
THE TORONTO-DOMINION BANK TRUST COMPANY,
as Tranche A Co-Agent, Agent and Security
Agent
By: [SIGNATURE APPEARS HERE]
__________________________________________
Title:
GENERAL ELECTRIC CAPITAL CORPORATION, as
Junior Tranche Agent, Project Letter 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, General Partner Term
Lender, Counterparty, Limited Partner and
Tranche B Lender
By: [SIGNATURE APPEARS HERE]
__________________________________________
Title: Manager - Operations
COGEN TECHNOLOGIES CAMDEN GP LIMITED
PARTNERSHIP, as General Partner
By: Cogen Technologies Camden, Inc.,
its General Partner
By: [SIGNATURE APPEARS HERE]
___________________________________________
Title: Vice President
<PAGE>
36
THE BANK OF TOKYO TRUST COMPANY, as
Senior Tranche Agent and Tranche A
Lender
By: [SIGNATURE APPEARS HERE]
______________________________________
Title
THE TORONTO-DOMINION BANK, as Tranche A
Lender
By: [SIGNATURE APPEARS HERE]
______________________________________
Title:
<PAGE>
SUCCESSOR SECURITY DEPOSIT AGENT AGREEMENT
This AGREEMENT (the "Agreement"), dated as of December 22, 1993, among
(a) Camden Cogen L.P., a Delaware limited partnership (the "Partnership" or the
"Borrower") of which Cogen Technologies Camden GP Limited Partnership, a
Delaware limited partnership, is the general partner (the "General Partner"),
(b) The Toronto-Dominion Bank Trust Company, a New York trust company ("TD
Trust Company"), as agent and collateral agent (in such capacity, the "Agent")
under 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
the date hereof and as further amended, supplemented or otherwise modified),
hereinafter referred to, among (i) the Partnership, (ii) the Agent, (iii) The
Bank of Tokyo Trust Company, a banking corporation organized and existing under
the laws of the State of New York ("BOTT"), as Senior Tranche Agent for the
Tranche A Lenders (in such capacity, the "Senior Tranche Agent"), (iv) General
Electric Capital Corporation, a New York corporation ("GE Capital"), as Junior
Tranche Agent for the Tranche B Lenders (in such capacity, the ("Junior Tranche
Agent"), (v) the lenders from time to time parties thereto (the "Lenders") and
(vi) GE Capital, as Letter of Credit Issuer (the "Letter Credit Issuer"), (c)
the General Partner, (d) GE Capital, as the limited partner of the Partnership
(the "Limited Partner"), (e) GE Capital, as lender (the "General Partner Term
Lender") under the General Partner Term Loan Agreement hereinafter referred to,
(f) Midlantic National Bank, as lender under the Midlantic Agreements
("Midlantic" or the "Working Capital Lender") and (g) Midlantic National Bank,
as agent for the Agent, GE Capital, and the Lenders and the Working Capital
Lender under this Security Deposit Agreement (in such capacity, the "Original
Security Agent"), which are parties to the Amended and Restated Security Deposit
Agreement, dated as of April 1, 1993 (the "Security Deposit Agreement") and (h)
TD Trust Company, as successor to the Original Security Agent (in such capacity,
the "Security Agent" and (i) the Lenders.
W I T N E S S E T H :
-------------------
WHEREAS, pursuant to Section 6.02 of the Security Deposit Agreement,
the original Security Agent is hereby resigning and concurrently herewith being
replaced by the Security Agent;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
<PAGE>
2
1. Defined Terms. Unless otherwise defined herein, terms defined in
the Security Deposit Agreement shall have such defined meanings when used
herein.
2. Assignment and Transfer. (a) The Original Security Agent hereby
assigns, transfers, grants and conveys to the Security Agent, for the benefit of
the Lenders, without recourse, representation or warranty, and the Security
Agent, for the benefit of the Lenders, hereby takes and accepts, all of the
Original Security Agent's right, title and interest in and to any and all of the
Accounts, all cash, cash equivalents, instruments and other securities on
deposit in such Accounts, chattel paper, documents, general intangibles,
instruments and all of the Original Security Agent's other rights, interests,
benefits and obligations under the Security Deposit Agreement as of the date of
this Agreement.
(b) The original Security Agent shall, concurrently with the execution
of this Agreement, deliver to the Security Agent all Accounts held by Original
Security Agent and all proceeds thereof held by original Security Agent and
arrange for the transfer of all such funds into the appropriate respective
Accounts established at the Security Agent. Notwithstanding anything implied to
the contrary in this Agreement, the Security Agent shall not succeed to nor
shall the Original Security Agent be released from any liabilities arising as a
result of facts existing or acts or omissions occurring prior to the execution
and delivery of this Agreement by the parties hereto. Any funds described in the
previous sentence received by the Original Security Agent after the date hereof
shall be promptly transferred to the Security Agent.
(c) The Original Security Agent represents, warrants and covenants
that it has transferred and delivered, or, concurrently with the execution of
this Agreement, will transfer and deliver, to the Security Agent all property
and originals of all books, records and documents in its possession relating to
the Security Deposit Agreement.
3. Resignation and Appointment. Pursuant to subsection 6.02 of the
Security Deposit Agreement, Midlantic National Bank hereby resigns as Original
Security Agent and TD Trust Company is hereby appointed Security Agent by the
parties hereto and TD Trust Company hereby accepts such appointment. The
Security Agent hereby succeeds to and becomes vested with all the rights,
powers, privileges and duties of the Original Security Agent, And, Except for
the matters provided for in the last two sentences of Sections 2(b) and 4
hereof, the Original Security Agent is hereby discharged from its duties and
obligations under the Security Deposit Agreement as of the date of this
Agreement. The provisions of Section 6 and Section 9.02 of the Security Deposit
Agreement shall continue in effect for the benefit of Midlantic in respect of
any actions taken or omitted to be taken by it while it was acting as Original
Security Agent.
<PAGE>
3
4. Further Assurances.
----------------------
(a) The Original Security Agent shall, promptly upon the request of
the Security Agent, execute, or cause to be executed, and deliver, or cause to
be delivered, or if Borrower fails to pay the same, at the cost of the Tranche B
Lenders on a pro rata basis, such other and further instruments of assignment
and/or transfer, and any other instruments or documents, and take any other
actions, as may be reasonably necessary, and are consistent with the Original
Security Agent's duties and obligations as the former agent, to transfer to, and
properly vest in the Security Agent, for the benefit of the Lenders, and to
perfect, all liens, security interests, pledges, assignments and other
hypothecations, and all rights of secured party, under the Accounts, and to
otherwise effectuate the purposes of this Agreement.
. (b) The Original Security Agent hereby agrees to promptly turn over
all funds, notices, communications and other documents received by it in such
capacity after the date hereof to the Security Agent.
5. Miscellaneous.
-----------------
(a) All notices and other communications provided for herein shall be
delivered in the manner set forth in Section 11.2 of the Credit Agreement and to
the addresses of the parties hereto set forth on the signature pages hereto
(until notice of a change thereof is delivered as provided in Section 11.2 of
the Credit Agreement).
(b) This Agreement may be modified or waived only by an instrument or
instruments in writing signed by each party hereto.
(c) This Agreement shall be binding upon and inure to the benefit of
each of the parties hereto and their respective successors and assigns.
(d) This Agreement may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument, and any of
the parties hereto may execute this Agreement by signing any such counterpart.
(E) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN AND
INTERPRETED IN ACCORDANCE WITH, LAWS OF THE STATE OF NEW YORK.
(f) The Borrower hereby consents to the foregoing terms and
conditions of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
THE TORONTO-DOMINION BANK TRUST
COMPANY, as Agent and as Security Agent,
By: /s/ [SIGNATURE APPEARS HERE]
________________________________________
Title:
Address:
COGEN TECHNOLOGIES CAMDEN GP
LIMITED PARTNERSHIP, as General Partner
By: Cogen Technologies Camden, Inc.
By: /s/ [SIGNATURE APPEARS HERE]
____________________________________
Title:
Address:
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent, as Letter
of Credit Issuer, as General Partner
Term Lender, as Limited Partner,
as Original Senior Tranche Agent
and as Junior Tranche Agent
By: /s/ [SIGNATURE APPEARS HERE]
_________________________________________
Title:
Address:
<PAGE>
5
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/ [SIGNATURE APPEARS HERE]
_______________________________________
Title:
Address:
MIDLANTIC NATIONAL BANK, as Working
Capital Lender and Original Security Agent
By: /s/ [SIGNATURE APPEARS HERE]
____________________________________________
Title:
Address:
By: /s/ [SIGNATURE APPEARS HERE]
____________________________________________
Title:
Address:
THE BANK OF TOKYO TRUST COMPANY,
as a Tranche A Lender
By: /s/ [SIGNATURE APPEARS HERE]
____________________________________________
Title:
Address:
THE TORONTO-DOMINION BANK,
as a Tranche A Lender
By: /s/ [SIGNATURE APPEARS HERE]
____________________________________________
Title:
Address:
<PAGE>
5
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:
__________________________________
Title:
Address:
MIDLANTIC NATIONAL BANK, as Working
Capital Lender
By: /s/ [SIGNATURE APPEARS HERE]
__________________________________
Title: VICE PRESIDENT
Address:
MIDLANTIC NATIONAL BANK, as
Original Security Agent
By: /s/ [SIGNATURE APPEARS HERE]
__________________________________
Title: VICE PRESIDENT
Address:
By: __________________________________
Title:
Address:
THE BANK OF TOKYO TRUST COMPANY,
as a Tranche A Lender
By: __________________________________
Title:
Address:
<PAGE>
EXHIBIT 10.48
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of the Conformed Agreement Date, made by
CAMDEN COGEN L.P., a Delaware limited partnership, having its principal office
at 1600 Smith Street, Suite 5000, 50th Floor, Houston, Texas 77002 (the
"Borrower"), in favor of GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation, as agent for the Lenders (as defined below) and the issuer of the
Letters of Credit (as defined below), having its principal office at 1600 Summer
Street, Stamford, CONNECTICUT 06927 ("GE Capital" or the "Agent").
W I T N E S S E T H :
--------------------
WHEREAS, pursuant to the Construction and Term Loan Agreement, dated
as of the Conformed Agreement Date (as amended, supplemented or otherwise
modified from time to time, the "Loan Agreement"), among the Borrower, the
lenders parties thereto (the "Lenders") and the Agent, the Lenders have agreed,
subject to the terms and conditions set forth therein, to make construction
loans and term loans (collectively, the "Loans") to, and GE Capital has agreed
to issue letters of credit (together with any application therefor, the "Letters
of Credit") for the account of, the Borrower in an aggregate principal and
drawable amount not to exceed $149,000,000, such Loans to be evidenced by the
promissory notes of the Borrower issued thereunder (as amended, supplemented or
modified from time to time, together with any substitute therefor or replacement
thereof, the "Notes"); and
WHEREAS, it is a condition precedent to the obligations of the Lenders
to make the Loans and of GE Capital to issue the Letters of Credit under the
Loan Agreement that the Borrower shall have executed and delivered this Security
Agreement to the Agent;
NOW, THEREFORE, in consideration of the premises and to induce the
Lenders to make the Loans and GE Capital to issue the Letters of Credit under
the Loan Agreement, and for other good and valuable consideration, the receipt
of which is hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined in
this Agreement shall have the meanings assigned to them in the Loan Agreement.
Unless the context indicates otherwise, definitions in the Code (as hereinafter
defined) apply to words and phrases in this Security Agreement; if definitions
in the Code conflict, definitions in Article 9 of the Code apply. The following
terms shall have the following meanings:
<PAGE>
2
"Accounts" shall have the meaning assigned to it in Section 2 of this
Security Agreement.
"Code" shall mean the Uniform Commercial Code as the same may from
time to time be in effect in the State of New York, except that "Code"
shall mean the Uniform Commercial Code as the same may from time to time be
in effect in the State of New Jersey with respect to the provisions hereof
relating to the creation and enforcement of security interests on tangible
personal property of the Borrower located in the State of New Jersey.
"Collateral" shall have the meaning assigned to it in Section 2 of
this Security Agreement.
"Contracts" shall mean the Contracts listed on Schedule 1 hereto and
all Additional Contracts, as any of the same may be amended, supplemented
or otherwise modified from time to time.
"Equipment" shall have the meaning assigned to it in Section 2 of this
Security Agreement.
"Loan Documents shall mean the Loan Agreement, the Notes, the Letters
of Credit, this Security Agreement, any other Collateral Security Documents
and any other agreements and documents contemplated hereby or thereby.
"Obligations" shall mean all the unpaid principal amount of, and
accrued interest on, the Notes and all other obligations and liabilities of
the Borrower to the Agent, GE Capital 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 the
Loan Agreement, the Notes, the Letters of Credit, this Security Agreement
or the other Loan Documents whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses (including,
without limitation, all fees and disbursements of counsel to the Agent and
the Lenders) or otherwise.
"Proceeds" shall have the meaning assigned to it in Article 9 of the
Code and, in any event, shall include, but not be limited to, (i) any and
all proceeds of any insurance, judgment, indemnity, warranty or guaranty
payable to the Borrower from time to time with respect to any of the
Collateral; (ii) any and all payments (in any form whatsoever) made or due
and payable to the Borrower from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or
any part of the Collateral by any Governmental Authority (or any person
acting under color of Governmental Authority); and (iii) any and all other
amounts from time to tine paid
<PAGE>
3
or payable under or in connection with any of the Collateral.
"Security Agreement" shall mean this Security Agreement, as amended,
supplemented or otherwise modified from time to time.
2. Grant of Security Interest. As collateral security for the prompt
and complete payment and performance when due (whether at the stated maturity,
by acceleration or otherwise) of the Obligations, the Borrower hereby grants,
bargains, sells, transfers and assigns to the Agent for the equal and ratable
benefit of GE Capital and the Lenders, and grants to the Agent for the equal
and ratable benefit of GE Capital and the Lenders, a first security interest in,
all of the Borrower's right, title and interest, whether now owned or at any
time hereafter acquired, in all of the following (all of which being hereinafter
collectively called the "Collateral"):
(a) the Project to be located on the Site more particularly described
in Schedule 2 hereto;
(b) all of the Borrower's inventory, equipment, construction
materials, fixtures, chattels, electronic business machines, machinery,
apparatus, fittings and articles of personal property of every kind and
nature whatsoever, and all appurtenances, accessions and additions thereto
and substitutions or replacements and products thereof, currently owned or
hereafter acquired by the Borrower, including but not limited to, all such
goods now or hereafter attached to, or contained in or used or usable in
any way in connection (though not attached thereto) with any present or
future operation of the Site or the Project or placed on any part thereof,
and all warehouse receipts, bills of lading and other documents of title
now or hereafter covering such goods (hereinafter collectively referred to
as the "Equipment") including, but without limiting the generality of the
foregoing, all Equipment kept at the locations listed on Schedule 3 hereto
and, to the extent not included therein, all screens, awnings, shades,
blinds, curtains, draperies, carpets, rugs, storm doors and windows,
furniture and furnishings, heating, electrical, mechanical, lighting,
switchboards, lifting, plumbing, ventilating, air conditioning and air-
cooling apparatus, boilers, furnaces, oil burners and transformers,
refrigerating, incinerating, escalator, elevator, power, loading and
unloading equipment and systems, stoves, ranges, laundry, cleaning
systems, communication systems, dynamics, sprinkler systems and other fire
prevention and extinguishing apparatus and materials, dynamos,
generators, ducts, controls, belting, heaters, motors, engines, machinery,
pipes, pumps, tanks, fans, conduits, appliances, equipment, fittings and
fixtures, and motor vehicles of every kind and description;
<PAGE>
4
(c) any and all leases, subleases, underlettings, concession
agreements and licenses of the Equipment, the Site or the Project, or any
part thereof, now existing or hereafter entered into by the Borrower;
(d) all rights of the Borrower under or arising out of the Contracts;
(e) (i) the accounts established and maintained by the Security Agent
pursuant to the Security Deposit Agreement (the "Accounts") and all cash
instruments and securities at any time and from time to time on deposit
therein; (ii) all other monies, deposits, funds and accounts and all
collections, contract rights, instruments, documents, general intangibles
(including trademarks, trade names, symbols used in connection therewith
and trademark licenses), partnership interests, the Plans and
Specifications, patent rights, patents, patent licenses, copyrights,
claims, demands and notes or chattel paper arising from or by virtue of any
transactions related to the foregoing; (iii) all permits, recordings,
registrations, filings, consents, orders, authorizations, waivers,
variances, permissions, declarations, licenses, franchises, approvals,
exemptions, certificates, and other rights and privileges obtained in
connection with the foregoing (including, without limitation, all permits
and licenses listed on Schedules 2 and 5 to the Loan Agreement); and (iv)
all books, records, documents (including, but not limited to, computer
programs, tapes, and related electronic data and processing software) and
instruments of the Borrower relating in whole or in part to any of the
Collateral;
(f) all rents, royalties, issues, profits, revenues, earnings, income
and other benefits, instruments, documents, securities, cash or property
derived from the Collateral or arising from the ownership, operation or
management of the Site, the Project or the Equipment, or from any lease or
agreement pertaining thereto;
(g) all other personal property of the Borrower comprising the Project
being and to be acquired, developed, constructed, installed, completed,
operated and maintained on the Site (including all property acquired by the
Borrower pursuant to the Equipment Supply Contract and all Fuel) and all
other personal property of the Borrower used in or relating to such
acquisition, development, construction, installation, completion, operation
and maintenance;
(h) all extensions, improvements, betterments, renewals, accessions,
substitutes and replacements of, and
<PAGE>
5
all additions and appurtenances too any and all of the foregoing, hereafter
acquired by or released to the Borrower (other than released by the Agent,
including, without limitation, such releases with respect to the
Modifications, as such term is defined in Section 15 of the Capital
Contribution Agreement) or constructed, assembled or placed by the Borrower
on the Site or the Project, and all conversions of the security constituted
thereby, immediately upon such acquisition, release, construction,
assembling, placement or conversion, as the case may be; and
(i) all Proceeds, both cash and noncash, arising from or by virtue of
the sale, lease or other disposition of any and all of the foregoing or any
interest therein and all products of any and all of the foregoing.
3. Borrower's Representations and Warranties. The Borrower hereby
represents and warrants that:.
(a) Title; No Other Liens. Except for the Lien granted to the Agent
pursuant to this Security Agreement and other Permitted Liens, the
Borrower is (or in the case of Collateral acquired after the date hereof,
will be) the sole legal and beneficial owner of each item of the
Collateral, having good and marketable title thereto, free and clear of any
and all Liens.
(b) Other Financing Statements. No security agreement, financing
statement, statement of assignment, chattel mortgage, or equivalent
security or lien instrument or continuation statement covering all or any
part of the Collateral is on file or of record in any public office, except
for those that may have been filed with respect to this Security Agreement
or other Permitted Liens.
(c) Accounts. All books, records and documents relating to the
Collateral are and will be genuine and in all respects what they purport to
be; the amount of each account represented from time to time as owing is
the correct amount actually owing thereunder. No amount payable to the
Borrower under or in connection with any account is evidenced by any
instrument or chattel paper which has not been delivered to the Agent.
Portions of the Collateral may constitute accounts, general intangibles or
contract rights and all records concerning such Collateral are and will be
located at the address of the Borrower specified above.
(d) Place of Business. The Borrower's chief executive office and/or
chief place of business is located at 1600 Smith Street, Suite 5000, 50th
Floor, Houston, Texas 77002.
(e) Location of Equipment. As of the date of this Security Agreement,
no item of Equipment is kept at any location other than the locations
listed on Schedule 3 hereto.
<PAGE>
6
(f) Contracts. No consent of any party (other than those that have
been duly obtained, made or performed, and are in full force and effect) to
any Project Contract, 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 in existence on the most recent Borrowing Date
is required, or purports to be required, in connection with the execution,
delivery and performance of this Security Agreement. Except as previously
disclosed by the Borrower to the Agent and the Lenders in a writing which
refers specifically to this subsection, to the best knowledge of the
Borrower each of the Project Contracts is in full force and effect and
constitutes a legal, valid and binding obligation 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 other laws affecting the
enforcement of creditors' rights generally and by general principles of
equity. All Governmental Approvals and other consents or approvals required
in connection with the execution, delivery, performance of each of the
Project Contracts by the Borrower, and to the best knowledge of the
Borrower the other parties thereto have been duly obtained or made, are in
full force and effect and are not subject to appeal or judicial,
governmental or other review, except the Governmental Approvals and other
consents and approvals set forth on Schedule 5 of the Loan Agreement, none
of which are obtainable prior to the initial Borrowing Date, but all of.
which are obtainable in the ordinary course of the Borrower's business as
and when required. The Borrower has duly performed and complied in all
material respects with all agreements and conditions required to be
performed or complied with by it as of the date hereof under each Project
Contract. The Borrower has delivered to the Agent a complete and correct
copy of each Contract, including all amendments, supplements and other
modifications thereto. No amount payable to the Borrower under or in
connection with any such Contract is evidenced by any instrument or chattel
paper which has not been delivered to the Agent.
(g) Perfected First Lien on Collateral. This Security Agreement is
effective to create, in favor of the Agent and for the ratable benefit of
GE Capital and the Lenders, 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 all
necessary and appropriate filings having been duly effected in all
appropriate public offices so that the liens and security interests created
by this Security Agreement constitute perfected first (other than as to
Permitted Liens) liens on and prior (other than as to Permitted Liens)
perfected security interests in all right,
<PAGE>
7
title, estate and interest of the Borrower in and to all items of
Collateral (other than any item of Collateral as to which a security
interest cannot be perfected by filing pursuant to the Code) prior and
superior to all other Liens, existing or future, except Permitted Liens.
The filings shown on Schedule 4 are all the filings and other actions
necessary and appropriate in order to establish, protect and perfect
Secured Party's lien 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).
4. Borrower's Covenants. The Borrower covenants and agrees with the
Agent, GE Capital and the Lenders that from and after the date of this Security
Agreement until the Obligations are paid in full:
(a) Covenants in Mortgage. From and after the date of execution and
delivery of the Mortgage, the Borrower shall observe and perform each of
its covenants contained therein.
(b) Compliance with Laws, etc. The Borrower will comply with all
Requirements of Law applicable to the Collateral or any part thereof.
(c) 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) 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 Construction Budget and, in the reasonable opinion of the
Required Lenders, after giving affect to such expense, sufficient funds are
projected to be available in the Construction Budget to complete the
Facility in accordance with subsection 7.1 of the Loan Agreement, (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 timely completion or operation of the Facility and (d)
in the reasonable opinion of the Required Lenders, such
<PAGE>
8
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.
(d) Mechanics' and Materialmen's Liens. The Borrower shall protect and
defend its interest in, and the Agent's, GE Capital's 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) 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
Construction 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 Construction Budget to complete the Facility in accordance
with subsection 7.1 of the Loan Agreement, (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 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 timely completion or
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.
(e) Limitation on Liens on Collateral. The Borrower will not create,
or suffer to exist, any Lien on the Collateral, other than the Liens
created hereby and other Permitted Liens.
(f) Maintenance of Equipment. The Borrower will maintain the Facility,
including each item of Equipment 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 the Facility to
operate in compliance with the terms of the Basic Documents, and in
compliance with all Requirements of Law affecting the Project and 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, except
to the extent that the failure to comply
<PAGE>
9
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.
(g) Maintenance of Insurance. The Borrower will maintain, with
financially sound and reputable companies, the insurance on the Collateral
required to be maintained by it pursuant to subsection 7.5 of the Loan
Agreement.
(h) Information and Inspection. The Borrower shall furnish to the
Agent any information with respect to the collateral, including schedules
further identifying and describing the Collateral, reasonably requested by
the Agent, will allow the Agent to inspect the Collateral at any reasonable
time and wherever located, and will allow the Agent to inspect and copy, or
will furnish the Agent with copies of, all records relating to the
Collateral. The Borrower shall furnish to the Agent such information as the
Agent may request to identify notes receivable, accounts receivable,
chattel paper, general intangibles and contract rights assigned hereunder,
at the times and in the form and substance reasonably requested by the
Agent, and shall permit the Agent to discuss its affairs, finances and
accounts with its officers at such reasonable times and as often as the
Agent may reasonably request.
(i) Additional Documents. At any time and from time to time, upon the
request of the Agent, and at the sole expense of the Borrower, the Borrower
will promptly execute and deliver any and all such further instruments and
documents and will take such further action as the Agent reasonably may
deem necessary or desirable to obtain, maintain and perfect the lien and
security interest granted to the Agent herein, including, without
limitation, the filing of any financing or continuation statements under
the Code in effect in any jurisdiction with respect to the lien and
security interest granted hereby and the Agent is authorized on behalf of
the Borrower as the Borrower's agent and attorney in fact for such purpose,
to complete and sign one or more financing statements or continuation
statements with respect to the lien and security interest granted hereby
and to file the same in any appropriate office or place. If any amount
payable under or in connection with any of the Collateral shall be or
become evidenced by any instrument or chattel paper, such instrument or
chattel paper shall be delivered to the Agent, duly endorsed in a manner
satisfactory to the Agent, to be held as Collateral pursuant to this
Security Agreement.
(j) Performance under Other Agreements. The Borrower shall duly
perform and observe in all material respects all of the covenants,
agreements and conditions on its part to
<PAGE>
10
be performed and observed under each Project Contract to which it is a
party. The Borrower shall diligently enforce all of its rights under each
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, (ii) materially adversely affect the Borrower's
ability to perform its obligations under the Basic Documents to which it is
a party or (iii) delay Substantial Completion of the Facility beyond
December 31, 1993. The Borrower shall have the right to terminate any
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, (ii) materially adversely affect the Borrower's
ability to perform its obligations under the Basic Documents to which it is
a party or (iii) delay Substantial Completion of the Facility beyond
December 31, 1993.
(k) 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 Project Contract or any
other contract referred to in subsection 8.19 of the Loan Agreement (except
upon the expiration of the stated term of such contract), (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 the Loan
Agreement, this Security Agreement or the Assignment relating to such other
contract or (y) as permitted without the consent of the Borrower by the
terms of such Project Contract or such other contract, or (c) any
amendment, supplement or modification of, or waiver with respect to any of
the provisions of, any Project Contract or any such other contract to which
the Borrower is a party or with respect to which the consent of the
Borrower is required.
(1) Books of Account. The Borrower will, at all times, maintain
accurate books and records with respect to the Collateral. Immediately upon
the execution of this Security Agreement, as requested by the Agent, the
Borrower will mark all books and records with an entry showing the
assignment of all notes, accounts, chattel paper and contracts assigned as
security hereunder to the Agent, and the Agent is hereby given the right
to audit the books and records of the Borrower relating to said Collateral
at any time, and from time to time, as the Agent deems proper.
(m) Notices. The Borrower will advise the Agent as soon as
practicable, in reasonable detail, at its address set forth in the Loan
Agreement, (i) of any Lien on, or claim asserted against, any of the
Collateral and (ii) of
<PAGE>
11
the occurrence of any other event which could reasonably be expected to
have a material adverse effect on the value of any of the Collateral or on
the Liens created hereunder.
(n) Changes in Locations. Name. etc. The Borrower shall not (i) 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 specified in subsection (d) of Section
3, unless the Borrower shall have given the Agent 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 this Security Agreement shall have been taken or
(ii) change its name except on 60 days' prior written notice to the Agent.
(o) Maintenance and Removal. The Borrower shall maintain the
Collateral as provided in the Loan Agreement and the Mortgage. The Borrower
shall not sell, lease, transfer or otherwise dispose of the Collateral or
attempt, offer or contract to do so, except as permitted by the Loan
Agreement and the Mortgage.
(p) Indemnification. The Borrower agrees to pay, and to save the
Agent, GE Capital and each Lender harmless from, any and all liabilities,
costs and expenses (including, without limitation, legal fees and expenses)
(A) with respect to, or resulting from, any delay in paying, any and all
excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the Collateral, (B) with respect to, or
resulting from, any delay in complying with any law, statute, rule or
regulation or determination of any Governmental Authority applicable to any
of the Collateral or (C) in connection with any of the transactions
contemplated by this Security Agreement. In any suit, proceeding or action
brought by the Agent, GE Capital or any Lender under any account or any
Contract for any sun owing thereunder, or to enforce any provisions of any
account or any Contract, the Borrower will save, indemnify and keep the
Agent, GE Capital and each Lender harmless from and against all expense,
loss or damage suffered by reason of any defense, setoff, counterclaim,
recoupment or reduction or liability whatsoever of the account debtor or
obligor thereunder, arising out of a breach by the Borrower of any
obligation thereunder or arising out of any other agreement, indebtedness
or liability at any time owing to or in favor of such account debtor or
obligor or its successors from the Borrower.
(q) Equipment. After any item of Equipment that has a fair market
value in excess of $250,000 has been delivered to the Site, the Borrower
shall not permit any such item of
<PAGE>
12
Equipment to be located at any location other than the locations set forth
on Schedule 3.
5. Remedies of Secured Party Upon Event of Default. (a) If an Event of
Default shall occur and be continuing, the Agent may exercise, in addition to
all other rights and remedies granted to it in this Security Agreement and in
any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, the Agent without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon the
Borrower or any Person (all and each of which demands, defenses, advertisements
and notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, lease, assign, give option or options to purchase or
otherwise dispose of and deliver the Collateral or any part thereof (or contract
to do any of the foregoing), in one or more parcels at public or private sale or
sales, at any exchange, broker's board or office of the Agent or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk. The Agent shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or
sales, to purchase the whole or any part of the Collateral so sold, free of any
right or equity of redemption in the Borrower, which right or equity is hereby
waived or released. The Borrower further agrees at the Agent's request, to
assemble the Collateral and make it available to the Agent at places which the
Agent shall reasonably select, whether at the Borrower's promises or elsewhere.
The Agent shall apply the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred therein or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Agent hereunder, including, without limitation, reasonable
attorneys' fees and disbursements, to the payment in whole or in part of the
Obligations, in such order as the Agent may elect, in accordance with the
Collateral Agency Agreement, and only after such application and after the
payment by the Agent of any other amount required by any provision of law,
including, without limitation, Section 9-504 (1) (c) of the Code, need the Agent
account for the surplus, if any, to the Borrower. To the extent permitted by
applicable law, the Borrower waives all claims, damages and demands it may
acquire against the Agent arising out of the exercise by it of any rights
hereunder. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition. The Borrower shall
remain liable for any-deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay the Obligations and the
fees
<PAGE>
13
and disbursements of any attorneys employed by the Borrower to collect such
deficiency.
(b) The Agent shall have the right (i) to notify or to require the
Borrower to notify persons obligated on any instruments, accounts, or Contracts
which are part of the Collateral to make payment thereof directly to the Agent
or as the Agent shall direct, (ii) to collect and enforce any such accounts and
contracts, and (iii) if an event of default shall have occurred and be
continuing, to compromise, settle or otherwise agree to waive, amend or modify
the obligation of any account debtors or obligors under such accounts and
contracts. Subject to the Security Deposit Agreement, until such time as the
Agent elects to exercise such rights, the Borrower, as the agent of the Agent
shall collect and enforce all such contracts and accounts. The cost of such
collection and enforcement, including attorneys' fees and expenses, shall be
borne by the Borrower, whether the same is incurred by the Agent or the
Borrower.
The foregoing rights and powers of the Agent shall be in addition to, and
not a limitation upon, any rights and powers of the Agent given by law, custom,
elsewhere by this Security Agreement, the Loan Agreement or otherwise.
6. Agent's Appointment as Attorney-in-Fact (a) Powers. The Borrower
hereby irrevocably constitutes and appoints the Agent and any officer or agent
thereof,. with full power of substitution, as its true and lawful attorney-in-
fact with full irrevocable power and authority in the place and stead of the
Borrower and in the name of the Borrower or in its own name, from time to time
in the Agent's discretion, for the purpose of carrying out the terms of this
Security Agreement, to take any and all appropriate action and to execute any
and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Security Agreement, and, without limiting the
generality of the foregoing, the Borrower hereby gives the Agent the power and
right, on behalf of the Borrower, without notice to or assent by the Borrower,
to do the following:
(i) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, to effect any repairs or any insurance
called for by the terms of this Security Agreement and to pay all or any
part of the premiums therefor and the costs thereof; and
(ii) (A) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Agent or an the Agent shall direct; (B) to ask
or demand for, collect, receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (C) to sign and indorse any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications, notices and
<PAGE>
14
other documents in connection with any of the Collateral; (D) to commence
and prosecute any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any thereof
and to enforce any other right in respect of any Collateral; (E) to defend
any suit, action or proceeding brought against the Borrower with respect to
any Collateral; (F) upon the occurrence and during the continuance of any
Event of Default, to settle, compromise or adjust any suit, action or
proceeding described in clause (E) above and, in connection therewith, to
give such discharges or releases as the Agent may deem appropriate; (G)
upon the occurrence and during the continuance of any Event of Default, to
assign any patent or trademark (along with the goodwill of the business to
which any such trademark pertains), throughout the world for such term or
terms on such conditions, and in such manner, as the Agent shall in its
sole discretion determine; and (H) upon the occurrence and during the
continuance of any Event of Default, generally, to sell, transfer, pledge
and make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Agent were the absolute
owner thereof for all purposes, and to do, at the Agent's option and the
Borrower's expense, at any time, or from time to time, all acts and things
which the Agent reasonably deems necessary to protect, preserve or realize
upon the Collateral and the Agent's Lions thereon and to effect the intent
of this Security Agreement, all as fully and effectively as the Borrower
might do.
The Borrower hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
(b) Other Powers. The Borrower also authorizes the Agent, at any time
and from time to time, to execute, in connection with the sale provided for in
Section 5 hereof, any indorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
(c) No Duty on Part of Agent or Lenders. The powers conferred on the
Agent hereunder are solely to protect the Agent's interests in the Collateral
and shall not impose any duty upon the Agent, GE Capital or the Lenders to
exercise any such powers. The Agent, GE Capital and the Lenders shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to the Borrower for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct,
and specifically disclaim any liability for negligence.
7. Performance by Agent of the Borrower's Obligations. If the
Borrower fails to perform or comply with any of its
<PAGE>
15
agreements contained herein and the Agent, as provided for by the terms of this
Security Agreement, shall itself perform or comply, or otherwise cause
performance or compliance, with such agreement, the expenses of the Agent
incurred in connection with such performance or compliance, together with
interest thereon at a rate per annum equal to the Default Rate, shall be payable
by the Borrower to the Agent on demand and shall constitute obligations secured
hereby.
8. Proceeds. If an Event of Default shall occur and be continuing (a)
all Proceeds received by the Borrower consisting of cash, checks and other near-
cash items shall be paid to the Collateral Agent for application in accordance
with the terms of the Collateral Agency Agreement, and otherwise shall be held
by the Borrower in trust for the Agent, segregated from other funds of the
Borrower, and shall, forthwith upon receipt by the Borrower, be turned over to
the Agent in the exact form received by the Borrower (duly indorsed by the
Borrower to the Agent, if required), and (b) any and all such Proceeds received
by the Agent (whether from the Borrower or otherwise) may, in the sole
discretion of the Agent, be held by the Agent as collateral security for, and/or
then or at anytime thereafter may be applied by the Agent against, the
obligations (whether matured or unmatured), such application to be in such order
an the Agent shall elect in accordance with the Collateral Agency Agreement. Any
balance of such Proceeds remaining after the obligations shall have been paid in
full and the Commitments shall have been terminated shall be paid over to the
Borrower or to whomsoever may be lawfully entitled to receive the same.
9. General. (a) No Waiver. No delay on the part of any of the Agent,
GE Capital or any Lender in exercising any power or right shall operate as a
waiver thereof; nor shall any single or partial exercise of any power or right
preclude other or further exercise thereof or the exercise of any other power or
right. No waiver by the Agent, GE Capital or any Lender of any right hereunder
or of any default by the Borrower shall be binding upon the Agent, GE Capital
or any Lender unless in writing, and no failure by the Agent or any Lender to
exercise any right hereunder or waiver of any default of the Borrower shall
operate as a waiver of any other or further exercise of such right or of any
further default. A waiver by the Agent, GE Capital or any Lender of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Agent, GE Capital or any Lender would otherwise have
on any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
(b) Waivers and Amendments; Successors and Assigns. None of the terms
or provisions of this security Agreement may be waived, amended, supplemented
or otherwise modified except by a written instrument executed by the Borrower
and the Agent, Provided that any provision of this Security Agreement may be
waived by the Agent in a written letter or agreement executed by
<PAGE>
16
the Agent or by telex or facsimile transmission from the Agent. This Security
Agreement shall be binding upon the successors and assigns of the Borrower and
shall inure to the benefit of the Agent, GE Capital and the Lenders and their
respective successors and assigns.
(c) 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, answerback received, addressed as set forth in subsection 11.2 of the
Loan Agreement.
(d) Financing Statement. The Agent is authorized on behalf of the
Borrower or the Borrower's agent and attorney-in-fact for such purpose, to
complete and sign one or more financing statements, including continuation
statements, or chattel mortgages with respect to any Collateral covered by this
Security Agreement and to file the same in any appropriate office or place. A
carbon, photographic or other reproduction of this Security Agreement or of any
financing statement or chattel mortgage prepared in conjunction herewith is
sufficient as a financing statement.
(e) Limitation on Duties Regarding Preservation of Collateral. The
Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the
Code or otherwise, shall be to deal with it in the same manner as the Agent
deals with similar property for its own account. None of the Agent, GE Capital
and any Lender, nor any of their respective directors, officers, employees or
agents shall be liable for failure to demand, collect or realize upon all or any
part of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
the Borrower or otherwise.
(f) Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
(g) Severability. Any provision of this Security Agreement 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 any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(h) Paragraph Headings. The paragraph headings used in this Security
Agreement are for convenience of reference only
<PAGE>
17
and are not to affect the construction hereof or be taken into consideration in
the interpretation hereof.
(i) Governing law. This Agreement shall be governed by, and be
construed and interpreted in accordance with, the law of the State of New York.
(j) 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 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
Now 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 say be effected by sailing 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(c)
or at such other address of which the Agent 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 Agent hereby irrevocably and unconditionally
waive trial by jury in any legal action or proceeding referred to in paragraph A
above.
(k) Limitation of Liability. The Agent, GE Capital and the Lenders
agree that the liability of the Borrower under this Security Agreement, the
Notes and the other Obligations shall be limited to the Collateral (as defined
in the Loan Agreement) and the rights and remedies of the Lenders against the
Collateral (as defined in the Loan Agreement) pursuant to this Security
Agreement and the other 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 Agent, GE Capital and the Lenders to the
<PAGE>
18
Collateral (as defined in the Loan Agreement) pursuant to this Security
Agreement and the other 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.
(1) Rights of Agent; Limitations on Agent's Obligations. It is
expressly agreed by the Borrower that, anything herein to the contrary
notwithstanding, the Borrower shall remain liable under each Contract to observe
and perform all the conditions and obligations to be observed and performed by
it thereunder, all in accordance with and pursuant to the terms and provisions
of each such Contract. The Agent, GE Capital and the Lenders shall have no
obligation or liability under any Contract by reason of or arising out of this
Security Agreement or the assignment to the Agent for the benefit of GE Capital
and the Lenders of any payment relating to any Contract pursuant hereto, nor
shall the Agent, GE Capital or the Lenders be required or obligated in any
manner to perform or fulfill any of the obligations of the Borrower under or
pursuant to any Contract, or to make any payment, or to make any inquiry as to
the nature or the sufficiency of any payment received by it or the sufficiency
of any performance by any party under any Contract, or to present or file any
claim, or to take any action to collect or enforce any performance or the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.
(1) Release. If the Borrower shall pay the indebtedness secured hereby
and perform faithfully each of the covenants and agreements contained herein and
in the other Loan Documents, then, and only then, this Security Agreement and
the security interest created hereby shall be null and void and shall be
released in due form, at the Borrower's expense; otherwise, it shall remain in
full force and effect. No release of this Security Agreement, or of the lien,
security interest or assignment created and evidenced hereby, shall be valid
unless executed by the Agent. The Agent, upon the Borrower's request
<PAGE>
19
and at the Borrower's expense, shall deliver to the Borrower all documents
evidencing such release.
EXECUTED as of the date and year first above written.
BORROWER:
CAMDEN COGEN L.P.
By Cogen Technologies Camden GP
Limited Partnership,
its general partner
By Cogen Technologies, Camden, Inc.
its general partner
By: /s/ ???
----------------------------------
Title: Vice President
------------------------------
AGENT:
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ ???
--------------------------------------
Title: Senior Vice President and Manager
----------------------------------
of Energy Project Financing
<PAGE>
AMENDMENT NO. 1
TO SECURITY AGREEMENT
AMENDMENT NO. 1 TO SECURITY AGREEMENT, dated as of April 1, 1993 (this
"Amendment") between CAMDEN COGEN L.P., a Delaware limited partnership (the
"Borrower") and GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, as
agent for the Lenders (as defined below) and the issuer of the letters of credit
("GE Capital" or the "Agent").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower and the Agent are parties to that certain
Security Agreement, dated as of February 4, 1992 (as amended, modified or
supplemented from time to time, the "Security Agreement");
WHEREAS, the Borrower and the Agent wish to amend certain provisions
of the Security Agreement;
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 Security Agreement shall have their respective
meanings as therein defined.
2. Global Amendment to Security Agreement. The Security Agreement is
hereby amended by deleting the reference to "Collateral Agency Agreement" in
each place it appears and inserting, in lieu thereof, the following term:
"Intercreditor Agreement".
3. Amendment to Section 1 (Definitions). Section 1 of the Security
Agreement is hereby amended by deleting the definition of "Loan Documents" in
its entirety and inserting, in lieu thereof, the following definition:
"'Loan Documents' shall mean the Loan Agreement, the Notes, the
Letters of Credit, this Security Agreement, the Interest Rate Hedging
Agreement, any other Collateral SECURITY DOCUMENTS AND ANY OTHER
agreements and documents contemplated hereby or thereby.'"
4. Amendment to Section 2 (Grant of Security Interest). Section 2 of
the Security Agreement is hereby amended
<PAGE>
2
by (i) re-lettering Paragraph "(i)" Paragraph "(j)", (ii) deleting the
"and" at the end of Paragraph (h) and (iii) inserting the following new
Paragraph (i):
"(i) all rights of the Borrower to receive money due and to become due
to it under or in connection with the Interest Rate Hedging Agreement,
all rights of the Borrower to damages arising out of, or for, breach
or default in respect of the Interest Rate Hedging Agreement and all
rights of the Borrower to perform and to exercise all remedies under
the Interest Rate Hedging Agreement."
5. Amendment to Section 8 (Proceeds). Section 8 of the Security
Agreement is hereby amended by deleting the phrase "and the Commitments shall
have been terminated" at the end thereof.
6. Ratification and Confirmation; Governing Law; Counterparts.
Except as or to the extent expressly amended or waived hereby, the Security
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 NEW YORK, 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.
CAMDEN COGEN L.P.
By: COGEN TECHNOLOGIES CAMDEN GP
LIMITED PARTNERSHIP, its sole
general partner
By: COGEN TECHNOLOGIES CAMDEN,
INC., its sole general
partner
By: /s/ ???
---------------------------------
Title: Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By: /s/ ???
------------------------------------------
Title: MANAGER - OPERATIONS
<PAGE>
AMENDMENT NO. 2
TO SECURITY AGREEMENT
AMENDMENT No. 2 TO SECURITY AGREEMENT, dated as of December 22, 1993
(this "Amendment") between CAMDEN COGEN L.P., a Delaware limited partnership
(the "Borrower") and THE TORONTO DOMINION BANK TRUST COMPANY, a New York trust
company, as agent for the Lenders (as defined below) and the issuer of the
Borrower Letters of Credit and the Debt Service Reserve Letter of Credit ("TD"
or the "Agent").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower and General Electric Capital Corporation ("GE
Capital"), as agent were parties to that certain Security Agreement, dated as of
February 4, 1992 and as amended by Amendment No. 1 to Security Agreement dated
as of April 1, 1993 (as further amended, modified or supplemented from time to
time, the "Security Agreement");
WHEREAS, pursuant to that certain Successor Agency Agreement, dated as
of the date hereof, among TD, GE Capital, The Bank of Tokyo Trust Company and
the Borrower, GE Capital transferred, granted and conveyed to TD all of its
right, title and interest in and to any and all of the Collateral (as defined in
the Loan Agreement referred to below) and all of its other rights, benefits and
obligations under the Collateral Security Documents (as defined in the Loan
Agreement referred to below);
WHEREAS, the Borrower and the Agent wish to amend certain provisions
of the Security Agreement;
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 Security Agreement shall have their respective
meanings as therein defined.
2. Amendment to Section 1 (Definitions). Section 1 of the Security
Agreement is hereby amended by deleting the word "Agent" in the definition of
"Obligations" and inserting, in lieu thereof, the word "Agents".
3. Amendment to Section 3 (g) (Perfected First Lien on Collateral).
Section 3 (g) of the Security Agreement is hereby amended by deleting the phrase
"Secured Party's" and inserting, in lieu thereof, the word "Agent".
<PAGE>
2
4. Amendment to Section 5 (Remedies of Secured Party Upon Event of
Default). Section 5 of the Security Agreement is hereby amended by (i) deleting
from the title thereof the phrase "Secured Party" and inserting, in lieu
thereof, the word "Agent" and (ii) deleting the word "Borrower" in the
penultimate line thereof and inserting, in lieu thereof, the word "Agent".
5. Amendment to Section 8 (Proceeds). Section 8 of the Security
Agreement is hereby amended by (i) deleting the phrase "Collateral Agent" and
inserting, in lieu thereof, the word "Agent" and (ii) deleting the phrase
"Collateral Agency Agreement" and inserting, in lieu thereof, the phrase
"Intercreditor Agreement".
6. Agreement of The Toronto-Dominion Bank Trust Company. TD will not
amend the Security Agreement without the consent of GE Capital if such amendment
would have a material adverse effect on the rights of GE Capital under the
Security Agreement.
7. Ratification and Confirmation; Governing Law; Counterparts. Except
as or to the extent expressly amended or waived hereby, the Security 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 NEW YORK, 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.
CAMDEN COGEN L.P.
By: COGEN TECHNOLOGIES CAMDEN GP
LIMITED PARTNERSHIP, its sole
general partner
By: COGEN TECHNOLOGIES CAMDEN,
INC., its sole general
partner
By: /s/ ???
---------------------------------
Title:
THE TORONTO-DOMINION BANK TRUST COMPANY
By: /s/ ???
---------------------------
Name:
Title:
ACKNOWLEDGED:
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ ???
--------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.49
COGEN PLEDGE AND SECURITY AGREEMENT
PLEDGE and SECURITY AGREEMENT, dated as of the Conformed Agreement
Date, made by COGEN TECHNOLOGIES CAMDEN, INC., a Texas corporation (the
"Pledgor" or "Cogen), the sole general partner of Cogen Technologies Camden GP
Limited Partnership (the "General Partner"), a Delaware limited partnership and
the sole general partner of Camden Cogen L.P. (the "Limited Partnership"), a
Delaware limited partnership, in favor of General Electric Capital Corporation
("GE Capital"), as collateral agent for the LP Agent (as defined below) and the
LP Lenders (as defined below) under the Limited Partnership Loan Agreement (as
defined below) and for the GP Lender (as defined below) under the General
Partner Loan Agreement (as defined below) (in such capacity, the "Collateral
Agent").
W I T N E S S E T H
WHEREAS, pursuant to the Construction and Term Loan Agreement, dated
as of the Conformed Agreement Date, among the Limited Partnership, the Lenders
from time to time party thereto (the "LP Lenders") and GE Capital, as agent for
the LP Lenders (in such capacity, the "LP Agent") (as the same may be amended,
supplemented or otherwise modified from time to time, the "Limited Partnership
Loan Agreement"), the LP Lenders have agreed to make loans (the "LP Loans") to,
and GE Capital has agreed to issue letters of credit (the "Letters of Credit")
for the account of, the Limited Partnership; and
WHEREAS, pursuant to the Term Loan Agreement, dated as of the
Conformed Agreement Date, between the General Partner and General Electric
Capital Corporation (in such capacity, the "GP Lender") (as the same may be
amended supplemented or otherwise modified from time to time, the "General
Partner Loan Agreement", together with the Limited Partnership Loan Agreement,
the "Loan Agreements"), the GP Lender has agreed to make certain loans (the "GP
Loans", together with the LP Loans, the "Loans") for the account of the General
Partner; and
WHEREAS, it is a condition precedent to (i) the obligation of the LP
Lenders to make LP Loans to, and of GE Capital to issue Letters of Credit for
the account of, the Limited Partnership under the Limited Partnership Loan
Agreement
<PAGE>
2
and (ii) the obligation of the GP Lender to make the GP Loans to the General
Partner under the General Partner Loan Agreement that the Pledgor shall have
executed and delivered this Pledge and Security Agreement; and
NOW, THEREFORE, in consideration of the premises and to induce the LP
Lenders, the LP Agent and the GP Lender (collectively, the "Secured Parties") to
enter into the Loan Agreements and to make Loans and to issue Letters of Credit
thereunder, the Pledgor hereby agrees with the Collateral Agent as follows:
1. Defined Terms. (a) All capitalized terms used herein which are
defined in the Limited Partnership Loan Agreement shall have their respective
meanings as therein defined, unless such terms are defined herein. All terms
defined herein or in the Loan Agreements in the singular shall have the same
meanings when used in the plural and vice versa.
(b) The following terms defined in Article 9 of the Uniform Commercial
Code as in effect in the State of New York are used herein as so defined:
Chattel Paper and Instrument; and the following terms shall have the following
meanings:
"Agreement" shall mean this Pledge and Security Agreement, as the same
may from time to time be amended, supplemented or otherwise modified.
"Code" shall mean the Uniform Commercial Code as the same may from
time to time be in effect in the State of New York.
"Collateral" shall have the meaning assigned to it in Section 2 of
this Agreement.
"Obligations" shall mean (i) all the unpaid principal amount of, and
accrued interest on, the Notes (as defined in the Limited Partnership Loan
Agreement) and all other obligations and liabilities of the Limited Partnership
to the LP Agent and the LP 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 the Limited Partnership Loan
Agreement, the Notes, the Letters of Credit, this Agreement or the other
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 LP Agent and
the LP Lenders) or otherwise and (ii) all the unpaid principal amount of, and
accrued interest on, the Notes (as defined in the General Partner Loan
Agreement) and all other obligations and liabilities of the General Partner to
the GP Lender, whether direct or indirect, absolute or
<PAGE>
3
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of or in connection with the General Partner Loan
Agreement, the Notes (as defined in the General Partner Loan Agreement), this
Agreement, or the other Collateral Security Documents (as defined in the General
Partner Loan Agreement), whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses (including,
without limitation, all fees and disbursements of counsel to the GP Lender) or
otherwise.
"Partnership Agreement": shall mean the collective reference to (a) the
certificate of limited Partnership of the General Partner, dated July 26, 1991,
filed by Cogen with the Secretary of State of Delaware on August 12, 1991, and
(b) the Agreement of Limited Partnership of the General Partner, dated as of
July 26, 1991 between Cogen, as general partner, and the Limited Partner (as
defined in the General Partner Loan Agreement), as limited partner (as amended
by the Amendment thereto dated as of December 1, 1991), in each case as amended,
supplemented or otherwise modified from time to time.
"Proceeds" shall have the meaning assigned to it under the Code and, in any
event, shall include, but not be limited to, (i) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to the Pledgor from time to
time with respect to any of the Collateral, (ii) any and all payments (in any
form whatsoever) made or due and payable to the Pledgor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any person acting under color of Governmental Authority) and (iii) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
2. Assignment and Grant of Security Interest. As collateral security for
the prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Loans and all other obligations,
the Pledgor hereby sells, assigns, coveys mortgages, pledges, hypothecates and
transfers to the Collateral Agent for the ratable benefit of the Secured
Parties, and hereby grants to the Collateral Agent for the ratable benefit of
the Secured Parties a continuing first (other than as to Permitted Liens)
priority security Interest in, to and under all of the following property now
owned or at any time hereafter acquired by the Pledgor or in which the Pledgor
now has or at any time in the future may acquire any rights, title or Interest
(all of which being hereinafter collectively called the "Collateral"):
<PAGE>
4
(i) all right, title and Interest of the Pledgor in the General Partner;
(ii) any and all moneys due and to become due to the Pledgor now or in the
future by way of a distribution made to the Pledgor in its capacity as a partner
of the General Partner;
(iii) any and all moneys due or to become due to the Pledgor now or in the
future by virtue of the Pledgor's Interest as a partner in the General Partner;
(iv) any other property of the General Partner to which the Pledgor now or
in the future may be entitled in its capacity as a partner of the General
Partner by way of distribution, return of capital or otherwise;
(v) any other claim which the Pledgor now has or may in the future acquire
in its capacity as a partner of the General Partner against the General Partner
and its property; and
(vi) to the extent not otherwise included, all Proceeds of any or all of
the foregoing.
3. Registration of Pledge. Concurrently with the execution of this
Agreement, the Pledgor shall send written instructions in the form of Exhibit A
hereto to the General Partner, and shall cause the General Partner to, and the
General Partner shall, deliver to the Collateral Agent the Initial Transaction
Statement in the form of Exhibit B hereto confirming that the General Partner
has registered the pledge effected by this Agreement on its books.
4. Limitations on Distributions. Except as provided in subsection 7.3
of the General Partner Loan Agreement, so long as this Agreement shall remain in
full force and effect and no Default or Event of Default under the Loan
Agreements shall have occurred and be continuing, any distributions of cash or
other property payable in respect of the Collateral shall be paid to the
Pledgor. After the occurrence of a Default or Event of Default and for so long
as such Default or Event of Default is continuing, such distributions shall be
applied by the Collateral Agent to the payment in whole or in part of the
obligations in accordance with the Collateral Agency Agreement.
5. Representations and Warranties. The Pledgor hereby represents and
warrants that:
(a) The Pledgor (i) is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas, (ii) has all the full
power and authority and the legal right to own its properties, to conduct its
<PAGE>
5
business as now conducted and as proposed to be conducted by it, to execute,
deliver and perform this Agreement and to pledge its Interest in the Collateral
pursuant to this Agreement and (iii) 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 require such qualification.
The Pledgor is the sole general partner of the General Partner, and its
Partnership Interest in the General Partner is 81.945%. Complete and correct
copies of the Partnership Agreement and of all contracts and agreements between
the Pledgor and the General Partner have been delivered to the Secured Parties.
(b) Except for those filings and registrations required to perfect the
Liens created by this Agreement, neither the General Partner nor the Pledgor is
required to obtain any order, consent, approval or authorization of, or required
to make any declaration or filing with, any Governmental Authority or any other
Person in connection with the execution and delivery of this Agreement and the
granting and perfection of the security interests pursuant to this Agreement.
(c) This Agreement has been duly executed and delivered on behalf of the
Pledgor, and this Agreement constitutes a legal, valid and binding obligation of
the Pledgor, enforceable against the Pledgor in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and except as enforceability may be subject to
general principles of equity, whether such principles are applied in a court of
equity or at law.
(d) The execution, delivery and performance of this Agreement will not
result in any violation of or be in conflict with or constitute a default under
any term of the Certificate of Incorporation or the By-Laws of the Pledgor, or
the Partnership Agreement, or of any other Requirement of Law or Contractual
obligation applicable to the Pledgor except to the extent that the failure to
comply therewith could not reasonably be expected to (i) have a material adverse
effect on the Collateral or (ii) materially adversely affect the ability of the
Pledgor to perform its obligations under this Agreement or the other Basic
Documents or Transaction Documents (as defined in the General Partner Loan
Agreement) to which it is a party, or result in the creation of any Lien upon
any of the properties or revenues of the Pledgor pursuant to any such
Requirement of Law or Contractual obligation other than the Liens in favor of
the Collateral Agent created pursuant to this Agreement and in favor of the
Secured Parties created pursuant to the other Collateral Security Documents.
<PAGE>
6
(e) Except for the security interest granted to the Collateral Agent
pursuant to this Agreement, the Pledgor is the sole owner of the Collateral,
having good title thereto, free and clear of any and all Liens other than
Permitted Liens and the Liens in favor of the Collateral Agent created pursuant
to this Agreement and in favor of the Secured Parties created pursuant to the
other Collateral Security Documents.
(f) No security agreement, financing statement, equivalent security or lien
instrument or continuation statement covering all or any part of the Collateral
is on file or of record in any public office or with the General Partner, except
such as constitute Permitted Liens or may have been or will be filed or
registered (i) by the Pledgor in favor of the Collateral Agent pursuant to this
Agreement and in favor of the Secured Parties created pursuant to the other
Collateral Security Documents or (ii) by the Pledgor in favor of GE Power
Funding pursuant to the Term Loan Agreement, dated as of February 15, 1990,
between Cogen Technologies Linden, Ltd. and GE Power Funding.
(g) This Agreement constitutes a valid and continuing first lien (other
than as to the Permitted Liens) on and perfected security interest in the
Pledgor's right, title and interest in and to the Collateral (other than those
items of Collateral which, individually or in the aggregate, are not material)
in favor of the Collateral Agent, prior (other than as to the Permitted Liens)
to all other Liens, and is enforceable as such against creditors of and
purchasers from the Pledgor. All action necessary or desirable to protect and
perfect such security interest, including, but not limited to, the filing of
financing statements in the jurisdictions referred to on Schedule I to this
Agreement and the registration of the pledge effected hereby on the books of the
General Partner in accordance with the provisions of the Uniform Commercial Code
in effect in the jurisdiction in which the General Partner is organized in each
item of the Collateral (other than those items of Collateral which, individually
or in the aggregate, are not material) has been duly taken.
(h) The Pledgor's principal place of business and chief executive office
and the place where its records concerning the Collateral are kept is located at
the address set forth with its signature below and the Pledgor will not change
such address or remove such records without 30 days' prior written notice to the
Collateral Agent.
6. Covenants. The Pledgor covenants and agrees with the Collateral Agent
and the Secured Parties that from and after the date of this Agreement and until
the Obligations are fully satisfied:
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7
(a) Further Documentation; Pledge of Instruments. At any time and from time
to time, upon the written request of the Collateral Agent and at the sole
expense of the Pledgor, the Pledgor will promptly and duly execute and deliver
any and all such further instruments and documents and take such further action
as the Collateral Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code in effect in any
jurisdiction with respect to the Lien granted hereby. The Pledgor also hereby
authorizes the Collateral Agent to file any such financing or continuation
statement without the signature of the Pledgor to the extent permitted by
applicable law. The Pledgor and the Collateral Agent agree that a carbon,
photographic or other reproduction of this Agreement or a financing statement is
sufficient as a financing statement. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
promissory note or other Instrument or Chattel Paper, such note, Instrument or
Chattel Paper shall be immediately delivered to the Collateral Agent, duly
indorsed in a manner satisfactory to the Collateral Agent, to be held as
Collateral pursuant to this Agreement.
(b) Maintenance of Records. The Pledgor will keep and maintain at its own
cost and expense satisfactory and complete records of the Collateral including,
without limitation, a record of all payments received and all credits granted
with respect to the Collateral and all other dealings with the Collateral. The
Pledgor will mark its books and records pertaining to the Collateral to evidence
this Agreement and the security interests granted hereby. For the further
security of the Collateral Agent and the Secured Parties, the Pledgor agrees
that the Collateral Agent, for the ratable benefit of the Secured Parties, shall
have a special property interest in all of the Pledgor's books and records
pertaining to the Collateral and the Pledgor shall, upon the acceleration of the
Loans and any other amounts due under any Loan Agreement or the Collateral
Security Documents, deliver and turn over any books and records to the
Collateral Agent or to its representatives at any time on demand of the
Collateral Agent. The Collateral Agent in turn agrees to provide the Pledgor
with reasonable access to such records during normal business hours and also
with such copies of such records (made at the Pledgor's expense) as the Pledgor
may reasonably request, such access and such copies to be available subject to
the Collateral Agent's prior right to use such records to enforce its rights in
or to realize upon the Collateral.
<PAGE>
8
(c) Limitation on Rights and Liens with Respect to Collateral. The Pledgor
will not (i) vote to enable, or take any other action to permit, the General
Partner to issue any other Partnership interests in the General Partner or grant
any right to purchase or otherwise acquire any existing or other partnership
interests in the General Partner, (ii) sell, assign, transfer or exchange, or
otherwise dispose of, or grant any option with respect to, or mortgage, pledge
or hypothecate its interest in, the Collateral, or attempt, offer or contract to
do so, except as provided herein, or (iii) create, incur, permit or suffer to
exist, and will defend the Collateral against and will take such other action as
is necessary to remove, any Lien or claim on or to the Collateral, other than
Permitted Liens, and will defend the right, title and interest of the Collateral
Agent in and to any of the Pledgor's rights to the Collateral and in and to the
Proceeds thereof against the claims and demands of all Persons whomsoever.
(d) Regulatory Filings. If and to the extent required, the Pledgor will
file this Agreement, and any other agreements or instruments which are required
to be filed with any regulatory body in accordance with the rules and
regulations of such regulatory body.
(e) Notices. The Pledgor will advise the Collateral Agent and the Secured
Parties promptly, in reasonable detail, of any Lien or claim made or asserted
against any of the Collateral.
(f) Change of Name. The Pledgor will not change its name or identity in any
manner which might make any financing statement filed hereunder seriously
misleading unless the Pledgor shall have given the Collateral Agent and the
Secured Parties at least 30 days' prior written notice thereof.
(g) Compliance with Laws. etc. The Pledgor will comply in all material
respects with all acts, rules, regulations, orders, decrees and directions of
any Governmental Authority applicable to the Collateral or any part thereof,
except any thereof the non-compliance with which could not reasonably be
expected to have a material adverse effect on the Collateral or any part
thereof.
(h) Taxes and Claims. The Pledgor shall pay and discharge all taxes,
assessments and governmental charges or levies imposed on the General Partner 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 General Partner. The Pledgor shall have the right,
however, to contest in good faith the validity or amount of any such
<PAGE>
9
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 Pledgor diligently
prosecutes such contest, (b) during the period of such contest the enforcement
of any contested item is effectively stayed; provided, however, that this
clause (b) shall apply to contested income taxes of a Partner only if the
failure to pay such tax may then become a Lien on the Collateral and (c) in the
reasonable opinion of the Collateral Agent, such contest does not involve any
substantial danger of the sale, forfeiture or loss of any part of the
Collateral, title thereto or any interest therein. The Pledgor 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. Collateral Agent's Appointment as Attorney-in-Fact. (a) Powers. The
Pledgor hereby irrevocably constitutes and appoints the Collateral Agent and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of the Pledgor and in the name of the Pledgor or in its own name, from
time to time in the Collateral Agent's discretion, for the purpose of carrying
out the terms of this Agreement, to take any and all appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement, and, without limiting
the generality of the foregoing, the Pledgor hereby gives the Collateral Agent
the power and right, on behalf of the Pledgor, without notice to or assent by
the Pledgor to do the following:
(i) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral; and
(ii) upon the occurrence and during the continuance of any Default or
Event of Default, (A) to direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Collateral Agent or as the Collateral Agent shall
direct; (B) to ask or demand for, collect, receive payment of and receipt for,
any and all moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (C) in the name of the Pledgor or
its own name or otherwise, to take possession of and endorse and collect any
checks, drafts, notes, acceptances or other instruments for the payment of
moneys due with respect to the Collateral; (D) to file any claim or to commence
and prosecute any suits, actions or proceedings in any court of law or equity or
otherwise as deemed appropriate by the Collateral Agent to collect the
Collateral or any part thereof and to enforce
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10
any other right in respect of any Collateral; (E) to defend any suit, action or
proceeding brought against the Pledgor with respect to any Collateral; (F) to
settle, compromise or adjust any suit, action or proceeding described in clause
(D) or (E) above and, in connection therewith, to give such discharges or
releases as the Collateral Agent may deem appropriate; and (G) generally, to
sell, transfer, pledge and make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though the Collateral
Agent were the absolute owner thereof for all purposes, and to do, at the
Collateral Agent's option and the Pledgor's expense, at any time, or from time
to time, all acts and things which the Collateral Agent reasonably deems
necessary to protect, preserve or realize upon the Collateral and the Liens of
the Collateral Agent and the Secured Parties thereon and to effect the intent of
this Agreement, all as fully and effectively as the Pledgor might do.
The Pledgor hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
(b) Other Powers. The Pledgor also authorizes the Collateral Agent, at
any time and from time to time, to execute, in connection with the sale provided
for in Section 9 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
(c) No Duty on Part of the Collateral Agent and the Secured Parties.
The powers conferred on the Collateral Agent and the Secured Parties hereunder
are solely to protect the interests of the Collateral Agent and the Secured
Parties in the Collateral and shall not impose any duty upon any of them to
exercise any such powers. The Collateral Agent and the Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to the Pledgor for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.
8. Performance by Collateral Agent of Pledgor's Obligations; Rights
of Pledgor Prior to Default or Event of Default. (a) If the Pledgor fails to
perform or comply with any of its agreements contained herein and the Collateral
Agent, as provided for by the terms of this Agreement, shall itself perform or
comply, or otherwise cause performance or compliance, with such agreement, the
expenses of the Collateral Agent incurred in connection with such performance or
compliance, together with interest thereon at a rate per annum equal to the
Default Rate
<PAGE>
11
shall be payable by the Pledgor to the Collateral Agent on demand and shall
constitute Obligations secured hereby.
(b) Unless and until a Default or Event of Default shall have occurred
and be continuing, the Pledgor shall be entitled to take any action, or omit to
take any action, as the Pledgor may deem necessary or advisable or convenient
with respect to the Collateral; provided that no action shall be taken, or
omitted to be taken, by the Pledgor which would (i) violate or be inconsistent
with any of the terms of this Agreement or the Loan Agreements, or (ii) give
rise to any defense, counterclaim or offset in favor of the Pledgor against the
Collateral Agent or the Secured Parties or to any claim or action against the
Pledgor or (iii) have the effect of materially impairing the position or
interests of the Collateral Agent or the Secured Parties or of the value of the
Collateral. All such rights of the Pledgor to take or omit to take any action
shall cease upon the occurrence of a Default or an Event of Default and the
continuance thereof.
9. Remedies, Rights Upon the Occurrence of a Default or an Event of
Default. (a) If any Default or Event of Default shall occur and be continuing,
the Collateral Agent, on behalf of the Secured Parties, may exercise, in
addition to all other rights and remedies granted to them in this Agreement and
in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code, with the
express obligation of the Pledgor to cooperate with the Collateral Agent in all
respects as are necessary to perfect such rights and remedies. Without limiting
the generality of the foregoing, the Collateral Agent, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except the notice specified below of time and place of public or
private sale) to or upon the Pledgor or any other Person (all and each of which
demands, defenses, advertisements and notices are hereby waived), may in such
circumstances (i) exercise all voting, partnership and other rights of the
Pledgor in its capacity as a partner in the General Partner as fully and
completely as though the Collateral Agent were the absolute owner of the
Pledgor's partnership interest in the General Partner, (ii) transfer all or any
part of the Collateral into the Collateral Agent's name or the name of its
nominee or nominees, (iii) forthwith collect, receive, appropriate and realize
upon the Collateral, or any part thereof, and/or may forthwith sell, lease,
assign, give option or options to purchase, or otherwise dispose of and deliver
said Collateral or any part thereof (or contract to do any of the foregoing), in
one or more parcels at public or private sale or sales, at any exchange,
broker's board or office of the Collateral Agent or any Secured Party or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery
without assumption of any credit risk. The Collateral Agent or any Secured Party
shall
<PAGE>
12
have the right upon any such public sale or sales, and, to the extent permitted
by law, upon any such private sale or sales, to purchase the whole or any part
of said Collateral so sold, free of any right or equity of redemption in the
Pledgor, which right or equity is hereby waived or released. The Pledgor further
agrees, at the Collateral Agent's request, to assemble the Collateral and make
it available to the Collateral Agent at places which the Collateral Agent shall
reasonably select, whether at the Pledgor's premises or elsewhere. The
Collateral Agent shall apply the net proceeds of any collection, recovery,
receipt, appropriation, realization or sale of or with respect to the
Collateral, after deducting all reasonable costs and expenses of every kind
incurred therein or incidental to the care, safe keeping or otherwise of any or
all of the Collateral or in any way relating to the rights of the Collateral
Agent and the Secured Parties hereunder, including reasonable attorneys' fees
and legal expenses, to the payment in whole or in part of the Obligations in
accordance with the Collateral Agency Agreement, the Pledgor remaining liable
for any deficiency remaining unpaid after such application, and only after so
applying such net proceeds and after the payment by the Collateral Agent of any
other amount required by any provision of law, including Section 9-504(l)(c) of
the Code, need the Collateral Agent account for the surplus, if any, to the
Pledgor. To the extent permitted by applicable law, the Pledgor waives all
claims, damages, and demands against the Collateral Agent or any Secured Party
arising out of the repossession, retention or sale of the Collateral. The
Pledgor agrees that the Collateral Agent need not give more than 10 days' notice
(which notification shall be deemed given when mailed, postage prepaid,
addressed to the Pledgor at its address referred to in paragraph 11 hereof) of
the time and place of any public sale or of the time after which a private sale
may take place and that such notice is reasonable notification of such matters.
(b) The Pledgor also agrees to pay all costs of the Collateral Agent,
including attorneys' fees, incurred with respect to the collection of any of the
Obligations and the enforcement of any of the rights of the Collateral Agent or
any Secured Party hereunder.
(c) The Pledgor hereby waives presentment, demand, protest or any
notice (to the extent permitted by applicable law) of any kind in connection
with this Agreement or any Collateral and expressly waives and agrees not to
assert any rights or privileges it may acquire under Section 9-112 of the Code.
(d) The Pledgor consents and agrees that the Collateral Agent may
exercise any or all of its rights and remedies hereunder notwithstanding any
provision in the Partnership Agreement which purports to limit the
transferability of partnership interests without the consent of any partners.
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13
10. Limitation on Duties in Respect of Collateral; Limitations on
Collateral Agent's Obligations. (a) Beyond the use of reasonable care in the
custody thereof, the Collateral Agent shall not have any duty as to any
Collateral in its possession or control or in the possession or control of any
agent or nominee of it or any income thereon or as to the preservation of rights
against prior parties or any other rights pertaining thereto.
(b) It is expressly agreed by the Pledgor that, anything herein to
the contrary notwithstanding, the Pledgor shall remain liable under each of its
contracts or other agreements, including, without limitation, the Partnership
Agreement, to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with and pursuant to
the terms of the provisions thereof. The Collateral Agent and the Secured
Parties shall not have any obligation or liability by reason of or arising out
of this Agreement, nor shall the Collateral Agent or any Secured Party be
required or obligated in any manner to perform or fulfill any of the obligations
of the General Partner or the Pledgor, or to make any payment, or to make any
inquiry as to the nature or the sufficiency of any payment received by it or the
sufficiency of any performance by the Pledgor, or to present or file any claim,
or to take any action to collect or enforce any performance or the payment of
any amounts which may have been assigned to it or to which it may be entitled at
any time or times.
11. Notices. Notices hereunder may be given by mail, by telex or by
facsimile transmission, addressed or transmitted to, in the case of the Pledgor,
as set forth with its signature hereto, in the case of the Collateral Agent and
the LP Lenders, at such Person's address or transmission number set forth in the
Limited Partnership Loan Agreement and in the case of the GP Lender, as set
forth in the General Partner Loan Agreement, and shall be effective as provided
for in the Loan Agreements. The Pledgor may change its address and transmission
number by written notice to the Collateral Agent and the Secured Parties, and
the Collateral Agent or any Secured Party may change its address and
transmission number by written notice to the Pledgor and, in the case of a
Secured Party, to the Collateral Agent.
12. Severability. Any provision of this Agreement 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. Where provisions
of any law or regulation resulting in such prohibition or unenforceability may
be waived they are hereby waived by the Pledgor and the Collateral Agent and the
Secured Parties to the full extent permitted by law so that this
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14
Agreement shall be deemed a valid and binding agreement, and the security
interest created hereby shall constitute a continuing first lien (other than as
to the Permitted Liens) on and first (other than as to the Permitted Liens)
perfected security Interest in the Collateral, in each case enforceable in
accordance with its terms.
13. Release of Lien in Favor of the LP Agent and the LP Lenders. (a)
Upon receipt by the Collateral Agent from the LP Agent of a written notice
stating that all of the obligations (as defined in the Limited Partnership Loan
Agreement) have been paid in full and the Commitments under the Limited
Partnership Loan Agreement have been terminated, the security interests in favor
of the LP Agent and the LP Lenders created pursuant to Section 2 shall forthwith
terminate.
(b) Upon receipt by the Collateral Agent from the GP Lender of a
written notice stating that all of the Obligations (as defined in the General
Partner Loan Agreement) have been paid in full and the Commitments thereunder
have been terminated, the security interests in favor of the GP Lender created
pursuant to Section 2 shall forthwith terminate.
(c) The Collateral Agent, upon request by the Pledgor shall execute
and deliver, at the Pledgor's expense, all such documentation reasonably
necessary to release the lien in its Favor in and to this Agreement.
14. Section Headings. The section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
15. No Waiver; Cumulative Remedies. The Collateral Agent and Secured
Parties shall not by any act (except pursuant to the execution of a written
instrument pursuant to Section 16 hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Collateral Agent or any Secured Party, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, remedy, power or privilege hereunder
shall preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. A waiver by the Collateral Agent or any
Secured Party of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Collateral Agent or any
Secured Party would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any rights or remedies provided by law.
<PAGE>
15
16. Waivers and Amendments; Successors and Assigns; Governing Law.
None of the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Pledgor and the Collateral Agent. This Agreement shall be binding upon the
successors and assigns of the Pledgor and shall inure to the benefit of the
Collateral Agent and the Secured Parties and their respective successors and
assigns. This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York.
17. Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an Interest.
18. Indemnification. The Pledgor agrees to pay, indemnify and hold
the Collateral Agent, each Secured Party and their respective affiliates,
directors and/or 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
obligations) be imposed on, incurred by or asserted against any such Person in
any way relating to or arising out of this Agreement or the Collateral, or any
documents contemplated by or referred to herein or the transactions contemplated
hereby or thereby (all of the foregoing, collectively, the "indemnified
liabilities"), provided, that the Pledgor 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
Obligations and all other amounts payable hereunder.
19. Collateral Agent Not a Partner. Nothing contained in this
Agreement shall be construed or interpreted (a) to transfer to the Collateral
Agent or any Secured Party any of the rights and obligations of a partner of the
General Partner other than the rights of collateral security in and to the
Collateral described herein or (b) to constitute the Collateral Agent or any
Secured Party a partner of the General Partner.
20. Limitation of Liability. The Collateral Agent and the Secured
Parties agree that the liability of the Pledgor under this Agreement and the
Obligations shall be limited to the Collateral (as defined in the Loan
Agreements) and the rights and remedies of the Collateral Agent and the Secured
Parties against
<PAGE>
16
the Collateral (as defined in the Loan Agreements) pursuant to this Agreement
and the other Collateral Security Documents, and in no event shall the Pledgor
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 Collateral Agent and the Secured Parties, to the
Collateral (as defined in the Loan Agreements) pursuant to this Agreement or the
other 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 certificate or document
delivered pursuant hereto.
21. Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly
executed and delivered as of the date first set forth above.
COGEN TECHNOLOGIES CAMDEN, INC.
[Signature appears here]
BY: _____________________________
Title: Vice President
1600 Smith Street
Suite 5000
Houston, Texas 77002
Attention: Robert C. McNair
<PAGE>
SCHEDULE I
FINANCING STATEMENT FILINGS
---------------------------
Jurisdiction Document
Debtor Where Filed Filed
- ------ ------------ --------
General Partner Secretary of State UCC-1 Financing
of Delaware Statement
General Partner Secretary of State UCC-1 Financing
of New Jersey Statement
General Partner County Clerk, UCC-1 Financing
Camden County, Statement
New Jersey
General Partner Secretary of State UCC-1 Financing
of New York Statement
General Partner City Registrar, New UCC-1 Financing
York County Statement
General Partner County Clerk, UCC-1 Financing
Schenectady County, Statement
New York
General Partner Secretary of State UCC-1 Financing
of South Carolina Statement
General Partner County Clerk, UCC-1 Financing
Greenville County, Statement
South Carolina
General Partner Secretary of State UCC-1 Financing
of Texas Statement
<PAGE>
EXHIBIT A
[Form of Instruction to Register Pledge]
________ __, 19 ___
TO: Cogen Technologies Camden GP Limited Partnership
You are hereby instructed to register the pledge of the following
uncertificated security as follows:
The entire partnership interest of the undersigned in Cogen
Technologies Camden GP Limited Partnership (the "General Partner"), including
without limitation all of the following property now owned or at any time
hereafter acquired by the Pledgor or in which the Pledgor now has or at any time
in the future may acquire any rights, title or interest:
(i) all right, title and interest of the Pledgor in the General
Partner;
(ii) any and all moneys due and to become due to the Pledgor now or in
the future by way of a distribution made to the Pledgor in its capacity as
a partner of the General Partner;
(iii) any and all moneys due or to become due to the Pledgor now or in
the future by virtue of the Pledgor's interest as a partner in the General
Partner;
(iv) any other property of the General Partner to which the Pledgor
now or in the future may be entitled in its capacity as a partner of the
General Partner by way of distribution, return of capital or otherwise;
<PAGE>
2
(v) any other claim which the Pledgor now has or may in the future
acquire in its capacity as a partner of the General Partner against the General
Partner and its property; and
(vi) to the extent not otherwise included, all Proceeds of any or all of
the foregoing.
Pledgor Pledgee
------- -------
Cogen Technologies General Electric Capital
Camden, Inc. Corporation, as Collateral
1600 Smith Street Agent
Suite 5000 1600 Summer Street
Houston, Texas 77002 Sixth Floor
Stamford, CT 06927
Very truly yours,
Cogen Technologies Camden, Inc.
By: _________________________________
Title:
<PAGE>
EXHIBIT B
[Form of Initial Transaction Statement]
__________ ___, 199_
To: General Electric Capital
Corporation, as Collateral Agent
1600 Summer Street
Sixth Floor
Stamford, CT 06927
Attn: Project Financing Investments-
Transportation and Industrial
Financing Division
This statement is to advise you that a pledge of the following
uncertificated security has been registered in the name of General Electric
Capital Corporation, as Collateral Agent, as follows:
1. Uncertificated Security:
The entire partnership interest of Cogen Technologies Camden, Inc. in
the undersigned partnership (the "General Partner"), including without
limitation all of the following property now owned or at any time hereafter
acquired by the Pledgor or in which the Pledgor now has or at any time in the
future may acquire any rights, title or interest:
(i) all right, title and interest of the Pledgor in the General
Partner;
(ii) any and all moneys due and to become due to the Pledgor now or
in the future by way of a distribution made to the Pledgor in its capacity as a
partner of the General Partner;
(iii) any and all moneys due or to become due to the Pledgor now or
in the future by virtue of the
<PAGE>
2
Pledgor's interest as a partner in the General Partner;
(iv) any other property of the General Partner to which the Pledgor now
or in the future may be entitled in its capacity as a partner of the General
Partner by way of distribution, return of capital or otherwise;
(v) any other claim which the Pledgor now has or may in the future
acquire in its capacity as a partner of the General Partner against the General
Partner and its property; and
(vi) to the extent not otherwise included, all Proceeds of any or all of
the foregoing.
2. Registered Owner:
Cogen Technologies Camden, Inc.
1600 Smith Street
Suite 5000
Houston, Texas 77002
Taxpayer Identification Number: 76-0322566
3. Registered Pledgee:
General Electric Capital Corporation, as Collateral Agent
Taxpayer Identification Number: 13-1500700
4. There are no liens (except for Permitted Liens) or restrictions of
the undersigned partnership and no adverse claims to which such uncertificated
security is or may be subject known to the undersigned partnership.
5. The pledge was registered on __________________ ____, 1992
<PAGE>
3
THIS STATEMENT IS MERELY A RECORD OF THE RIGHTS OF THE ADDRESSEE AS OF
THE TIME OF ITS ISSUANCE. DELIVERY OF THIS STATEMENT, OF ITSELF, CONFERS NO
RIGHTS ON THE RECIPIENT. THIS STATEMENT IS NEITHER A NEGOTIABLE INSTRUMENT NOR A
SECURITY.
Very truly yours,
Cogen Technologies Camden GP Limited
Partnership
By: Cogen Technologies Camden, Inc.
its general partner
BY:
-------------------------------
Title:
<PAGE>
AMENDMENT NO. 1
TO COGEN PLEDGE AND SECURITY AGREEMENT
AMENDMENT NO. 1 TO COGEN PLEDGE AND SECURITY AGREEMENT, dated as of
April 1, 1993 (this "Amendment") between COGEN TECHNOLOGIES CAMDEN, INC. (the
"Pledgor"), the sole general partner of Cogen Technologies Camden GP Limited
Partnership, the sole general partner of Camden Cogen L.P., and GENERAL ELECTRIC
CAPITAL CORPORATION ("GE Capital"), a New York corporation, as agent for the LP
Agent and the LP Lenders under the Limited Partnership Loan Agreement and for
the GP Lender under the General Partner Loan Agreement.
W I T N E S S E T H :
WHEREAS, the Pledgor and GE Capital are parties to that certain Cogen
Pledge and Security Agreement, dated as of February 4, 1992 (as amended,
modified or supplemented from time to time, the "Cogen Pledge and Security
Agreement");
WHEREAS, the Pledgor and the Agent wish to amend certain provisions of
the Cogen Pledge and Security Agreement;
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 Cogen Pledge and Security Agreement shall have
their respective meanings as therein defined.
2. Global Amendment to Cogen Pledge and Security Agreement. The Cogen
Pledge and Security Agreement is hereby amended by deleting the reference to
"Collateral Agency Agreement" in each place it appears and inserting, in lieu
thereof, the following term: "Intercreditor Agreement".
3. Amendment to Section 1 (Defined Terms). Section 1 of the Cogen
Pledge and Security Agreement is hereby amended by inserting in the definition
of "Obligations" after the words "Notes, the Letters of Credit", the words "the
Interest Hedging Agreement,".
4. Amendment to Section 5 (Representations and Warranties). Paragraph
(f) of Section 5 of the Cogen Pledge and Security Agreement is hereby amended by
(i) deleting the "(i)" therefrom, (ii) deleting the "or" at the end of clause
(i) thereof, (iii) deleting clause (ii) thereof in its entirety and (iv)
inserting a period at the end of clause (i).
<PAGE>
2
5. Amendment to Section 13 (Release of Lien in Favor of the LP Agent
and the LP Lenders. Section 13 of the Assignment and Security Agreement is
hereby amended by (i) deleting, from Paragraph (a) thereof, the phrase "and the
Commitments under the Limited Partnership Loan Agreement have been terminated"
and (ii) deleting, from Paragraph (b) thereof, the phrase "and the Commitments
thereunder have been terminated"
6. Ratification and Confirmation; Governing Law; Counterparts. Except
as or to the extent expressly amended or waived hereby, the Cogen Pledge and
Security 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 NEW YORK, 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.
COGEN TECHNOLOGIES CAMDEN, INC.
By: /s/ LARRY THOMAS
----------------------------------------------
Name: Larry Thomas
Title: Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION, as Collateral Agent
By: /s/ M. J. TZOUGRAKIS
----------------------------------------------
Name: M. J. Tzougrakis
Title: Manager - Operations
<PAGE>
AMENDMENT NO. 2
TO COGEN PLEDGE AND SECURITY AGREEMENT
AMENDMENT NO. 2 TO COGEN PLEDGE AND SECURITY AGREEMENT, dated as of
December 22, 1993 (this "Amendment") between COGEN TECHNOLOGIES CAMDEN, INC.
(the "Pledgor), the sole general partner of Cogen Technologies Camden GP Limited
Partnership, the sole general partner of Camden Cogen L.P., and THE TORONTO -
DOMINION BANK TRUST COMPANY ("TD"), a New York trust company, as agent for the
LP Agent and the LP Lenders under the Limited Partnership Loan Agreement and for
the GP Lender under the General Partner Loan Agreement.
W I T N E S S E T H:
WHEREAS, the Pledgor and General Electric Capital Corporation ("GE
Capital") are parties to that certain Cogen Pledge and Security Agreement, dated
as of February 4, 1992 and as amended by Amendment No. 1 to Cogen Pledge and
Security Agreement dated as of April 1, 1993 (as further amended, modified or
supplemented from time to time, the "Cogen Pledge and Security Agreement");
WHEREAS, pursuant to that certain Successor Agency Agreement, dated as
of the date hereof, among TD, GE Capital, The Bank of Tokyo Trust Company and
the Borrower, GE Capital transferred, granted and conveyed to TD all of its
right, title and interest in and to any and all of the Collateral (as defined in
the Limited Partnership Loan Agreement referred to below) and all of its other
rights, benefits and obligations under the Collateral Security Documents (as
defined in the Limited Partnership Loan Agreement referred to below);
WHEREAS, TD has become the Collateral Agent under the Cogen Pledge
and Security Agreement;
WHEREAS, the Pledgor and the Collateral Agent wish to amend certain
provisions of the Cogen Pledge and Security Agreement;
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 Cogen Pledge and Security Agreement shall have
their respective meanings as therein defined.
<PAGE>
2
2. Amendment to Definition of "Secured Parties". The definition of
"Secured Parties" is hereby amended to be the LP Lenders, the Agents and the GP
Lender.
3. Amendment to Section 1 (Defined Terms). Section 1 of the Cogen
Pledge and Security Agreement is hereby amended by inserting in the definition
of "Obligations", (i) in lieu of the phrase "and all other obligations and
liabilities of the Limited Partnership to the LP Agent", the phrase "and all
other obligations and liabilities of the Limited Partnership to the Agents" and
(ii) in lieu of the words "LP Agent", the word "Agents".
4. Amendment to Section 13 (Release of Lien in Favor of the LP Agent
and the LP Lenders). Section 13 of the Cogen Pledge and Security Agreement is
hereby amended by (i) deleting, from the title thereto the phrase "LP Agent" and
inserting, in lieu thereof, the word "Agents", (ii) deleting the parenthetical
contained therein and (iii) deleting the phrase "L.P. Agent" and inserting, in
lieu thereof, the word "Agents".
5. Amendment to Section 9 (Remedies, Rights Upon the Occurrence of a
Default or an Event of Default). Section 9 of the Assignment and Security
Agreement is hereby amended by adding the following new paragraph (e) to the end
thereof:
"(e) As used in this Section 9, the term "Collateral Agent" shall mean
the Collateral Agent or its designees."
6. Ratification and Confirmation; Governing Law; Counterparts. Except
as or to the extent expressly amended or waived hereby, the Cogen Pledge and
Security 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 NEW YORK, and may be executed in any
number of counterparts, all of which counterparts, taken together, shall
constitute one and the same instrument.
7. Agreement of The Toronto-Dominion Bank Trust Company. TD will not
amend the Cogen Pledge and Security Agreement without the consent of GE Capital
if such amendment would have a material adverse effect on the rights of the GP
Lender under the Cogen Pledge and Security Agreement.
<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.
COGEN TECHNOLOGIES CAMDEN, INC.
By: [Signature appears here]
-------------------------------------------
Name:
Title:
THE TORONTO-DOMINION BANK TRUST COMPANY,
as Collateral Agent
By: [Signature appears here]
-------------------------------------------
Name
Title:
ACKNOWLEDGED:
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ MICHAEL J. TZOUGRAKIS
------------------------------
Name:
Title:
<PAGE>
================================================================================
EXHIBIT 10.50
MORTGAGE
from
CAMDEN COGEN L.P.,
Mortgagor
to
GENERAL ELECTRIC POWER FUNDING CORPORATION,
Mortgagee
Dated as of February 4, 1992
THIS MORTGAGE ALSO CONSTITUTES A SECURITY
AGREEMENT UNDER THE UNIFORM COMMERCIAL CODE
================================================================================
After recording return to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: Mark J. Eagan
This Instrument Prepared by the Undersigned
in consultation with: Messrs. McCarter & English
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4096
Signature /s/ Mardi R. Merjian
-------------------------
Mardi R. Merjian
<PAGE>
TABLE OF CONTENTS
Page
----
1. Warranty of Title.................................................. 5
2. Payment of Indebtedness............................................ 5
3. Proper Care and Use; Inspection.................................... 6
4. Requirements....................................................... 7
5. Payment of Impositions............................................. 7
6. Insurance.......................................................... 9
7. Condemnation/Eminent Domain........................................ 11
8. Limitation on Disposition and Priority of Lien, Utilities.......... 11
9. Estoppel Certificates.............................................. 12
10. Expenses........................................................... 12
11. Mortgagee's Right to Perform....................................... 13
12. Further Assurances................................................. 13
13. Assignment of Rents................................................ 13
14. Events of Default.................................................. 14
15. Remedies........................................................... 15
16. Remedies Cumulative and Concurrent................................. 16
17. Discontinuance of Proceedings...................................... 17
18. Application of Proceeds............................................ 17
19. Successor Mortgagor................................................ 18
20. Security Agreement Under Uniform Commercial Code................... 18
21. Indemnification; Waiver of Claim................................... 19
22. No Waivers, Etc.................................................... 19
23. Waivers by Mortgagor............................................... 20
24. Trust Funds........................................................ 20
-i-
<PAGE>
Page
----
25. Notices............................................................ 20
26. Taxes on Mortgages................................................. 21
27. No Modification; Binding Obligations............................... 21
28. Miscellaneous...................................................... 21
29. Captions........................................................... 22
30. Successors and Assigns............................................. 22
31. Enforceability..................................................... 22
32. RECEIPT OF COPY.................................................... 23
33. Loan Agreement..................................................... 23
34. Limitation of Liability............................................ 23
35. Release............................................................ 23
-ii-
<PAGE>
MORTGAGE
THIS MORTGAGE dated as of February 4, 1992 from CAMDEN COGEN L.P., a
Delaware limited partnership, ("Mortgagor"), having an office at c/o Cogen
Technologies, 1600 Smith Street, Suit 5000, 50th Floor, Houston, Texas 77002, to
GENERAL ELECTRIC POWER FUNDING CORPORATION, a Delaware corporation
(""Mortgagee"), having an office at One River Road, Building Two, Room 741,
Schenectedy, New York, 12345. Unless otherwise defined herein, all capitalized
terms used herein shall have their respective meanings set forth in the "Loan
Agreement", as defined below.
WITNESSETH:
WHEREAS, Mortgagor is the owner in fee simple of certain tracts of land
located in Camden, Camden County, New Jersey and more particularly described in
Exhibit A attached hereto and made a part hereof (the "Land"); and
WHEREAS, pursuant to a Mortgage dated as of February 4, 1992 (the "First
Mortgage"), Mortgagor has granted to General Electric Capital Corporation, a New
York corporation, a mortgage lien on, among other collateral, the Land; and
WHEREAS, pursuant to the Term Loan Agreement dated as of February 15, 1990
between Cogen Technologies Linden, Ltd. ("Linden Cogen") and Mortgagee (as the
same has been, and hereafter may be amended, supplemented or otherwise modified
from time to time, the "Loan Agreement"), Mortgagee agreed, subject to the terms
and conditions set forth therein, to make Loans, from time to time, to Linden
Cogen, which are evidenced by the Notes; and
WHEREAS, Mortgagee is not currently obligated to make certain loans under
the Loan Agreement because certain conditions have not been met; and
WHEREAS, Mortgagee is willing to waive such conditions provided Mortgagor
executes and delivers this Mortgage;
NOW, THEREFORE, in consideration of the premises, the sum of ten dollars
and for other good and valuable consideration, the receipt and legal sufficiency
of which are hereby acknowledged, Mortgagor hereby agrees as follows:
TO SECURE:
<PAGE>
2
(a) (i) repayment of all amounts advanced and to be advanced and to be
advanced under the Notes, the terms of which are hereby made a part of this
Mortgage, (ii) payment of all interest (including interest on principal
after default), fees and expenses payable on the Notes or under the Loan
Agreement as provided in the Loan Agreement and (iii) payment of any and
all fees, costs and expenses, including, without limitation, attorney's
fees, incurred by Mortgagee in enforcing rights and remedies of Mortgagee
hereunder and under the Loan Agreement, the Notes and the Collateral
Security Documents (the items set forth in clauses (i), (ii) and (iii)
being referred to collectively as the "Indebtedness"); and
(b) performance of all covenants, agreements, obligations and
liabilities of Mortgagor and Linden Cogen (the "Obligations") under or
pursuant to the provisions of the Loan Agreement, the Notes, this Mortgage
and the other Loan Documents (as defined below) and any extensions,
renewals, restatements, replacements or modifications of any of the
foregoing (the Loan Agreement, the Notes, this Mortgage and the other
Collateral Security Documents and all other documents and instruments from
time to time evidencing, securing or guaranteeing the payment of the
Indebtedness or performance of the Obligations are collectively referred to
as the "Loan Documents");
Mortgagor hereby grants a security interest in, and hereby mortgages, conveys,
assigns, bargains, transfers and sets over to Mortgagee, the following property
and rights and interests in property (collectively, the "Mortgaged Property"):
A. the Land;
B. all right, title and interest of Mortgagor in and to any and all
buildings and improvements now or hereafter erected on the Land (the
"Improvements"; the Land, together with the Improvements, are hereinafter
collectively referred to as the "Real Estate");
C. all right, title and interest of Mortgagor, now owned or hereafter
acquired, in and to all streets, the land lying in the bed of any streets, roads
or avenues, opened or proposed, in front of, adjoining, or abutting the Real
Estate to the center line thereof and strips and gores within or adjoining the
Real Estate, the air space and right to use said air space above the Real
Estate, all rights of way, privileges, liberties, hereditaments, all easements
now or hereafter affecting or benefitting the Real Estate, all royalties and all
rights appertaining to the use and enjoyment of said Real Estate, including,
without limitation, all alley, vault, drainage, mineral, water, oil and gas
rights;
D. all and singular, the tenements, hereditaments and appurtenances
belonging or in anywise appertaining to the Real Estate, and the reversion or
reversions, remainder or remainders,
<PAGE>
3
rents, issues, profits and revenue thereof; and also all the estate, right,
title, interest, dower and right of dower, curtesy and rights of curtesy,
property, possession, claim and demand whatsoever, both in law and equity, of
Mortgagor, of, in and to the Real Estate and of, in and to every part and parcel
thereof, with the appurtenances, at any time belonging to in anywise
appertaining thereto;
E. all of the legal fixtures of every kind and nature whatsoever currently
owned or hereafter acquired by Mortgagor, and all appurtenances and additions
thereto and substitutions or replacements thereof, now or hereafter attached to,
or intended to be attached to (though not attached thereto) the Real Estate or
placed on any part thereof (said legal fixtures of every kind and nature
whatsoever, and all appurtenances and additions thereto and substitutions or
replacements thereof, are hereinafter collectively referred to as the
"Equipment"), including, but without limiting the generality of the foregoing,
all fixtures and equipment as defined in the Uniform Commercial Code and
including, but without limiting the generality of the foregoing, all furnaces,
turbines, generators, plumbing, ventilating, air conditioning and air-cooling
apparatus, refrigerating, incinerating, and escalator, elevator, power, loading
and unloading equipment and systems, sprinkler systems and other fire prevention
and extinguishing apparatus and pipes, pumps, tanks, conduits, fittings and
fixtures; it being understood and agreed that all Equipment is appropriated to
the use of the Real Estate and, whether affixed or annexed or not, for the
purposes of this Mortgage shall be deemed conclusively to be Real Estate and
mortgaged hereby; and Mortgagor hereby agrees to execute and deliver, from time
to time, such further instruments (including security agreements), as may be
requested by Mortgagee to confirm the lien of this Mortgage on the Equipment;
F. all unearned premiums, accrued, accruing or to accrue under insurance
policies now or hereafter obtained by Mortgagor and Mortgagor's interest in and
to all proceeds of the conversion and the interest payable thereon, voluntary or
involuntary, relating to the Mortgaged Property, or any part thereof, into cash
or liquidated claims, including, without limiting the generality of the
foregoing, proceeds of casualty insurance, title insurance or any other
insurance maintained on the Real Estate and the Equipment, and the right to
collect and receive the same, and all awards and/or other compensation including
the interest payable thereon and the right to collect and receive the same (in
the alternative and collectively, "Awards"), heretofore and hereafter made to
the present and all subsequent owners of the Real Estate and the Equipment by
the United States, the State of New Jersey or any political subdivision thereof,
or any agency, department, bureau, board, commission, or instrumentality of any
of them, now existing or hereafter created (collectively, "Governmental
Authority") for the taking by eminent domain, condemnation or otherwise, of all
or any part of the Real Estate and Equipment or any easement or
<PAGE>
4
other right therein, including, without limiting the generality of the
foregoing, Awards for any change or changes of grade or the widening of streets,
roads or avenues affecting the Real Estate, to the extent of all amounts which
may be secured by this Mortgage as of the date of receipt, notwithstanding the
fact that the amount thereof may not then be due and payable, and to the extent
of attorneys' fees, costs and disbursements incurred by Mortgagee in connection
with the collection of such Awards. Mortgagor hereby assigns to Mortgagee, and
Mortgagee is hereby authorized to collect and receive such Awards, and to give
proper receipts and acquittance therefor and, subject to the other provisions
hereof and the provisions of the Security Deposit Agreement, to apply the same
toward the Indebtedness, notwithstanding the fact that the full amount thereof
may not then be due and payable; Mortgagor hereby agrees, upon demand of
Mortgagee, to make, execute and deliver, from time to time, such further
instruments as may be reasonably requested by Mortgagee to confirm such
assignment of said Awards to Mortgagee, free and clear and discharged of any
encumbrances of any kind or nature whatsoever;
G. all extensions, improvements, betterments, renewals, substitutes and
replacements of, and all additions and appurtenances to, the Real Estate and the
Equipment, hereafter acquired by or released to Mortgagor (other than by
Mortgagee) or constructed, assembled or placed by Mortgagor on the Real Estate
(other than the "Modifications" referred to in Section 15 of the "Capital
Contribution Agreement", as defined in the Construction and Term Loan
Agreement", as defined in the Construction and Term Loan Agreement of even date
with this Mortgage between Mortgagor and General Electric Capital Agreement (the
"Camden Loan Agreement"), and all conversions of the security constituted
thereby, immediately upon such acquisition, release, construction, assembling,
placement or conversion, as the case may be, and in each such case, without any
further mortgage, conveyance, assignment or other act by Mortgagor, shall become
subject to the lien of this Mortgage as fully paid and completely, and with the
same effect, as though now owned by Mortgagor and specifically described herein;
H. all right, title and interest of Mortgagor in, to and under all leases,
subleases, underlettings, concession agreements and licenses of the Real Estate
and Equipment, or any part thereof, now existing or hereafter entered into by
Mortgagor (collectively, "Leases"), and all rights of Mortgagor in respect of
cash and securities deposited thereunder and the right to receive and collect
the benefits, revenues, income, rents, issues and profits thereof;
I. all right, title and interest of Mortgagor, to the extent permitted by
law, in, to and under (i) all consents, licenses and building permits required
for the construction, completion, occupancy and operation of the Real Estate;
(ii) all plans and specifications for the construction of the Real Estate,
including, without limitation, installations of curbs, sidewalks, gutters,
landscaping, utility connections and all fixtures and
<PAGE>
5
equipment necessary for the construction, operation and occupancy of the
Improvements; and (iii) all contracts from time to time executed by Mortgagor
relating to the ownership, construction, maintenance, operation or occupancy of
the Real Estate together with all rights of Mortgagor to compel performance of
the terms of such contracts;
J. any and all monies now or hereafter on deposit for the payment of real
estate taxes or special assessments against the Real Estate or for the payment
of premiums on policies of fire and other hazard insurance covering the
Mortgaged Property; and
K. all rights of Mortgagor under or arising out of the Contracts described
on Schedule 1 and all Additional Contracts (as defined in the Camden Loan
Agreement), as any of the same may be amended, supplemented or otherwise
modified from time to time.
L. all proceeds, both cash and noncash, and products of the foregoing,
including, without limitation, all proceeds and products as defined in the
Uniform Commercial Code of the State of New Jersey, which may be realized upon
any sale or other disposition of any of the foregoing or produced therefrom;
TO HAVE AND TO HOLD the Mortgaged Property and the rights and privileges
hereby mortgaged or intended to be, unto Mortgagee, its successors and assigns
for the uses and purposes herein set forth, until the Indebtedness is fully paid
and the Obligations are fully paid or fully performed, as the case may be.
Mortgagor represents, warrants, covenants and agrees as follows:
1. Warranty of Title. Mortgagor warrants that it has and owns good and
marketable title to the Real Estate and has the right to mortgage the same; and
Mortgagor warrants that this Mortgage is a valid and enforceable lien on the
Mortgaged Property subject only to the First Mortgage and to Permitted Liens as
defined in the Camden Loan Agreement. Mortgagor hereby covenants that it shall
preserve such title and the validity and priority of the lien hereof and shall
forever warrant and defend the same to Mortgagee against the claims of all and
every person or persons, corporation or corporations and parties whomsoever
claiming or threatening to claim the same or any part thereof.
2. Payment of Indebtedness. Subject to the terms of Section 34 hereof,
Mortgagor shall cause Linden Cogen to pay the Indebtedness and shall perform and
shall cause Linden Cogen to perform, as applicable, all of the Obligations in
accordance with the terms of the Loan Documents.
<PAGE>
6
3. Proper Care and Use; Inspection. (a) Mortgagor shall:
(i) not abandon the Mortgaged Property,
(ii) maintain the Facility (as defined in the Camden Loan Agreement)
in good working order and condition,
(iii) make all repairs, renewals and replacements to the Facility (as
defined in the Camden Loan Agreement) and additions and betterments thereto
which are necessary for the Facility (as defined in the Camden Loan
Agreement) to operate in compliance with the terms of the Basic Documents
(as defined in the Camden Loan Agreement), and in compliance with all Legal
Requirements (as hereinafter defined) affecting the Mortgaged Property and
all requirements of the appropriate Board of Fire Underwriters or other
similar body acting in and for the locality in which the Mortgaged Property
is located, except to the extent that the failure to comply with the terms
of the Basic Documents (as defined in the Camden Loan Agreement) could not
reasonably be expected to have a material adverse effect on the business,
properties, operations, condition (financial or otherwise) or prospects of
Mortgagor or the Mortgaged Property or on the ability of Mortgagor to
perform its obligations under the Basic Documents (as defined in the Camden
Loan Agreement) to which it is a party,
(iv) not commit or suffer waste with respect to the Mortgaged
Property,
(v) refrain from impairing or diminishing the value or integrity of
the Mortgaged Property or the security value of this Mortgage,
(vi) not remove, demolish or in any material respect alter any of the
Improvements, and
(vii) not make, suffer or permit any nuisance to exist on any of the
Mortgaged Property (the construction and operation of the Improvements
being deemed not to constitute a nuisance).
(b) Mortgagee and any persons authorized by Mortgagee shall have the right
to enter and inspect the Mortgaged Property and the right to inspect all work
done, labor performed and materials furnished in and about the Improvements and
the right to inspect and make copies of all books, contracts and records of
Mortgagor relating to the Mortgaged Property, all at such reasonable times
during business hours and at such intervals as Mortgagee may request. Mortgagor
authorizes Mortgagee to communicate directly with its accountants and with any
other entity keeping its book and records. If an Event of Default (as
hereinafter defined) shall have occurred and be continuing, Mortgagee and any
persons authorized by Mortgagee may (without
<PAGE>
7
being obligated to do so) enter or cause entry to be made upon the Real Estate
and inspect, repair and/or maintain the same as Mortgagee may deem necessary or
advisable, and may (without being obligated to do so) make such expenditures and
outlays of money as Mortgagee may deem appropriate for the preservation of the
Mortgaged Property. All expenditures and outlays of money made by Mortgagee
pursuant hereto shall be added to the Indebtedness and shall be secured hereby
and shall be payable on demand together with interest at an interest rate equal
to the lower of (i) the highest rate allowed by applicable law and (ii) an
interest rate per annum equal to 2% plus the Fixed Interest Rate (as defined in
the Loan Agreement) then applicable to the Fixed Rate Loans (such lower rate,
the "Default Rate") from the date of the expenditure or outlay until paid.
4. Requirements. Mortgagor, at Mortgagor's sole cost and expense, shall
promptly comply with, or cause to be complied with, and conform to all present
and future laws, statutues, codes, ordinances, judgments, decrees, injunctions,
rules, regulations and requirements pertaining to the Mortgaged Property,
including any applicable environmental, zoning or building, use and land use
laws, ordinances, rules or regulations and all covenants, restrictions and
conditions now or hereafter of record which may be applicable to it or to any of
the Mortgaged Property, or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction of any of the
Mortgaged Property (collectively, the "Legal Requirements"), except any Legal
Requirements (other than Relevant Environmental Laws (as defined in the Camden
Loan Agreement)), 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 Mortgagor or the rights or
interests of Mortgagee or (ii) materially adversely affect Mortgagor's ability
to perform its obligations under the Basic Documents (as defined in the Camden
Loan Agreement) to which it is a party.
5. Payment of Impositions. (a) Mortgagor shall pay and discharge all taxes,
assessments and governmental charges or levies imposed on it or its income or
profit or on any of its property, including the Mortgaged Property, prior to the
date on which penalties attach thereto, and all lawful claims which, if unpaid,
might become a lien upon the property, including the Mortgaged Property (all of
the foregoing are hereinafter collectively referred to as the "Imposition").
Mortgagor shall have the right, at Mortgagor's sole cost and expense, to contest
in good faith the amount or validity of any such Imposition by proper
proceedings timely instituted, and may permit the Impositions so contested to
remain unpaid during the period of such contest if (i) Mortgagor has given prior
written notice to Mortgagee of Mortgagor's intent so to contest or object to an
Imposition, (ii) Mortgagor diligently prosecutes such contest, (iii) such
contested Imposition (other than any such Imposition which Mortgagor, with the
consent of the Required Lenders (as defined in the Camden Loan Agreement) (not
to be unreasonably
<PAGE>
8
withheld), deems to be unmerited and not to require the setting aside of any
reserves) is included as an expense in the Construction Budget (as defined in
the Camden Loan Agreement) and, in the reasonable opinion of the Mortgagee after
giving effect to such expense, sufficient funds are projected to be available in
such Construction Budget to complete the Facility (as defined in the Camden Loan
Agreement) in accordance with subsection 7.1 of the Camden Loan Agreement, (iv)
during the period of such contest the enforcement of any contested Imposition is
effectively stayed; provided, however, that this clause (iv) shall apply to
contested income taxes of a Partner (as defined in the Camden Loan Agreement)
only if the failure to pay such tax may then become a lien on the Mortgaged
Property or may interfere with the operation of the Facility (as defined in the
Camden Loan Agreement) and (v) in the reasonable opinion of the Mortgagee, such
contest does not involve any substantial danger of the sale, forfeiture or loss
of any part of the Mortgaged Property, title thereto or any interest therein and
does not interfere with the operation of the Facility (as defined in the Camden
Loan Agreement). Mortgagor will promptly pay or cause to be paid any valid,
final judgment enforcing any such Imposition and cause the same to be satisfied
of record. Subject to the foregoing right of Mortgagor to contest any
Imposition, within thirty (30) days after the date when an Imposition is due and
payable, Mortgagor shall deliver to Mortgagee evidence acceptable to Mortgagee
showing payment of such Imposition. If by law any Imposition at Mortgagor's
option may be paid in installments (whether or not interest shall accrue on the
unpaid balance of such Imposition), Mortgagor may elect to pay such Imposition
in such installments and shall be responsible for the payment of such
installments with interest, if any.
(b) Except for the foregoing right of Mortgagor to contest any Imposition,
nothing herein otherwise shall affect any right or remedy of Mortgagee under
this Mortgage or otherwise, without notice or demand to Mortgagor, to pay any
Imposition after the date such Imposition shall have become due and to add to
the Indebtedness the amount so paid, together with interest thereon from the
date of such payment at the Default Rate. Any sums paid by Mortgagee in
discharge of any Imposition shall be (i) a lien on the Real Estate secured
hereby prior to any right or title to, interest in, or claim upon the Real
Estate subordinate to the lien of this Mortgage, and (ii) payable on demand
together with interest as set forth above.
(c) Mortgagor shall not claim, demand or be entitled to receive any credit
or credits towards the satisfaction of this Mortgage or on any interest payable
thereon for any taxes assessed against the Mortgaged Property or any part
thereof, and Mortgagor shall not claim any deduction from the taxable value of
the Mortgaged Property by reason of this Mortgage.
(d) Upon the occurrence and during the continuance of an Event of Default
hereunder, Mortgagor shall be entitled upon notice to Mortgagor to require
Mortgagor to pay to Mortgagee on a
<PAGE>
9
specified day each month an amount equal to one-twelfth of the annual
Impositions reasonably estimated by Mortgagee so that Mortgagee shall have
sufficient funds to pay the Impositions on the first day of the month preceding
the month in which they become due. In such event, Mortgagor agrees to cause all
bills, statements or other documents relating to Impositions to be sent or
mailed directly to Mortgagee. Upon receipt of such bills, statements or other
documents, and providing Mortgagor has deposited sufficient funds with Mortgagee
pursuant to this paragraph, Mortgagee shall pay such amounts as may be due
thereunder out of the funds so deposited with Mortgagee. If at any time and for
any reason the funds deposited with Mortgagee are or will be insufficient to pay
such amounts as may then or subsequently be due, Mortgagee shall notify
Mortgagor and Mortgagor shall immediately deposit an amount equal to such
deficiency with Mortgagee. Notwithstanding the foregoing, nothing contained
herein shall cause Mortgagee to be deemed a trustee of said funds or to be
obligated to pay any amounts in excess of the amount of funds deposited with
Mortgagee pursuant to this paragraph or constitute any limitation on the rights
of Mortgagee upon the occurrence of such Event of Default. Mortgagor shall not
be entitled to receive interest on said funds. If amounts collected by Mortgagee
under this paragraph exceed amounts necessary in order to pay Impositions,
Mortgagee may impound or reserve for future payment of Impositions such portion
of such excess payments as Mortgagee in its absolute discretion may deem proper.
Should Mortgagor fail to deposit with Mortgagee sums sufficient to pay such
Impositions in full at least thirty (30) days before delinquency thereof,
Mortgagee may, at Mortgagee's election, but without any obligation so to do,
advance any amounts required to make up the deficiency, which advances, if any,
shall be added to the Indebtedness and shall be secured hereby and shall be
repayable to Mortgagee with interest at the Default Rate or at the option of
Mortgagee the latter may, without making any advance whatsoever, apply any sums
held by it upon any obligation of Mortgagor secured hereby.
6. Insurance. (a) Mortgagor shall comply in all respects with the terms
and provisions contained in subsection 7.5 of the Camden Loan Agreement, which
terms and provisions are hereby incorporated in their entirety into this
Mortgage by reference thereto, as though expressly stated in this Mortgage.
(b) If Mortgagor is in default of its obligations to insure or deliver any
prepaid insurance policy or policies, then Mortgagee, at its option and without
notice, may effect such insurance from year to year, and pay the premium or
premiums therefor, and Mortgagor shall pay to Mortgagee such premium or premiums
so paid by Mortgagee with interest from the time of payment at the Default Rate,
on demand, and the same shall be deemed to be secured by this Mortgage and shall
be collectible in the same manner as the Indebtedness secured by this Mortgage.
(c) Mortgagor promptly shall comply with and conform to (i) all provisions
of each insurance policy, and (ii) all
<PAGE>
10
requirements of the insurers applicable to Mortgagor or to any of the Mortgaged
Property or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration or repair of any of the Mortgaged Property. Mortgagor
shall not use the Mortgaged Property, or conduct any activities on the Premises,
if such use or activities would permit any insurer to cancel any insurance
policy required to be maintained by the Camden Loan Agreement.
(d) If the Mortgaged Property or any part thereof is damaged or destroyed
by fire or any other cause, Mortgagor shall give prompt notice to Mortgagee and
all insurance proceeds shall be paid as provided in the Security Deposit
Agreement (as defined in the Camden Loan Agreement).
(e) In the event of foreclosure of this Mortgage or other transfer of
title to the Mortgaged Property in extinguishment of the Indebtedness, all
right, title and interest of Mortgagor in and to any insurance policies then in
force shall pass to the purchaser or grantee and Mortgagor hereby appoints
Mortgagee its attorney-in-fact, in Mortgagor's name, to assign and transfer all
such policies and proceeds to such purchaser or grantee.
(f) Upon the occurrence and during the continuance of an Event of Default
hereunder, Mortgagee shall be entitled upon notice to Mortgagor to require
Mortgagor to pay monthly in advance to Mortgagee the equivalent of 1/12th of the
estimated annual premiums due on such insurance. In such event, Mortgagor shall
cause all bills, statements or other documents relating to the insurance
premiums to be sent or mailed directly to Mortgagee. Upon receipt of such bills,
statements or other documents, and providing Mortgagor has deposited sufficient
funds with Mortgagee pursuant to this paragraph, Mortgagee shall pay such
amounts as may be due thereunder out of the funds so deposited with Mortgagee.
If at any time and for any reason the funds deposited with Mortgagee are or will
be insufficient to pay such amounts as may then or subsequently be due,
Mortgagee shall notify Mortgagor and Mortgagor shall immediately deposit an
amount equal to such deficiency with Mortgagee. Notwithstanding the foregoing,
nothing contained herein shall cause Mortgagee to be deemed a trustee of said
funds or to be obligated to pay any amounts in excess of the amount of funds
deposited with Mortgagee pursuant to this paragraph or constitute any limitation
on the rights of Mortgagee upon the occurrence of such Event of Default.
Mortgagor shall not be entitled to receive interest on said funds. If amounts
collected by Mortgagee under this paragraph exceed amounts necessary in order to
pay such premiums, Mortgagee may impound or reserve for future payment of
insurance premiums such portion of such excess payments as Mortgagee in its
absolute discretion may deem proper. Should Mortgagor fail to deposit with
Mortgagee sums sufficient to pay in full such insurance premiums at least 30
days before delinquency thereof, Mortgagee may, at Mortgagee's election, but
without any obligation so to do, advance any amounts required to make up the
deficiency, which advances, if any, shall be payable on demand by Mortgagor with
<PAGE>
11
interest thereon at the Default Rate, or at the option of Mortgagee the latter
may, without making any advance whatsoever, apply any sums held by it upon any
obligation of Mortgagor secured hereby.
7. Condemnation/Eminent Domain. Immediately upon obtaining knowledge of
the institution of any proceedings for the condemnation of the Mortgaged
Property, or any portion thereof, Mortgagor will notify Mortgagee of the
pendency of such proceedings. Mortgagee, at Mortgagee's option and in
Mortgagee's sole discretion, shall have the right to commence, appear in and
prosecute, jointly with Mortgagor, any action or proceeding relating to any
condemnation of the Mortgaged Property, or any portion thereof at its sole cost
and expense. Mortgagor shall not, without Mortgagee's written consent, settle or
compromise any claim in connection with such condemnation. If Mortgagee elects
not to participate in such condemnation proceeding, then Mortgagor shall, at its
expense, diligently prosecute any such proceeding and shall consult with
Mortgagee, its attorneys and experts and cooperate with them in any defense of
any such proceedings. All awards and proceeds of condemnation shall be assigned
to Mortgagee to be applied as provided in the Security Deposit Agreement (as
defined in the Camden Loan Agreement). Mortgagor agrees to execute any such
assignments of all such awards as Mortgagee may request.
8. Limitation on Disposition and Priority of Lien, Utilities. (a) Except
as permitted under the Camden Loan Agreement, without the prior written consent
of Mortgagee in each instance, Mortgagor shall not sell, assign, convey or
otherwise transfer or dispose of the Mortgaged Property or any part thereof or
interest therein, either voluntarily or involuntarily, by operation of law or
otherwise, and Mortgagor shall not contract to do any of the foregoing. Except
for Permitted Liens (as defined in the Camden Loan Agreement) and except as
permitted in Article 5 of this Mortgage and in the next following sentence,
Mortgagor shall not create, consent to or suffer the creation or existence of
any liens, charges or encumbrances (each, a "Prohibited Loan") on any of the
Mortgaged Property, whether or not such Prohibited Lien is superior or
subordinate to this Mortgage. Mortgagor shall pay when due all lawful claims and
demands of mechanics, materialmen, laborers and others which, if unpaid, might
result in, or permit the creation of a Prohibited Lien; provided that Mortgagor
shall have the right to contest in good faith any such Prohibited Lien by proper
proceedings timely instituted, and may permit such Prohibited Lien to exist
during the period of such contest if: (i) Mortgagor diligently prosecutes such
contest, (ii) such contested item (other than any such item which Mortgagor with
the consent of the Mortgagee (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 Construction Budget (as defined in the Camden Loan Agreement)
and, in the reasonable opinion of the Mortgagee, after giving effect to such
expense, sufficient funds are projected to be available in such Construction
Budget to complete the Facility
<PAGE>
12
(as defined in the Camden Loan Agreement) in accordance with subsection 7.1 of
the Camden Loan Agreement, (iii) during the period of such contest the
enforcement of any contested item and the Prohibited Lien relating thereto is
effectively stayed, and (iv) in the reasonable opinion of the Required Lenders
(as defined in the Camden Loan Agreement), such contest does not involve any
substantial danger of the sale, forfeiture or loss of any part of the Mortgaged
Property, title thereto or any interest therein and does not interfere with the
operation of the Facility (as defined in the Camden Loan Agreement). Mortgagor
will promptly pay or cause to be paid any valid, final judgment enforcing any
such item, cause the Prohibited Lien relating thereto to be removed and
otherwise cause such item to be satisfied of record.
(b) Mortgagor shall pay when due all utility charges which are incurred by
it for gas, electricity, water or sewer services and all other assessments or
charges of a similar nature, whether public or private and whether or not such
assessments or charges are liens on the Mortgaged Property.
(c) All Leases of the Mortgaged Property or any part thereof shall be
subordinate to the lien of this Mortgage.
9. Estoppel Certificates. Mortgagor, within ten (10) business days upon
request, shall deliver a written statement, duly acknowledged, setting forth the
amount of the Indebtedness, and whether any offsets, claims, counterclaims or
defenses exist against the Indebtedness secured by this Mortgage.
10. Expenses. Mortgagor shall pay all out-of-pocket expenses reasonably
incurred by Mortgages with respect to any and all transactions contemplated
herein and the preparation of any document reasonably required hereunder
including (without limiting the generality of the foregoing) all title and
conveyancing charges, recording and filing fees and taxes, mortgage taxes,
intangible personal property taxes, escrow fees, revenue and tax stamp expenses,
insurance premiums (including title insurance premiums), brokerage commissions,
finders' fees, placement fees, surveyors', appraisers' and attorneys' fees and
disbursements (subject to the limitation on attorneys' fees contained in
subsection 11.5 of the Camden Loan Agreement), and will reimburse to Mortgagee
all of the foregoing expenses paid by Mortgagee which have been or may be
reasonably incurred by Mortgagee with respect to any and all of the transactions
contemplated herein. In addition to the foregoing, if any action or proceeding
be commenced (including but not limited to any action to foreclose this Mortgage
or to collect the Indebtedness), to which action or proceeding Mortgagee is made
a party, or in which it becomes necessary to defend or uphold the lien of this
Mortgage, or in which Mortgage is served with any legal process, discovery
notice or subpoena relating to Mortgagee's lending to Mortgagor or accepting a
guaranty from a guarantor of the Indebtedness or of any of the Obligations,
Mortgagor will reimburse Mortgagee for all of the foregoing
<PAGE>
13
expenses which have been or may be reasonably incurred by Mortgagee with respect
to the foregoing. All sums paid by Mortgagee for the expense of any litigation
to prosecute or defend the rights and lien created by this Mortgage or to appear
or to take action in response to any such legal process, discovery notice or
subpoena (including counsel fees and disbursements) shall be paid by Mortgagor,
together with interest thereon at the Default Rate, and any such sum and the
interest thereon shall be a lien on the Mortgaged Property, prior to any right,
or title to, interest in or claim upon the Mortgaged Property attaching or
accruing subsequent to the lien of this Mortgage, and shall be deemed to be
secured by this Mortgage. In any action to foreclose this Mortgage, or to
recover or collect the Indebtedness, the provisions of this Article with respect
to the recovery of costs, disbursements and allowances shall prevail unaffected
by the provisions of any law with respect to the same to the extent that the
provisions of this Article are not inconsistent therewith or violative thereof.
11. Mortgagee's Right to Perform. Upon the occurrence of an Event of
Default, Mortgagee, without waiving, or releasing Mortgagor from, any Event of
Default under this Mortgage, may (but shall be under no obligation to), at any
time perform any of the covenants or agreements of Mortgagor hereunder, and the
cost thereof, with interest at the Default Rate, shall immediately be due from
Mortgagor to Mortgagee, and the same shall be secured by this Mortgage and shall
be a lien on the Mortgaged Property prior to any right, title to, interest in or
claim upon the Mortgaged Property attaching subsequent to the lien of this
Mortgage. No payment or advance of money by Mortgagee under this Article shall
be deemed or construed to cure Mortgagor's default or waive any right or remedy
of Mortgagee hereunder.
12. Further Assurances. Mortgagor agrees, upon demand of Mortgagee, to do
any act or execute any additional documents (including, but not limited to,
security agreements on any personalty included or to be included in the
Mortgaged Property) as may be reasonably required by Mortgagor to confirm the
lien of this Mortgage.
13. Assignment of Rents. All of the rents, royalties, issues, profits,
revenue, income and other benefits of the Mortgaged Property arising from the
use and enjoyment by Mortgagor of all or any portion thereof or from any Lease
(the "Rents and Profits") are hereby absolutely and unconditionally assigned,
transferred, conveyed and set over to Mortgagee to be applied in accordance with
the terms of the Security Deposit Agreement (as defined in the Camden Loan
Agreement), and Mortgagor grants to Mortgagee the right to enter the Mortgaged
Property for the purpose of collecting the same and to let the Mortgaged
Property or any part thereof, and to apply the Rents and Profits in accordance
with the Security Deposit Agreement (as defined in the Camden Loan Agreement).
The foregoing assignment and grant shall continue in effect until the
Indebtedness is paid in full, but Mortgage hereby waives the right to enter the
<PAGE>
14
Mortgaged Property for the purpose of collecting the Rents and Profits and
Mortgagor shall be entitled to collect, receive, use and retain the Rents and
Profits until the occurrence of an Event of Default under this Mortgage; such
right of Mortgagor to collect, receive, use and retain the Rents and Profits may
be revoked by Mortgagee upon the occurrence of any Event of Default by giving
not less than five days' written notice of such revocation to Mortgagor; in the
event such notice is given, Mortgagor shall pay over to Mortgagee, or to any
receiver appointed to collect the Rents and Profits, any lease security deposits
(which security deposits shall be held in trust and not co-mingled with
Mortgagee's other funds), and shall pay monthly in advance to Mortgagee, or to
any such receiver, the fair and reasonable rental value for the use and
occupancy of the Mortgaged Property or of such part thereof as may be in the
possession of Mortgagor, and upon default in any such payment will vacate and
surrender the possession of the Mortgaged Property to Mortgagee or to such
receiver, and in default thereof may be evicted by summary proceedings.
Mortgagor shall not accept prepayments of installments of Rent and Profits to
become due for a period of more than one month in advance (except for security
deposits and estimated payments of percentage rent, if any).
14. Events of Default. The occurrence of any one or more of the following
events shall constitute an "Event of Default" by Mortgagor hereunder:
(a) the occurrence of any event which would constitute an event of default
under the Loan Agreement;
(b) if Mortgagor sells, transfers, assigns or conveys the Mortgaged
Property or any part thereof or interest therein (by operation of law or
otherwise) or if Mortgagor further mortgages, pledges or otherwise encumbers
the Mortgaged Property or any part thereof or any interest therein or creates
or suffers to exist any lien, charge or other encumbrance on the Mortgaged
Property or any part thereof, whether superior or subordinate to the lien of
this Mortgage, whether recourse or nonrecourse, except for Permitted Liens
(as defined in the Camden Loan Agreement) and the First Mortgage; or
(c) a failure to (i) keep in force the insurance required by the Camden
Loan Agreement or (ii) comply with and conform to all provisions and
requirements of the insurance policies and the insurers thereunder which
would affect the Mortgagor's ability to keep in force the insurance required
by the Camden Loan Agreement or to collect any proceeds therefrom; or
(d) upon default, ten days after request, either in assigning and
delivering the policy or policies of insurance described in the Camden Loan
Agreement or in reimbursing
<PAGE>
15
Mortgagee for premiums paid on such insurance, together with interest
thereon, as provided herein; or
(e) the holder of any other mortgage lien on the Real Estate shall
commence any action to foreclose such lien or to otherwise enforce any of
its rights under its mortgage.
15. Remedies. Upon the occurrence of an Event of Default hereunder,
(i) if such event is an Event of Default specified in paragraph (e) or (f) of
Section 8 of the Loan Agreement, then during the continuance of such Event of
Default, automatically and without notice the Indebtedness and all amounts owing
under this Mortgage shall immediately become due and payable, and (ii) if such
event is an Event of Default other than those specified in paragraph (e) or (f)
of Section 8 of the Loan Agreement, Mortgagee may declare the Indebtedness and
all amounts owing under this Mortgage to be immediately due and payable without
presentment, demand, protest or notice of any kind, and Mortgagee personally, or
by its agents or attorneys, may take such action, without notice or demand, as
it deems advisable to protect and enforce Mortgagee's rights against Mortgagor
in and to the Mortgaged Property, including, but not limited to, the following
actions:
(a) enter upon and take possession of the Mortgaged Property, and
lease and let the Mortgaged Property, or any part thereof, and receive all
the Rents and Profits thereof which are overdue, due or to become due, and
apply the same, after payment of all reasonably necessary charges and
expenses, on account of the amounts hereby secured, and the Mortgagee is
hereby given and granted full power and authority to do any act or thing
which Mortgagor might or could do in connection with the management and
operation of the Mortgaged Property. This covenant becomes effective
either with or without any action brought to foreclose this Mortgage and
without applying at any time for a receiver of such rents;
(b) institute an action of mortgage foreclosure, or take other
action as the law may allow, at law or in equity, for the enforcement of
this mortgage, and proceed thereon to final judgment and execution of the
entire unpaid balance of the Indebtedness including costs of suit,
interest and reasonable attorneys' fees. In case of any sale of the
Mortgaged Property by virtue of judicial proceedings, the Mortgaged
Property may be sold in one parcel and as an entirety or in such parcels,
manner or order as the Mortgagee in its sole discretion may elect;
(c) institute partial foreclosure proceedings with respect to the
portion of the Indebtedness so in default, as if under a full foreclosure,
and without declaring the entire Indebtedness due, provided that if
foreclosure sale is made because of default of a part of the Indebtedness,
such sale may be made subject to the continuing lien of this
<PAGE>
16
Mortgage for the unmatured part of the Indebtedness; and it is agreed that
such sale pursuant to a partial foreclosure, if so made, shall not in any
manner affect the unmatured part of this Mortgage and the lien thereof
shall remain in full force and effect just as though no foreclosure sale
had been made under the provisions of this subsection. Notwithstanding the
filing of any partial foreclosure or entry of a decree of sale therein,
Mortgagee may elect at any time prior to a foreclosure sale pursuant to
such decree, to discontinue such partial foreclosure and to accelerate the
Indebtedness by reason of any uncured default or defaults upon which such
partial foreclosure was predicated or by reason of any other defaults, and
proceed with full foreclosure proceedings. It is further agreed that
several foreclosure sales may be made pursuant to partial foreclosures
without exhausting the right of full or partial foreclosure sale for any
unmatured part of the Indebtedness, it being the purpose to provide for a
partial foreclosure sale of the secured Indebtedness of any matured
portion of the secured Indebtedness without exhausting the power to
foreclose and to sell the Mortgaged Property pursuant to any such partial
foreclosure for any other part of the secured Indebtedness whether matured
at the time or subsequently maturing; and without exhausting any right of
acceleration and full foreclosure;
(d) appoint a receiver of the Rents and Profits of the Mortgaged
Property without the necessity of proving either the depreciation or the
inadequacy of the value of the security or the insolvency of Mortgagor or
any person who may be legally or equitably liable to pay moneys secured
hereby and Mortgagor and each such person waives such proof and hereby
consents to the appointment of a receiver;
(e) institute an action for specific performance of any covenant
contained herein or in aid of the execution of any power herein granted;
(f) if Mortgagor is occupying the Mortgaged Property, or any part
thereof, it is hereby agreed that the said occupants shall pay such
reasonable rental monthly in advance as the Mortgagee shall demand for the
Mortgaged Property, or the part so occupied, and for the use of Equipment
covered by this Mortgage;
(g) apply on account of the unpaid Indebtedness and the interest
thereon or on account of any arrearages of interest thereon, or on account
of any balance due to the foreclosure sale of the Mortgaged Property, or
any part thereof, any unexpended moneys still retained by the Mortgagee
that were paid by Mortgagor to the Mortgagee pursuant to Article 6(d)
hereof;
<PAGE>
17
(h) exercise any and all other rights and remedies granted under
this Mortgage or now or hereafter existing in equity, at law, by virtue of
statute or otherwise.
16. Remedies Cumulative and Concurrent. Mortgages shall be entitled
to enforce payment and performance of any Indebtedness or Obligations secured
hereby and to exercise all rights and powers under this Mortgage or other
agreement or any laws now or hereafter in force, notwithstanding some or all of
the Indebtedness and Obligations may nor or hereafter be otherwise secured,
whether by mortgage, deed of trust, pledge, lien, assignment or otherwise.
Neither the acceptance of this Mortgage nor its enforcement, whether by court
action or pursuant to the power of sale or other powers herein contained, shall
prejudice or in any manner affect Mortgagee's right to realize upon or enforce
any other securities now or hereafter held by Mortgagee, it being agreed that
Mortgagee shall be entitled to enforce this Mortgage and any other security now
or hereafter held by Mortgagee in such order and manner as Mortgagee may in its
absolute discretion determine. No remedy herein conferred upon or reserved to
Mortgagee is intended to be exclusive of any other remedy herein or by law
provided or permitted, but each shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute. Every power or remedy given to Mortgagee or to which
Mortgagee may be otherwise entitled, may be exercised, concurrently or
independently against each Mortgagor or against the Mortgaged Property, or
either of them, from time to time and as often as may be deemed expedient by
Mortgagee. The failure to exercise any such power or remedy will not be
construed as a waiver or release of that power or remedy.
17. Discontinuance of Proceedings. If Mortgagee has proceeded to
enforce any right under the Note, the Loan Agreement, or this Mortgage and such
proceedings have been discontinued or abandoned for any reason, then in every
such case, Mortgagor and Mortgagee will be restored to their former positions
and the rights, remedies and powers of Mortgagee will continue as if no such
proceedings had been taken.
18. Application of Proceeds. The proceeds of any sale of all or any
portion of the Mortgaged Property upon foreclosure and the earnings of any
holding, leasing, operation or other use of the Mortgaged Property following any
Event of Default will be applied by Mortgagee as follows:
First: To the payment of the costs and expenses of any such sale or
of any such holding, leasing, operation or other use and of any judicial
proceeding wherein any sale may be made, and all expenses, advances,
liabilities and sums made or furnished or incurred by Mortgagee,
including, without limitation, receiver's, accountants' and attorneys'
fees and all taxes, assessments or other charges, except any taxes,
assessments or other charges subject to which the Mortgaged Property shall
have been sold.
<PAGE>
18
Second: To the payment of the amount secured by the First Mortgage.
Third: To the payment of the Indebtedness secured hereby.
Fourth: To the payment of any other sums required to be paid pursuant
to any provision of this Mortgage, the Note or the Loan Agreement.
Fifth: The balance, if any, to whomsoever may be lawfully entitled to
receive the same.
19. Successor Mortgagor. In the event ownership of the Mortgaged
Property or any portion thereof becomes vested in a person other than the
Mortgagor herein named, Mortgagee may, without notice to the Mortgagor herein
named, whether or not Mortgagee has given written consent to such change in
ownership, deal with such successor or successors in interest with reference to
this Mortgage and the indebtedness secured hereby, and in the same manner as
with the Mortgagor herein named, without in any vitiating or discharging the
Mortgagor's liability hereunder or under the Indebtedness.
20. Security Agreement Under Uniform Commercial Code. Mortgagor and
Mortgagee agree that this Mortgage shall constitute a Security Agreement within
the meaning of the Uniform Commercial Code of the State of New Jersey
(hereinafter in this paragraph referred to as the "Code") with respect to (i)
any and all sums at any time on deposit or held by Mortgagee pursuant to any of
the provisions of this Mortgage ("Deposits") and (ii) with respect to any goods
or property included in the definition of the term "Mortgaged Property", which
goods or property may not be deemed to form a part of the Real Estate described
in Exhibit A hereto or may not constitute a "fixture" (within the meaning of
Section 9-313 of the Code), and all replacements of such property, substitutions
for such property, additions to such property, and the proceeds thereof (all of
said property and the replacements, substitutions, and additions thereto and the
proceeds thereof being sometimes hereinafter collectively referred to as the
"Collateral"), and that a security interest in and to the Collateral is hereby
granted to Mortgagee, and the Collateral and all of Mortgagor's right, title and
interest therein are hereby assigned to Mortgagee, to secure the Indebtedness
and Obligations. Upon the occurrence and during the continuance of an Event of
Default under this Mortgage, Mortgagee, pursuant to the appropriate provisions
of the Code, shall have the option of proceeding with respect to the Collateral
as to both real and personal property in accordance with its rights and remedies
with respect to the real property, in which event the default provisions of the
Code shall not apply. The parties agree that, in the event Mortgagee shall elect
to proceed with respect to the Collateral separately from the real property, ten
(10) days' notice of the sale of the Collateral shall be reasonable notice. The
expenses of retaking,
<PAGE>
19
holding, preparing for sale, selling and the like incurred by Mortgagee shall
include, but not be limited to, attorneys' fees and expenses incurred by
Mortgagee. Mortgagor agrees that, without the written consent of Mortgagee,
Mortgagor will not remove or permit to be removed from the Real Estate any of
the Collateral. Mortgagor shall, from time to time, on request of Mortgagee,
deliver to Mortgagee an inventory of the Collateral in reasonable detail.
Mortgagor covenants and represents that all Collateral now is, and that all
replacements thereof, substitutions therefor or additions thereto, will be, free
and clear of liens, encumbrances, or the security interest of others, other than
Permitted Liens (as defined in the Camden Loan Agreement).
21. Indemnification; Waiver of Claim. (a) If Mortgagee is made a party
defendant to any litigation concerning this Mortgage or the Mortgaged Property
or any part thereof or interest therein, or the occupancy thereof by Mortgagor,
then Mortgagor shall indemnify, defend and hold Mortgagee harmless from all
liability by reason of said litigation (other than that arising solely from
Mortgagee's own willful misconduct or gross negligence), including attorneys'
fees and expenses incurred by Mortgagee in any such litigation, whether or not
any such litigation is prosecuted to judgment. If Mortgagee commences an action
against Mortgagor to enforce any of the terms hereof or because of the breach by
Mortgagor of any of the terms hereof, or for the recovery of any sum secured
hereby, Mortgagor shall pay to Mortgagee attorneys' fees and expenses, together
with interest thereon at the Default Rate from the date the same are paid by
Mortgagee to the date of reimbursement by Mortgagor, and the right to such
attorneys' fees and expenses shall be deemed to have accrued on the commencement
of such action, and shall be enforceable whether or not such action is
prosecuted to judgment. If an Event of Default shall have occurred, Mortgagee
may engage an attorney or attorneys to protect its rights hereunder, and in the
event of such engagement, Mortgagor shall pay Mortgagee attorneys' fees and
expenses incurred by Mortgagee, whether or not an action is actually commenced
against Mortgagor by reason of breach.
(b) Mortgagor waives any and all right to claim or recover against
Mortgagee, its officers, employees, agents and representatives, for loss of or
damage to Mortgagor, the Mortgaged Property, Mortgagor's property or the
property of others under Mortgagor's control from any cause whatsoever, except
for the willful misconduct or gross negligence of Mortgagee, its officers,
employees, agents or representatives.
22. No Waivers, Etc. Any failure by Mortgagee to insist upon the strict
performance by Mortgagor of any of the terms and provisions of this Mortgage
shall not be deemed to be a waiver of any of the terms and provisions hereof,
and Mortgagee, notwithstanding any such failure, shall have the right thereafter
to insist upon the strict performance by Mortgagor of any and all of the terms
and provisions of this Mortgage to be performed by
<PAGE>
20
Mortgagor; Mortgagee may release, regardless of consideration and without the
necessity for any notice to or consent by the holder of any subordinate lien on
the Mortgaged Property, any part of the security held for the obligations
secured by this Mortgage without, as to the remainder of the security, in
anywise impairing or affecting the lien of this Mortgage or the priority of such
lien over any subordinate lien. Mortgagee may resort for the payment of the
Indebtedness secured by this Mortgage to any other security therefor held by
Mortgagee in such order and manner as Mortgagee may elect.
23. Waivers by Mortgagor. Mortgagor hereby waives, to the fullest extent
permitted by applicable law, all errors and imperfections in any proceedings
instituted by Mortgagee under this Mortgage and all benefit of any present or
future statute of limitations or moratorium law or any other present or future
law, regulation or judicial decision, nor shall Mortgagor at any time insist
upon or plead, or in any manner whatever claim or take any benefit or advantage
of such statute, law, regulation or judicial decision which (a) exempts any of
the Mortgaged Property or any other property, real or personal, or any part of
the proceeds arising from any sale thereof from attachment, levy or sale under
execution, (b) provides for any stay of execution, moratorium, marshalling of
assets, exemption from civil process, redemption, extension of time for payment
or valuation or appraisement of any of the Mortgage Property, (c) requires
Mortgagee to institute proceedings in mortgage foreclosure against the Mortgaged
Property before exercising any other remedy afforded Mortgagee hereunder upon
the occurrence of an Event of Default, or (d) conflicts with or may affect,
adverse to Mortgagee, any provision, covenant or term of this Mortgage.
24. Trust Funds. All lease security deposits of the Real Estate shall be
treated as trust funds not to be commingled with any other funds of Mortgagor.
Within 10 days after request by Mortgagee, Mortgagor shall furnish Mortgagee
satisfactory evidence of compliance with this paragraph, together with a
statement of all lease security deposits by lessees and copies of all Leases not
theretofore delivered to Mortgagee, which statement shall be certified by
Mortgagor.
25. 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, or to such other
address as may be hereafter notified by the respective parties hereto and any
future holders of the Notes:
<PAGE>
21
Mortgagor: Camden Cogen L.P.
c/o Cogen Technologies, Inc.
1600 Smith Street
Suite 5000, 50th Floor
Houston, Texas 77002
Attention: Robert C. McNair
Telecopy: (713) 951-7747
Mortgagee: 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
1600 Summer Street
Stamford, Connecticut 06927
Attention: Project Financing
Investments -- Transportation and
Industrial Financial Division
Telecopy: (203-357-6366
26. Taxes on Mortgagee. In the event of the passage after the date of
this Mortgage of any law of the jurisdiction in which the Real Estate is located
deducting from the value of the Real Estate for the purposes of taxation any
lien thereon or changing in any way the laws for the taxation of mortgages or
debts secured by mortgages for state or local purposes or the manner of the
collection of any such taxes and imposing a tax, either directly or indirectly,
on this Mortgage, Mortgagee shall have the right to declare all sums outstanding
secured by this Mortgage immediately due and payable, provided, however, that
such election shall be ineffective if Mortgagor is exempt from such tax or, if
not exempt from such tax, is permitted by law to pay the whole of such tax (or
to provide funds to Mortgagee to pay such taxes or to reimburse Mortgagee for
payment of such taxes) in addition to all other payments required hereunder and
if Mortgagor pays such tax (or provides funds to Mortgagee to pay such tax or
reimburses Mortgagee for payment of such tax) when the same is due and payable
and agrees in writing to pay such tax when thereafter levied or assessed against
the Real Estate.
27. No Modification; Binding Obligations. This Mortgage is subject to
modification or amendment by a writing executed by Mortgagor and Mortgagee which
shall be recorded in the land records of the County of Camden, New Jersey.
Pursuant to N.J.S.A. 46:9-2, such modification or amendment shall not affect the
priority of this Mortgage. The covenants of this Mortgage shall run with the
land and bind Mortgagor, and its distributee, personal representatives,
successors and assigns, and all present and subsequent encumbrancers, lessees
and sublessee of any of the Mortgaged Property, and shall inure to
<PAGE>
22
the benefit of Mortgagee and its successors, assigns and endorsees.
28. Miscellaneous. As used in this Mortgage, the singular shall include
the plural as the context requires and the following words and phrases shall
have the following meanings: (a) "including" shall mean "including but not
limited to"; (b) "provisions" shall mean "provisions, terms, covenants and/or
conditions"; (c) "lien" shall mean "lien, charge, encumbrance, security
interest, mortgage and/or deed of trust"; (d) "obligation" shall mean
"Obligation, duty, covenant and/or condition"; and (e) "any of the Mortgaged
Property" shall mean "the Mortgaged Property or any part thereof or interest
therein." Any act which Mortgagee is permitted to perform hereunder may be
performed at any time and from time to time by Mortgagee or any person or entity
designated by Mortgagee. Any act which is prohibited to Mortgagor hereunder is
also prohibited to all lessees of any of the Mortgaged Property. Each
appointment of Mortgagee as attorney-in-fact for Mortgagor under the Mortgage is
irrevocable and coupled with an interest. Mortgagee has the right to reasonably
refuse to grant its consent, approval or acceptance or to indicate its
satisfaction, whenever such consent, approval, acceptance or satisfaction is
required hereunder.
29. Captions. The captions or headings at the beginning of each Article
hereof are for the convenience of the parties and are not a part of this
Mortgage.
30. Successors and Assigns. The covenants contained herein shall run
with the land and bind Mortgagor, its successors and assigns, and all subsequent
owners, encumbrances and tenants of the Mortgaged property, and shall inure to
the benefit of the Mortgagee.
31. Enforceability. (a) This Mortgage, the validity and enforceability
of this Mortgage and all transactions and questions arising hereunder, shall be
governed by and construed and interpreted in accordance with the laws of the
State of New Jersey. Whenever possible, each provision of this Mortgage shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Mortgage shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remaining provisions of this
Mortgage. Nothing in this Mortgage shall require Mortgagor to pay, or Mortgagee
to accept, interest in an amount which would subject Mortgagee to penalty under
applicable law. In the event that the payment of any interest due hereunder
would subject Mortgagee to penalty under applicable law, then ipso facto the
obligation of Mortgagor to make such payment shall be reduced to the highest
rate authorized under applicable law without penalty.
(b) Mortgagor hereby irrevocably agrees that any legal action, suit, or
proceeding against it with respect to its
<PAGE>
23
obligations, liabilities or any other matter under or arising out of or in
connection with this Mortgage or for recognition or enforcement of any judgment
rendered in any such action, suit or proceeding may be brought in the United
States Courts for the Southern District of New York, or in the courts of the
State of New Jersey, as Mortgagee may elect, and, by execution and delivery of
this Mortgege, Mortgagor hereby irrevocably accepts and submits to the non-
exclusive jurisdiction of each of the aforesaid courts in personam, generally
and unconditionally with respect to any such action, suit or proceeding for
itself and in respect of its property. Mortgagor further agrees that final
judgment against it in any action, suit, or proceeding referred to herein shall
be conclusive and may be enforced in any other jurisdiction, 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. Mortgagor and Mortgagee each
hereby waives trial by jury.
32. RECEIPT OF COPY. MORTGAGOR ACKNOWLEDGES THAT IT HAS RECEIVED
WITHOUT CHARGE A TRUE COPY OF THIS MORTGAGE.
33. Loan Agreement. This Mortgage has been executed and delivered
pursuant to the Loan Agreement and is entitled to the benefits thereof.
34. Limitation of Liability. Mortgagee agrees that the liability of
Mortgagor under this Mortgage, the Loan Agreement, the Notes and the other
Obligations shall be limited to the Mortgaged Property and the rights and
remedies of Mortgagee against the Mortgaged Property pursuant to this Mortgage
and the other Collateral Security Documents, and in no event shall Mortgagor or
any Partner (as defined in the Camden Loan Agreement) 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 Mortgagee to the
Mortgaged Property pursuant to this Mortgage and the other Collateral Security
Documents or be deemed to constitute a waiver of liability, if any, of any
Person for
<PAGE>
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.
35. Release. Mortgagee shall release the lien of this Mortgage promptly
following the fulfillment of the provisions of Section 9.3 of the Loan Agreement
with respect to the release of Collateral.
IN WITNESS WHEREOF, the undersigned has caused this Mortgage to be duly
executed under seal the day and year first above written.
CAMDEN COGEN L.P.
(Corporate Seal) By: Cogen Technologies Camden GP
Limited Partnership, its general
partner
ATTEST: By: Cogen Technologies Camden,
Inc., its general partner
/s/ MaryAnn McLendon
- ---------------------------- By: /s/ Lawrence Thomas
MaryAnn McLendon --------------------------
Assistant Secretary Name: Lawrence Thomas
Title: V.P. - Finance
<PAGE>
EXHIBIT A
ALL THAT CERTAIN land or premises situate, lying and being in the City
of Camden, County of Camden and State of New Jersey. The legal description
being more particularly bounded and described as follows:
BEGINNING at a point in the Southeasterly corner of Broadway (66 feet
wide) and Chelton Avenue (60 feet wide); thence
(1) South 88 degrees 33 minutes 00 seconds East along the Southerly line
off Chelton Avenue, a distance of 450 feet to the Westerly line of Sixth Street
(50 feet wide); thence
(2) South 01 degrees 20 minutes 45 seconds West along the Westerly line
of Sixth Street, a distance of 400 feet to a point; thence
(3) North 88 degrees 33 minutes 00 seconds West, a distance of 210 feet
to a point in the center line of Fillmore Street (now vacated); thence
(4) North 01 degrees 20 minutes 45 seconds East and along the center
line of Fillmore Street (now vacated) 20 feet to a point; thence
(5) North 88 degrees 33 minutes 00 seconds West, a distance of 115
feet to a point in the center line of Hedley Street (now vacated); thence
(6) North 01 degrees 20 minutes 45 seconds East along the center line
of Hedley Street (now vacated), a distance of 20 feet to a point; thence
(7) North 88 degrees 33 minutes 00 seconds West, a distance of 125 feet
to a point in the Easterly line of Broadway; thence
(8) North 01 degrees 20 minutes 45 seconds East along the Easterly line
of Broadway, a distance of 360 feet to point and place of beginning.
BEING Lot 1, Block 506, Tax Map.
<PAGE>
STATE OF TEXAS (S)
(S) ss.:
COUNTY OF HARRIS (S)
BE IT REMEMBERED, that on this 27th day of January, 1992, in the County
and State aforesaid, before me, the subscriber, a Notary Public of Harris
County, Texas authorized to take acknowledgments and proofs in said County and
State, personally appeared Lawrence Thomas and MaryAnn McLendon, who, I am
satisfied, are the persons who signed the within instrument as V.P. - Finance
and Asst. Secretary, respectively, of Cogen Technologies Camden, Inc., the
corporation named therein, and they thereupon acknowledged that the within
instrument signed by the corporation and sealed with its corporate seal, was
signed, sealed with the corporate seal and delivered by them as such officers
and is the voluntary act and deed of the corporation, made by virtue of
authority from its Board of Directors, as a general partner on behalf of Cogen
Technologies Camden GP Limited Partnership, a Delaware limited partnership, as a
general partner on behalf of CAMDEN COGEN L.P., a Delaware limited partnership
the partnership which executed the within instrument.
Signature /s/ Elaine A. Campbell
---------------------------
ELAINE A. CAMPBELL Elaine A. Campbell
[SEAL] NOTARY PUBLIC, STATE OF TEXAS
MY COMMISSION EXPIRES Printed
JUL. 27, 1993 -----------------------------
Notary Public
My commission expires:
--------------
<PAGE>
Schedule 1
CONTRACTS
Equipment Contract, dated February 3, 1992, by and between the Borrower
and General Electric.
Power Purchase Agreement, dated April 15, 1988, between PSE&G and the
Borrower.
Energy Purchase Agreement, dated December 18, 1989, between the Steam
Host and the Borrower.
Gas Service Agreement, dated May 15, 1991, between PSE&G and the
Borrower, as amended by the First Amendment thereto dated November 1, 1991.
Engineering, Procurement and Construction Contract, dated as of
February 3, 1992, by and between Camden Cogen L.P. and Ebasco Constructors Inc.
Operation and Maintenance Agreement.
(Capitalized terms used but not defined in this Schedule shall have the
respective meanings given such terms in the Camden Loan Agreement)
<PAGE>
RECORDED-CAMDEN COUNTY
92FEB-4 PM 3:29
SUSAN R. ROSE
REGISTER
<PAGE>
EXHIBIT 10.51
Charge, Record And Return To
CONTINENTAL TITLE INSURANCE COMPANY
The Corporate Center At Sagemore
8000 Sagemore Drive, Suite 8202
Marlton, NJ 08053
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECOND MORTGAGE
from
CAMDEN COGEN L.P.,
Mortgagor
to
PUBLIC SERVICE ELECTRIC AND GAS COMPANY,
Mortgagee
Dated as of February 4, 1992
THIS MORTGAGE ALSO CONSTITUTES A SECURITY
AGREEMENT UNDER THE UNIFORM COMMERCIAL CODE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
After recording return to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: Mark J. Eagan
This Instrument Prepared by the Undersigned
in consultation with: Messrs. McCarter & English
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4096
Signature /s/ Mardi R. Merjian
--------------------
Mardi R. Merjian
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Warranty of Title.......................................... 5
2. Payment of Indebtedness.................................... 5
3. Proper Care and Use; Inspection............................ 5
4. Requirements............................................... 6
5. Payment of Impositions..................................... 7
6. Insurance.................................................. 8
7. Condemnation/Eminent Domain................................ 10
8. Limitation on Disposition.................................. 10
9. Estoppel Certificates...................................... 11
10. Expenses................................................... 11
11. Mortgagee's Right to Perform............................... 12
12. Further Assurances......................................... 12
13. Assignment of Rents........................................ 12
14. Events of Default.......................................... 13
15. Remedies................................................... 13
16. Remedies Cumulative and Concurrent......................... 15
17. Discontinuance of Proceedings.............................. 15
18. Application of Proceeds.................................... 15
19. Successor Mortgagor........................................ 16
20. Security Agreement Under Uniform Commercial Code........... 16
21. Indemnification; Waiver of Claim........................... 17
22. No Waivers, Etc............................................ 17
23. Waivers by Mortgagor....................................... 18
24. Trust Funds................................................ 18
25. Notices.................................................... 18
-i-
<PAGE>
Page
----
26. Taxes on Mortgagee.......................................... 19
27. No Modification; Binding Obligations........................ 19
28. Miscellaneous............................................... 19
29. Captions.................................................... 20
30. Successors and Assigns...................................... 20
31. Enforceability.............................................. 20
32. RECEIPT OF COPY............................................. 21
33. Subordination............................................... 21
-ii-
<PAGE>
SECOND MORTGAGE
---------------
THIS MORTGAGE dated as of February 4, 1992 from CAMDEN COGEN L.P., a
Delaware limited partnership, ("Mortgagor"), having an office at c/o Cogen
Technologies, 1600 Smith Street, Suite 5000, 50th Floor, Houston, Texas 77002,
to PUBLIC SERVICE ELECTRIC AND GAS COMPANY, a New Jersey corporation
("Mortgagee"), having an office at 80 Park Plaza, Newark, New Jersey 07101.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Mortgagor is the owner in fee simple of certain tracts of
land located in Camden, Camden County, New Jersey and more particularly
described in Exhibit A attached hereto and made a part hereof (the "Land");
and
WHEREAS, pursuant to a Mortgage dated as of February 4, 1992 (the
"First Mortgage"), Mortgagor has granted to General Electric Capital
Corporation, a New York corporation ("First Mortgagee") a mortgage lien on,
among other collateral, the Land; and
WHEREAS, pursuant to a Mortgage dated as of February 4, 1992 (the
"Linden Mortgage"), Mortgagor has granted to General Electric Power Funding
Corporation ("Linden Mortgagee") as mortgage lien on, among other collateral,
the Land, which mortgage lien is intended to be released on the Second Capital
Contribution Date (as such term is defined in the Term Loan Agreement, dated as
of February 15, 1990, between Cogen Technologies Linden, Ltd. and the Linden
Mortgagee); and
WHEREAS, pursuant to the Power Purchase and Interconnection Agreement
dated as of April 15, 1988 between Mortgagor and Mortgagee (as the same may be
amended, supplemented or otherwise modified from time to time, the "Purchase
Agreement"), Mortgagor has agreed to grant to Mortgagee a lien on the Mortgaged
Property, an defined below, which shall be subject and subordinate in all
respects to the terms, conditions and lien of the First Mortgage and the Linden
Mortgage, as more particularly described in Section 18, below but shall be
superior to all liens and claims other than Permitted Liens (as such term in
defined in the First Mortgage);
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged, Mortgagor hereby agrees as follows:
TO SECURE:
<PAGE>
2
(a) (i) payment of all amounts due Mortgagee under Section H,
"Security Provision" of the Purchase Agreement (the "Obligations Section")
and (ii) payments of any and all fees, costs and expenses including,
without limitation, attorney's fees, incurred by Mortgagee in enforcing its
rights and remedies hereunder (the "Indebtedness"); and
(b) performance of all covenants, agreements, obligations and
liabilities of Mortgagor (the "Obligations") under or pursuant to the
provisions of the Obligations Section;
Mortgagor hereby grants a security interest in, and hereby mortgages, conveys,
assigns, bargains, transfers and sets over to Mortgagee, the following property
and rights and interests in property (collectively, the "Mortgaged Property"):
A. the Land;
B. all right, title and interest of Mortgagor in and to any and all
buildings and improvements now or hereafter erected on the Land (the
"Improvements"; the Land, and the Improvements are hereinafter collectively
referred to as the "Real Estate");
C. all right, title and interest of Mortgagor, now owned or hereafter
acquired, in and to all streets, the land lying in the bed of any streets, roads
or avenues, opened or proposed, in front of, adjoining, or abutting the Real
Estate to the center line thereof and strips and gores within or adjoining the
Real Estate, the air space and right to use said air space above the Real
Estate, all rights of way, privileges, liberties, hereditaments, all easements
now or hereafter affecting or benefitting the Real Estate, all royalties and all
rights appertaining to the use and enjoyment of said Real Estate, including,
without limitation, all alley, vault, drainage, mineral, water, oil and gas
rights;
D. all and singular, the tenements, hereditaments and appurtenances
belonging or in anyway appertaining to the Real Estate, and the reversion or
reversions, remainder or remainders, rents, issues, profits and revenue thereof;
and also all the estate, right, title, interest, dower and right of dower,
curtesy and rights of curtesy, property, possession, claim and demand
whatsoever, both in law and equity, of Mortgagor, of, in and to the Real Estate
and of, in and to every part and parcel thereof, with the appurtenances, at any
time belonging or in anyway appertaining thereto;
E. all of the legal fixtures of every kind and nature whatsoever
currently owned or hereafter acquired by Mortgagor, and all appurtenances and
additions thereto and substitutions or replacements thereof, now or hereafter
attached to, or intended to be attached to (though not attached thereto) the
Real Estate or placed on any part thereof (said legal fixtures of every kind
<PAGE>
3
and nature whatsoever, and all appurtenances and additions thereto and
substitutions or replacements thereof, are hereinafter collectively referred to
as the "Equipment"), including, but without limiting the generality of the
foregoing, all fixtures and equipment as defined in the Uniform Commercial Code
and including, but without limiting the generality of the foregoing, all
furnaces, turbines, generators, plumbing, ventilating, air conditioning and air-
cooling apparatus, refrigerating, incinerating, and escalator, elevator, power,
loading and unloading equipment and systems, sprinkler systems and other fire
prevention and extinguishing apparatus and pipes, pumps, tanks, conduits,
fittings and fixtures; it being understood and agreed that all Equipment is
appropriated to the use of the Real Estate and, whether affixed or annexed or
not, for the purposes of this Mortgage shall be deemed conclusively to be Real
Estate and mortgaged hereby; and Mortgagor hereby agrees to execute and deliver,
from time to time, such further instruments (including security agreements), as
may be requested by Mortgagee to confirm the lien of this Mortgage on the
Equipment;
F. all unearned premiums, accrued, accruing or to accrue under
insurance policies now or hereafter obtained by Mortgagor and Mortgagor's
interest in and to all proceeds of the conversion and the interest payable
thereon, voluntary or involuntary, relating to the Mortgaged Property, or any
part thereof, into cash or liquidated claims, including, without limiting the
generality of the foregoing, proceeds of casualty insurance, title insurance or
any other insurance maintained on the Real Estate and the Equipment, and the
right to collect and receive the same, and all awards and/or other compensation
including the interest payable thereon and the right to collect and receive the
same (in the alternative and collectively, "Awards"), heretofore and hereafter
made to the present and all subsequent owners of the Real Estate and the
Equipment by the United States, the State of New Jersey or any political
subdivision thereof, or any agency, department, bureau, board, commission, or
instrumentality of any of them, now existing or hereafter created (collectively,
"Governmental Authority") for the taking by eminent domain, condemnation or
otherwise, of all or any part of the Real Estate and Equipment or any easement
or other right therein, including, without limiting the generality of the
foregoing, awards for any change or changes of grade or the widening of streets,
roads or avenues affecting the Real Estate, to the extent of all amounts which
may be secured by this Mortgage as of the date of receipt, notwithstanding the
fact that the amount thereof may not then be due and payable, and to the extent
of attorneys' fees, costs and disbursements incurred by Mortgagee in connection
with the collection of such Awards. Mortgagor hereby assigns to Mortgagee, and
Mortgagee is hereby authorized to collect and receive such Awards, and to give
proper receipts and acquittance therefor and, subject to the other provisions
hereof and the provisions of the Security Deposit Agreement, to apply the same
toward the Indebtedness, notwithstanding the fact that the full amount thereof
may not
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4
then be due and payable; Mortgagor hereby agrees, upon demand of Mortgagee, to
make, execute and deliver, from time to time, such further instruments as may be
reasonably requested by Mortgagee to confirm such assignment of said Awards to
Mortgagee, free and clear and discharged of any encumbrances of any kind or
nature whatsoever;
G. all extensions, improvements, betterments, renewals, substitutes
and replacements of, and all additions and appurtenances to, the Real Estate and
the Equipment, hereafter acquired by or released to Mortgagor or constructed,
assembled or placed by Mortgagor on the Real Estate, and all conversions of the
security constituted thereby, immediately upon such acquisition, release,
construction, assembling, placement or conversion, as the case may be, and in
each such case, without any further mortgage, conveyance, assignment or other
act by Mortgagor, shall become subject to the lien of this Mortgage as fully and
completely, and with the same effect, as though now owned by Mortgagor and
specifically described herein;
H. all right, title and interest of Mortgagor in, to and under all
leases, subleases, underlettings, concession agreements and licenses of the Real
Estate and Equipment, or any part thereof, now existing or hereafter entered
into by Mortgagor (collectively, "Leases"), and all rights of Mortgagor in
respect of cash and securities deposited thereunder and the right to receive and
collect the benefits, revenues, income, rents, issues and profits thereof;
I. all right, title and interest of Mortgagor, to the extent
permitted by law, in, to and under (i) all consents, licenses and building
permits required for the construction, completion, occupancy and operation of
the Real Estate; (ii) all plans and specifications for the construction of the
Real Estate, including, without limitation, installations of curbs, sidewalks,
gutters, landscaping, utility connections and all fixtures and equipment
necessary for the construction, operation and occupancy of the Improvements; and
(iii) all contracts from time to time executed by Mortgagor relating to the
ownership, construction, maintenance, operation or occupancy of the Real Estate
together with all rights of Mortgagor to compel performance of the terms of such
contracts;
J. any and all monies now or hereafter on deposit for the payment of
real estate taxes or special assessments against the Real Estate or for the
payment of premiums on policies of fire and other hazard insurance covering the
Mortgaged Property; and
K. all rights of Mortgagor under or arising out of the Contracts
described on Schedule 1 and all additional Contracts (as defined in the Loan
Agreement executed in connection with the First Mortgage, as any of the same may
be amended, supplemented or otherwise modified from time to time.
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5
L. all proceeds, both cash and noncash, and products of the
foregoing, including, without limitation, all proceeds and products as defined
in the Uniform Commercial Code of the State of New Jersey, which may be realized
upon any sale or other disposition of any of the foregoing or produced
therefrom;
TO HAVE AND TO HOLD the Mortgaged Property and the rights and
privileges hereby mortgaged or intended to be, unto Mortgagee, its successors
and assigns for the uses and purposes herein set forth, until the Indebtedness
is fully paid and the obligations are fully paid or fully performed, as the case
may be.
Mortgagor represents, warrants, covenants and agrees as follows:
1. Warranty of Title. Mortgagor warrants that it has and owns good
and marketable title to the Real Estate and has the right to mortgage the same;
and Mortgagor warrants that this Mortgage is a valid and enforceable lien on the
Mortgaged Property subject only to the First Mortgage, the Linden Mortgage and
to those other matters described on Exhibit B, if any (the "Permitted Liens").
Mortgagor hereby covenants that it shall preserve such title and the validity
and priority of the lien hereof and shall forever warrant and defend the same to
Mortgagee against the claims of all and every person or persons, corporation or
corporations and parties whomsoever claiming or threatening to claim the same or
any part thereof.
2. Payment of Indebtedness. Mortgagor shall pay the Indebtedness and
shall perform all of the Obligations in accordance with the terms of the
Obligations Section.
3. Proper Care and Use: Inspection. (a) Mortgagor shall:
(i) not abandon the Mortgaged Property,
(ii) maintain the Mortgaged Property in good working order and
condition,
(iii) make all repairs, renewals and replacements to the Mortgaged
Property and additions and betterments thereto which are necessary for the
Mortgaged Property to operate in compliance with all Legal Requirements
affecting the Mortgaged Property and all requirements of the appropriate
Board of Fire Underwriters or other similar body acting in and for the
locality in which the Mortgaged Property is located,
(iv) not commit or suffer waste with respect to the Mortgaged
Property,
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6
(v) refrain from impairing or diminishing the value or integrity of
the Mortgaged Property or the security value of this Mortgage,
(vi) not remove, demolish or in any material respect alter any of
the Improvements, and
(vii) not make, suffer or permit any nuisance to exist on any of the
Mortgaged Property (the construction and operation of the Improvements
being deemed not to constitute a nuisance).
(b) Mortgagee and any persons authorized by Mortgagee shall have the
right to enter and inspect the Mortgaged Property and the right to inspect all
work done, labor performed and materials furnished in and about the Improvements
and the right to inspect and make copies of all books, contracts and records of
Mortgagor relating to the Mortgaged Property, all at such reasonable times
during business hours and at such intervals as Mortgagee may request. Mortgagor
authorizes Mortgagee to communicate directly with its accountants and with any
other entity keeping its books and records. If an Event of Default (as
hereinafter defined) shall have occurred and be continuing, Mortgagee and any
persons authorized by Mortgagee may (without being obligated to do so) enter or
cause entry to be made upon the Real Estate and inspect, repair and/or maintain
the same as or advisable, and may (without being and outlays of money as
Mortgagee may deem appropriate for the preservation of the Mortgaged Property.
All expenditures and outlays of money made by Mortgagee pursuant hereto shall be
added to the Indebtedness and shall be secured hereby and shall be payable on
demand together with interest at an interest rate equal to the lower of (i) the
highest rate allowed by applicable law and (ii) an interest rate per annum equal
to 2% plus the rate of interest from time to time quoted in the Wall Street
Journal as the "Prime Rate" (such lower rate, the "Default Rate") from the date
of the expenditure or outlay until paid.
4. Requirements. Mortgagor, at Mortgagor's sole cost and expense,
shall promptly comply with, or cause to be complied with, and conform to all
present and future laws, statutes, codes, ordinances, orders, judgments,
decrees, injunctions, rules, regulations and requirements pertaining to the
Mortgaged Property, including any applicable environmental, zoning or building,
use and land use laws, ordinances, rules or regulations and all covenants,
restrictions and conditions now or hereafter of record which may be applicable
to it or to any of the Mortgaged Property, or to the use, manner of use,
occupancy, possession, operation, maintenance, alteration, repair or
reconstruction of any of the Mortgaged Property (collectively, the "Legal
Requirements"), except any Legal Requirements, the non-compliance with which
could not reasonably be expected to have a material adverse effect on the
business, operations, property, condition (financial or other) or prospects of
<PAGE>
7
Mortgagor or the rights or interests of Mortgagee or (ii) materially adversely
affect Mortgagor's ability to perform its obligations under the Obligations
Section.
5. Payment of Impositions. (a) Mortgagor shall pay and discharge all
taxes, assessments and governmental charges or levies imposed on it or its
income or profit or on any of its property, including the Mortgaged Property,
prior to the date on which penalties attach thereto, and all lawful claims
which, if unpaid, might become a lien upon the property, including the Mortgaged
Property (all of the foregoing are hereinafter collectively referred to as the
"Impositions"). Mortgagor shall have the right, at Mortgagor's sole cost and
expense, to contest in good faith the amount or validity of any such Imposition
by proper proceedings timely instituted, and may permit the Impositions so
contested to remain unpaid during the period of such contest. Mortgagor will
promptly pay or cause to be paid any valid, final judgment enforcing any such
Imposition and cause the same to be satisfied or record. Subject to the
foregoing right of Mortgagor to contest any Imposition, within thirty (30) days
after the date when an Imposition is due and payable, Mortgagor shall deliver to
Mortgagee evidence acceptable to Mortgagee showing payment of such Imposition.
If by law any Imposition at Mortgagor's option may be paid in installments
(whether or not interest shall accrue on the unpaid balance of such Imposition),
Mortgagor may elect to pay such Imposition in such installments and shall be
responsible for the payment of such installments with interest, if any.
(b) Except for the foregoing right of Mortgagor to contest any
Imposition, nothing herein otherwise shall affect any right or remedy of
Mortgagee under this Mortgage or otherwise, without notice or demand to
Mortgagor, to pay any Imposition after the date such Imposition shall have
become due and to add to the Indebtedness the amount so paid, together with
interest thereon from the date of such payment at the Default Rate. Any sums
paid by Mortgagee in discharge of any Imposition shall be (i) a lien on the Real
Estate secured hereby prior to any right or title to, interest in, or claim upon
the Real Estate subordinate to the lien of this Mortgage, and (ii) payable on
demand together with interest as set forth above.
(c) Mortgagor shall not claim, demand or be entitled to receive any
credit or credits towards the satisfaction of this Mortgage or on any interest
payable thereon for any taxes assessed against the Mortgaged Property or any
part thereof, and Mortgagor shall not claim any deduction from the taxable value
of the Mortgaged Property by reason of this Mortgage.
(d) Upon the occurrence and during the continuance of an Event of
Default hereunder, Mortgagee shall be entitled upon notice to Mortgagor to
require Mortgagor to pay to Mortgagee on a specified day each month an amount
equal to one-twelfth of the annual Impositions reasonably estimated by Mortgagee
so that Mortgagee shall have sufficient funds to pay the Impositions on
<PAGE>
8
the first day of the month preceding the month in which they become due. In such
event, Mortgagor agrees to cause all bills, statements or other documents
relating to Impositions to be sent or mailed directly to Mortgagee. Upon receipt
of such bills, statements or other documents, and providing Mortgagor has
deposited sufficient funds with Mortgagee pursuant to this paragraph, Mortgagee
shall pay such amounts as may be due thereunder out of the funds so deposited
with Mortgagee. If at any time and for any reason the funds deposited with
Mortgagee are or will be insufficient to pay such amounts as may then or
subsequently be due, Mortgagee shall notify Mortgagor and Mortgagor shall
immediately deposit an amount equal to such deficiency with Mortgagee.
Notwithstanding the foregoing, nothing contained herein shall cause Mortgagee to
be deemed a trustee of said funds or to be obligated to pay any amounts in
excess of the amount of funds deposited with Mortgagee pursuant to this
paragraph or constitute any limitation on the rights of Mortgagee upon the
occurrence of such Event of Default. Mortgagor shall not be entitled to receive
interest on said funds. If amounts collected by Mortgagee under this paragraph
exceed amounts necessary in order to pay Impositions, Mortgagee may impound or
reserve for future payment of Impositions such portion of such excess payments
as Mortgagee in its absolute discretion may deem proper. Should Mortgagor fail
to deposit with Mortgagee sums sufficient to pay such Impositions in full at
least thirty (30) days before delinquency thereof, Mortgagee may, at Mortgagee's
election, but without any obligation so to do, advance any amounts required to
make up the deficiency, which advances, if any, shall be added to the
Indebtedness and shall be secured hereby and shall be repayable to Mortgagee
with interest at the Default Rate or at the option of Mortgagee the latter may,
without making any advance whatsoever, apply any sums held by it upon any
obligation of Mortgagor secured hereby.
6. Insurance. (a) Mortgagor shall maintain the casualty insurance on
the Mortgaged Property required to be maintained pursuant to the Construction
and Term Loan Agreement dated as of January 2, 1992 between Mortgagor and First
Mortgagee as the same may be amended, supplemented or otherwise modified from
time to time and Mortgagee shall be an additional insured thereunder with
respect to the coverage set forth in Section 7.5(a)(1). In the event the
Mortgaged Property is damaged or destroyed due to casualty loss but (i) the loss
is less than a total or constructive total loss and (ii) Mortgagor has elected
to repair or reconstruct such damaged Mortgaged Property in accordance with the
terms of the loan documentation associated with the First Mortgage, until the
First mortgage is terminated and released, and thereafter in accordance with the
terms of the partnership agreement of Mortgagor, Mortgagee agrees it will
promptly endorse any insurance proceeds check payable with respect to such loss
which includes Mortgagee as additional insured over to Mortgagor or its designee
promptly upon request by Mortgagor.
<PAGE>
9
(b) If Mortgagor is in default of its obligations to insure or deliver
any prepaid insurance policy or policies, then Mortgagee, at its option and
without notice, may effect such insurance from year to year, and pay the premium
or premiums therefor, and Mortgagor shall pay to Mortgagee such premium or
premiums so paid by Mortgagee with interest from the time of payment at the
Default Rate, on demand, and the same shall be deemed to be secured by this
Mortgage and shall be collectible in the same manner as the Indebtedness secured
by this Mortgage.
(c) Mortgagor promptly shall comply with and conform to (i) all
provisions of each insurance policy, and (ii) all requirements of the insurers
applicable to Mortgagor or to any of the Mortgaged Property or to the use,
manner of use, occupancy, possession, operation, maintenance, alteration or
repair of any of the Mortgaged Property. Mortgagor shall not use the Mortgaged
Property, or conduct any activities on the Premises, if such use or activities
would permit any insurer to cancel any insurance policy required to be
maintained by Section 6(a), above.
(d) If the Mortgaged Property is damaged or destroyed by fire or any
other cause, Mortgagor shall give prompt notice to Mortgagee and, if the
Mortgaged Property is not rebuilt or restored and the insurance proceeds are
applied to the payment of the First Indebtedness, shall pay over to Mortgagee
the amount of such insurance proceeds remaining after the payment in full of the
First Indebtedness up to the amount of the Indebtedness.
(e) In the event of foreclosure of this Mortgage or other transfer of
title to the Mortgaged Property in extinguishment of the Indebtedness, all
right, title and interest of Mortgagor in and to any insurance policies then in
force shall pass to the purchaser or grantee and Mortgagor hereby appoints
Mortgagee its attorney-in-fact, in Mortgagor's name, to assign and transfer all
such policies and proceeds to such purchaser or grantee.
(f) Upon the occurrence and during the continuance of an Event of
Default hereunder, Mortgagee shall be entitled upon notice to Mortgagor to
require Mortgagor to pay monthly in advance to Mortgagee the equivalent of
1/12th of the estimated annual premiums due on such insurance. In such event,
Mortgagor shall cause all bills, statements or other documents relating to the
insurance premiums to be sent or mailed directly to Mortgagee. Upon receipt of
such bills, statements or other documents, and providing Mortgagor has deposited
sufficient funds with Mortgagee pursuant to this paragraph, Mortgagee shall pay
such amounts as may be due thereunder out of the funds so deposited with
Mortgagee. If at any time and for any reason the funds deposited with Mortgagee
are or will be insufficient to pay such amounts as may then or subsequently be
due, Mortgagee shall notify Mortgagor and Mortgagor shall immediately deposit an
amount equal to such deficiency with Mortgagee. Notwithstanding the foregoing,
nothing contained herein shall cause Mortgagee to be deemed a trustee of said
funds or to be obligated to pay any
<PAGE>
10
amounts in excess of the amount of funds deposited with Mortgagee pursuant to
this paragraph or constitute any limitation on the rights of Mortgagee upon the
occurrence of such Event of Default. Mortgagor shall not be entitled to receive
interest on said funds. If amounts collected by Mortgagee under this paragraph
exceed amounts necessary in order to pay such premiums, Mortgagee may impound or
reserve for future payment of insurance premiums such portion of such excess
payments as Mortgagee in its absolute discretion may deem proper. Should
Mortgagor fail to deposit with Mortgagee sums sufficient to pay in full such
insurance premiums at least 30 days before delinquency thereof, Mortgagee may,
at Mortgagee's election, but without any obligation so to do, advance any
amounts required to make up the deficiency, which advances, if any, shall be
payable on demand by Mortgagor with interest thereon at the Default Rate, or at
the option of Mortgagee the latter may, without making any advance whatsoever,
apply any sums held by it upon any obligation of Mortgagor secured hereby.
7. Condemnation/Eminent Domain. Immediately upon obtaining knowledge
of the institution of any proceedings for the condemnation of the Mortgaged
Property, or any portion thereof, Mortgagor will notify Mortgagee of the
pendency of such proceedings. Mortgagee, at Mortgagee's option and in
Mortgagee's sole discretion, shall have the right to commence, appear in and
prosecute, jointly with Mortgagor, any action or proceeding relating to any
condemnation of the Mortgaged Property, or any portion thereof at its sole cost
and expense. Mortgagor shall not, without Mortgagee's written consent, settle or
compromise any claim in connection with such condemnation. If Mortgagee elects
not to participate in such condemnation proceeding, then Mortgagor shall, at its
expense, diligently prosecute any such proceeding and shall consult with
Mortgagee, its attorneys and experts and cooperate with them in any defense of
any such proceedings.
8. Limitation on Disposition. (a) Except as permitted under the Power
Purchase Agreement, without the prior written consent of Mortgagee in each
instance, Mortgagor shall not sell, assign, convey or otherwise transfer or
dispose of the Mortgaged Property or any part thereof or interest therein, and
Mortgagor shall not contract to do any of the foregoing. Except for Permitted
Liens and except as permitted in Article 5 of this Mortgage and in the next
following sentence, Mortgagor shall not create, consent to or suffer the
creation or existence of any liens, charges or encumbrances (each, a "Prohibited
Lien") on any of the Mortgaged Property, whether or not such Prohibited Lien is
superior or subordinate to this Mortgage. Mortgagor shall pay when due all
lawful claims and demands of mechanics, materialmen, laborers and others which,
if unpaid, might result in, or permit the creation of a Prohibited Lien;
provided that Mortgagor shall have the right to contest in good faith any such
Prohibited Lien by proper proceedings timely instituted, and may permit such
Prohibited Lien to exist during the period of such contest subject to the
following conditions (i) Mortgagor diligently
<PAGE>
11
prosecutes such contest, (ii) during the period of such contest the enforcement
of any contested item and the Prohibited Lien relating thereto is effectively
stayed, and (iii) if, in the reasonable opinion of the Mortgagee, such contest
does not involve any substantial danger of the sale, forfeiture or loss of any
part of the Mortgaged Property, title thereto or any interest therein and does
not interfere with the operation of the Facility. Mortgagor will promptly pay or
cause to be paid any valid, final judgment enforcing any such item, cause the
Prohibited Lien relating thereto to be removed and otherwise cause such item to
be satisfied of record.
(b) Mortgagor shall pay when due all utility charges which are
incurred by it for gas, electricity, water or sewer services and all other
assessments or charges of a similar nature, whether public or private and
whether or not such assessments or charges are liens on the Mortgaged Property.
(c) All Leases of the Mortgaged Property or any part thereof shall be
subordinate to the lien of this Mortgage.
9. Estoppel Certificates. Mortgagor, within ten (10) business days
upon request, shall deliver a written statement, duly acknowledged, setting
forth the amount of the Indebtedness, and whether any offsets, claims,
counterclaims or defenses exist against the Indebtedness secured by this
Mortgage.
10. Expenses. Mortgagor shall pay all out-of-pocket expenses
reasonably incurred by Mortgagee with respect to any and all transactions
contemplated herein and the preparation of any document reasonably required
hereunder including (without limiting the generality of the foregoing) all title
and conveyancing charges, recording and filing fees and taxes, mortgage taxes,
intangible personal property taxes, escrow fees, revenue and tax stamp expenses,
insurance premiums (including title insurance premiums), brokerage commissions,
finders' fees, placement fees, surveyors', appraisers' and attorneys' fees and
disbursements, and will reimburse to Mortgagee all of the foregoing expenses
paid by Mortgagee which have been or may be reasonably incurred by Mortgagee
with respect to any and all of the transactions contemplated herein. in addition
to the foregoing, if any action or proceeding be commenced (including but not
limited to any action to foreclose this Mortgage or to collect the
Indebtedness), to which action or proceeding Mortgagee is made a party, or in
which it becomes necessary to defend or uphold the lien of this Mortgage, or in
which Mortgagee is served with any legal process, discovery notice or subpoena
relating to Mortgagee's lending to Mortgagor or accepting a guaranty from a
guarantor of the Indebtedness or of any of the Obligations, Mortgagor will
reimburse Mortgagee for all of the foregoing expenses which have been or may be
reasonably incurred by Mortgagee with respect to the foregoing. All sums paid by
Mortgagee for the expense of any litigation to prosecute or defend the rights
and lien created by this Mortgage or to appear or to take action in response to
any such legal process,
<PAGE>
12
discovery notice or subpoena (including counsel fees and disbursements) shall
be paid by Mortgagor, together with interest thereon at the Default Rate, and
any such sum and the interest thereon shall be a lien on the Mortgaged Property,
prior to any right, or title to, interest in or claim upon the Mortgaged
Property attaching or accruing subsequent to the lien of this Mortgage, and
shall be deemed to be secured by this Mortgage. In any action to foreclose this
Mortgage, or to recover or collect the Indebtedness, the provisions of this
Article with respect to the recovery of costs, disbursements and allowances
shall prevail unaffected by the provisions of any law with respect to the same
to the extent that the provisions of this Article are not inconsistent therewith
or violative thereof.
11. Mortgagee's Right to Perform. Upon the occurrence of an Event of
Default, Mortgagee, without waiving, or releasing Mortgagor from, any Event of
Default under this Mortgage, may (but shall be under no obligation to), at any
time perform any of the covenants or agreements of Mortgagor hereunder, and the
cost thereof, with interest at the Default Rate, shall immediately be due from
Mortgagor to Mortgagee, and the same shall be secured by this Mortgage and shall
be a lien on the Mortgaged Property prior to any right, title to, interest in or
claim upon the Mortgaged Property attaching subsequent to the lien of this
Mortgage. No payment or advance of money by Mortgagee under this Article shall
be deemed or construed to cure Mortgagor's default or waive any right or remedy
of Mortgagee hereunder.
12. Further Assurances. Mortgagor agrees, upon demand of Mortgagee,
to do any act or execute any additional documents (including, but not limited
to, security agreements on any personalty included or to be included in the
Mortgaged Property) as may be reasonably required by Mortgagor to confirm the
lien of this Mortgage and to add to the lien of this Mortgage any and all
easements acquired by the Mortgagor and made subject to the lien of the First
Mortgage and the Linden Mortgage.
13. Assignment of Rents. All of the rents, royalties, issues, profits,
revenue, income and other benefits of the Mortgaged property arising from the
use and enjoyment by Mortgagor of all or any portion thereof or from any Lease
(the "Rents and Profits") are hereby absolutely and unconditionally assigned,
transferred, conveyed and set over to Mortgagee, and Mortgagor grants to
Mortgagee the right to enter the Mortgaged Property for the purpose of
collecting the same and to let the Mortgaged Property or any part thereof. The
foregoing assignment and grant shall continue in effect until the Indebtedness
is paid in full, but Mortgagee hereby waives the right to enter the Mortgaged
Property for the purpose of collecting the Rents and Profits and Mortgagor shall
be entitled to collect, receive, use and retain the Rents and Profits until the
occurrence of an Event of Default under this Mortgage; such right of Mortgagor
to collect, receive, use and retain the Rents and Profits may be revoked by
Mortgagee upon the occurrence of any Event of Default by giving not less than
five days' written notice of such
<PAGE>
13
revocation to Mortgagor; in the event such notice is given, Mortgagor shall pay
over to Mortgagee, or to any receiver appointed to collect the Rents and
Profits, any lease security deposits (which security deposits shall be held in
trust and not co-mingled with Mortgagee's other funds), and shall pay monthly in
advance to Mortgagee, or to any such receiver, the fair and reasonable rental
value for the use and occupancy of the Mortgaged Property or of such part
thereof as may be in the possession of Mortgagor, and upon default in any such
payment will vacate and surrender the possession of the Mortgaged Property to
Mortgagee or to such receiver, and in default thereof may be evicted by summary
proceedings. Mortgagor shall not accept prepayments of installments of Rent and
Profits to become due for a period of more than one month in advance (except for
security deposits and estimated payments of percentage rent, if any).
14. Events of Default. The following events shall constitute an
"Event of Default" by Mortgagor hereunder (i) Mortgagor shall fail to pay any
amount when due under the Obligations Section or to perform any covenant
contained in the Obligations Section within the applicable grace period, if any,
or (ii) the First Mortgagee or the Linden Mortgagee shall foreclose the First
Mortgage or the Linden Mortgage, as the case may be.
15. Remedies. Upon the occurrence of an Event of Default hereunder,
Mortgagee may take such action, without notice or demand, as it deems advisable
to protect and enforce Mortgagee's rights against Mortgagor in and to the
Mortgaged Property, including, but not limited to, the following actions:
(a) enter upon and take possession of the Mortgaged Property, and
lease and let the Mortgaged Property, or any part thereof, and receive all
the Rents and Profits thereof which are overdue, due or to become due, and
apply the same, after payment of all reasonably necessary charges and
expenses, on account of the amounts hereby secured, and the Mortgagee is
hereby given and granted full power and authority to do any act or thing
which Mortgagor might or could do in connection with the management and
operation of the Mortgaged Property. This covenant becomes effective either
with or without any action brought to foreclose this Mortgage and without
applying at any time for a receiver of such rents;
(b) institute an action of mortgage foreclosure, or take other action
as the law may allow, at law or in equity, for the enforcement of this
mortgage, and proceed thereon to final judgment and execution of the entire
unpaid balance of the Indebtedness including costs of suit, interest and
reasonable attorneys' fees. In case of any sale of the Mortgaged Property
by virtue of judicial proceedings, the Mortgaged Property may be sold in
one parcel and as an
<PAGE>
14
entirety or in such parcels, manner or order as the Mortgagee in its sole
discretion may elect;
(c) institute partial foreclosure proceedings with respect to the
portion of the Indebtedness so in default, as if under a full foreclosure,
and without declaring the entire Indebtedness due, provided that if
foreclosure sale is made because of default of a part of the Indebtedness,
such sale may be made subject to the continuing lien of this Mortgage for
the unmatured part of the Indebtedness; and it is agreed that such sale
pursuant to a partial foreclosure, if so made, shall not in any manner
affect the unmatured part of this Mortgage and the lien thereof shall
remain in full force and effect just as though no foreclosure sale had been
made under the provisions of this subsection. Notwithstanding the filing of
any partial foreclosure or entry of a decree of sale therein, Mortgagee may
elect at any time prior to a foreclosure sale pursuant to such decree, to
discontinue such partial foreclosure and to accelerate the Indebtedness by
reason of any uncured default or defaults upon which such partial
foreclosure was predicated or by reason of any other defaults, and proceed
with full foreclosure proceedings. It is further agreed that several
foreclosure sales may be made pursuant to partial foreclosures without
exhausting the right of full or partial foreclosure sale for any unmatured
part of the Indebtedness, it being the purpose to provide for a partial
foreclosure sale of the secured Indebtedness of any matured portion of the
secured Indebtedness without exhausting the power to foreclose and to sell
the Mortgaged Property pursuant to any such partial foreclosure for any
other part of the secured Indebtedness whether matured at the time or
subsequently maturing; and without exhausting any right of acceleration and
full foreclosure;
(d) appoint a receiver of the Rents and Profits of the Mortgaged
Property without the necessity of proving either the depreciation or the
inadequacy of the value of the security or the insolvency of Mortgagor or
any person who may be legally or equitably liable to pay moneys secured
hereby and Mortgagor and each such person waives such proof and hereby
consents to the appointment of a receiver;
(e) institute an action for specific performance of any covenant
contained herein or in aid of the execution of any power herein granted;
(f) if Mortgagor is occupying the Mortgaged Property, or any part
thereof, it is hereby agreed that the said occupants shall pay such
reasonable rental monthly in advance as the Mortgagee shall demand for the
Mortgaged Property, or the part so occupied, and for the use of Equipment
covered by this Mortgage;
<PAGE>
15
(g) apply on account of the unpaid Indebtedness and the interest
thereon or on account of any arrearages of interest thereon, or on account
of any balance due to the foreclosure sale of the Mortgaged Property, or
any part thereof, any unexpended moneys still retained by the Mortgagee
that were paid by Mortgagor to the Mortgagee pursuant to Article 6(d)
hereof;
(h) exercise any and all other rights and remedies granted under this
Mortgage or now or hereafter existing in equity, at law, by virtue of
statute or otherwise.
16. Remedies Cumulative and Concurrent. Mortgagee shall be entitled
to enforce payment and performance of any Indebtedness or Obligations secured
hereby and to exercise all rights and powers under this Mortgage or other
agreement or any laws now or hereafter in force, notwithstanding some or all of
the Indebtedness and Obligations may now or hereafter be otherwise secured,
whether by mortgage, deed of trust, pledge, lien, assignment or otherwise.
Neither the acceptance of this Mortgage nor its enforcement, whether by court
action or pursuant to the power of sale or other powers herein contained, shall
prejudice or in any manner affect Mortgagee's right to realize upon or enforce
any other securities now or hereafter held by Mortgagee, it being agreed that
Mortgagee shall be entitled to enforce this Mortgage and any other security now
or hereafter held by Mortgagee in such order and manner as Mortgagee may in its
absolute discretion determine. No remedy herein conferred upon or reserved to
Mortgagee is intended to be exclusive of any other remedy herein or by law
provided or permitted, but each shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute. Every power or remedy given to Mortgagee or to which
Mortgagee may be otherwise entitled, may be exercised, concurrently or
independently against each Mortgagor or against the Mortgaged Property, or
either of them, from time to time and as often as may be deemed expedient by
Mortgagee. The failure to exercise any such power or remedy will not be
construed as a waiver or release of that power or remedy.
17. Discontinuance of Proceedings. If Mortgagee has proceeded to
enforce any right under the Obligations Section and such proceedings have been
discontinued or abandoned for any reason, then in every such case, Mortgagor and
Mortgagee will be restored to their former positions and the rights, remedies
powers of Mortgagee will continue as if no such proceedings been taken.
18. Application of Proceeds. The proceeds of any sale of all or any
portion of the Mortgaged Property upon foreclosure and the earnings of any
holding, leasing, operation or other use of the Mortgaged Property following any
Event of Default will be applied as follows:
<PAGE>
16
First: To the payment of the costs and expenses of any such sale or of
any such holding, leasing, operation or other use and of any judicial
proceeding wherein any sale may be made, and all expenses, advances,
liabilities and sums made or furnished or incurred by the First Mortgagee,
including, without limitation, receiver's, accountants' and attorneys' fees
and all taxes, assessments or other charges, except any taxes, assessments
or other charges subject to which the Mortgaged Property shall have been
sold.
Second: To the payment of the amount secured by the First Mortgage.
Third: If the Linden Mortgage has not been discharged, to the payment
of the amount secured by the Linden Mortgage.
Fourth: To the payment of the Indebtedness secured hereby.
Fifth: To the payment of any other sums required to be paid pursuant
to any provision of this Mortgage or the Obligations Section.
Sixth: The balance, if any, to whomsoever may be lawfully entitled to
receive the same.
19. Successor Mortgagor. In the event ownership of the Mortgaged
Property or any portion thereof becomes vested in a person other than the
Mortgagor herein named, Mortgagee may, without notice to the Mortgagor herein
named, whether or not Mortgagee has given written consent to such change in
ownership, deal with such successor or successors in interest with reference to
this Mortgage and the indebtedness secured hereby, and in the same manner as
with the Mortgagor herein named, without in any way vitiating or discharging the
Mortgagor's liability hereunder or under the Indebtedness.
20. Security Agreement Under Uniform Commercial Code. Mortgagor and
Mortgagee agree that this Mortgage shall constitute a Security Agreement within
the meaning of the Uniform Commercial Code of the State of New Jersey
(hereinafter in this paragraph referred to as the "Code") with respect to (i)
any and all sums at any time on deposit or held by Mortgagee pursuant to any of
the provisions of this Mortgage ("Deposits") and (ii) with respect to any goods
or property included in the definition of the term "Mortgaged Property", which
goods or property may not be deemed to form a part of the Real Estate described
in Exhibit A hereto or may not constitute a "fixture" (within the meaning of
Section 9-313 of the Code), and all replacements of such property, substitutions
for such property, additions to such property, and the proceeds thereof (all of
said property and the replacements, substitutions, and additions thereto and the
proceeds thereof being sometimes hereinafter collectively referred to as the
"Collateral"), and that a security interest in
<PAGE>
17
and to the Collateral is hereby granted to Mortgagee, and the Collateral and
all of Mortgagor's right, title and interest therein are hereby assigned to
Mortgagee, to secure the Indebtedness and Obligations. Upon the occurrence of an
Event of Default under this Mortgage, Mortgagee, pursuant to the appropriate
provisions of the Code, shall have the option of proceeding with respect to the
Collateral as to both real and personal property in accordance with its rights
and remedies with respect to the real property, in which event the default
provisions of the Code shall not apply. The parties agree that, in the event
Mortgagee shall elect to proceed with respect to the Collateral separately from
the real property, ten (10) days, notice of the sale of the Collateral shall be
reasonable notice. The expenses of retaking, holding, preparing for sale,
selling and the like incurred by Mortgagee shall include, but not be limited to,
attorneys' fees and expenses incurred by Mortgagee. Mortgagor agrees that,
without the written consent of Mortgagee, Mortgagor will not remove or permit to
be removed from the Real Estate any of the Collateral. Mortgagor shall, from
time to time, on request of Mortgagee, deliver to Mortgagee an inventory of the
Collateral in reasonable detail. Mortgagor covenants and represents that all
Collateral now is, and that all replacements thereof, substitutions therefor or
additions thereto, will be, free and clear of liens, encumbrances, or the
security interest of others, other than Permitted Liens.
21. Indemnification: Waiver of Claim. (a) If Mortgagee is made a party
defendant to any litigation concerning this Mortgage or the Mortgaged Property
or any part thereof or interest therein, or the occupancy thereof by Mortgagor,
then Mortgagor shall indemnify, defend and hold Mortgagee harmless from all
liability by reason of said litigation (other than that arising solely from
Mortgagee's own willful misconduct or gross negligence), including attorneys'
fees and expenses incurred by Mortgagee in any such litigation, whether or not
any such litigation is prosecuted to judgment. If Mortgagee commences an action
against Mortgagor to enforce any of the terms hereof or because of the breach by
Mortgagor of any of the terms hereof, or for the recovery of any sum secured
hereby, Mortgagor shall pay to Mortgagee attorneys' fees and expenses, together
with interest thereon at the Default Rate from the date the same are paid by
Mortgagee to the date of reimbursement by Mortgagor, and the right to such
attorneys' fees and expenses shall be deemed to have accrued on the commencement
of such action, and shall be enforceable whether or not such action is
prosecuted to judgment. If an Event of Default shall have occurred, Mortgagee
may engage an attorney or attorneys to protect its rights hereunder, and in the
event of such engagement, Mortgagor shall pay Mortgagee attorneys' fees and
expenses incurred by Mortgagee, whether or not an action is actually commenced
against Mortgagor by reason of breach.
(b) Mortgagor waives any and all right to claim or recover against
Mortgagee, its officers, employees, agents and representatives, for loss of or
damage to Mortgagor, the
<PAGE>
18
Mortgaged Property, Mortgagor's property or the property of others under
Mortgagor's control from any cause whatsoever, except for the willful misconduct
or gross negligence of Mortgagee, its officers, employees, agents or
representatives.
22. No Waivers, Etc. Any failure by Mortgagee to insist upon the
strict performance by Mortgagor of any of the terms and provisions of this
Mortgage shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Mortgagee, notwithstanding any such failure, shall have the right
thereafter to insist upon the strict performance by Mortgagor of any and all of
the terms and provisions of this Mortgage to be performed by Mortgagor;
Mortgagee may release, regardless of consideration and without the necessity for
any notice to or consent by the holder of any subordinate lien on the Mortgaged
Property, any part of the security held for the obligations secured by this
Mortgage without, as to the remainder of the security, in anyway impairing or
affecting the lien of this Mortgage or the priority of such lien over any
subordinate lien. Mortgagee may resort for the payment of the Indebtedness
secured by this Mortgage to any other security therefor held by Mortgagee in
such order and manner as Mortgagee may elect.
23. Waivers by Mortgagor. Mortgagor hereby waives, to the fullest
extent permitted by applicable law, all errors and imperfections in any
proceedings instituted by Mortgagee under this Mortgage and all benefit of any
present or future statute of limitations or moratorium law or any other present
or future law, regulation or judicial decision, nor shall Mortgagor at any time
insist upon or plead, or in any manner whatever claim or take any benefit or
advantage of such statute, law, regulation or judicial decision which (a)
exempts any of the Mortgaged Property or any other property, real or personal,
or any part of the proceeds arising from any sale thereof from attachment, levy
or sale under execution, (b) provides for any stay of execution, moratorium,
marshalling of assets, exemption from civil process, redemption, extension of
time for payment or valuation or appraisement of any of the Mortgaged Property,
(c) requires Mortgagee to institute proceedings in mortgage foreclosure against
the Mortgaged Property before exercising any other remedy afforded Mortgagee
hereunder upon the occurrence of an Event of Default, or (d) conflicts with or
may affect, adverse to Mortgagee, any provision, covenant or term of this
Mortgage.
24. Trust Funds. All lease security deposits of the Real Estate shall
be treated as trust funds not to be commingled with any other funds of
Mortgagor. Within 10 days after request by Mortgagee, Mortgagor shall furnish
Mortgagee satisfactory evidence of compliance with this paragraph, together with
a statement of all lease security deposits by lessees and copies of all Leases
not theretofore delivered to Mortgagee, which statement shall be certified by
Mortgagor.
25. Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in
<PAGE>
19
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:
Mortgagor: Camden Cogen L.P.
c/o Cogen Technologies, Inc.
1600 Smith Street
Suite 5000, 50th Floor
Houston, Texas 77002
Attention: Robert C. McNair
Telecopy: (713) 951-7747
Mortgagee: Public Service Electric and Gas Company
80 Park Plaza
Mail Code 11A
P.O. Box 570
Newark, New Jersey 07101-0570
Attention: DIRECTOR-COGENERATION
Telecopy: (201) 430-5795
26. Taxes on Mortgagee. In the event of the passage after the date of
this Mortgage of any law of the jurisdiction in which the Real Estate is located
deducting from the value of the Real Estate for the purposes of taxation any
lien thereon or changing in any way the laws for the taxation of mortgages or
debts secured by mortgages for state or local purposes or the manner of the
collection of any such taxes and imposing a tax, either directly or indirectly,
on this Mortgage, Mortgagee shall have the right to declare all sums outstanding
secured by this Mortgage immediately due and payable, provided, however, that
such election shall be ineffective if Mortgagor is exempt from such tax or, if
not exempt from such tax, is permitted by law to pay the whole of such tax (or
to provide funds to Mortgagee to pay such taxes or to reimburse Mortgagee for
payment of such taxes) in addition to all other payments required hereunder and
if Mortgagor pays such tax (or provides funds to Mortgagee to pay such tax or
reimburses Mortgagee for payment of such tax) when the same is due and payable
and agrees in writing to pay such tax when thereafter levied or assessed against
the Real Estate.
27. No Modification: Binding Obligations. This Mortgage is subject to
modification or amendment by a writing executed by Mortgagor and Mortgagee which
shall be recorded in the land records of the County of Camden, New Jersey.
Pursuant to N.J.S.A. 46:9-8.2, such modification or amendment shall not affect
the priority of this Mortgage. The covenants of this Mortgage shall run with the
land and bind Mortgagor, and its distributee, personal representatives,
successors and assigns, and all present and subsequent encumbrancers, lessees
and sublessee of any of the Mortgaged Property, and shall inure to
<PAGE>
20
the benefit of Mortgagee and its successors, assigns and endorsees.
28. Miscellaneous. As used in this Mortgage, the singular shall
include the plural as the context requires and the following words and phrases
shall have the following meanings: (a) "including" shall mean "including but not
limited to"; (b) "provisions" shall mean "provisions, terms, covenants and/or
conditions"; (c) "lien" shall mean "lien, charge, encumbrance, security
interest, mortgage and/or deed of trust"; (d) "obligation" shall mean
"obligation, duty, covenant and/or condition"; and (e) "any of the Mortgaged
Property" shall mean "the Mortgaged Property or any part thereof or interest
therein." Any act which Mortgagee is permitted to perform hereunder may be
performed at any time and from time to time by Mortgagee or any person or entity
designated by Mortgagee. Any act which is prohibited to Mortgagor hereunder is
also prohibited to all lessees of any of the Mortgaged Property. Each
appointment of Mortgagee as attorney-in-fact for Mortgagor under the Mortgage is
irrevocable and coupled with an interest. Mortgagee has the right to reasonably
refuse to grant its consent, approval or acceptance or to indicate its
satisfaction, whenever such consent, approval, acceptance or satisfaction is
required hereunder.
29. Captions. The captions or headings at the beginning of each
Article hereof are for the convenience of the parties and are not a part of this
Mortgage.
30. Successors and Assigns. The covenants contained herein shall run
with the land and bind Mortgagor, its successors and assigns, and all subsequent
owners, encumbrancers and tenants of the Mortgaged Property, and shall inure to
the benefit of the Mortgagee.
31. Enforceability. (a) This Mortgage, the validity and enforceability
of this Mortgage and all transactions and questions arising hereunder, shall be
governed by and construed and interpreted in accordance with the laws of the
State of New Jersey. Whenever possible, each provision of this Mortgage shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Mortgage shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remaining provisions of this
Mortgage. Nothing in this Mortgage shall require Mortgagor to pay, or Mortgagee
to accept, interest in an amount which would subject Mortgagee to penalty under
applicable law. In the event that the payment of any interest due hereunder
would subject Mortgagee to penalty under applicable law, then ipso facto the
obligation of Mortgagor to make such payment shall be reduced to the highest
rate authorized under applicable law without penalty.
(b) Mortgagor hereby irrevocably agrees that any legal action, suit,
or proceeding against it with respect to its
<PAGE>
21
obligations, liabilities or any other matter under or arising out of or in
connection with this Mortgage or for recognition or enforcement of any judgment
rendered in any such action, suit or proceeding may be brought in the United
States Courts for the Southern District of New York, or in the courts of the
State of New Jersey, as Mortgagee may elect, and, by execution and delivery of
this Mortgage, Mortgagor hereby irrevocably accepts and submits to the non-
exclusive jurisdiction of each of the aforesaid courts in personam, generally
and unconditionally with respect to any such action, suit or proceeding for
itself and in respect of its property. Mortgagor further agrees that final
judgment against it in any action, suit, or proceeding referred to herein shall
be conclusive and may be enforced in any other jurisdiction, 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. Mortgagor and Mortgagee each
hereby waives trial by jury.
32. RECEIPT OF COPY. MORTGAGOR ACKNOWLEDGES THAT IT HAS RECEIVED
WITHOUT CHARGE A TRUE COPY OF THIS MORTGAGE.
33. Subordination. Notwithstanding anything to the contrary contained
herein:
(a) This Mortgage, the lien and security interest created by this
Mortgage and the Indebtedness are and shall at all times, whether before,
after or during the pendency of any bankruptcy, reorganization or other
insolvency proceeding, continue to be junior, subject to and subordinate in
each and every respect to the lien and security interest created by the
First Mortgage and the Linden Mortgage, and to all sums (the "Prior
Indebtedness") that are secured by the First Mortgage or the Linden
Mortgage, with interest thereon, including, without limitation, any
interest on the Prior Indebtedness accruing subsequent to the commencement
of bankruptcy, insolvency or similar proceedings with respect to the
obligor of the Prior indebtedness, and reasonable costs and charges,
including reasonable attorneys' fees, incurred by First Mortgagee and
Linden Mortgagee in collecting the Prior Indebtedness, less the amounts
paid on the Prior Indebtedness and other credits to the Prior Indebtedness.
(b) No payment on account of the Indebtedness shall be made until
payment-in-full of all amounts of the Prior Indebtedness has been made (it
being understood that reductions in the amount of the Payment Tracking
Account pursuant to Article IV, Section H of the Power Purchase Agreement
shall not constitute payments for purposes of this Section 33(b)).
(c) Mortgagor and First Mortgagee, and Mortgagor and Linden Mortgagee,
may amend, modify and extend the First Mortgage and the Linden Mortgage,
respectively, and this Mortgage shall be subject and subordinate to each
such
<PAGE>
22
amendment, modification or extension; provided that such amendment,
modification or extension shall not result in an increase in the amounts
secured by the First Mortgage and the Linden Mortgage by an amount in
excess of 125% of the maximum principal amounts thereof under the First
Mortgage and the Linden Mortgage, as in effect on the date hereof.
(d) All rights and privileges (including any assignment of leases and
rents and any rights regarding insurance proceeds and condemnation awards)
granted in this Mortgage shall be subordinate to the First Mortgage and the
Linden Mortgage and to the rights and privileges of First Mortgagee and
Linden Mortgagee, respectively, thereunder.
(e) Mortgagee shall not acquire by purchase, foreclosure, exercise of
any option to purchase or right of first refusal, subordination or
otherwise any lien, estate, right or other interest in the Mortgaged
Premises that is, or may be, prior in right to the First Mortgage or the
Linden Mortgagee or to any extension, consolidation, modification or
supplement thereto, or to the lien, estate, rights or interests of First
Mortgagee or Linden Mortgagee, respectively, thereunder, including any
right or interest that may arise in respect to real estate taxes,
assessments or other governmental charges.
(f) Mortgagee shall not commence any foreclosure or other action, or
exercise any right or remedy available to it under this Mortgage unless and
until Mortgagor shall be in default under the First Mortgage or the Linden
Mortgage and First Mortgagee or Linden Mortgagee shall have commenced a
foreclosure or other action as it shall elect to enforce its rights under
the First Mortgage or the Linden Mortgage, as applicable. Notwithstanding
any action that Mortgagee takes hereunder or otherwise, Mortgagee shall not
in any way interfere with the rights and remedies of First Mortgagee under
the First Mortgage or Linden Mortgagee under the Linden Mortgage.
(g) Mortgagee shall give First Mortgagee and Linden Mortgagee notice
of any default under this Mortgage and copies of all notices relating to
such default, together with copies of any foreclosure or other documents
relating to this Mortgage. Any such notice or document shall not be
effective unless and until received by First Mortgagee and Linden
Mortgagee. Mortgagee shall also give First Mortgagee and Linden Mortgagee
at least 30 days prior written notice of any action that Mortgagee takes
hereunder.
(h) Mortgagee shall not take any action to have a receiver appointed
for Mortgagor until at least 30 days have elapsed since a default occurred
under this Mortgage. No rents, profits or other income from the Mortgaged
Premises shall be collected by or on behalf of Mortgagee except by a duly
appointed receiver and all such rents, profits and
<PAGE>
23
income so collected shall first be paid to First Mortgagee and applied in
accordance with the terms of the First Mortgage and then to Linden
Mortgagee and applied in accordance with the terms of the Linden Mortgage.
(i) If Mortgagee shall commence any foreclosure against the Mortgaged
Premises or other action to enforce its rights under this Mortgage, all
rents, issues and profits received or receivable by Mortgagee shall be paid
to First Mortgagee and applied in accordance with the terms of the First
Mortgage and then to Linden Mortgagee and applied in accordance with the
terms of the Linden Mortgage. In any such foreclosure or other action to
enforce its rights under this Mortgage, no tenant of the Mortgaged Premises
shall be named as a party defendant nor shall any action be taken that
would terminate any lease or other right held by or granted to any third
party with respect to the Mortgaged Premises.
(j) Neither First Mortgagee nor Linden Mortgagee shall be deemed paid
nor shall the First Mortgage nor the Linden Mortgage be deemed in good
standing unless and until all payments received by First Mortgagee and
Linden Mortgagee are no longer subject to recision, restoration or return.
(k) The indebtedness secured by this Mortgage shall not in any event
exceed $45,000,000.
(1) If for any reason the (i) interest and/or lien of First Mortgagee,
Linden Mortgagee or any assignee or designee of First Mortgagee or Linden
Mortgagee (collectively, a "Lender"), as mortgagee under the First Mortgage
or the Linden Mortgage, and (ii) any fee or other interest of a Lender in
the Mortgaged Premises is deemed to merge, as between Mortgagee on the one
hand, and First Mortgagee and Linden Mortgagee on the other hand, it shall
be deemed that First Mortgagee has a first lien on and security interest in
the Mortgaged Premises, Linden Mortgagee a second lien on and security
interest in the Mortgaged Premises and Mortgagee a third lien on and
security interest in the Mortgaged Premises, and First Mortgagee and Linden
Mortgagee, collectively, shall be deemed to have all the rights that
Mortgagee has pursuant to this Mortgage, including, without limitation, all
the rights of Mortgagee at any foreclosure sale of the Mortgaged Premises
(up to the amount of the Prior Indebtedness). In no event, and at no time,
shall Mortgagee assert that any interest or lien of a Lender in or on the
Mortgaged Premises has merged with any fee or other interest of a Lender in
the Mortgaged Premises.
(m) Mortgagee shall assign and release unto First Mortgagee (or,
following the release of the First Mortgage, Linden Mortgagee) all of its
right, title and interest or
<PAGE>
24
claim, if any, in and to the proceeds of all policies of insurance covering
the Mortgaged Premises and/or any awards or other compensation made for any
taking of any part of the Mortgaged Premises, for application in accordance
with the provisions of the First Mortgage (or the Linden Mortgage, as
applicable), such assignment and release however, shall not be in
derogation of Mortgagee's rights under Section 6(a) hereof.
(n) Mortgagee shall deliver to First Mortgagee and Linden Mortgagee
such further assurances and undertakings confirming the subordination
hereinabove set forth as First Mortgagee or Linden Mortgagee shall
reasonably require.
(o) No provision of this Section 33 shall be modified or amended
except by written instrument executed by Mortgagor, Mortgagee, First
Mortgagee and Linden Mortgagee.
IN WITNESS WHEREOF, the undersigned has caused this Mortgage to be
duly executed under seal the day and year first above written.
CAMDEN COGEN L.P.
(Corporate Seal) By: Cogen Technologies Camden GP
Limited Partnership, its general
partner
ATTEST: By: Cogen Technologies Camden GP
Inc., its general partner
/s/ Mary Ann McLendon
- ---------------------
Mary Ann McLendon By: /s/ Lawrence Thomas
Assistant Secretary -------------------
Name: Lawrence Thomas
Title: V.P. - Finance
<PAGE>
Schedule 1
----------
CONTRACTS
---------
Equipment Supply Contract
Power Purchase Agreement
Steam Supply Agreement
Gas Service Agreement
Turnkey Contract
Operation and Maintenance Agreement
(Capitalized terms used but not defined in this Schedule shall have the
respective meanings given such terms in the Loan Agreement executed in
connection with the First Mortgage)
<PAGE>
EXHIBIT A
---------
ALL THAT CERTAIN land or promises situate, lying and being in the City of
Camden, County of Camden and State of New Jersey. The legal description being
more particularly bounded and described as follows:
BEGINNING at a point in the Southeasterly corner of Broadway (66 feet wide)
and Chelton Avenue (60 feet wide); thence
(1) South 88 degrees 33 minutes 00 seconds East along the Southerly line of
Chelton Avenue, a distance of 450 feet to the Westerly line of Sixth Street (50
feet wide); thence
(2) South 01 degrees 20 minutes 45 seconds West along the Westerly line of
Sixth Street, a distance of 400 feet to a point; thence
(3) North 88 degrees 33 minutes 00 seconds West, a distance of 210 feet to
a point in the center line of Fillmore Street (now vacated); thence
(4) North 01 degrees 20 minutes 45 seconds East and along the center line
to Fillmore Street (now vacated) 20 feet to a point; thence
(5) North 88 degrees 33 minutes 00 seconds West, a distance to 115 feet to
a point in the center line of Hedley Street (now vacated); thence
(6) North 01 degrees 20 minutes 45 seconds East along the center line of
Hedley Street (now vacated), a distance of 20 feet to a point; thence
(7) North 88 degrees 33 minutes 00 seconds West, a distance of 125 feet to
a point in the Easterly line of Broadway; thence
(8) North 01 degrees 20 minutes 45 seconds East along the Easterly line of
Broadway, a distance of 360 feet to point and place of beginning.
BEING Lot 1, Block 506, Tax Map.
<PAGE>
STATE OF TEXAS )
: ss.:
COUNTY OF HARRIS)
BE IT REMEMBERED, that on this 31st day of January 1992, in the County and
State aforesaid, before me, the subscriber, a Notary Public of Harris County, TX
authorized to take acknowledgments and proofs in said County and State,
personally appeared Lawrence Thomas and Mary Ann McLendon, who I am satisfied,
are the persons who signed the within instrument as V.P. - Finance and Asst.
Sec'y, respectively, of Cogen Technologies Camden, Inc., the corporation named
therein, and they thereupon acknowledged that the within instrument signed by
the corporation and sealed with its corporate seal, was signed, sealed with the
corporate seal and delivered by them as such officers and is the voluntary act
and deed of the corporation, made by virtue of authority from its Board of
Directors, as a general partner on behalf of Cogen Technologies Camden GP
Limited Partnership, a Delaware limited partnership, as a general partner on
behalf of CAMDEN COGEN L.P., a Delaware limited partnership the partnership
which executed the within instrument.
Signature /s/ Elaine A. Campbell
----------------------
Printed
------------------------
Notary Public
My commission expires:
----------
ELAINE A. CAMPBELL
NOTARY PUBLIC, STATE OF TEXAS
MY COMMISSION EXPIRES
JUL 27, 1993
<PAGE>
EXHIBIT B
---------
Permitted Exceptions
--------------------
None
<PAGE>
ACCOMMODATION
RECORDING ONLY
NO INSURANCE
Charge, Record and Return To
CONTINENTAL TITLE INSURANCE COMPANY
The Corporate Center At Sagemore
8000 Sagemore Drive, Suite 8202
Mariton, NJ 08053
361 552 HO
LJ U
RECORDED-CAMDEN COUNTY
92FEB-4 PM 3:29
/s/ ???
REGISTER
<PAGE>
EXHIBIT 10.52
ISDA
----(R)
International Swap Dealers Association, Inc.
INTEREST RATE
AND
CURRENCY EXCHANGE AGREEMENT
April 1, 1993
Dated as of
-----------------------------
CAMDEN COGEN L.P. GENERAL ELECTRIC CAPITAL
(Party A) and CORPORATION (Party B)
--------------------------- ------------------------------------------
have entered and/or anticipate entering into one or more transactions (each a
"Swap Transaction"). The parties agree that each Swap Transaction will be
governed by the terms and conditions set forth in this document (which includes
the schedule (the "Schedule")) and in the documents (each a "Confirmation")
exchanged between the parties confirming such Swap Transactions. Each
Confirmation constitutes a supplement to and forms part of this document and
will be read and construed as one with this document, so that this document and
all the Confirmations constitute a single agreement between the parties
(collectively referred to as this "Agreement"). The parties acknowledge that all
Swap Transactions are entered into in reliance on the fact that this document
and all Confirmations will form a single agreement between the parties, it being
understood that the parties would not otherwise enter into any Swap
Transactions.
Accordingly, the parties agree as follows:-
1. INTERPRETATION
(a) Definitions. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions of
any Confirmation and this document, such Confirmation will prevail for the
purpose of the relevant Swap Transaction.
2. PAYMENTS
(a) Obligations and Conditions.
(i) Each party will make each payment specified in each Confirmation as
being payable by it.
(ii) Payments under this Agreement will be made not later than the due
date for value on that date in the place of the account specified in the
relevant Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the
required currency.
(iii) Each obligation of each party to pay any amount due under Section
2(a)(i) is subject to (1) the condition precedent that no Event of Default
or Potential Event of Default with respect to the other party has occurred
and is continuing and (2) each other applicable condition precedent
specified in this Agreement.
(b) Change of Account. Either party may change its account by giving notice to
the other party at least five days prior to the due date for payment for
which such change applies.
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(c) Netting. If on any date amounts would otherwise be payable:-
(i) in the same currency; and
(ii) in respect of the same Swap Transaction.
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
If the parties specify "Net Payments - Corresponding Payment Dates" in a
Confirmation or otherwise in this Agreement, sub-paragraph (ii) above will cease
to apply to all Swap Transactions with effect from the date so specified (so
that a net amount will be determined in respect of all amounts due on the same
date in the same currency, regardless of whether such amounts are payable in
respect of the same Swap Transaction); provided that, in such case, this Section
2(c) will apply separately to each Office through which a party makes and
receives payments as set forth in Section 10.
(d) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will be made without any
deduction or withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law, as modified by
the practice of any relevant governmental revenue authority, then in
effect. If a party is so required to deduct or withhold, then that
party ("X") will:-
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to be
deducted or withheld (including the full amount required to be deducted
or withheld from any additional amount paid by X to Y under this
Section 2(d)) promptly upon the earlier of determining that such
deduction or withholding is required or receiving notice that such
amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified
copy), or other documentation reasonably acceptable to Y, evidencing
such payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the
payment to which Y is otherwise entitled under this Agreement, such
additional amount as is necessary to ensure that the net amount
actually received by Y (free and clear of Indemnifinable Taxes, whether
assessed against X or Y) will equal the full amount Y would have
received had no such deduction or withholding been required. However, X
will not be required to pay any additional amount to Y to the extent
that it would not be required to be paid but for:-
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i) or 4(d); or
(B) the failure of a representation made by Y pursuant to Section
3(f) to be accurate and true unless such failure would not have
occurred but for a Change in Tax Law.
(ii) Liability. If:-
(1) X is required by any applicable law, as modified by the practice of
any relevant governmental revenue authority, to make any deduction or
withholding in respect of which X would not be required to pay an
additional amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly against X,
then, except to the extent Y has satisfied or then satisfies the liability
resulting from such Tax, Y will promptly pay to X the amount of such
liability (including any related liability for interest, but including any
related liability for penalties only if Y has failed to comply with or
perform any agreement contained in Section 4(a)(i) or (d)).
(e) Default Interest. A party that defaults in the payment of any amount due
will, to the extent permitted by law, be required to pay interest (before as
well as after judgment) on such amount to the other party on demand in the same
currency as the overdue amount, for the period from (and including)
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the original due date for payment to (but excluding) the date of actual payment,
at the Default Rate. Such interest will be calculated on the basis of daily
compounding and the actual number of days elapsed.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Swap Transaction is entered
into and, in the case of the representations in Section 3(f), at all times until
the termination of this Agreement) that:-
(a) Basic Representations.
(i) Status. It is duly organised and validly existing under the laws of the
jurisdiction of its organisation or incorporation and, if relevant under
such laws, in good standing;
(ii) Powers. It has the power to execute and deliver this Agreement and any
other documentation relating to this Agreement that it is required by this
Agreement to deliver and to perform its obligations under this Agreement
and any obligations it has under any Credit Support Document to which it is
a party and has taken all necessary action to authorise such execution,
delivery and performance;
(iii) No Violation or Conflict. Such execution, delivery and performance do
not violate or conflict with any law applicable to it, any provision of its
constitutional documents, any order or judgment of any court or other
agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
(iv) Consents. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in full
force and effect and all conditions of any such consents have been complied
with; and
(v) Obligations Binding. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal, valid
and binding obligations, enforceable in accordance with their respective
terms (subject to applicable bankruptcy, reorganisation, insolvency,
moratorium or similar laws affecting creditors' rights generally and
subject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a proceeding in
equity or at law)).
(b) Absence of Certain Events. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has
occurred and is continuing and no such event or circumstance would occur as
a result of its entering into or performing its obligations under this
Agreement or any Credit Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or
proceeding at law or in equity or before any court, tribunal, governmental
body, agency or official or any arbitrator that purports to draw into
question, or is likely to affect, the legality, validity or enforceability
against it of this Agreement or any Credit Support Document to which it is
a party or its ability to perform its obligations under this Agreement or
such Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is
identified for the purpose of this Section 3(d) in paragraph 2 of Part 3 of
the Schedule is, as of the date of the information true, accurate and
complete in every material respect.
(e) Payer Tax Representation. Each representation specified in Part 2 of the
Schedule as being made by it for the purpose of this Section 3(e) is
accurate and true.
(f) Payee Tax Representation. Each representation specified in Part 2 of the
Schedule as being made by it for the purpose of this Section 3(f) is
accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as it has or may have any
obligation under this Agreement or under any Credit Support Document to which it
is a party:-
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(a) Furnish Specified Information. It will deliver to the other party:-
(i) any forms, documents or certificates relating to taxation specified in
Part 3 of the Schedule or any Confirmation and
(ii) any other documents specified in Part 3 of the Schedule or any
Confirmation, by the date specified in Part 3 of the Schedule or such
Confirmation or, if none is specified, as soon as practicable.
(b) Maintain Authorisations. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) Tax Agreement. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of
such failure.
(e) Payment of Stamp Tax. It will pay any Stamp Tax levied or imposed upon it or
in respect of its execution or performance of this Agreement by a jurisdiction
in which it is incorporated, organised, managed and controlled, or considered to
have its seat, or in which a branch or office through which it is acting for
the purpose of this Agreement is located ("Stamp Tax Jurisdiction") and will
indemnify the other party against any Stamp Tax levied or imposed upon the other
party or in respect of the other party's execution or performance of this
Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax
Jurisdiction with respect to the other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) Events of Default. The occurrence at any time with respect to a party
or, if applicable, any Specified Entity of such party, of any of the following
events constitutes an event of default (an "Event of Default") with respect to
such party:-
(i) Failure to Pay. Failure by the party to pay, when due any amount
required to be paid by it under this Agreement if such failure is not
remedied on or before the third Business Day after notice of such failure to
pay is given to the party;
(ii) Breach of Agreement. Failure by the party to comply with or perform any
agreement or obligation (other than an obligation to pay any amount required
to be paid by it under this Agreement or to give notice of a Termination
Event or any agreement or obligation under Section 4(a)(i) or 4(d)) to be
complied with or performed by the party in accordance with this Agreement if
such failure is not remedied on or before the thirtieth day after notice of
such failure is given to the party;
(iii) Credit Support Default.
(1) Failure by the party or any applicable Specified Entity to
comply with or perform any agreement or obligation to be complied with
or performed by the party or such Specified Entity in accordance with
any Credit Support Document if such failure is continuing after any
applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support Document, or
the ceasing of such Credit Support Document to be in full force and
effect, prior to the final Scheduled Payment Date of each Swap
Transaction to which such Credit Support Document relates without the
written consent of the other party; or
(3) the party or such Specified Entity repudiates, or challenges the
validity of, such Credit Support Document.
(iv) Misrepresentation. A representation (other than a representation under
Section 3(e) or (f) made or repeated or deemed to have been made or repeated
by the party or any applicable Specified Entity in this Agreement or any
Credit Support Document relating to this Agreement proves to have been
incorrect or misleading in any material respect when made or repeated or
deemed to have been made or repeated.
(v) Default under Specified Swaps. The occurrence of an event of default in
respect of the party or any applicable Specified Entity under a Specified
Swap which, following the giving of any
<PAGE>
applicable notice or the lapse of any applicable grace period has
resulted in the designation or occurrence of an early termination date in
respect of such Specified Swap:
(vi) CROSS DEFAULT. If "Cross Default" is specified in Part 1 of the
Schedule as applying to the party; (1) the occurrence or existence of an
event or condition in respect of such party or any applicable Specified
Entity, under one or more agreements or instruments, relating to Specified
Indebtedness of such party or any such Specified Entity in an aggregate
amount of not less than the Threshold Amount as specified in Part 1 of the
Schedule which has resulted in such Specified Indebtedness becoming or
becoming capable at such time of being declared due and payable under such
agreements or instruments before it would otherwise have been due and
payable or (2) the failure by such party or any such Specified Entity to
make one or more payments at maturity in an aggregate amount of not less
than the Threshold Amount under such agreements or instruments (after giving
effect to any applicable grace period).
(vii) BANKRUPTCY. The party or any applicable Specified Entity:-
(1) is dissolved; (2) becomes insolvent or fails or is unable or
admits in writing its inability generally to pay its debts as they
become due; (3) makes a general assignment arrangement or composition
with or for the benefit of its creditors; (4) institutes or has
instituted against it a proceeding seeking a judgment of insolvency or
bankruptcy or any other relief under any bankruptcy or insolvency law
or other similar law affecting creditors rights or a petition is
presented for the winding-up or liquidation of the party or any such
Specified Entity and in the case of any such proceeding or petition
instituted or presented against it such proceeding or petition (A)
results in a judgment of insolvency or bankruptcy or the entry of an
order for relief or the making of an order for the winding-up or
liquidation of the party of such Specified Entity or (B) is not
dismissed, discharged, stayed or restrained in each case within 30
days of the institution or presentation thereof; (5) has a resolution
passed for its winding-up or liquidation; (6) seeks or becomes subject
to the appointment of an administrator, receiver, trustee, custodian
or other similar official for it or for all or substantially all its
assets regardless of how brief such appointment may be or whether any
obligations are promptly assumed by another entity or whether any
other event described in this clause (6) has occurred and is
continuing; (7) any event occurs with respect to the party or any such
Specified Entity which under the applicable laws of any jurisdiction
has an analogous effect to any of the events specified in clauses (1)
to (6) (inclusive) or; (8) takes any action in furtherance of or
indicating its consent to approval of or acquiescence in any of the
foregoing acts;
other than in the case of clause (1) or (5) or to the extent it relates to
those clauses, clause (8), for the purpose of a consolidation amalgamation
or merger which would not constitute an event described in (viii) below: or
(viii) MERGER WITHOUT ASSUMPTION. The party consolidates or amalgamates
with or merges into, or transfers all or substantially all its assets to
another entity and, at the time of such consolidation, amalgamation, merger
or transfer:-
(1) the resulting, surviving or transferee entity fails to assume all
the obligations of such party under this Agreement by operation of law
or pursuant to an agreement reasonably satisfactory to the other party
to this Agreement: or
(2) the benefits of any Credit Support Document relating to this
Agreement fail to extend (without the consent to the other party) to
the performance by such resulting surviving or transferee of its
obligations under this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party or,
if applicable, any Specified Entity of such party of any event specified below
constitutes an Illegality if the event is specified in (i) below, a Tax Event if
the event is specified in (ii) below, a Tax Event Upon Merger if the event is
specified in (iii) below or a Credit Event Upon Merger if the event is specified
in (iv) below:-
(i) ILLEGALITY. Due to the adoption of, or any change in, any applicable law
after the date on which such Swap Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court, tribunal
or regulatory authority with competent jurisdiction of any applicable law
after such date, it becomes unlawful (other than as a result of a breach by
the party of Section 4(b) for such party (which will be the Affected
Party):-
<PAGE>
(1) to perform any absolute or contingent obligation to make a payment
or to receive a payment in respect of such Swap Transaction or to
comply with any other material provision of this Agreement relating to
such Swap Transaction; or
(2) to perform or for any applicable Specified Entity to perform, any
contingent or other obligation which the party (or such Specified
Entity) has under any Credit Support Document relating to such Swap
Transaction:
(ii) TAX EVENT.
(1) The party (which will be the Affected Party) will be required on
the next succeeding Scheduled Payment Date to pay to the other party
an additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2 (e)) as a
result of a Change in Tax Law; or
(2) there is a substantial likelihood that the party (which will be the
Affected Party will be required on the next succeeding Scheduled
Payment Date to pay to the other party an additional amount in respect
of an Indemnifiable Tax under Section 2(d)(i)(4) except in respect of
interest under Section 2(e)) and such substantial likelihood results
from an action taken by a taxing authority, or brought in a court of
competent jurisdiction, or after the date on which such Swap
Transaction was entered into (regardless of whether such action was
taken or brought with respect to a party to this Agreement):
(iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the next
succeeding Scheduled Payment Date will either (1) be required to pay an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e)) or (2) receive
a payment from which an amount has been deducted or withheld for or on
account of any Indemnifiable Tax in respect of which the other party is not
required to pay an additional amount in either case as a result of a party
consolidating or amalgamating with or merging into or transferring all or
substantially all its assets to another entity (which will be the Affected
Party) where such action does not constitute an event described in Section
5(a)(viii); or
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is specified in
Part 1 of the Schedule as applying to the party, such party ("X")
consolidates or amalgamates with or merges into or transfers all or
substantially all its assets to another entity and such action does not
constitute an event described in Section 5(a)(viii) but the creditworthiness
of the resulting, surviving or transferee entity (which will be the Affected
Party) is materially weaker than that of X immediately prior to such action.
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality it will be treated as an Illegality and will not constitute an Event
of Default.
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party may, by not more than 20 days notice to the
defaulting party specifying the relevant Event of Default, designate a day not
earlier than the day such notice is effective as an Early Termination Date in
respect of all outstanding Swap Transactions. However, an Early Termination
Date will be deemed to have occurred in respect of all Swap Transactions
immediately upon the occurrence of any Event of Default specified in Section
5(a)(vii) (1), (2), (3), (5), (6), (7) or (8) and as of the time immediately
preceding the institution of the relevant proceeding or the presentation of the
relevant petition upon the occurrence of any Event of Default specified in
Section 5(a)(vii)(4).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) Notice. Upon the occurrence of a Termination Event, an Affected Party
will, promptly upon becoming aware of the same, notify the other party
thereof, specifying the nature of such Termination Event and the Affected
Transactions relating thereto. The Affected Party will also give such other
information to the other party with regard to such Termination Event as the
other party may reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under
Section 5(b)(i)( 1) or a Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the
Affected Party, the Affected Party will as a condition to its right to
designate an Early Termination Date under Section 6(b)(iv) use all
reasonable efforts (which
<PAGE>
will not require such party to incur a loss, excluding immaterial,
incidental expenses) to transfer within 20 days after it gives notice under
Section 6(b)(i) all its rights and obligations under this Agreement in
respect of the Affected Transactions to another of its offices, branches or
Affiliates so that such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period, where-
upon the other party may effect such a transfer within 30 days after the
notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject to
and conditional upon the prior written consent of the other party, which
consent will not be withheld if such other party's policies in effect at
such time would permit it to enter swap transactions on the terms proposed.
(iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1) or a
Tax Event occurs and there are two Affected Parties, each party will use all
reasonable efforts to reach agreement within 30 days after notice thereof is
given under Section 6(b)(i) on action that would cause such Termination
Event to cease to exist.
(iv) RIGHT TO TERMINATE. If:-
(1) a transfer under Section 6(b)(ii) or an agreement under Section
6(b)(iii), as the case may be, has not been effected with respect to
all Affected Transactions within 30 days after an Affected Party gives
notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2) or a Credit Event Upon
Merger occurs, or a Tax Event Upon Merger occurs and the Burdened Party
is not the Affected Party.
either party in the case of an Illegality, the Burdened Party in the case of a
Tax Event Upon Merger, any Affected Party in the case of a Tax Event, or the
party which is not the Affected Party in the case of a Credit Event Upon Merger
may by not more than 20 days notice to the other party and provided that the
relevant Termination Event is then continuing, designate a day not earlier than
the day such notice is effective as an Early Termination Date in respect of all
Affected Transactions.
(C) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under Section
6(a) or (b), the Early Termination Date will occur on the date so designated
whether or not the relevant Event of Default or Termination Event is
continuing on the relevant Early Termination Date.
(ii) Upon the effectiveness of notice designating an Early Termination Date
(or the deemed occurrence of an Early Termination Date), the obligations of
the parties to make any further payments under Section 2(a)(i) in respect of
the Terminated Transactions will terminate. but without prejudice to the
other provisions of this Agreement.
(d) CALCULATIONS.
(i) STATEMENT. Following the occurrence of an Early Termination Date, each
party will make the calculations (including calculation of applicable
interest rates) on its part contemplated by Section 6(e) and will provide to
the other party a statement (1) showing, in reasonable detail, such
calculations (including all relevant quotations) and (2) giving details of
the relevant account to which any payment due to it under Section 6(e) is to
be made. In the absence of written confirmation of a quotation obtained in
determining a Market Quotation from the source providing such quotation, the
records of the party obtaining such quotation will be conclusive evidence of
the existence and accuracy of such quotation.
(ii) DUE DATE. The amount calculated as being payable under Section 6(e)
will be due on the day that notice of the amount payable is effective (in
the case of an Early Termination Date which is designated or deemed to occur
as a result of an Event of Default) and not later than the day which is two
Business Days after the day on which notice of the amount payable is
effective (in the case of an Early Termination Date which is designated as a
result of a Termination Event). Such amount will be paid together with (to
the extent permitted under applicable law) interest thereon in the
Termination Currency from (and including) the relevant Early Termination
Date to (but excluding) the relevant due date, calculated as follows:-
(1) if notice is given designating an Early Termination Date or if
an Early Termination Date is deemed to occur in either case as a
result of an Event of Default, at the Default Rate; or
<PAGE>
(2) if notice is given designating an Early Termination Date as a
result of a Termination Event, at the Default Rate minus 1% per annum.
Such interest will be calculated on the basis of daily compounding and
the actual number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION.
(i) DEFAULTING PARTY OR ONE AFFECTED PARTY. If notice is given designating
an Early Termination Date or if an Early Termination Date is deemed to occur
and there is a Defaulting Party or only one Affected Party, the other party
will determine the Settlement Amount in respect of the Terminated
Transactions and:-
(1) if there is a Defaulting Party, the Defaulting Party will pay to the
other party the excess, if a positive number, of (A) the sum of such
Settlement Amount and the Termination Currency Equivalent of the Unpaid
Amounts owing to the other party over (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to the Defaulting Party; and
(2) if there is an Affected Party, the payment to be made will be equal
to (A) the sum of such Settlement Amount and the Termination Currency
Equivalent of the Unpaid Amounts owing to the party determining the
Settlement Amount ("X") less (B) the Termination Currency Equivalent of
the Unpaid Amounts owing to the party not determining the Settlement
Amount ("Y").
(ii) TWO AFFECTED PARTIES. If notice is given of an Early Termination Date
and there are two Affected Parties, each party will determine a Settlement
Amount in respect of the Terminated Transactions and the payment to be made
will be equal to (1) the sum of (A) one-half of the difference between the
Settlement Amount of the party with the higher Settlement Amount ("X") and
the Settlement Amount of the party with the lower Settlement Amount ("Y")
and (B) the Termination Currency Equivalent of the Unpaid Amounts owing to X
less (2) the Termination Currency Equivalent of the Unpaid Amounts owing to
Y.
(iii) PARTY OWING. If the amount calculated under Section 6(e)(i)2) or (ii)
is a positive number, Y will pay such amount to X, if such amount is a
negative number, X will pay the absolute value of such amount to Y.
(iv) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early Termination
Date is deemed to occur, the amount determined under Section 6(c)(i) will be
subject to such adjustments as are appropriate and permitted by law to
reflect any payments made by one party to the other under this Agreement
(and retained by such other party) during the period from the relevant Early
Termination Date to the date for payment determined under Section 6(d)(ii).
(v) PRE-ESTIMATE OF LOSS. The parties agree that the amounts recoverable
under this Section 6(e) are a reasonable pre-estimate of loss and not a
penalty. Such amounts are payable for the loss of bargain and the loss of
protection against future risks and except as otherwise provided in this
Agreement neither party will be entitled to recover any additional damages
as a consequence of such losses.
7. TRANSFER
Subject to Section 6(b) and to any exception provided in the Schedule, neither
this Agreement nor any interest or obligation in or under this Agreement may be
transferred by either party without the prior written consent of the other party
(other than pursuant to a consolidation or amalgamation with or merger into or
transfer of all or substantially all its assets to, another entity) and any
purported transfer without such consent will be void.
8. CONTRACTUAL CURRENCY
(a) PAYMENT IS THE CONTRACTUAL CURRENCY. Each payment under this Agreement will
be made in the relevant currency specified in this Agreement for that payment
(the "Contractual Currency"). To the extent permitted by applicable law, any
obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner and
in good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amount, due in
respect of this Agreement. If for any reason the amount in the Contractual
Currency so received
<PAGE>
falls short of the amount in the Contractual Currency due in respect of this
Agreement, the party required to make the payment will, to the extent permitted
by applicable law, immediately pay such additional amount in the Contractual
Currency as may be necessary to compensate for the shortfall. If for any reason
the amount in the Contractual Currency so received exceeds the amount in the
Contractual Currency due in respect of this Agreement, the party receiving the
payment will refund promptly the amount of such excess.
(b) JUDGMENTS. To the extent permitted by applicable law, if any judgement or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement; (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgement or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgement or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgement or order for the purposes of such
judgement or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgement or order actually received by such
party. The term "rate of exchange" includes, without limitation, any premiums
and costs of exchange payable in connection with the purchase of or conversion
into the Contractual Currency.
(C) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums due in respect of this
Agreement.
(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.
9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the panics with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing and executed by each of the
parties or confirmed by an exchange of telexes.
(c) SURVIVAL OF OBLIGATIONS. Except as provided in Section 6(c)(ii), the
obligations of the parties under this agreement will survive the termination of
any Swap Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement may be executed in counterparts, each of which will be
deemed an original.
(ii) A Confirmation maybe executed in counterparts or be created by an
exchange of telexes, which in either case will be sufficient for all
purposes to evidence a binding supplement to this Agreement. Any such
counterpart or telex will specify that it constitutes a Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right power or privilege will
not be presumed to preclude any subsequent or further exercise of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and arc not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
<PAGE>
10. MULTIBRANCH PARTIES
If a party is specified as a Multibranch Party in Part 4 of the Schedule, such
Multibranch Party may make and receive payments under any Swap Transaction
through any of its branches or offices listed in the Schedule (each an
"Office"). The Office through which it so makes and receives payments for the
purpose of any Swap Transaction will be specified in the relevant Confirmation
and any change of Office for such purpose requires the prior written consent of
the other party. Each Multibranch Party, represents to the other party that,
notwithstanding the place of payment, the obligation of each Office are for all
purposes under this Agreement the obligations of such Multibranch Party. This
representation will be deemed to be repeated by such Multibranch Party on each
date on which a Swap Transaction is entered into.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or by reason of the early,
termination of any Swap Transaction, including, but not limited to, costs of
collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or communication in respect of this Agreement
will be sufficiency given to a party if in writing and delivered in person,
sent by certified or registered mail (airmail, if overseas) or the
equivalent (with return receipt requested) or by overnight courier or given
by telex (with answerback received) at the address or telex number specified
in Part 4 of the Schedule. A notice or communication will be effective:-
(i) if delivered by hand or sent by overnight courier, on the day it is
delivered (or if that day is not a day on which commercial banks are open
for business in the city specified in the address for notice provided by the
recipient (a "Local Banking Day"), or if delivered after the close of
business on a Local Banking Day, on the first following day that is a Local
Banking Day;
(ii) if sent by telex, on the day the recipient's answerback is received (or
if that day is not a Local Banking Day, or if after the close of business on
a Local Banking Day on the first following day that is a Local Banking Day);
or
(iii) if sent by certified or registered mail (airmail, if overseas) or the
equivalent (return receipt requested), three Local Banking Days after
despatch if the recipient's address for notice is in the same country as the
place of despatch and otherwise seven Local Banking Days after despatch.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address or telex number at which notices or communications are to be given to
it.
13. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in Part 4 of the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:-
(i) submits to the jurisdiction of the English courts if this Agreement is
expressed to be governed by english law, or to, the non-exclusive
jurisdiction of the courts of the State of New york and the united states
District Court located in the Borough of Manhattan in New York City, if this
Agreement is expressed to be governed by the laws of the State of New York;
and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum and further
waives the right to object, with respect to such Proceedings, that such
court does not have jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 10) of the Civil
Jurisdiction and Judgements Act 1982 or any modification extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in Part 4 of the Schedule to receive, for it
and an its behalf, service of process in any Proceedings. If for any reason any
party's Process Agent is unable to act as such, such party will
<PAGE>
promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to service
of process given in the manner provided for notices in Section 12. Nothing in
this Agreement will affect the right of either party to serve process in any
other manner permitted by law.
(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any, judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. DEFINITIONS
As used in this Agreement:-
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all Swap
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Swap Transactions.
"AFFILIATE" means, subject to Part 4 of the Schedule, in relation to any person,
any entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity under common control
with the person. For this purpose, control of any entity or person means
ownership of a majority of the voting power of the entity or person.
"BURDENED PARTY" has the meaning specified in Section 5(b).
"BUSINESS DAY" means (a) in relation to any payment due under Section 2(a)(i), a
day on which commercial banks and foreign exchange markets are open for business
in the place(s) specified in the relevant Confirmation and (b) in relation to
any other payment, a day on which commercial banks and foreign exchange markets
are open for business in the place where the relevant account is located and, if
different, in the principal financial center of the currency of such payment.
"CHANGE IN TAX LAW" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Swap Transaction is entered into.
"CONSENT" includes a consent, approval, action, authorization, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument which is specified
as such in this Agreement.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) of
funding the relevant amount plus 1% per annum.
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date specified as such in a notice given
under Section 6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a).
"ILLEGALITY" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organized present or engaged in a trade or business in
such jurisdiction or having or having had a permanent establishment or fixed
place of business in such jurisdiction but excluding a connection arising solely
from such recipient or related person having executed, delivered, performed its
obligations or received a payment
<PAGE>
under, or enforced, this Agreement or a Credit Support Document).
"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters. by the practice of any relevant governmental revenue authority) and
"lawful" and "unlawful" will be construed accordingly.
"LOSS" means, with respect to a Terminated Transaction and a party, an amount
equal to the total amount (expressed as a positive amount) required as
determined as of the relevant Early Termination Date (or, if an Early
Termination Date is deemed to occur, as of a time as soon thereafter as
practicable) by the party in good faith, to compensate it, for any issues and
costs, including loss of bargain and costs (including loss of bargain and costs
of funding but excluding legal fees and other out-of-pocket expenses) that it
may incur as a result of the early termination of the obligations of the parties
in respect of such Terminated Transaction. If a party determines that it would
gain or benefit from such early termination, such party's Loss will be an amount
(expressed as a negative amount) equal to the amount of the gain or benefit as
determined by such party.
"MARKET QUOTATION" means, with respect to a Terminated Transaction and a party
to such Terminated Transaction making the determination an amount (which may be
negative) determined on the basis of quotations from Reference Market-makers for
the amount that would be or would have been payable on the relevant Early
Termination Date either by the party to the Terminated Transaction making the
determination (to be expressed as a positive amount) or to such party (to be
expressed as a negative amount) in consideration of an agreement between such
party and the quoting Reference Market-maker and subject to such documentation
as they may in good faith agree with the relevant Early Termination Date as the
date of commencement of such agreement (or if later the date specified as the
effective date of such Terminated Transaction in the relevant Confirmation) that
would have the effect of preserving for such party the economic equivalent of
the payment obligations of the parties under Section 2(a)(i) in respect of such
Terminated Transaction that would. but for the occurrence of the relevant Early
Termination Date fall due after such Early Termination Date (excluding any
Unpaid Amounts in respect of such Terminated Transaction but including, without
limitation, any amounts that would but for the occurrence of the relevant Early
Termination Date have been payable (assuming each applicable condition precedent
had been satisfied) after such Early Termination Date by reference to any period
in which such Early Termination Date occurs). The party making the determination
(or its agent) will request each Reference Market-maker to provide its quotation
to the extent practicable as of the same time (without regard to different time
zones) on the relevant Early Termination Date (or, if an Early Termination Date
is deemed to occur as of a time as soon thereafter as practicable). The time as
of which such quotations are to be obtained will. if only one party is obliged
to make a determination under Section 6(e), be-selected in good faith by that
party and otherwise will be agreed by the parties. If more than three such
quotations are provided. the Market Quotation will be the arithmetic mean of the
Termination Currency Equivalent of the quotations. without regard to the
quotations having the highest and lowest values. If exactly three such
quotations are provided. the Market Quotation will be the quotation remaining
after disregarding the quotations having the highest and lowest values. If fewer
than three quotations are provided. it will be deemed that the market quotation
in respect of such terminated transaction cannot be determined.
"OFFICE" has the meaning specified in Section 10.
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of
notice or the lapse of time or both, would constitute an Event of Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant swap market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and N to the extent practicable. from among such dealers
having an office in the same city.
"RELEVANT JURISDICTION" means. with respect to a party, the jurisdictions (a) in
which the party is incorporated, organized. managed and controlled or considered
to have its seat, (b) where a branch or office through which the party is acting
for purposes of this agreement is located (c) in which the party executes this
Agreement and (d) in relation to any payment. from or through which such payment
is made.
"SCHEDULED PAYMENT DATE" means a date on which a payment is due under Section
2(a)(i) with respect to a Swap Transaction.
<PAGE>
"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of:-
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction for which a Market
Quotation is determined; and
(b) for each Terminated Transaction for which a Market Quotation is not, or
cannot be, determined the Termination Currency Equivalent of such party's Loss
(whether positive or negative);
provided that if the parties agree that an amount may be payable under Section
6(e) to a Defaulting, Party by the other party, no account shall be taken of a
Settlement Amount expressed as a negative number.
"SPECIFIED ENTITY" has the meaning specified in Part I of the Schedule.
"SPECIFIED INDEBTEDNESS" means, subject to Part I of the Schedule, any
obligation (whether present or future, contingent or otherwise, as principal or
surety or otherwise) in respect of borrowed money.
"SPECIFIED SWAP" means, subject to Part I of the Schedule, any rate swap or
currency exchange transaction now existing or hereafter entered into between
one party to this Agreement (or any applicable Specified Entity) and the other
party to this Agreement (or any applicable Specified Entity).
"STAMP TAX" means any stamp, registration, documentation or similar tax.
"TAX" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"TAX EVENT" has the meaning specified in Section 5(b).
"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).
"TERMINATED TRANSACTIONS" means (a) with respect to any Early Termination Date
occurring as a result of a Termination Event, all Affected Transactions and (b)
with respect to any Early Termination Date occurring as a result of an Event of
Default, all Swap Transactions, which in either case are in effect as of the
time immediately preceding the effectiveness of the notice designating such
Early Termination Date (or, in the case of an Event of Default specified in
Section 5(a)(vii), in effect as of the time immediately preceding such Early
Termination Date).
"TERMINATION CURRENCY" has the meaning specified in Part 1 of the Schedule.
"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date With the
Termination Currency at the rate equal to the spot exchange rate of the foreign
exchange agent (selected as provided below) for the purchase of such Other
Currency with the Termination Currency at or about 11.00 a.m. (in the city in
which such foreign exchange agent is located) on such date as would be customary
for the determination of such a rate for the purchase of such Other Currency for
value the relevant Early Termination Date. The foreign exchange agent will, if
only one party is obliged to make a determination under Section 6(e), be
selected in good faith by the party and otherwise will be agreed by the parties,
"TERMINATION EVENT" means an Illegality, a Tax Event, a Tax Event Upon Merger or
a Credit Event Upon Merger.
"UNPAID AMOUNTS" owing to any party means, with respect to any Early Termination
Date, the aggregate of the amounts that became due and payable (or that would
have become due and payable but for Section 2(a)(iii) or the designation or
occurrence of such Early Termination Date) to such party under Section 2(a)(i)
in respect of all Terminated Transactions by reference to all periods ended on
or prior to such Early Termination Date and which remain unpaid as at such Early
Termination Date, together with (to the extent permitted under applicable law
and in lieu of any interest calculated under Section 2(e)) interest thereon, in
the currency of such amounts, from (and including) the date such amounts became
due and payable or would have become due and payable to (but excluding) such
Early Termination Date, calculated as follows:-
(a) in the case of notice of an Early Termination Date given as a result of an
Event of Default:-
<PAGE>
(i) interest on such amounts due and payable by a Defaulting Party will be
calculated at the Default Rate, and
(ii) interest on such amounts due and payable by the other party will be
calculated at a rate per annum equal to the cost to such other party (as
certified by it) if it were to fund such amounts (without proof or evidence
of any actual cost), and
(b) in the case of notice of an Early Termination Date given as a result of a
Termination Event, interest on such amounts due and payable by either party will
be calculated at a rate per annum equal to the arithmetic mean of the cost
(without proof or evidence of any actual cost) to each party (as certified by
such party and regardless of whether due and payable by such party) if it were
to fund or of funding such amounts.
Such amounts of interest will be calculated on the basis of daily compounding
and the actual number of days elapsed.
IN WITNESS WHEREOF the parties have executed this document as of the date
specified on the first page of this document.
CAMDEN COGEN L.P. GENERAL ELECTRIC CAPITAL CORPORATION
- ------------------------------ ------------------------------------
(Name of party) (Name of party)
By: Cogen Technologies Camden
G.P. Limited Partnership,
as its sole general partner
By: Cogen Technologies Camden, By: /s/ Bruce Bennett
Inc., as its Sole general ----------------------------------
partner
Name: Bruce Bennett
By: /s/ [Signature appears here]
------------------------------ Title: Associate General Counsel,
Treasury Operations and
Title: Vice President Assistant Secretary
---------------------------
<PAGE>
SCHEDULE
TO THE
INTEREST RATE AND CURRENCY EXCHANGE AGREEMENT
DATED AS OF APRIL 1, 1993
BETWEEN CAMDEN COGEN L.P.,
A DELAWARE LIMITED PARTNERSHIP ("PARTY A")
AND
GENERAL ELECTRIC CAPITAL CORPORATION ("PARTY B")
PART 1
TERMINATION PROVISIONS
In this Agreement -
(1) "SPECIFIED ENTITY" means in relation to Party A and Party B for the purpose
of Sections 5(a)(iii), (iv), (v), (vi) and (vii) and Section 5(b)(i): Not
applicable
(2) "SPECIFIED SWAP" will have the meaning specified in Section 14 unless
another meaning is specified here:
"SPECIFIED SWAP" means, any rate swap or currency exchange
transaction (other than this Agreement and any Swap Transaction entered
into pursuant to this Agreement), any rate cap agreement, any rate collar
agreement any rate floor agreement any forward rate agreement or any
forward foreign exchange agreement, or any option with respect to any such
transactions, however designated, now existing or hereafter entered into,
to which both Party A and Party B are a party.
(3) Sections 5(a)(i) and (ii) are amended in their entirety as follows:
(i) "FAILURE TO PAY" means failure by the party to pay, when due, any
amount required to be paid by it under this Agreement if such failure is
not remedied on or before the fifth Business Day after notice of such
failure to pay is given to the party.
(ii) "BREACH OF AGREEMENT" means; failure by the party to comply with
or perform any agreement or obligation (other than obligation to pay any
amount required to be paid by it under this Agreement or to give notice of
a Termination Event or any agreement or obligation under Section 4(a)(i) or
4(d) to be complied with or performed by the party in accordance with this
Agreement if such failure is not
<PAGE>
2
remedied on or before the thirtieth day after notice of such failure is
given to the party; provided, however, that if such failure is susceptible
to cure, such 30 day period shall be "tended for such additional period of
time (not to exceed 60 days) during which such party shall be diligently
using its best efforts to cure such default.
(4) The "CREDIT SUPPORT DEFAULT" provisions of Section 5(a)(iii) will not apply
to Part A or Party B.
(5) The "CROSS DEFAULT" provisions of Section 5(a)(vi) will not apply to Party
B but will apply to Party A. For such purpose, Section 5(a)(vi) is amended
by deleting subclauses (1) and (2) in their entirety and replacing them
with the following:
The acceleration of any "Obligations" as defined in 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, supplemented or
otherwise modified from time to time, the "Loan Agreement") among Party A,
General Electric Capital Corporation, as Agent, General Electrical Capital
Corporation, as Senior Tranche Agent, General Electrical Capital
Corporation, as Junior Tranche Agent and the financial institutions parties
thereto from time to time as lenders (collectively, the "Lenders") pursuant
to the occurrence and during the continuance of an "Event of Default" (as
defined in the Loan Agreement).
(6) Sections 5(a)(vii) and (viii) are amended by deleting the words "The party"
appearing therein and substituting in lieu thereof, "Party B".
(7) "TERMINATION CURRENCY" means United States Dollars.
(8) The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(iv):
will not apply to Party A
will not apply to Party B
(9) Title "TAX EVENT" provisions of Section 5(b)(ii):
will not apply to Party A
will not apply to Party B
The "TAX EVENT UPON MERGER" provisions of Section 5(b)(iii):
will not apply to Party A
will not apply to Party B
(10) Section 6(a) is amended in its entirely as follows:
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event
of Default with respect to a party (the "Defaulting Party") has occurred
and is then continuing, the other party may, by not more than 20 days
notice to the Defaulting
<PAGE>
3
Party specifying the relevant Event of Default, designate a day not earlier
than the day such notice is effective as an Early Termination Date in
respect of all outstanding Swap Transactions. However, an Early Termination
Date will be deemed to have occurred in respect of all Swap Transactions
immediately upon the occurrence of, with respect to Party B, any Event of
Default specified in Section 5(a)(vii)(1), (2), (3), (5), (6), (7) or (8),
or with respect to Party A, any "Event of Default" regarding Party A
specified in paragraph (f) or paragraph (g) of Section 9 of the Loan
Agreement (as defined in the ISDA Schedule), and with respect to Party B,
as of the time immediately preceding the institution of the relevant
proceeding or the presentation of the relevant petition upon the occurrence
of any Event of Default specified in Section 5(a)(vii)(4), or with respect
to Party A, the relevant proceeding or the presentation of the relevant
petition upon the occurrence of any "Event of Default" specified in the
corresponding subparagraphs of paragraph (f) or paragraph (g) of Section 9
of the Loan Agreement.
PART 2
TAX REPRESENTATIONS
No representations will apply
PART 3
DOCUMENTS TO BE DELIVERED
For the purpose of Section 4(a):
(1) Tax forms, documents or certificates to be delivered are: Not applicable
(2) Other documents to be delivered are:
DATE BY COVERED BY
PARTY REQUIRED FORM/DOCUMENT/ WHICH TO (S)(3)(D)
TO DELIVER CERTIFICATE BE DELIVERED REPRESENTATION
- -------------- -------------- ------------ --------------
Party A & B Financial Information See Part 5 Yes
described in Part 5(l)
Party A & B Evidence of execution See Part 5 Yes
and delivery as
described in Part 5(2)
Party A Opinion of Counsel in At execution No
form and substance or promptly
satisfactory to Party B following
<PAGE>
4
PART 4
MISCELLANEOUS
(1) GOVERNING LAW. This Agreement will be governed by, and construed and
interpreted in accordance with, the laws of the State of New York.
(2) PROCESS AGENT. For the purpose of Section 13(c):
Party A appoints as its Process Agent: CT Corporation System.
Party B appoints as its Process Agent: Not applicable
(3) "AFFILIATE" will have the meaning specified in Section 14; provided,
however, P shall not be deemed an Affiliate of Party B.
(4) MULTIBRANCH PARTY. For the purpose of Section 10:
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
(5) For the purpose of Section 12(a):
Address for notices or communications to Party A:
Address: Camden Cogen L.P.
c/o Cogen Technologies
1600 Smith Street
Suite 5000, 50th Floor
Houston, Texas 77002
Attention: Lawrence D. Thomas
Facsimile: (713) 951-7747
with copies to: General Electric Capital Corporation
1600 Summer Street
Stamford, Connecticut 06927-1560
Attention: V.P. Energy Project Operations, Transportation and
Industrial Financing Division,
with a copy to Kathleen Yoh, Assistant Treasurer
Telecopy: (203) 357-4329
<PAGE>
5
Address for notices or communications to Party B:
Address: General Electric Capital Corporation
260 Longridge Road
Stamford, Connecticut 06927
Attention: Kathleen Yoh, Assistant Treasurer
Telex No.: 211440
Answerback: GECCSUR
Facsimile: (203) 357-4975
(6) CREDIT SUPPORT DOCUMENT: Each of the documents identified on Annex A hereto
shall be a Credit Support Document to the extent it relates to or secures
any Swap Transaction. Details of any Credit Support Document:
Party A: At the execution of the Swap Agreement, Party A shall deliver to
Party B duly executed copies of each of the Credit Support
Documents identified on Annex A hereto and not previously
delivered to Party B.
Party B: None
(7) NETTING OF PAYMENTS. If indicated here, "Net Payments--Corresponding
Payment Dates" will apply for the purpose of Section 2(c) with effect from
the date of this Agreement: Yes
(8) Confirmation by Telecopier. Section 9(b) of the Agreement is modified by
adding "(which shall include communications by telecopy)" after the word
"parties". Section 9(e)(i) of the Agreement is modified by adding "(which
counterparts may be in telecopy form)" after the word "counterparts".
Section 9(e)(ii) of the Agreement is modified by adding "(which
counterparts may be in telecopy form)" after the word "counterparts" in the
first sentence.
PART 5
OTHER PROVISIONS
(1) Upon request of Party B, Party A agrees to furnish to Party B a copy of any
financial or other information that is made available to any of the Lenders
party to the Loan Agreement pursuant to Section 7.13 thereof a copy of
which section is attached hereto as Annex B. Upon the request of Party A
and within a reasonable time after public availability, Party B agrees to
furnish to Party A a copy of Party B's Form 10-K as
<PAGE>
6
filed with the Securities and Exchange Commission for the last fiscal year
and a copy of Party B's Form 10-Q as filed with the Securities and Exchange
Commission with respect to the first three quarters of Party B's fiscal
year.
(2) The parties agree that, at or promptly following the execution and delivery
of this Agreement, and, if a Confirmation so requires on or before the date
set forth therein, each party shall deliver to the other evidence,
reasonably satisfactory in form and substance to the receiving party,
concerning the due execution and delivery of this Agreement or such
Confirmation.
(3) Transfer. Section 7 is modified to read in its entirety as follows:
Neither this Agreement nor any interest or obligation in or under this
Agreement may be transferred by either party without the prior written
consent of the other party (which shall not be unreasonably withheld)
(other than pursuant to a consolidation or amalgamation with, or merger
into, or transfer of all or substantially all its assets to another entity)
and any purported transfer without such consent win be void, except that
Party A may assign its rights hereunder to General Electric Capital
Corporation, as Agent, pursuant to the Security Agreement listed as Item
(ii) on Annex A hereto.
(4) CONFIRMATIONS. Notwithstanding anything to the contrary in the Agreement:
(a) The parties hereto agree that with respect to each Swap
Transaction hereunder, a legally binding agreement shall exist from the
moment that the parties hereto agree on the essential terms of such Swap
Transaction, which the parties anticipate will occur by telephone.
(b) For each Swap Transaction Party A and Party B agree to enter into
hereunder, Party B shall promptly send to Party A a telex or facsimile
transmission (a "Preliminary Confirmation") setting forth the essential
terms of such Swap Transaction. Party A shall respond to such terms by
confirming them or by requesting correction of any error via telex or
facsimile transmission.
(c) As soon as possible after agreement regarding a Swap Transaction
as set forth above, Party A shall complete a Confirmation in substantially
the form of Annex C hereto setting forth the terms agreed by the parties
and shall execute and send two copies of Such Final Confirmation to Party
B. Upon execution and return of one copy of the Final Confirmation by Party
B, the terms set forth in the Final Confirmation shall supersede and
replace the telephone agreement and/or the Preliminary Confirmation, and
such telephone agreement or Preliminary Confirmation shall thereafter cease
to be of any legal force or effect. Failure of Party B to sign and return a
Final Confirmation shall not affect the validity or enforceability of the
relevant Swap Transaction.
(d) A Preliminary Confirmation or a Final Confirmation shall
constitute a Confirmation for purposes of this Agreement.
<PAGE>
7
(5) CURRENCY EXCHANGE DEFINITIONS. Reference is hereby made to the 1991
Interest Rate and Currency Exchange Definitions (the "Currency Exchange
Definitions") published by the International Swap Dealers Association, Inc.
(without regard to any amendments thereto subsequent to the date hereof),
which are hereby incorporated by reference herein. Any terms used and not
otherwise defined herein which are contained in the Currency Exchange
Definitions shall have the meaning set forth therein.
(6) CALCULATION AGENT. The Calculation Agent shall be Party B.
(7) INCONSISTENCY. In the event of any inconsistency between the provisions of
this Schedule, the printed form of Agreement of which it is a part or the
Currency Exchange Definitions, the provisions set forth in this Schedule
will prevail, and in the event of any inconsistency between the provisions
of a Confirmation and this Schedule, the printed form of Agreement or the
Currency Exchange Definitions, the provisions set forth in the Confirmation
will prevail.
(8) LIMITATION OF LIABILITY. Party B agrees that the liability of Party A under
this Agreement shall be limited to the Collateral (as defined in the Loan
Agreement) and the rights and remedies of Party B against the Collateral
pursuant to the Collateral Security Documents, and in no event shall Party
A or any officer, director, partner or Affiliate (as defined in the Loan
Agreement) thereof be personally liable or obligated for any such
obligations. Nothing herein shall limit the full recourse of Party B 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 (as defined in the Loan Agreement) or in any
certificate or other document delivered pursuant hereto or thereto.
(9) ACKNOWLEDGMENT OF SWAP AGREEMENT. The parties hereby agree that this
Agreement constitutes the "Interest Rate Hedging Agreement" under and as
defined in the Loan Agreement.
(10) UNDERTAKING OF CALCULATION AGENT. Promptly after making each calculation
hereunder, the Calculation Agent shall deliver to Party A shall certificate
setting forth such calculation which shall be conclusive and binding on
Party A in the absence of manifest error.
<PAGE>
8
Please confirm your agreement to the terms of the foregoing Schedule by signing
below.
CAMDEN COGEN L.P.
By: Cogen Technologies Camden G.P. Limited Partnership,
as its sole general partner
By: Cogen Technologies Camden, Inc., as its sole
general partner
By__________________________________
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION
By ________________________________
Title: Vice President and Treasurer
<PAGE>
ANNEX A TO
ISDA SCHEDULE
-------------
CREDIT SUPPORT DOCUMENTS
------------------------
The Collateral Security Documents as defined in the Loan Agreement (as
defined in the ISDA Schedule), namely, (i) the Mortgage, (ii) the Security
Agreement, (iii) the Security Deposit Agreement, (iv) the Assignments, (v) the
Consents to Assignment, (vi) the Cogen Pledge Agreement and (vii) any other
agreement or instrument specifically identified in writing by the Borrower and
an Agent to be a Collateral Security Document.
<PAGE>
ANNEX B TO
ISDA SCHEDULE
-------------
7.13 Financial Statements./1/ The Borrower shall furnish or cause to
be furnished to the Agent and each Lender:
(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 Agent; 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).
- --------------------
/1/ Capitalized terms used in this Annex B Without definition shall have the
meanings assigned to such terms in the Loan Agreement.
<PAGE>
CAMDEN COGEN LP.
c/o Camden Technologies
1600 Smith Street
Suite 5000, 50th Floor
Houston, Texas 77002
April 21, 1993
Swap Transaction
General Electric Capital Corporation
260 Longridge Road
Stamford, Connecticut 06927
Attn: Vice President and Treasurer
Ladies and Gentlemen:
The purpose of this communication is to set forth the terms and
conditions of the Swap Transaction entered into between Camden Cogen L.P.,
(being referred to herein as "Party A") and General Electric Capital Corporation
("Party B") on the Trade Date specified below (the "Swap Transaction"). This
communication will constitute a "Confirmation" as referred to in the Interest
Rate and Currency Exchange Agreement specified below.
The definitions and provisions contained in the 1991 Interest Rate and
Currency Exchange Definitions, (as published by the International Swap Dealers
Association, Inc. ("ISDA")) (the "Definitions") are incorporated by reference
into this Confirmation. In the event of any inconsistency between the
Definitions and this Confirmation, this Confirmation will govern.
1. This Confirmation supplements, forms part of and is subject to the
Interest Rate and Currency Exchange Agreement dated as of April 1, 1993 (as
amended and supplemented from time to time, the "Swap Agreement") between
you and us. All provisions contained in the Swap Agreement will govern this
Confirmation except as expressly modified below.
2. Tie terms of the particular Swap Transaction to which this
confirmation relates are as follows:
<PAGE>
2
Notional Amount: As set forth on Schedule I hereto
Trade Date: April 21, 1993
Effective Date: April 23, 1993
Termination Date: May 1, 2007, subject to adjustment in accordance
with the Modified Following Business Day
Convention
Fixed Amounts:
Fixed Rate Payer: Party A
Fixed Rate Payer
Payment Dates: February 1, May 1, August 1 and November 1 of each
year to and including May 1, 2007, subject to
adjustment in accordance with the Modified Following
Business Day Convention
Fixed Rate: 5.945%
Fixed Rate Day Count
Fraction: Actual/360
Floating Amounts:
Floating Rate Payer: Party B
Floating Rate Payer
Payment Dates: February 1, May 1, August 1 and November 1 of each
year to and including May 1, 2007, subject to
adjustment in accordance with the Modified Following
Business Day Convention
Floating Rate Option: USD-LIBOR BBA Telerate Page 3750
Designated Maturity: Three months
Floating Rate Day
Count Fraction: Actual/360
<PAGE>
3
Compounding: Inapplicable
Business Days: New York
Calculation Agent: Party B
3. Account Details
Payments to Party A.
Midlantic National Bank, as Security Agent (the "Security Agent") under
that certain Amended and Restated Security Deposit Agreement, dated as of April
1, 1993, among Party A, General Electric Capital Corporation and the other
parties named therein, 499 Thornall Street, Edison, New Jersey 08837, Attention:
Corporate Trust Department
For Deposit in the "Camden Cogen L.P. Debt Service Account"
Account Number: 1101-5206
ABA No: 021-200-012
Attention: M. Davoran
Telephone: (908) 321-8182
Payments to Party B:
Bankers Trust Company
New York, N.Y.
ABA # 0210-0103-3
GECC/T&I Depository Account
Account No. 50-205-776
4. Offices
a. The Office of Party A for the Swap Transaction is 1600 Smith Street,
Suite 5000, 50th Floor, Houston, Texas 77002.
b. The Office of Party B for the Swap Transaction is 260 Longridge Road,
Stamford, CT 06927.
<PAGE>
4
5. Prepayments of Loans
If for any reason Party A prepays any of the Tranche A Term Loans pursuant
to Section 4.2 of the Loan Agreement (i) the Notional Amount set forth on
Schedule I shall be adjusted to conform to the revised amortization schedule
established under the Loan Agreement after giving effect to such prepayment and
(ii) in the sole discretion of Party B such prepayment shall be treated as an
Event of Default by Party A under this Swap Transaction to the extent of such
change in the Notional Amount hereunder.
Please promptly confirm that the foregoing correctly sets forth the terms
of our agreement by executing the copy of this confirmation enclosed for that
purpose and returning it to us.
Yours sincerely,
CAMDEN COGEN L.P.
By: Cogen Technologies Camden G.P.,
Limited Partnership,
as its sole general partner
By: Cogen Technologies Camden
Inc., as its sole general
partner
By: /s/ R.A. Lydecker
------------------------
Name: Richard A. Lydecker
Title: Vice President and
Chief Financial Officer
Confirmed as of the date first written:
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ Jeffrey S. Werner
----------------------------------
Name: Jeffrey S. Werner
Title: Senior Vice President
<PAGE>
SCHEDULE I
SCHEDULE I TO ISDA SWAP CONFIRMATION
------------------------------------
NATIONAL
DATE AMOUNT
---- ------
01 -Aug-93 81,600,000
01 -Nov-93 81,600,000
01 -Feb-94 80,826,763
01 -May-94 80,041,226
01 -Aug-94 79,243,194
01 -Nov-94 78,432,466
01 -Feb-95 77,608,842
01 -May-95 76,772 113
01 -Aug-95 75,922,O73
01 -Nov-95 75,043,753
01 -Feb-96 74,151,458
01 -May-96 73,244,964
01 -Aug-96 72,324,045
01 -Nov-96 71,349,126
01 -Feb-97 70,358,691
01 -May-97 69,352,492
01 -Aug-97 68,330,277
01 -Nov-97 67,252,446
01 -Feb-98 66,157,457
01 -May-98 65,045,036
01 -Aug-98 63,914,904
01 -Nov-98 62,727,434
01 -Feb-99 61,521,057
01 -May-99 60,295,469
01 -Aug-99 59,050,364
01 -Nov-99 57,746,087
01 -Feb-2000 56,421,036
01 -May-2000 55,074,881
01 -Aug-2000 53,707,284
01 -Nov-2000 52,278,559
01 -Feb-2001 50,827,073
01 -May-2001 49,352,464
01 -Aug-2001 47,854,361
01 -Nov-2001 46,293,044
01 -Feb-2002 44,706,850
01 -May-2002 43,095,381
01 -Aug-2002 41,458,232
01 -Nov-2002 39,755,647
01 -Feb-2003 38,025,928
01 -May-2003 36,268,641
01 -Aug-2003 34,483,343
01 -Nov-2003 32,630,243
01 -Feb-2004 30,747,641
01 -May-2004 28,834,950
01 -Aug-2004 26,891,803
01 -Nov-2004 24,878.332
01 -Feb-2005 22,832,756
01 -May-2005 20,754,563
01 -Aug-2005 18,643,230
01 -Nov-2005 16,458,882
01 -Feb-2006 14,239,699
01 -May-2006 11,985,122
01 -Aug-2006 9,694,585
01 -Nov-2006 7,328,167
01 -Feb-2007 4,924,002
01 -May-2007 2,481,484
<PAGE>
AMENDMENT NO. 1
AMENDMENT NO. 1, dated as of December 22, 1993 (the "Amendment"), to
Schedule to the Interest Rate and Currency Exchange Agreement dated as of April
1, 1993 (as amended, modified or otherwise supplemented and in effect on the
date hereof, the "Swap Agreement"), between Camden Cogen L.P., a Delaware
limited partnership ("Party All") and General Electric Capital Corporation
("Party B").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the parties hereto wish to amend the make the amendments set
forth below:
NOW THEREFORE, in consideration of the premises and the mutual
covenants set forth below, the parties hereto agree as follows:
SECTION 1. Defined Terms. Unless otherwise defined herein, terms that
are defined in the Swap Agreement are used herein as so defined.
SECTION 2. Amendment of Part 4. Clause (5) of Part 4 of the Schedule
is hereby amended by deleting the phrase "Lawrence D. Thomas" therefrom and
substituting in lieu thereof "Richard A. Lydecker."
SECTION 3. Amendment of Part 5. Clause (3) of Part 5 of the Schedule
is hereby amended by deleting the phrase "(which shall not be unreasonably
withheld)" therefrom and substituting in lieu thereof the phrase "((i) which
consent from Party B shall not be unreasonably withheld, and (ii) which consent
from Party A shall be made in its sole discretion, provided that in the event,
and solely in the event, that compliance by Party B with effective and in force
regulatory requirements that are directly applicable to Party B and to the swap
obligations of Party B which are of the nature and type provided for in this
Confirmation, and which regulatory requirements, when applied to Party B and
such swap obligations, would have a material adverse effect on the economic
benefit of this transaction to Party B, then in such event, Party A will not
unreasonably withhold its consent to an assignment by Party B to any of its
rights and liabilities hereunder to an assignee, which assignee shall have a
credit standing equal to the higher of (i) that of Party B at the time of such
assignment and (ii) a Standard & Poor's credit rating of at least "A")".
SECTION 4. Continuing Effect; Amendment Limited. Except as expressly
amended hereby, the Swap Agreement and Schedule shall continue to be and shall
remain in full force and effect in accordance with its terms.
<PAGE>
2
SECTION 5. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. Counterparts. This Amendment may be executed in any number
of counterparts, each of which shall be an original but all of which together
shall constitute one agreement.
IN WITNESS WHEREOF, each party has caused this Amendment to be
executed and delivered by its respective duly authorized officer as of the day
and year first above written.
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ [Signature Appears Here]
----------------------------------------
Title: Senior Vice President of Treasury
and Global Funding Operation
CAMDEN COGEN L.P.
By: Cogen Technologies Camden
G.P. Limited Partnership, as its
sole general partner
By: Cogen Technologies Camden,
Inc., as its sole general
partner
By: /s/ [Signature Appears Here]
-------------------------------
Title:
<PAGE>
EXHIBIT 10.53
FIRM GAS PURCHASE AND SALE AGREEMENT
between
CAMDEN COGEN, L.P.
and
ANADARKO ENERGY SERVICES COMPANY
<PAGE>
TABLE OF CONTENTS
Page
----
TABLE OF CONTENTS
ARTICLE 1: DEFINITIONS................................................... 1
ARTICLE 2: QUANTITIES.................................................... 5
ARTICLE 3: NOMINATIONS................................................... 5
ARTICLE 4: PRICE......................................................... 6
ARTICLE 5: RESERVATION CHARGES AND SUBSTITUTE FUELS...................... 12
ARTICLE 6: PAYMENT....................................................... 13
ARTICLE 7: TAXES......................................................... 16
ARTICLE 8: POINT(S) OF DELIVERY.......................................... 16
ARTICLE 9: PRESSURE...................................................... 17
ARTICLE 10: MEASUREMENT................................................... 17
ARTICLE 11: QUALITY....................................................... 17
ARTICLE 12: TRANSPORTATION AND IMBALANCE CHARGES.......................... 18
ARTICLE 13: TERM.......................................................... 19
ARTICLE 14: FORCE MAJEURE................................................. 19
ARTICLE 15: NOTICE........................................................ 21
ARTICLE 16: LAWS, ORDERS & REGULATIONS.................................... 22
ARTICLE 17: APPLICABLE LAW................................................ 23
ARTICLE 18: WAIVER........................................................ 23
ARTICLE 19: TITLE......................................................... 23
ARTICLE 20: ASSIGNMENT.................................................... 24
i
<PAGE>
ARTICLE 21: ARBITRATION.................................................... 25
ARTICLE 22: DEFAULT........................................................ 26
ARTICLE 23: GENERAL........................................................ 28
ARTICLE 24: CONFIDENTIALITY................................................ 29
EXHIBIT A.................................................................. 30
EXHIBIT B.................................................................. 31
EXHIBIT C.................................................................. 32
ii
<PAGE>
FIRM GAS PURCHASE AND SALE AGREEMENT
This AGREEMENT ("Agreement") is made and entered into this 1st day of July,
1997, by and between CAMDEN COGEN, L.P., a Delaware limited partnership,
hereinafter referred to as "Buyer," and ANADARKO ENERGY SERVICES COMPANY, a
Delaware corporation, hereinafter referred to as "Seller,"
WHEREAS, Buyer requires a supply of gas for use in Buyer's cogeneration
facility in Camden, New Jersey; and
WHEREAS, Seller is willing to sell gas to Buyer on a firm basis to meet its
requirements.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties do hereby covenant and agree as follows:
ARTICLE 1: DEFINITIONS
In addition to the terms "Buyer" and "Seller" which shall refer to the
parties identified above, or their duly designated agents or representatives,
the following terms shall have the specified meanings:
1.1 The term "Alternate Commodity Price" shall have the meaning set forth
in Section 4.3.
1.2 The term "Btu" shall mean the amount of heat required to raise the
temperature of one (1) pound avoirdupois pure water from fifty-eight and five-
tenths degrees (58.5 degrees) to fifty-nine and five-tenths degrees (59.5
degrees) Fahrenheit, as defined in the American Gas Association Gas Measurement
Manual and any subsequent revisions.
1
<PAGE>
1.3 The term "Cancellation Notice" shall mean the notice described in
Section 22.1.
1.4 The term "Commodity Price" shall have the meaning set forth in Section
4.2.
1.5 The term "Daily Contract Quantity" or "DCQ" shall mean twelve thousand
five hundred (12,500) MBtu per day, plus Transporter(s)' Market Area Fuel.
1.6 The term "day" shall mean a period of twenty-four (24) consecutive
hours, beginning and ending at the time specified in the receiving
Transporter(s)' tariff(s) at the Point of Delivery.
1.7 The term "Delivery Period" shall mean a period of five (5) consecutive
months beginning with the commencement of deliveries of gas hereunder.
1.8 The term "Facility" shall mean the cogeneration facility owned and
operated by Buyer that is located in Camden, New Jersey.
1.9 The term "force majeure" shall have the meaning set forth in Section
14.2.
1.10 The term "Gas" or "gas" shall mean any mixture of hydrocarbons or of
hydrocarbons and non-combustible gases, in a gaseous state, consisting
essentially of methane and shall include casinghead gas produced with crude oil,
natural gas from gas wells, coal-bed methane gas, synthetic gas, coal
gasification gas and residue gas resulting from processing any of the foregoing.
1.11 The term "lender" shall mean (i) any and all lenders (other than
Seller) providing the construction, interim, or long-term financing or
refinancing of the Facility (including a leveraged lease), and any trustee or
agent acting on their behalf, and
2
<PAGE>
(ii) any and all equity investors or limited partners providing any such
financing or refinancing of the Facility, and any trustee or agent acting on
their behalf. The current lenders are Bank of Tokyo (as agent for the Traunch A
lenders) and General Electric Capital Corporation and hereafter such entity as
is designated to Seller in writing by the entity then recognized as the lender
hereunder.
1.12 The term "Market Area Fuel" shall mean the volume of gas retained by
Transporter(s) as fuel for the transportation of gas from the Point(s) of
Delivery to the Point(s) of Redelivery.
1.13 The term "Market Price" shall have the meaning set forth in
Section 4.3.
1.14 The term "Minimum Quantity" shall mean one hundred percent (100%) of
the product of the DCQ and the number of days in each month of the Delivery
Period, as reduced by circumstances of force majeure.
1.15 The term "MMBtu" shall mean one million (1,000,000) Btus.
1.16 The term "month" shall mean the period commencing on the beginning of
the first day of a calendar month and ending on the beginning of the first day
of the succeeding calendar month.
1.17 The term "Nominated Quantity" shall have the meaning set forth in
Section 3.1.
1.18 The term "Nomination Notice" shall mean the notice described in
Section 3.1 and Exhibit A to this Agreement.
1.19 The term "NYMEX" shall mean the New York Mercantile Exchange.
1.20 The term "NYMEX Forward Price" shall have the meaning set forth in
Section 4.7 (b).
3
<PAGE>
1.21 The term "NYMEX Price" shall have the meaning set forth in
Section 4.7(a).
1.22 The term "Point(s) of Delivery" shall have the meaning set forth in
Article 8.
1.23 The term "Point(s) of Redelivery" shall mean the point or points on
Transporter(s)' pipeline system where gas is redelivered to or for the account
of Buyer or PSE&G on the PSE&G system in New Jersey.
1.24 The term "PPIA" or "Power Purchase and Interconnection Agreement"
shall mean the contract dated April 15, 1988, between Buyer and PSE&G, covering
the sale of electricity from the Facility, and any amendments thereto that have
been and may be made from time to time.
1.25 The term "PSE&G" shall mean Public Service Electric and Gas Company.
1.26 The term "Reservation Charge" shall have the meaning set forth in
Section 5.2.
1.27 The term "Reservation Rate" shall mean one cent ($0.01) per MMBtu.
1.28 The term "Spot Market Price" shall mean the arithmetic average of the
prices reported in the weekly and bi-weekly updates of the reference pricing
reports during the month of delivery for the reference points set forth in
Exhibit "B" hereto.
1.29 The term "TETCO" shall mean Texas Eastern Transmission Corporation.
1.30 The term "Transporter(s)" shall mean any pipeline(s) transporting gas
sold hereunder to and from the Point(s) of Delivery and to the Point(s) of
Redelivery.
4
<PAGE>
ARTICLE 2: QUANTITIES
2.1 Buyer shall purchase and receive and Seller shall sell and deliver the
Nominated Quantity at the Point(s) of Delivery, except to the extent excused
under the provisions of this Agreement.
2.2 If during the Delivery Period Buyer purchases and receives less than
the DCQ, except to the extent excused under the provisions of this Agreement or
due to Seller's unexcused failure to deliver, then Buyer shall pay Seller an
amount equal to the difference between the price payable hereunder and the then
effective applicable Spot Market Price of gas multiplied by the difference
between the Minimum Quantity and the quantity of gas purchased and received by
Buyer. Except in the case of Buyer's willful misconduct or gross negligence and
except as described in Articles 12, 14 and 22, this is the sole remedy available
to Seller for any failure by Buyer to purchase and receive gas.
ARTICLE 3: NOMINATIONS
3.1 On or before the day prior to which pipeline nominations are required
to be nominated by Buyer and Seller to the applicable pipeline company(s)
referenced herein, and subject to the provisions of Sections 3.2 and 3.3, Buyer
shall notify Seller in writing by providing a Nomination Notice, substantially
in the form attached hereto as Exhibit A, specifying the daily quantity of gas,
in MMBtus, up to the DCQ, that Buyer shall purchase and receive from Seller
during the next month (hereinafter the "Nominated Quantity"). In the
alternative, Buyer may specify a standing Nominated Quantity to be effective
until changed in writing pursuant to the first sentence of this section.
5
<PAGE>
3.2 The parties recognize that fluctuations in the production and
transportation of gas can occur on a daily basis. Buyer and Seller will attempt
to receive and deliver gas on a uniform hourly basis. Notwithstanding anything
to the contrary herein, any revisions to the Nominated Quantity shall be
implemented in accordance with Transporter(s)' nomination procedures, unless a
waiver of such procedures is received by either Buyer or Seller.
3.3 Buyer and Seller shall be responsible for nominations to their
respective Transporters and the nominations in each case shall reflect the
Nominated Quantity.
3.4 If no Nominated Quantity is submitted by Buyer in accordance with
Section 3.1, the DCQ shall be the Nominated Quantity.
ARTICLE 4: PRICE
4.1 For all gas nominated by Buyer and delivered by Seller during a month,
Buyer shall pay the Commodity Price or the Alternate Commodity Price per MMBtu,
rounded to the nearest $0.001.
4.2 The term "Commodity Price" shall mean the price of gas for each month
which shall be mutually agreed upon by the parties and subsequently confirmed in
writing PRIOR to the date Buyer's nomination notice to Seller is due for the
month of delivery. In the event that the parties fail to reach agreement as to
the Commodity Price, the Alternate Commodity Price determined in accordance with
Section 4.3 shall apply.
4.3 The term "Alternate Commodity Price" shall mean the arithmetic average
of the prices reported in the referenced issue of the month of delivery for the
price references included in the "Market Price Index," set forth in Exhibit B.
The price
6
<PAGE>
references in the Market Price Index are intended to reflect the price paid for
gas delivered at the Point(s) of Delivery under spot contracts (the "Market
Price"). The price references in the "Backup Price Index" set forth in Exhibit B
are intended to serve as a substitute for the price references in the Market
Price Index in the event the latter price references are not available or are
"erroneous," as that term is defined in Section 4.5.
4.4 Either party may request that a price reference be added to or deleted
from the Market Price Index or Backup Price Index by providing written notice to
the other party. For a price reference to be added to the Market Price Index or
Backup Price Index, the price reference must reflect the Market Price and be
from an independent publication which is not controlled by a buyer, seller or
broker of gas. For a price reference to be deleted from the Market Price Index
or Backup Price Index, such price reference must no longer reflect the Market
Price. If within thirty (30) days after the date of notice by a party, the
parties are unable to agree to add or delete a price reference, then the party
seeking such addition or deletion may submit the issue to arbitration which
shall be conducted pursuant to Article 21. A price reference shall be added or
deleted effective the first day of the month after notice by the requesting
party and the price ultimately determined by negotiation or arbitration will be
given retroactive effect to take into account the period of negotiation or
arbitration with interest assessed at the rate provided in Section 6.3. Unless
otherwise agreed by the parties, in no event may either party request that a
price reference be added to or deleted from the Market Price Index or Backup
Price Index more than once during the Delivery Period.
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4.5 If during any month a price reference included in the Market Price
Index is not published, the Market Price Index will exclude such price reference
from the Market Price Index for so long as such price reference is not published
and the price reference(s) from the Backup Price Index shall be substituted for
the excluded price reference. If the excluded price reference is the only price
reference in the Market Price Index and no price references in the Backup Price
Index are published, then Section 4.6 below shall apply. If an erroneous price
is published and the publisher confirms such error, then the correct price, if
available, shall be used. If the publisher does not confirm such error or if the
correct price is not available, then the price reference containing such
erroneous price shall not be included in the Market Price Index or Backup Price
Index for such month. For purposes of Sections 4.3 and 4.5, the term "erroneous"
price shall mean any price reference that varies by more than four percent (4%)
from the average of the other price references included in the Market Price
Index and Backup Price Index for such month.
4.6 If no Market Price Index and no Backup Price Index reference prices
are available or if, in the opinion of either party, there are no price
references which reasonably reflect the Market Price and the basis of such
opinion is provided in writing to the other party, then a new method to
determine the Alternate Commodity Price will be negotiated. If the parties are
unable to agree within thirty (30) days after notice by a party, then the matter
of determining whether a basis exists to invoke this provision and, if so, the
determination of a new method to determine the Alternate Commodity Price shall
be submitted to arbitration pursuant to Article 21. During a period of
negotiation or arbitration, the last applicable Commodity Price or Alternate
Commodity
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Price shall remain in effect and shall be adjusted at the conclusion of such
negotiation or arbitration to give retroactive effect to the result with
interest assessed at the rate provided in Section 6.3.
4.7 Alternatively, and in lieu of the price calculated pursuant to
Sections 4.2 and 4.3 hereof, the parties may mutually agree to a NYMEX Price or
NYMEX Forward Price based on the NYMEX posting for the natural gas futures
contract, calculated as follows:
(a) On or before the business day prior to the NYMEX Settlement day,
Buyer may propose that the price under this Agreement for gas nominated by Buyer
for delivery in the applicable month be the NYMEX Price, plus or minus the basis
differentials that may be mutually agreed upon at the time of Buyer's proposal.
The NYMEX Price shall be the arithmetic average of the NYMEX posting of the
settlement price of the natural gas futures contract for the last three trading
days applicable to the month of delivery. Buyer's proposal shall designate the
volume of gas for delivery in the applicable month at the proposed price, up to
the volume nominated in accordance with Section 3.1 of this Agreement. Upon
receipt of Buyer's proposal, the parties shall confer by telephone as soon as
possible and decide whether or not to use the NYMEX Price, which decision shall
ultimately be made by Buyer and Seller no later than 11:00 a.m. Central Time on
the business day before the last trading day of the applicable natural gas
futures contract. In the event the parties agree to use the NYMEX Price and
agree on the basis differential, the parties' agreement shall be set forth in a
confirmation prepared by Buyer and transmitted by telecopy to
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Seller. The parties' agreement shall be deemed conclusive upon receipt of the
confirmation (as evidenced by electronic confirmation of transmission) unless
Seller objects promptly in writing following receipt of the confirmation. Either
party shall have the right to withhold agreement on any proposed price under
this Section 4.7 (a) at its sole discretion prior to execution of the NYMEX
transaction, in which case the price under this Agreement will be calculated
under Sections 4.2 or 4.3 hereof. If the parties are unable to agree on the
basis differentials or methodology for determining the basis, the NYMEX Price
shall be deemed to be rejected. In the event the parties agree to use the NYMEX
Price, the nominated volumes which are covered by the NYMEX Price shall remain
in effect during the applicable month and shall not be reduced or increased
pursuant to Sections 3.2 or 3.3 of this Agreement.
(b) In addition to the NYMEX Price, Buyer shall have the right to
propose that the NYMEX Forward Price, plus or minus the basis differentials that
may be mutually agreed upon at the time of Buyer's proposal, be the price to be
paid under this Agreement during any calendar months designated by Buyer. The
NYMEX forward price shall be the NYMEX posting for the natural gas futures
contract applicable to the month or months selected by Buyer and prevailing at
the time Buyer's proposal is communicated to Seller by telephone and confirmed
by Seller. Buyer's proposal shall designate the volume of gas for delivery
during the designated months at the proposed price, up to the volume that can be
nominated in accordance with Section 3.1 of this Agreement. Upon receipt of
Buyer's proposal, the parties shall confer by telephone and decide
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whether or not to use the nymex forward price, which decision shall be made no
later than 11:00 a.m. central time on the first business day following seller's
receipt and confirmation of buyer's request. In the event the parties agree to
use the nymex forward price and agree on the basis differential or methodology
for determining the basis, the parties' agreement shall be set forth in a
confirmation prepared by buyer and transmitted by telescope to seller. The
parties' agreement shall be deemed conclusive upon receipt of the confirmation
(as evidenced by electronic confirmation of transmission) unless seller objects
promptly in writing following receipt of the confirmation. either party shall
have the right to withhold agreement on any proposed price under this section
4.7 (b) at its sole discretion prior to the execution of the NYMEX transaction,
in which case the price under this agreement will be calculated under sections
4.2 or 4.3 hereof. If the parties are unable to agree on the basis differentials
or methodology for determining the basis, the NYMEX Forward Price shall be
deemed to be rejected. Nothing in this subsection (b) shall be construed to
prevent buyer from proposing the NYMEX Forward Price in any designated month if
either of the parties had previously rejected the NYMEX Forward Price for that
month. In the event the parties agree to use the NYMEX Forward Price, the
nominated volumes which are covered by the NYMEX Forward Price shall remain in
effect during the designated months and shall not be decreased or increased
pursuant to Sections 3.2 or 3.3 of this Agreement. In addition, should the
parties agree to use the NYMEX Forward Price, the selection of that
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option shall remain in effect during the months selected by the parties unless
the parties mutually agree to use a different pricing option.
ARTICLE 5: RESERVATION CHARGES AND SUBSTITUTE FUELS
5.1 If during any month, Seller sells and delivers less than one hundred
percent (100%), but greater than ninety percent (90%), of the Nominated Quantity
multiplied by the number of days in the month, except to the extent excused
under the provisions of this Agreement or due to Buyer's unexcused failure to
receive, then Buyer shall be relieved of its obligation to pay Seller the
Reservation Charge applicable to the volumes not made available and Seller shall
refund to Buyer any payments attributable to such volumes if already invoiced
and paid. If during any month Seller sells and delivers less than ninety percent
(90%) of the Nominated Quantity multiplied by the number of days in the month,
except to the extent excused under the provisions of this Agreement or due to
Buyer's unexcused failure to receive, then Buyer shall be relieved of its
obligation to pay Seller the Reservation Charge set forth in Section 5.2 for the
entire month during which such supply failure occurred. Under such circumstances
in this Section 5.1, Seller shall also reimburse Buyer its actual costs incurred
for the purchase and/or production and transportation of alternate supplies of
fuel equal to the undelivered volume, including but not limited to any imbalance
carrying charges and/or cash-out costs and penalties imposed by Transporter(s)
and PSE&G, less the costs that Buyer would have otherwise incurred for the
purchase and transportation of gas under this Agreement. Buyer shall use
commercially reasonable efforts to minimize its incremental actual costs for
acquiring alternate supplies of fuel. In the exercise of its commercially
reasonable efforts, Buyer
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shall exercise diligent good faith efforts to purchase least cost substitute
fuel, including purchasing gas under existing agreements with other sellers
which will enable Buyer to utilize its transportation rights used to transport
gas hereunder. Because of environmental restrictions on Buyer's use of fuels
other than gas at the Facility, Buyer shall have the sole discretion whether to
purchase gas or an alternate fuel as a substitute for gas not delivered by
Seller hereunder, even where gas is more expensive. Except in the case of
Seller's willful misconduct or gross negligence and except as described in
Articles 12, 14 and 22, these are the sole and exclusive remedies available to
Buyer for any failure by Seller to deliver gas.
5.2 Buyer shall pay Seller a monthly Reservation Charge in consideration
for Seller's maintaining the capability to deliver gas up to the DCQ, assuming
market and supply risks, and agreeing to reimburse Buyer for any amounts
pursuant to Section 5.1. The Reservation Charge shall be the Reservation Rate
multiplied by the DCQ, multiplied by the number of days in such month. To
illustrate how the Reservation Charge would be calculated assume that the DCQ is
12,500 MMBtus per Day, at the Reservation Rate hereunder, the Reservation Charge
for the month of November would be: $3,750 (12,500 X $0.01 X 30).
ARTICLE 6: PAYMENT
6.1 Seller shall render an invoice on or before the fifteenth (15th) day
of each month setting forth the actual quantity of gas nominated by Buyer and
delivered by Seller hereunder during the preceding month, the Commodity Price,
Alternate Commodity Price, NYMEX Price or NYMEX Forward Price, the Reservation
Charge, any amounts due under Sections 2.2 and 12.2 and the total amount due. In
the event that
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the actual quantity delivered, the Alternate Commodity Price or the Reservation
Charge is not known at the time the invoice is rendered, an estimated quantity,
Alternate Commodity Price and Reservation Charge, based on the best available
information, shall be used. Buyer shall pay Seller for the amount due by wire
transfer with immediately available funds to Seller's account in accordance with
instructions contained in Seller's invoice. Payment shall be due on or before
the last day of such month. If PSE&G fails to pay Buyer under the PPIA by the
last day of the month, Buyer's obligation to pay Seller shall be suspended from
the last day of the month, until one (1) day following Buyer's receipt of
PSE&G's payment, but, in such a case, Buyer's obligation to pay Seller shall not
be suspended past the third business day of the following month. When the actual
quantity, Alternate Commodity Price or Reservation Charge becomes known and if
an adjustment is necessary, an invoice containing the adjustment for the
difference between the actual value and the estimated value will be rendered.
Payment will be made in subsequent months' payment cycles.
6.2 Buyer shall submit an invoice on or before the fifteenth (15th) day of
the month, if necessary, for any amount due pursuant to sections 5.1 and 12.2.
Seller shall pay Buyer in accordance with instructions contained in Buyer's
invoice. Payment shall be due on or before the last day of such month. 6.3
Should either party fail to pay any amount not in dispute when due, interest
thereon shall accrue at the lesser of (i) the rate of one percent (1%) above the
prime commercial rate charged by Citibank, N.A., New York, New York, compounded
annually from the due date or (ii) the maximum lawful contract rate permitted by
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applicable law, until the amount due and interest have been paid in full. Such
interest shall be in addition to any other rights and remedies the owed party
may have for the owing party's failure to pay any amount not in dispute. Should
the owing party dispute the amount invoiced, such party shall pay the undisputed
amount and notify the other party of any disputed amount by the due date. Both
parties will mutually resolve the disputed amount in a timely manner with
interest accruing from the original due date on any disputed amount determined
to be a valid amount due. Notwithstanding the foregoing or any other provision
herein, if Buyer fails to pay any amount within five (5) days after receiving
written notice from Seller that payment is delinquent, Seller may withhold
deliveries and, should said nonpayment continue for a period of thirty (30) days
after such notice, subject to the provisions of Article 22, Seller may terminate
this Agreement upon written notice.
6.4 Upon reasonable notice, each party shall have the right at reasonable
times to have an independent public accounting firm examine the books, records,
and charts controlled by the other party to the extent necessary to verify the
accuracy of any statement, payment, charge, or computation made pursuant to this
Agreement. In the event an error is discovered in any statement, payment,
charge, or computation, the adjusted amount shall be due within thirty (30) days
of the determination thereof, provided that any statement, payment, charge, or
computation shall be final as to both parties unless objected to in writing
within twelve (12) months after payment has been made.
6.5 If either party pays any amount shown due and owing upon the invoice
of the other party, and such amount is subsequently determined by agreement,
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arbitration or judgment of court not to have been due and owing when paid, the
payee will refund such amount to the paying party together with interest from
the date Of payment to the date of refund at the interest rate set forth in
Section 6.3 hereof.
ARTICLE 7: TAXES
7.1 Seller shall pay, or cause to be paid, all taxes, assessments, fees or
other charges now and hereafter lawfully levied and imposed by federal, state,
or local authorities upon Seller with respect to the gas prior to delivery at
the Point(s) of Delivery. In the event Buyer is required to remit such taxes,
assessments, fees or charges, Seller shall reimburse Buyer for such amount.
Seller shall furnish Buyer with a copy of the exemption certificate in
situations in which exemption from any such imposition is claimed by Seller.
7.2 Buyer shall pay, or cause to be paid, all taxes, assessments, fees or
other charges (including, but not limited to, sales and value added taxes) now
and hereafter lawfully levied and imposed by federal, state, or local
authorities upon Buyer with respect to the gas at and subsequent to delivery at
the Point(s) of Delivery. In the event Seller is required to remit such taxes,
assessments, fees or charges, Buyer shall reimburse Seller for such amount.
Buyer shall furnish Seller with a copy of the exemption certificate in
situations in which exemption from any such imposition is claimed by Buyer.
ARTICLE 8: POINT(S) OF DELIVERY
The "Point(s) of Delivery" shall be the point(s) on Transporter(s)'
pipeline system(s) where gas is delivered by Seller to Transporter(s) for
Buyer's account, as specified in Exhibit C attached hereto and made a part
hereof. As between the parties
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hereto, title, risk of loss, and liabilities associated with delivered gas shall
pass to and vest in Buyer at the Point(s) of Delivery. Changes in the Point(s)
of Delivery shall require the mutual consent of the parties.
ARTICLE 9: PRESSURE
Seller shall deliver gas at the Point(s) of Delivery at a pressure
sufficient to effect delivery into the receiving Transporter(s)' facilities.
ARTICLE 10: MEASUREMENT
All measurement of gas delivered and sold hereunder shall be in accordance
with the provisions of the receiving Transporter(s)' tariff(s) at the Point(s)
of Delivery.
ARTICLE 11: QUALITY
The gas delivered and sold by Seller to Buyer at the Point(s) of Delivery
shall meet the quality specifications set forth in the receiving Transporter(s)'
tariff(s) at the Point(s) of Delivery. Buyer shall have the right to be
represented and to participate in all tests of gas delivered hereunder performed
by Seller, and to inspect any equipment used in such tests to determine the
nature of the quality of gas delivered hereunder. In the event the gas does not
meet such quality specifications, Buyer may refuse delivery of the gas. Seller's
delivery of gas refused by Buyer for failure to meet quality specifications
shall not constitute delivery for the purposes of Articles 2, 5 and 6. Buyer's
sole remedy for such failure of gas to meet quality specifications shall be to
refuse receipt of the gas and receive the remedy specified in Article 5.
ARTICLE 12: TRANSPORTATION AND IMBALANCE CHARGES
12.1 Transporter(s)' rules, guidelines, operational procedures and
policies, as may be changed from time to time, may define and set forth the
manner in which gas
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delivered and sold under this Agreement is transported. Seller and Buyer agree
to provide to the other, in as prompt a manner as reasonable, all information
necessary to permit scheduling pursuant to such requirements. Seller shall
prorate Buyer with other firm purchasers of Seller's gas when nominating or
allocating volumes to Transporter(s) for delivery to Buyer under this Agreement.
12.2 Each party agrees to make all reasonable efforts to cooperate with the
other in operating under this Agreement to avoid pipeline imbalance charges,
cash-out costs and penalties. Buyer shall bear any under or over delivery
charges, cash-out costs and penalties assessed by Transporter(s) and PSE&G which
are caused by variances (including variances due to events of force majeure
declared by Buyer) in Buyer's receipts from the Nominated Quantity and Seller
shall bear any under or over delivery charges, cash-out costs and penalties
assessed by Transporter(s) and PSE&G which are caused by variances (including
variances due to events of force majeure declared by Seller) in Seller's
deliveries from the Nominated Quantity.
12.3 Seller shall be responsible for transportation to the Point(s) of
Delivery and payment of all transportation charges relating thereto. Buyer shall
be responsible for transportation from the point(s) of delivery and payment of
all transportation charges relating thereto. The parties recognize that the gas
purchased hereunder may be transported by Transporter(s) whose transportation
rates and related charges such as fuel reimbursement and take-or-pay surcharges
are subject to refund. The party which pays the Transporter(s) for
transportation of gas hereunder shall be entitled to retain any refunds
associated therewith.
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ARTICLE 13: TERM
This Agreement shall be effective from the date first set forth above-and,
unless sooner terminated under the provisions of this Agreement, shall continue
for five (5) months from the commencement of deliveries of gas hereunder. The
commencement of deliveries of gas hereunder shall be November 1, 1997, unless
otherwise agreed by the parties. The term of this Agreement may be extended by
mutual agreement of the Parties.
ARTICLE 14: FORCE MAJEURE
14.1 If, by reason of force majeure either party is rendered unable, wholly
or in part, to carry out its obligations under this Agreement, and such party
provides written notice and full particulars of such event of force majeure as
soon as practicable after the occurrence thereof, the obligations of such
affected party shall be suspended to the extent and for the period of such event
of force majeure, except for the payment of monies in respect of obligations
that have accrued hereunder prior to such event of force majeure. The cause of
suspension other than strikes or lockouts shall be remedied so far as possible
with reasonable dispatch. Settlement of strikes and lockouts shall be wholly
within the discretion of the party having the difficulty.
14.2 The term "force majeure" shall mean any act or event which wholly or
partially prevents or delays the performance of obligations arising under this
Agreement if such act or event is not reasonably within the control of and not
caused by the fault or negligence of the party claiming force majeure and which
by the exercise of due diligence such party is unable to prevent or overcome,
including, without limitation by the following enumeration: acts of God, the
public enemy or the
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elements; fire, accidents, breakdowns, shutdowns for purposes of necessary
repairs, maintenance, relocation or construction of facilities; breakage,
freezing or accidents to wells, machinery or lines of pipe; the necessity of
making repairs or alterations to machinery or lines of pipe; inability to obtain
materials, supplies, permits, or labor to perform or comply with any obligation
or condition of this Agreement; any curtailment of firm gas transportation
service to, of electricity or steam purchases from, or of resale service by
PSE&G to, the Facility; strikes and any other industrial, civil or public
disturbances; any laws, orders, rules, regulations, acts, restraints of any
government or governmental body or authority, civil or military which have the
effect of prohibiting performance of a party's obligations. The term "force
majeure" shall also expressly include the imposition upon Buyer of any gross
receipts, franchise or other gas consumption tax which Buyer is not obligated to
pay on the date of execution of this Agreement, which tax Buyer determines has a
material economic impact on its ability to continue to purchase gas at the
prices or in the quantities set forth herein.
14.3 Except as provided in Section 14.2, neither party may rely upon
changes in market conditions, curtailment of interruptible transportation, or
denial by a regulatory authority of the pass through of the cost of gas
purchased under this Agreement as events of force majeure. In the event of force
majeure that causes Seller to curtail its deliveries hereunder, Seller shall
treat Buyer on a pro rata basis with Seller's other firm customers and shall
give Buyer priority of service over all interruptible customers.
14.4 In the event Buyer fails to take or Seller fails to make available,
due to a declared event of force majeure, at least fifty percent (50%) of the
aggregate DCQ for
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a period of sixty (60) consecutive days, then the non-declaring party may
terminate this Agreement upon written notice, provided that such notice is given
prior to the date the force majeure is remedied.
ARTICLE 15: NOTICE
Any notice, request, demand, statement, or bill provided for in this
Agreement shall be in writing and delivered by hand, mail, or telescope. All
such written communications shall be effective upon receipt by the other party
at the address of the parties hereto as follows:
Buyer:
Notices & Statements
Camden Cogen, L.P.
c/o Cogen Technologies Camden, Inc.
Suite 5000, 50th Floor
1600 Smith Street
Houston, TX 77002
Attention: Vice President - Fuel Supply
Telephone No.: (713) 951-7768
Telescope No.: (713) 951-7803
Seller:
Notices & Statements
Anadarko Energy Services Company
P.O. Box 1330
Houston, TX 77251-1330
Attention: Marketing Department
Telephone No.: (281) 874-3226
Telescope No.: (281) 874-3354
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Payments:
By Wire Transfer:
To the Account of:
Anadarko Energy Services Company
Mellon Bank, N.A. Pittsburgh, PA
Account No. 1157237
Transit Routing No. 043000261
Nomination Notices:
Attention: Marketing, Gas Control
Telephone No.: (281) 874-3525
Telescope No.: (281) 874-3354
Either of the parties may designate a further or different address by giving
written notice to the other party.
ARTICLE 16: LAWS, ORDERS & REGULATIONS
This Agreement, and all terms and provisions contained herein, and the
respective obligations of the parties are subject to valid laws, orders, rules,
and regulations of duly constituted authorities having jurisdiction over Buyer,
Seller, Transporter(s) or PSE&G. In the event that any regulatory or government
body asserting jurisdiction over Transporter(s), PSE&G, Buyer or Seller
prohibits any of the transactions described in this Agreement or any
transportation or delivery agreement between Transporter(s), PSE&G, Seller
and/or Buyer covering the transportation and delivery of the gas sold hereunder,
or otherwise conditions such transactions in a form that is unacceptable in the
reasonable judgment of the party affected thereby, then either party hereto so
affected or prohibited may, by giving one (1) month prior written notice to the
other party, terminate this Agreement and each party shall be held harmless as a
result of such termination except for obligations which were
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incurred prior to termination; provided, however, such termination shall be
effective immediately where required by law, rule or regulation.
ARTICLE 17: APPLICABLE LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS.
ARTICLE 18: WAIVER
No waiver by either party of anyone or more defaults in the performance of
any provision of this Agreement shall operate or be construed as a waiver of any
future default, whether of a like or a different character.
ARTICLE 19: TITLE
Seller warrants title to, or good right to sell, all gas delivered
hereunder by Seller, and that such gas is free from liens and adverse claims of
every kind. Seller will pay, or cause to be paid, all royalties and other sums
imposed on the production, gathering, or transportation of the gas prior to its
delivery by Seller to Buyer. Seller will indemnify and save Buyer harmless
against all loss, damage, and expense of every character on account of adverse
claims to the gas delivered by it or of royalties, payments or other charges
thereon applicable before delivery to Buyer. If any adverse claim of any
character is asserted with respect to Seller's right to deliver gas hereunder,
or with respect to Seller's right to receive payment for such gas, or if
Seller's title is questioned or involved in any action, then Buyer shall
immediately notify Seller of such adverse claim and then may withhold that
portion of sums due hereunder reasonably related to such claim until such claim
is finally determined or title
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is clear, or until such time as Seller furnishes a corporate undertaking
conditioned to save Buyer harmless from such claim.
ARTICLE 20: ASSIGNMENT
Either party may, without relieving itself of its obligations under this
Agreement, assign any of its rights hereunder to an entity with which it is
affiliated, but otherwise no assignment of this Agreement or any of the-rights
or obligations hereunder shall be made unless there first shall have been
obtained the consent thereto in writing of the other party, which consent shall
not be unreasonably withheld. Any successor-in-interest of Buyer or Seller shall
be entitled to the rights and shall be subject to the obligations of its
predecessor-in-interest under this Agreement. It is agreed, however, that the
restrictions on assignment contained in this paragraph shall not in any way
prevent either party to this Agreement from pledging, mortgaging or assigning
its rights hereunder as security for its indebtedness. In connection with any
such pledge, mortgage or assignment by Buyer, Seller will execute an appropriate
consent to any such pledge, mortgage or assignment as reasonably requested by
Buyer's lender. Any such consent will acknowledge, in effect, that this
Agreement has been duly authorized and is valid and enforceable against Seller
and that this Agreement is in full force and effect; that Seller will not agree
to any amendment to this Agreement without the lender's approval in writing,
which approval shall not be unreasonably withheld by the lender; that Seller
will make all payments due to Buyer hereunder in accordance with the
instructions of the lender; that Seller will not terminate this Agreement by
reason of Buyer's default or by reason of force majeure, without giving the
lender notice of default and notice of termination and the same opportunity to
cure
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provided to Buyer under this Agreement (plus any longer period as may be
necessary, not to exceed one (1) month, if the lender in good faith is
endeavoring to obtain possession of the Facility and pays Seller in accordance
with the terms of this Agreement during such period); that Seller will deliver
to the lender a copy of each notice of default and notice of termination at the
same time that such notice is delivered to Buyer; and that in the event the
lender exercises its rights under its loan documentation or partnership
documentation with Buyer, Seller will accept performance by the lender or any
successor or assign thereof, provided that the lender or any such successor or
assign pays all sums then due to Seller hereunder and is also otherwise in
compliance with this Agreement.
ARTICLE 21: ARBITRATION
21.1 Any issue not resolved by agreement between the parties shall be
submitted to binding arbitration pursuant to the provisions of this Agreement.
The parties shall each appoint one (1) arbitrator and the two (2) arbitrators so
appointed will select a third arbitrator, all of such arbitrators to be
qualified by education, knowledge, and experience to resolve the dispute or
controversy. If either party fails to appoint an arbitrator within ten (10) days
after a request for such appointment is made by the other party in writing, or
if the two (2) appointed fail, within ten (10) days after the appointment of the
second, to agree on a third arbitrator, the arbitrator or arbitrators necessary
to complete a board of three (3) arbitrators will be appointed upon application
by either party therefor to the American Arbitration Association.
21.2 The jurisdiction of the arbitrators will be limited to the single
issue or issues referred to arbitration and the arbitration shall be conducted
pursuant to the
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guidelines set forth by the American Arbitration Association; provided, however,
that should there be any conflict between such guidelines and the procedures set
forth in this Agreement, the terms of this Agreement shall control.
21.3 Within fifteen (15) days following selection of the third arbitrator,
each party shall furnish the arbitrators in writing its position and supporting
arguments regarding the issue or issues being arbitrated. The arbitrators may,
if they deem necessary, convene a hearing regarding the issue or issues being
arbitrated. All hearings shall be held at a location to be agreed upon among the
arbitrators in Houston, Harris County, Texas. Within thirty (30) days following
the later of the appointment of the third arbitrator or of the hearing, if one
is held, the arbitrators shall notify the parties in writing as to which of the
two (2) positions submitted with respect to the issue or issues in question is
most consistent with the intent of this Agreement. Such decision shall be
binding on the parties hereto until and unless changed in accordance with the
provisions of this Agreement.
21.4 Enforcement of the award may be entered in any court having
jurisdiction over the parties.
21.5 Each party will pay the expense of the arbitrator selected by or for
it, and its counsel, witnesses and employees. All other costs of arbitration
will be equally divided between the parties.
ARTICLE 22: DEFAULT
22.1 In the event either party fails to perform any of the material
covenants or obligations imposed upon it under and by virtue of this Agreement,
the party not in default hereto, having first given thirty (30) days written
notice to the party in default
26
<PAGE>
stating specifically the nature of the default and declaring it to be the
intention of the party giving notice to cancel this Agreement (the "Cancellation
Notice"), may, at its option, cancel this Agreement in accordance with this
Article 22. If within said period of thirty (30) days the party in default
remedies or removes said default, including payment of sums due with interest at
the rate set forth in Section 6.3 hereof, or provides adequate security to fully
indemnify the party not in default for any and all direct damages of such
breach, including payment of sums due with interest at the rate set forth in
Section 6.3 hereof, then such Cancellation Notice shall be withdrawn and this
Agreement shall continue in full force and effect; provided, however, that if
the default is the failure to pay sums due hereunder, then the party not in
default shall have the right to suspend gas deliveries or takes, as the case may
be, after service of the Cancellation Notice.
22.2 If the party in default does not so remedy or remove the default or
does not provide adequate security to fully indemnify the party not in default
for any and all direct damages of such breach, and fails to represent that
further defaults shall not occur and that steps have been taken to avoid such a
recurrence, within said period of thirty (30) days, this Agreement, at the
option of the party not in default, shall be canceled upon written notice to the
defaulting party. Cancellation of this Agreement, pursuant to the provisions of
this Article 22, shall be without prejudice to any other rights and remedies the
party not in default has available to it. Further, such cancellation of this
Agreement or failure to cancel shall be without prejudice to the right of Seller
to collect any amounts then due Seller for gas delivered prior to the time of
cancellation.
27
<PAGE>
ARTICLE 23: GENERAL
23.1 The headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement.
23.2 Any modification, revision or amendment of this Agreement made
subsequent to its execution shall be valid and effective only if and when made
in writing and duly executed by the parties hereto.
23.3 This Agreement and any Exhibit hereto shall constitute a single
agreement, superseding all prior agreements or undertakings between the parties
on the subject matter hereof. This Agreement contains the entire agreement of
the parties and, except as stated herein, there are no promises, agreements,
warranties, obligations, assurances or conditions precedent or otherwise
affecting it.
23.4 By executing this Agreement, each of the individuals so executing
warrants that (I) the individual has all necessary corporate power and authority
to enter into and execute this Agreement and (ii) this Agreement constitutes the
valid and binding obligation of the party on whose behalf it is executed,
enforceable in accordance with its terms, subject to applicable bankruptcy and
insolvency laws.
23.5 The parties shall execute such additional documents and shall cause
such additional action to be taken as may be required, or, in the reasonable
judgment of any party, as may be necessary or desirable, to effect or evidence
the provisions of this Agreement and the transactions contemplated hereby.
23.6 The parties acknowledge that each provision to this Agreement
constitutes their joint work product.
28
<PAGE>
ARTICLE 24: CONFIDENTIALITY
24.1 The terms of this Agreement and information disclosed pursuant to this
Agreement, including but not limited to the price paid for gas, shall be kept
confidential by Seller and Buyer, (a) except to the extent any information must
be disclosed to (I) Transporter(s) and PSE&G for the purpose of effectuating
transportation and resale of the gas sold and purchased under this Agreement,
(ii) PSE&G for the purpose of complying with the PPIA and (iii) Buyer's lender
and (b) except as required by law, regulation or request of governmental
authority.
IN WITNESS WHEREOF, by execution in duplicate originals, the parties hereto
have caused this Agreement to be effective as of the day and year first above
written.
"BUYER" "SELLER"
CAMDEN COGEN, L.P. ANADARKO ENERGY SERVICES COMPANY
Cogen Technologies Camden GP By: /s/ R.J. Sharples
Limited Partnership, a Delaware --------------------------------
limited partnership, its general Name: R.J. Sharples
partner ------------------------------
Title: President
-----------------------------
Date: 8-18-97
------------------------------
By: Cogen Technologies Camden, Inc., a
Texas corporation, its general partner
By: /s/ W. Colin Harper
----------------------------
W. Colin Harper
Vice President - Fuel Supply
Date: August 7, 1997
--------------------------
29
<PAGE>
EXHIBIT A
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between CAMDEN COGEN, L.P., as Buyer, and
ANADARKO ENERGY SERVICES COMPANY, as Seller.
NOMINATION NOTICE
Date: _____________
Anadarko Energy Services Company
17001 Northchase Drive
Houston, TX 77060
Attention: Mr. John Ripple
Reference: Firm Gas Purchase and Sale Agreement
Dated: July 1, 1997
Buyer: Camden Cogen, L.P.
Seller: Anadarko Energy Services Company
Point of Delivery: Tetco - S. TX
____ Contract No.: ____________________________________
Gentlemen:
Pursuant to Section 3.1 of the subject Agreement, Camden Cogen, L.P., hereby
nominates the following:
Month of Delivery:
Nominated Quantity:
Very truly yours,
- ----------------------------
W. Colin Harper
Vice President - Fuel Supply
30
<PAGE>
EXHIBIT B
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between CAMDEN COGEN, L.P., as Buyer, and
ANADARKO ENERGY SERVICES COMPANY, as Seller.
<TABLE>
<CAPTION>
====================================================================================================
MARKET PRICE INDEX
(TETCO/SOUTH TEXAS)
====================================================================================================
Publication* Table Row Column
====================================================================================================
<S> <C> <C> <C>
Inside FERC's Gas Prices of Spot Gas Texas Eastern Index
Market Report (first Delivered to Pipelines Transmission Corp.
report in applicable (per MMBtu dry) South Texas
month)
- ----------------------------------------------------------------------------------------------------
Natural Gas Spot Prices on Region - South Texas Contract Index
Intelligence - Weekly Interstate Pipeline Texas Eastern (current month)
Gas Price Index (first Systems Delivered to
report in applicable Pipeline (30 Day Supply
month) Transactions)
====================================================================================================
====================================================================================================
BACKUP PRICE INDEX
(TETCO/SOUTH TEXAS)
====================================================================================================
Publication* Table Row Column
====================================================================================================
Natural Gas Week (first Spot Prices on Texas Eastern; South Bid Week (current
report in applicable Interstate Pipeline Texas month)
month) Systems; Delivered to
Pipeline ($MMBtu)
====================================================================================================
</TABLE>
31
<PAGE>
EXHIBIT C
Attached to and made a part of that Firm Gas Purchase and Sale Agreement
effective July 1, 1997, by and between CAMDEN COGEN, L.P., as Buyer, and
ANADARKO ENERGY SERVICES COMPANY, as Seller.
POINT(S) OF DELIVERY
The Point(s) of Delivery shall be:
The existing point(s) of receipt on TETCO's South Texas pipeline
system (downstream of Blessing , TX).
32
<PAGE>
STATE OF TEXAS )
)SS.
COUNTY OF HARRIS )
On this 7th day of August 1997, before me, Joy R. Toups, the undersigned
officer, personally appeared, W. Colin Harper, known to me to be the person
whose name is subscribed to the within instrument and acknowledged that Cogen
Technologies Camden, Inc., as General Partner of Cogen Technologies Camden GP
Limited Partnership, in turn acting as General Partner of Camden Cogen L.P.,
executed the same for the purpose therein contained.
In witness whereof I hereunto set my hand and official seal.
---------------------
JOY R. TOUPS /s/ Joy R. Toups
MY COMMISSION EXPIRES -------------------------------------------
August 13, 2001 Notary Public in and for the State of Texas
---------------------
[SEAL]
STATE OF TEXAS )
)SS.
COUNTY OF HARRIS )
On this 18th day of August, 1997, before me, Vicki Gustin, the undersigned
officer, personally appeared, R.J. Sharples, known to me to be the person whose
name is subscribed to the within instrument and acknowledged that Anadarko
Energy Services Company executed the same for the purpose therein contained.
In witness whereof I hereunto set my hand and official seal.
/s/ Vicki Gustin
-------------------------------------------
Notary Public in and for the State of Texas
[SEAL]
33
<PAGE>
PERFORMANCE GUARANTEE
WHEREAS, Anadarko Energy Services Company, a company incorporated under the
laws of the State of Delaware (hereinafter "Anadarko") has entered into a Firm
Gas Purchase and Sale Agreement dated July 1, 1997, with Camden Cogen, L.P.,
(hereinafter "Cogen"):
NOW, THEREFORE:
1. Anadarko Petroleum Corporation, the parent company of Anadarko, a company
incorporated under the laws of Delaware and having its office at 17001
Northchase Drive, Houston, Texas (hereinafter "Guarantor"), hereby guarantees
the due performance by Anadarko, of all obligations of Anadarko under the terms
of the Firm Gas Purchase and Sale Agreement and all amendments thereof which may
subsequently be executed by all relevant parties.
2. If Anadarko in any respect fails to perform any of its obligations
contained in the Firm Gas Purchase and Sale Agreement, the Guarantor, subject to
any claim of set off or counterclaim of Anadarko, if any, or any other defense,
shall undertake the following for Cogen, upon Cogen's request.
(a) Guarantor irrevocably and unconditionally guarantees to perform such
obligation in a timely fashion in accordance with the terms of the Firm Gas
Purchase and Sale Agreement.
(b) Guarantor shall not be discharged or released from its undertaking
hereunder by any waiver or forbearance by Cogen, whether as to payment, time,
performance or otherwise. Notwithstanding the foregoing the maximum amount of
<PAGE>
such obligations performed by the Guarantor shall not exceed the aggregate
amount of $6.5 million.
3. In the event and for the duration that the Guarantor assumes the
obligations of Anadarko under the Firm Gas Purchase and Sale Agreement, the
Guarantor shall be entitled to all of the rights of Anadarko under the Firm Gas
Purchase and Sale Agreement, and further shall assume all liabilities, losses or
damages arising from Anadarko's failure to perform its obligations under the
Firm Gas Purchase and Sale Agreement to the extent that Anadarko could be held
liable therefor.
4. This Guarantee shall inure to the benefit of and be binding upon COGEN and
its successors and assigns, and shall be binding upon the Guarantor and its
successors and assigns.
5. This Guarantee shall remain in force until the expiration or termination of
the Firm Gas Purchase and Sale Agreement, whichever is earlier.
6. THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS.
7. The Guarantor represents and warrants as follows:
(a) The Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty Agreement are within the Guarantor's corporate powers, have been
duly authorized by all necessary corporate action, and do not contravene
(i) the Guarantor's certificate of incorporation or by-laws or (ii) any
law, rule, regulation
2
<PAGE>
or order, or any restriction contained in any material agreement or
instrument, binding on or affecting the Guarantor.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by the Guarantor of this
Guaranty Agreement, except such as have been duly obtained or made and are
in full force and effect.
(d) This Guaranty Agreement is a legal, valid and binding obligation
of the Guarantor enforceable against the Guarantor in accordance with its
terms, except as enforce ability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles (whether enforcement is sought by proceeding in equity or at
law).
(e) The Guarantor owns, directly or indirectly, all the issued and
outstanding capital stock of Anadarko.
IN WITNESS WHEREOF, this Guarantee has been duly executed by a proper
representative of Anadarko Petroleum Corporation duly authorized to act in that
capacity as of the 8th day of August, 1997.
WITNESS: GUARANTOR:
/s/ Albert L. Richey
-----------------------------------
Albert L. Richey
/s/ Gloria Alaniz Title: Vice President and Treasurer
- ------------------------ ----------------------------
3
<PAGE>
EXHIBIT 10.54
AGREEMENT
BETWEEN
COGEN TECHNOLOGIES NJ , INC.
("SELLER")
AND
IMTT-BAYONNE
("BUYER")
FOR THE SALE OF STEAM AND ELECTRICITY
FROM
A COGENERATION PLANT
JUNE 13, 1985
<PAGE>
TABLE OF CONTENTS
ARTICLE TITLE PAGE
- ------- ----- ----
1 Definitions 1
2 General Description 3
3 Sale of Steam 4
4 Sale of Electricity 6
5 Respective Rights and Obligations of Parties 9
6 Measurement and Metering 12
7 Billing and Records 13
8 Taxes 15
9 Land Rights 15
10 Term 16
11 Eminent Domain 16
12 Force Majeure 17
13 Liability 18
14 Insurance 21
15 Breach of Contract 22
16 Termination for Breach 25
17 Notice and Service 25
18 Amendments 27
19 Successors and Assigns 27
20 Choice of Law 27
21 Severability and Renegotiation 28
22 Other Agreements 28
23 Captions 29
<PAGE>
AGREEMENT entered into this 13th day of June, 1985, by and between Cogen
Technologies NJ, Inc., a Delaware corporation ("Seller"), and IMTT-Bayonne, a
Delaware partnership ("Buyer").
WHEREAS, Buyer owns and operates a Tank Terminal Facility located at
Bayonne, New Jersey ("Buyer's Plant" or "Plant"), which Plant utilizes steam and
electricity for industrial purposes;
WHEREAS, Buyer finds it necessary to assure itself of a constant
supply of steam and electricity to maintain operation of its Plant;
WHEREAS, Seller plans to construct and operate a facility for the
cogeneration of steam and electricity on premises leased from Buyer pursuant to
the Lease Agreement;
WHEREAS, Buyer desires to purchase all of its steam requirements for
the operation of its Plant from Seller;
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;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Parties hereby agree as follows:
<PAGE>
ARTICLE I
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:
1.1. "Alternate Source of Power" or "Alternate Power Supplier" means
any source other than Seller from which Buyer may, from time to time during the
effective existence of this Agreement, obtain electrical power.
1.2. "Agreement" or "Steam Sales 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
12-month periods, the first of which shall begin on the Initial Delivery Date,
if such Date is the first day of a calendar month, or otherwise on the first
day of the month immediately following the month in which the Initial Delivery
Date occurs.
1.4. "Btu" means British Thermal Unit.
1.5. "Buyer's Plant" or "Plant" means the Buyer's Tank Terminal
Facility located at Bayonne, New Jersey, and all appurtenant property owned or
leased by Buyer at that location, including Buyer's steam supply system
beginning at the Point(s) of Delivery.
1.6. "Buyer's Steam Producing Facilities" means the existing boiler
and appurtenant structures and equipment located at Buyer's Plant and presently
operated by Buyer for the purpose of producing steam for industrial use purposes
at Buyer's Plant.
<PAGE>
-2-
1.7. "Cogeneration Facility" or "Seller's Facility" means the boiler,
turbiner generator and all appurtenant structures, equipment and real property
interests owned or leased and operated by Seller for the purpose of producing
steam and electricity.
1.8. "Electrical Interconnection Facilities" means all facilities
required to be installed solely to interconnect and deliver power from Seller's
facilities to Buyer's electrical system, 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.
1.9. "Excess Steam Requirements" means Buyer's steam requirements
for Buyer's Plant in excess of the Maximum Steam Production of the Cogeneration
Facility.
1.10. "Initial Delivery Date" means that day that Seller actually
delivers or is capable of and offers to deliver Steam to Buyer regardless of
whether Buyer accepts such delivery, or the lst day of June, 1987, whichever
date is earlier.
1.11. "K lbs." means 1,000 pounds of steam mass.
1.12. "kwh" means killowatt hours of electricity.
1.13. "Lease" or "Lease Agreement" means that certain Lease Agreement
between Seller, Buyer and Bayonne Industries, Inc., dated 13 day of June, 1985
(a copy of which is attached hereto as Exhibit 1).
1.14. "Maximum Steam Production" means the maximum amount of
steam that Seller is obligated to produce at the Cogeneration Facility
<PAGE>
-3-
for sale to Buyer pursuant to Section 3.1.A of this Agreement which maximum
amount is agreed to be 57,000 lbs. of steam per hour on a twenty-four (24) hour
per day, seven (7) day per week basis, all steam shall be at a pressure of not
less than 155 p.s.i.g., saturated when delivered to Buyer's Points of Delivery.
1.15. "Operate" means to provide the engineering, purchasing, repair,
supervision, training, inspection, testing, protection, operation, use,
management, replacement and maintenance of and for the Cogeneration Facility
and/or Buyer's Plant in accordance with applicable industry standards and good
engineering practices.
1.16. "Party" or "Parties" means the signatories to this Agreement
and their successors and assigns.
1.17. "Point(s) of Delivery" means any point or points where Seller's
steam supply system connects to Buyer's steam pipeline.
1-18. "p.s.i.g." means pound per square inch gauge.
1.19. "Steam Interconnection Facilities" means those
facilities required for the receipt or delivery of steam at Buyer's
Points of Delivery, including service stop valves, meter stop valves,
primary and secondary service pressure reducing valves, meter supports,
protection devices, meters, pipe systems, pipelines and other
facilities required to connect the Plant to the Seller's Facility in
order to effectuate the purposes of this Agreement.
ARTICLE 2
GENERAL DESCRIPTION
Subject to the terms and conditions set forth in this
<PAGE>
-4-
Agreements, the Parties hereby agree that: (1) Seller agrees to sell to Buyer
and Buyer agrees to purchase from Seller all of Buyer's requirements for steam
at Buyer's Plants, up to the Maximum Steam Production; and (2) Buyer agrees to
purchase such quantities of electricity from Seller as Buyer may require, when
called upon to do so, from time to time, by Seller.
ARTICLE 3
SALE OF STEAM
3.1. General.
A. Seller's Furnishing of Maximum Steam Production
Commencing with the Initial Delivery Date and thereafter during the
Term of this Agreement, Seller shall furnish and sell to Buyer and Buyer shall
purchase and receive from Seller any and all steam required at Buyer's Plant, up
to the Maximum Steam Production.
B. Buyer's Minimum Steam Purchases
For each of the first four (4) Annual Periods under this Agreements,
pursuant to Section 3.1.A Buyer shall purchase from Sellers, or pay Seller for
if tendered by Seller and not taken by Buyer, a minimum of One Hundred Twenty
Thousand (120,000) K lbs. of steam produced by the Cogeneration Facility.
C. Buyer's Excess Steam Requirements
Should the steam requirements at Buyer's Plant exceeds, for any
reasons, the Maximum Steam Production to be sold to Buyer pursuant to Section
3.1.A, Buyer shall acquire its Excess Steam Requirements exclusively from Seller
to the extent that Seller is capable of meeting Buyer's Excess Steam
Requirements.
<PAGE>
-5-
3.2. Monthly Steam Charge.
For all steam delivered to Buyer pursuant to Section 3.1 Buyer shall
pay Seller a Monthly Steam Charge as determined by Exhibit 2 to this Agreement.
3.3. Seller's Inability to Furnish Steam.
Should Seller at any time not be capable of meeting any portion of
Buyer's requirements for steam Buyer shall be free to obtain any and all
additional steam necessary to fill its requirements from any source and in any
manner chosen by Buyer, for so long as Seller remains incapable of meeting such
requirements.
3.4. Quality of Steam.
All steam delivered to Buyer by Seller shall be at a pressure of not
less than 155 p.s.i.g., saturated, when delivered to Buyer at the Point of
Delivery.
3.5. Buyer's Steam Producing Facilities.
A. Commencing upon the Initial Delivery Date and thereafter during the
Term of this Agreement, Seller shall, at its sole expense maintain Buyer's
Steam Producing Facilities in good operating condition and in compliance.with
all applicable and duly adopted laws, ordinances, rules and regulations of
public authorities and in conformity with all safety codes and recognized
Industry Safety Standards and guidelines and further subject to any other
reasonable requirements Buyer may from time to time impose. Buyer, however, will
retain the sole right to fire and operate Buyer's Steam Producing Facility.
<PAGE>
-6-
B. Buyer shall be entitled to terminate Seller's authority and
responsibility with respect to Buyer's Steam Producing Facilities under Article
3.5.A. at any time, without cause, upon written notice to Seller. In the event
of such termination Buyer shall be entitled to a credit against the Monthly
Steam Charger which credit shall be determined in accordance with Article 3.2
and Exhibit 2, Addendum 4.
C. If at any timer by reason of Seller's failure to furnish steam in
accordance with the Agreement, Buyer is required to produce steam by
utilization of Buyer's Steam Producing Facility, then Buyer shall be entitled to
a credit against the Monthly Steam Charge, which credit shall be determined in
accordance with Article 3.2 and Exhibit 2, Addendum 5.
3.6. Seller's Compliance with Applicable Laws and Regulations.
Seller's sale of steam to Buyer shall be subject to all local, county,
state and federal laws and regulations and further subject to all actions and
authority of any Regulatory Commission or body governing same,
ARTICLE 4
SALE OF ELECTRICITY
4.1. General.
A. Commencing with the Initial Delivery Date and thereafter during the
term of this Agreement, Seller shall have the option to require Buyer to
purchase from Seller electricity, produced by the Cogeneration Facility, for
use at Buyer's Plant, in lieu of purchases of electricity by Buyer from third
parties. Seller shall have sole
<PAGE>
-7-
discretion to determine the times and amounts of such purchases of electricity
by Buyer; provided, however, that (1) Seller shall not require Buyer to purchase
from Seller more than the maximum electrical power needs of Buyer's Plant, as
determined by Buyer; and (2) Seller's establishment of the times and amounts of
Buyer's purchases shall not interfere with nor adversely affect Buyer's
operation of its Plant.
B. Seller shall, during all times that Seller elects to require Buyer
to purchase electricity from Seller pursuant to Section 4.1.A, deliver to Buyer
all of the electricity Buyer requires at its Plant; all electricity so purchased
shall be delivered to the same points of delivery used by Buyer's then current
Alternate Power Supplier and shall be at the same voltage as delivered by
Buyer's then Current Alternate Power Supplier.
C. Seller's determination of the times for Buyer's purchases of
electricity shall afford Buyer sufficient opportunity to coordinate such
purchases with Buyer's then current Alternate Power Supplier so that Buyer will
have ample time to transfer to Seller's electrical service with the assistance
and cooperation of Buyer's then current Alternate Power Suppliers, such that
Buyer shall suffer no interruption of electrical service at any time.
D. During all times that Seller elects to require Buyer to purchase
electricity from Seller pursuant to Section 4.1.A, Seller shall not cease
delivery of electricity to Buyer until such time as Buyer has completed transfer
from Seller's electrical service to another Alternate Power Supplier of Buyer's
choice.
<PAGE>
-8-
E. Seller shall at all times at its sole cost and responsibility
construct, own, operate and maintain all facilities, equipment and appurtenances
necessary for Buyer to transfer, without interruption in electrical service,
from its then current Alternate Power Supplier to Seller's electrical service
and to transfer, without interruption in electrical service, back to the nearest
reasonable Alternate Power Supplier of Buyer's choice.
F. Notwithstanding anything herein to the contrary, Buyer shall not be
required to purchase any electricity under this Agreement unless and until Buyer
is completely satisfied with the capability of Seller's facility, equipment and
appurtenances to allow Buyer to transfer back and forth from Seller's electrical
service to any Alternate Power Supplier of Buyer's choice, with no interruption
of electrical service at any time.
4.2. Notice.
Seller shall give reasonable notice to Buyer, in writing, of the time
at which Seller shall elect to require Buyer to purchase electricity from Seller
pursuant to Section 4.1. Such notice shall include reasonably specific
indications of (1) the period during which Seller shall require Buyer to
purchase electricity from Sellers, and (2) the amount of electricity Seller
shall require Buyer to purchase from Seller during such period.
4.3. Monthly Electricity Charge.
For each month in which Buyer purchases electricity from Seller
pursuant to Section 4.1, Buyer shall pay Seller a Monthly Electricity Charge
which shall be equal to (1) the applicable tariff
<PAGE>
-9-
rate per kwh of electricity that Buyer would have paid its Alternate
Power Supplier for electricity purchased during that month, multiplied
by (2) the quantity of kwh of electricity purchased by Buyer from
Seller, minus (3) any standby or tie-in charge paid by Buyer during
such month to its Alternate Power Supplier or any other cost incurred
by Buyer during such month in maintaining the ability to purchase
electricity from its Alternate Power Supplier. Notwithstanding the
preceding sentence, at no time shall Buyer be charged a rate per kwh of
electricity which is above the lowest rate charged by Seller to any
other purchaser of electricity from Seller, excluding sales to electric
utilities.
4.4. Seller's Inability to Furnish Electricity.
Notwithstanding anything hereinabove to the contrary, should
Seller at any time not be capable of meeting Buyer's requirements for
electricity, Buyer shall have the right to terminate Seller's rights under
Section 4.1 and obtain electricity necessary to fill its requirements from any
source and in any manner it may choose.
4.5 Seller's Compliance with Applicable Laws and Regulations.
Seller's sale of electricity to Buyer shall be subject to
all local, county, state and federal laws and regulations and further
subject to all actions and authority of any Regulatory Commission or
body governing same as well as any requirements, restrictions or
limitations imposed by Buyer's then current Alternate Power Supplier.
<PAGE>
-10-
ARTICLE 5
RESPECTIVE RIGHTS AND OBLIGATIONS OF PARTIES
5.1. Rights and Obligations of Seller.
Seller shall:
A. Have the right to sell any and all steam produced at the
Cogeneration Facility (1) in excess of the Maximum Steam Production,
or (2) any steam offered to but not purchased by Buyer to any other
person on such terms and conditions as Seller and such person shall
agree without interference by Buyer except that such sale shall not
be conducted in such manner as to interfere with Buyer's steam
purchases pursuant to Section 3.1.A or with Buyer's operation of its
Plant and not to create any risk of injury or damage to any person or
property beyond normal risk associated with operation of the Facility
in accordance with applicable industry standards and good engineering
practices.
B. Construct, own, operate and maintain all Steam Interconnection
Facilities necessary for the delivery of steam (1) from Seller's Facility to and
including the Buyer's Points of Delivery, and (2) from Seller's Facility to and
including points of delivery to steam delivery systems maintained by other
purchasers of steam from Seller provided such facilities are operated and
maintained in such manner as not to interfere with Buyer's operation of its
Plant and not to create any risk of injury or damage to any person or property
beyond normal risks associated with operation of the Facility in accordance with
applicable industry standards and good engineering practices.
C. Have the right to sell electricity generated at the Cogeneration
Facility to any person on such terms and conditions as Seller and such person
shall agree, without interference by Buyer,
<PAGE>
-11-
provided such generation and sale is conducted in such manner as not to
interfere with Buyer's operation of its Plant and not to create any risk of
injury or damage to any person or property beyond normal risks associated with
operation of the Facility in accordance with applicable industry standards and
good engineering practices;
D. Construct, own, operate and maintain all Electrical
Interconnection Facilities and all other electrical interconnection or
transmission facilities necessary to deliver electricity from the Cogeneration
Facility to the persons to whom such electricity is sold, provided such
facilities are operated and maintained in such manner as not to interfere with
Buyer's operation of its Plant and not to create any risk of injury or damage to
any person or property beyond normal risks associated with operation of the
Facility in accordance with applicable industry standards and good engineering
practices;
E. Construct, own, operate and maintain such Electrical
Interconnection Facilities as shall be necessary to accept delivery of
electricity to the Cogeneration Facility provided such facilities are operated
and maintained in such manner as not to interfere with Buyer's operation of its
Plant and not to create any risk of injury to any person or property beyond
normal risks associated with operation of the Facility in accordance with
applicable industry standards and good engineering practices;
F. Obtain and maintain all necessary government authorizations,
licenses and permits for the operation of the Cogeneration Facility, and operate
the Cogeneration Facility in compliance with all such authorizations, licenses
and permits; and
<PAGE>
-12-
G. Operate and maintain the Cogeneration Facility at all times in
compliance with all applicable and duly adopted laws, ordinances, rules and
regulations of public authorities and in conformity with all safety codes and
recognized Industry Safety Standards and guidelines applicable to the operation
of the Cogeneration Facility.
5.2. Rights and Obligations of Buyer.
Buyer shall:
A. Have the right to operate its Plant without interference from
Seller;
B. Operate and maintain its Plant at all times in such condition that
such operation will be safe to persons and property and the safe and normal
operation of Seller's Facility is not affected;
C. Own, operate and maintain all Steam Interconnection Facilities
necessary for the receipt of steam from the Point(s) of Delivery to its Plant;
and
D. Obtain and maintain all necessary government authorizations,
licenses and permits for the operation of its Plant and shall operate its
Plant in compliance with all such authorizations, licenses and permits.
ARTICLE 6
MEASUREMENT AND METERING
For the purposes of this Agreement, steam shall be measured in units
of K lbs. of steam mass, and electricity shall be measured in units of kwh. All
steam and electricity sold and delivered hereunder by Seller to Buyer shall be
measured, monitored and recorded, by both
<PAGE>
-13-
Parties, in conformity and compliance with normally accepted industry standards.
ARTICLE 7
BILLING AND RECORDS
7.1. Billing.
A. Monthly Bill
On or before the tenth (10) day of each month, Seller shall prepare
and deliver to Buyer a statement setting forth the Monthly Steam Charge and the
Monthly Electricity Charge, if any, for the preceding month. The billing
statement shall also set forth the amount of steam and electricity actually
taken by Buyer during such month.
B. Payment and Penalties
(1) Payment
Buyer shall, within fifteen (15) days of the receipt of Seller's
statement, pay Seller for all amounts billed pursuant to Section 7.1.A.
(2) interest
If Buyer fails to pay all or a portion of the amounts billed within
the time stated in Section 7.1.B(1), Buyer shall owe interest on the unpaid
portion of the bill, which interest shall accrue at the maximum legal rate of
interest, from the due date until paid; however, said rate of interest shall
at no time exceed 18% per annum.
C. Billing for Buyers Minimum Purchases of Steam
Should Buyer fail to purchase and take delivery of the minimum amount
of steam specified in Section 3.1.B during any Annual Period specified in such
Section, Seller shall add to the Buyer's
<PAGE>
-14-
monthly bill for the last month of any such Annual Period an additional charge
for the portion of Buyer's minimum steam purchase which Buyer failed to purchase
and take delivery of during such Annual Period; the amount owed by Buyer shall
be determined by Exhibit 2 to to this Agreement.
D. Billing for Buyer's Failure to Purchase Electricity
Should Buyer fail to purchase and accept delivery of electricity from
Seller after receipt of proper notice from Seller under Section 4.2, Seller
shall add to Buyer's monthly bill for any month in which such failure occurs an
additional Charge equal to the charge which Buyer would have paid Seller
pursuant to Section 4.3 for all electricity which Buyer was required to accept
and purchase from Seller during that month, as provided under Section 4.1.
E. Buyer's Credits
Should Buyer at any time be entitled to a credit as provided in
Exhibit 2, Addenda 4 or 5, Buyer shall have the option: (1) of applying such
credit against any amount owing under Section 7.1.A or (2) demanding payment
from Seller in the same manner set forth in Section 7.1.B.
7.2. Records.
Both Seller and Buyer shall keep records, including but not limited to
invoices, receipts, charges, computer printouts, punchcards or magnetic tapes,
related to the volume and price of steam and 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 five years from the date of their preparation.
<PAGE>
-15-
ARTICLE 8
TAXES
Seller shall be solely responsible for any taxes relating to the
Cogeneration Facility and its components or appurtenances and the sale of the
steam or electricity produced therein. Buyer shall be solely responsible for
any taxes relating to the Buyer's Plant, its components or appurtenances and the
sale of the products produced therein, as well as any sales taxes imposed on
Buyer as a result of the sale to Buyer of steam or electricity produced by the
Cogeneration Facility.
ARTICLE 9
LAND RIGHTS
9.1. General
During the term of this Agreement, each Party grants to the other
Party a license for reasonable ingress and egress over property owned or leased
by such Party to the extent the other Party deems such ingress and egress
necessary in order to examine, test, calibrate or maintain the Electrical and
Steam Interconnection Facilities and to read meters, except that (1) such
access shall not disrupt or otherwise interfere with the operations of a Party's
business, and reasonable notice shall be provided before exercising such
license except in the case of an emergency, and (2) this license shall not be
deemed to establish in a Party any easement or servitude over the other Party's
land, and shall expire with the expiration of this Agreement.
9.2. Scope of Rights.
The rights granted under this Article to the Parties shall
<PAGE>
-16-
include the directors, officers, employees, agents or representatives of the
Parties, as well as independent contractors engaged by the Parties in connection
with their duties and obligations under this Agreement.
ARTICLE 10
TERM
10.1. Base Term of Agreement.
The Base Term of this Agreement shall commence on the Initial Delivery
Date and continue uninterrupted for a period of Ten (10) Annual Periods.
10.2. Renewal of Agreement.
This Agreement shall be renewed automatically from year to year for
Renewal Terms of an additional One (1) Annual Period each commencing 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 any such
Renewal 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
sixty (60) days prior to the expiration of the Bast Term or any Renewal Term.
ARTICLE 11
EMINENT DOMAIN
11.1. Termination.
If Seller's Cogeneration facility or Buyer's Plant shall be taken,
condemned, or otherwise conveyed pursuant to a condemnation proceeding, in
whole or in part, by any competent authority and such action renders the
performance by either Party under this Agreement impossible, impracticable or
unduly onerous, either Party may elect
<PAGE>
-17-
to terminate this Agreement by giving written notice to the other within three
(3) years after the date official notice of such intended taking or
condemnation is provided to the Parties or within three (3) months after such
taking or condemnation, whichever date is earlier. If such notice of termination
is given, this Agreement shall terminate as of the date on which performance by
either Party under this Agreement becomes impossible, impracticable or unduly
onerous, as a result of the taking or condemnation.
11.2 Rights of Parties.
In the event that this Agreement is terminated by either Party pursuant
to Section 11.1, the Parties shall have no rights, obligations or interests
pursuant to this Agreement as of the date of such termination, except that Buyer
shall remain obligated to pay Seller all sums due Seller under this Agreement as
of the date of such termination.
ARTICLE 12
FORCE MAJEURE
12.1. Definition.
"Force Majeure" means unforeseeable causes beyond the reasonable
control of and without the willful fault or negligence of the Party claiming
Force Majeure. It shall include failure or interruption of services due to
causes beyond that Party's control, including but not limited to war, sabotage,
acts of God, riots, drought or accidents not reasonably foreseeable.
12.2. Burden of Proof.
The burden of proof as to whether a Force Majeure has occurred shall be
upon the Party claiming the Force Majeure.
<PAGE>
-18-
12.3. Effect of Force MaJeure.
If either party is rendered wholly or partly unable to perform its
obligations under this Agreement because of Force Majeure, that Party shall be
excused from whatever performance is affected by the Force Majeure to the extent
so affected, provided that: (1) the non-performing Party, within two (2) days
after the occurrence of the Force Majeure, gives the other Party written notice
describing the particulars of the occurrence; (2) the suspension of performance
be of no greater scope and of no longer duration than is required by the Force
Majeure; and (3) no obligations of either Party that matured before the
occurrence of the Force Majeure shall be excused as a result of such occurrence.
ARTICLE 13
LIABILITY
13.1. Liability of Seller.
A. Steam
(1) Seller will at all times provide, pursuant to Article 3,
uninterrupted delivery of steam to Buyer's Plant in sufficient quantities to
fill all of Buyer's steam requirements, up to the Maximum Steam Production.
(2) In addition, should Seller at any time fail to
provide uninterrupted delivery of steam to Buyer's Plant in sufficient
quantities to fill all of Buyer's steam requirements up to the Maximum. Steam
Production, then Seller shall be liable to Buyer for any and all damages
suffered by Buyer as a result of Seller's failure, including but not limited to
direct, indirect and/or consequential losses,
<PAGE>
-19-
costs, expenses, damages and/or loss of profit, resulting from Seller's
failure, however caused, Buyer agrees to make reasonable efforts to mitigate
any and all damages resulting from Seller's failure, through use of Buyer's
Steam Producing Facilities or otherwise, and Seller shall not be liable for any
damages resulting from Buyer's negligence, inaction or failure to mitigate.
Furthermore, Seller shall not be liable for any damages incurred by Buyer as a
result of Seller's failure during any period with respect to which (i) Seller
had provided Buyer with no less than thirty (30) days written notice that Seller
will not be providing steam to Buyer, or (ii) Seller and Buyer have consulted
and agreed in writing that Seller will not be providing steam to Buyer.
B. Electricity
Should Seller fail to provide uninterrupted delivery of electricity to
Buyer's Plant at any time during any period for which Buyer is obligated to
purchase electricity from Seller pursuant to Article 4, then Seller shall be
liable to Buyer for any and all damages suffered by Buyer as a result of
Seller's failure, including but not limited to direct, indirect and/or
consequential losses, costs, expenses, damages and/or loss of profit resulting
from Seller's failure, however caused. Buyer agrees to make reasonable
efforts to mitigate any and all damages resulting from Seller's failure,
through use of Buyer's Alternate Power Supplier or otherwise, and Seller shall
not be liable for any damages resulting from Buyer's negligence, inaction or
failure to mitigate. Furthermore, Seller shall not be liable for any damages
resulting from the failure of Buyer's Alternate Power Supplier to provide
electricity to Buyer during those periods when Seller has not elected to provide
electricity to Buyer.
<PAGE>
-20-
C. Specific Performance
In addition to any of the rights and remedies referred to this
Agreement, Buyer shall have the right to seek the specific performance by Seller
of any of Seller's obligations under this Agreement, including but not limited
to the remedy of any breach of this Agreement regardless of whether or not
Seller has been placed in default.
13.2. Liability of Buyer.
A. Steam
Should Buyer during the first Four (4) Annual Periods under this
Agreement refuse to accept delivery of Buyer's minimum steam purchases set forth
in Section 3.1.B, Buyer shall remain liable to pay Seller for such minimum steam
purchases as if Buyer had purchased and accepted delivery thereof.
B. Specific Performance
In addition to any of the rights and remedies referred to in this
Agreement, Seller shall have the right to seek the specific performance by Buyer
of any of Buyer's obligations under this Agreement, including but not limited to
the remedy of any breach of
<PAGE>
-21-
this Agreement regardless of whether or not Buyer has been placed in default.
ARTICLE 14
INSURANCE
14.1. Responsibility of Parties.
Each Party shall provide and maintain, for the joint benefit of the
Parties (and mortgagees if any) during the entire term of this Agreement, public
liability insurance against claims for (1) bodily injury and death occurring on
or about the Cogeneration Facility with limits of not less than $l,000,000.00
per occurrence per individual, and (2) property damage with a limit of not less
than $20,000,000.00 for damage to property occurring on or about
the Cogeneration Facility. Each Party shall also provide and maintain Worker's
Compensation Insurance in statutory limits. In addition to the foregoing each
party shall provide and maintain comprehensive general liability for any claims
or acts that either party can be held legally liable for, regardless of the
jurisdiction.
14.2. Changes in Insurance Requirements.
The Parties take cognizance that changes may occur over the term of
this Agreement that make the insurance and/or the limits provided in Section
14.1 inadequate. Either Party shall have the right, from time to time, to make
such reasonable requirements with reference to insurance that will reasonably
cover liabilities to which the Parties may be exposed by virtue of this
Agreement.
14.3. Conditions Concerning Insurance Carriers.
Insurance companies issuing policies required in this
<PAGE>
-22-
Agreement shall be qualified to do business in New Jersey and shall have a
financial rating of A12 or better according to "Best's Insurance Reports, Fire
and Casualty," edition current at the inception date of each policy. All
insurance policies required to be furnished by the Parties hereunder shall name
both Seller and Buyer (and mortgagees if any) as named insureds and each such
policy shall be non-cancellable with respect to either Party without sixty (60)
days written notice to that Party. The policy or policies of insurance shall be
delivered to each Party together with evidence of the payment of the premiums
therefor, not less than fifteen (15) days prior to the commencement of the term
of the Lease Agreement or the date when the Seller shall enter into possession
of the Leased Premises, whichever occurs sooner. At least fifteen (15) days
prior to the expiration or termination date of any policy, each Party shall
deliver a renewal or replacement policy with proof of the payment of the premium
therefor.
ARTICLE 15
BREACH OF CONTRACT
15.1. Definition.
A breach of this Agreement shall be deemed to exist upon the
occurrence of any one or more of the following events:
A. Failure of Seller to furnish and sell steam to Buyer up to the
Maximum Steam Production pursuant to Section 3.1.A for any reason other than a
cause which constitutes a force majeure, pursuant to Section 12.1, which failure
or failures exceeds an aggregate of 1080 hours for any given Annual Period;
B. Failure by either Party to make payment of any amounts
<PAGE>
-23-
due the other Party under this Agreement, which failure continues for a period
of thirty (30) days after notice of such non-payment;
C. Failure by either party to perform fully any other provision of
this Agreement which failure continues for a period of thirty (30) days after a
notice of such non-performance;
D. 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 bankrupt 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 shall1 not be dismissed within sixty (60) days
after such filing; or
E. 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
<PAGE>
-24-
proceeding under 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 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
creditor; 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.
15.2. Remedies for Breach.
If either Party believes that the other Party has breached this
Agreement, as defined in Section 15.1, it shall provide such other Party with
notice thereof. Upon the giving of such notice the non-breaching Party may
terminate this Agreement pursuant to Article 16.
15.3. Buyer's Rights and Obligations.
Unless and until this Agreement has been terminated Seller shall
not refuse to deliver, suspend or delay any delivery of steam or electricity as
required under this Agreement as a result of any breach or alleged breach by
Buyer nor shall Buyer refuse to makep suspend or delay any of the payments
required under this Agreement as a result of any breach or alleged breach by
Seller.
1.5.4. Waiver of Breach.
Either Party may waive breach by the other Party, provided that no
waiver by or on behalf of either the Buyer or Seller of any
<PAGE>
-25-
each 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 16
TERMINATION FOR BREACH
16.1. Termination for Breach of Steam Sales Agreement.
In the event either Party elects to terminate this Agreement pursuant
to Section 15.2, 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 all available legal and equitable remedies for
breach of this Agreement.
16.2. Termination for Breach of Lease.
In addition to any other rights of termination, either Buyer or Seller
shall have the right to terminate this Agreement upon a breach by the opposing
party under Article 14 of the Lease Agreement which breach results in a
termination of the Lease Agreement by the non-breaching party.
ARTICLE 17
NOTICE AND SERV1CE
17.1. Notice.
All notices, including communications and statements which
<PAGE>
-26-
were required or permitted under the terms of this Agreements, shall be in
writing, except as otherwise provided.
17.2. Services.
A. Means of Service
Service of a notice may be accomplished by personal service, telegram
or registered or certified mail.
B. Date of Service
(1) Mail
If a notice is sent by registered or certified mail, it shall be
deemed served within three (3) days, excluding Saturdays, Sundays or legal
Federal holidays, except as otherwise demonstrated by a signed receipt.
(2) Telegram
If a notice is served by telegram, it shall be deemed served
eighteen (18) hours after delivery to the telegram company.
C. Addresses
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
or
<PAGE>
-27-
Cogen Technologies NJ, Inc.
Foot of E. 22nd Street
Bayonne, New Jersey 07002
Attn: Plant Manager
(2) Buyer: IMTT - Bayonne
Foot of E. 22nd Street
Bayonne, New Jersey 07002
Attn: Glynn Esteves
or
International-Matex Tank Terminals
Ninth Floor
321 St. Charles Avenue
New Orleans, Louisiana 70130
Attn: Mr. Thomas B. Coleman
Partnership Manager
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
Neither Seller nor Buyer shall be permitted to assign, pledge or
otherwise transfer this Agreement to any other party without the written consent
of the other party such consent not to be unreasonably withheld or denied, and
then only in accordance with the terms of this Agreement.
ARTICLE 20
CHOICE OF LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey.
<PAGE>
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ARTICLE 21
SEVERABILITY AND RENEGOTIATION
21.1. Severability.
Should Articles 3, 13, 14, 15 and/or 16 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 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 parte parts or portion which may
for any reason be hereafter declared invalid.
21.2. Renegotiation.
Notwithstanding the provisions of Section 21.1, should any term or
provision of this Agreement other than Articles 3, 13, 14, 15 and/or 16 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 supercedes any and all oral or written agreements and
understandings heretofore made relating to the subject
<PAGE>
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matters herein, and together with the Lease Agreement 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 convenience and are not
intended to be inclusive, definitive or to affect the meaning, content or scope
of this Agreement.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be signed at New Orleans, Louisiana, in quadruplicate original by their
respective officers thereunto duly authorized as of the day and year first set
forth above.
WITNESSES COGEN TECHNOLOGIES NJ, INC.
/s/ BY: /s/ ROBERT C. MCNAIR
- -------------------------- -----------------------------
Robert C. McNair
President
IMTT-BAYONNE
/s/ SUZANNE LAMBERT BY: /s/ THOMAS B. COLEMAN
- --------------------------- -----------------------------
Thomas B. Coleman
Partnership Manager
<PAGE>
EXHIBIT 1
LEASE AGREEMENT
BETWEEN
BAYONNE INDUSTRIES, INC.
AND
IMTT-BAYONNE
("LESSOR")
AND
COGEN TECHNOLOGIES NJ, INC.
("LESSEE")
JUNE 13, 1985
<PAGE>
EXHIBIT 1
TABLE OF CONTENTS
ARTICLE TITLE PAGE
- ------- ----- ----
1 Demised Premises........................................ 1
2 Term.................................................... 2
3 Rent.................................................... 3
4 Use of Premises and Ownership of Improvements........... 4
5 Taxes................................................... 6
6 Utility Expenses........................................ 8
7 Remedies Upon Lessee's Default.......................... 8
8 Non-Performance by Lessor............................... 9
9 Condition and Maintenance............................... 10
10 Liens................................................... 10
11 Insurance............................................... 11
12 Assignment.............................................. 11
13 Eminent Domain.......................................... 11
14 Termination............................................. 12
15 Quiet Enjoyment......................................... 15
16 Attendant Land Rights................................... 15
17 Mortgage Priority....................................... 16
18 Reimbursement of Lessor................................. 17
19 Non-Waiver by Lessor.................................... 17
20 Miscellaneous........................................... 18
<PAGE>
EXHIBIT 1
THIS LEASE made and entered into at New Orleans, State of Louisiana,
on June 13, 1985, by and between Bayonne Industries, Inc., a New Jersey
corporation, and IMTT-Bayonne, a Delaware partnership (collectively referred to
as the "Lessor"), and Cogen Technologies NJ, Inc., a Delaware corporation (the
"Lessee").
WHEREAS, Lessor, IMTT-Bayonne, owns and operates a Tank Terminal
Facility located at Bayonne, New Jersey ("Lessor's Plant" or "Bayonne
Facility"), which Plant utilizes steam and electricity for industrial purposes;
WHEREAS, Lessor, Bayonne Industries, Inc., is the owner of the
property whereon the IMTT-Bayonne Tank Terminal Facility is located and IMTT-
Bayonne leases such property from Bayonne Industries, Inc.; and
WHEREAS, the Parties are entering into an Agreement For The Sale of
Steam and Electricity From a Cogeneration Facility, a copy of which is attached
hereto and marked Exhibit A (the "Steam Sale Agreement"); and
WHEREAS, the Lessor desires to lease to Lessee the land upon which
the Cogeneration Facility will be located;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein and in the Steam Sale Agreement, and other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Lessor and Lessee agree an follows:
ARTICLE I
DEMISED PREMISES
Upon the terms and conditions hereinafter set forth, and in
consideration of the payment of the rents and the prompt performance
<PAGE>
-2-
EXHIBIT 1
by the Lessee of the covenants and agreements contained herein and in the Steam
Sale Agreement, the Lessor does lease, let and demise to the Lessee and the
Lessee hereby leases from the Lessor, that certain property situated in the
County of Rudson, State of New Jersey, consisting of two parcels of ground as
more fully shown and outlined in red on Exhibit B attached (hereinafter referred
to as the "Demised Premises").
ARTICLE 2
TERM
2.1 Base Term.
To have and to hold the Demised Premises for a term commencing 13 day
of June, 1985, and continuing for ten (10) Annual Periods from the Initial
Delivery Date under the Steam Sale Agreement, unless sooner terminated or
extended as hereinafter provided.
2.2 Automatic Renewal.
Provided that Lessee is not then in breach of either the Steam Sale
Agreement or this Leases, this Lease shall be automatically renewed from year to
year after the expiration of the Base Term, unless either party elects to
terminate this Lease at the expiration of the Base Term or at the expiration of
any one (1) year renewal term thereafter. Such termination shall be valid only
if the terminating Party provides written notice of its intent to terminate to
the other party at least nine (9) months prior to the expiration of the Base
Term or at least nine (9) months prior to the expiration of any one (1) year
term thereafter.
<PAGE>
-3-
EXHIBIT 1
ARTICLE 3
RENT
This Lease is made for and in consideration of the following rent:
A. For any time during which the Steam Sale Agreement is in effect
and commencing with the first day that Lessee actually delivers or is capable of
delivering and offers to deliver steam to Lessor, or by the 1st day of June,
1987, whichever date is sooner (hereinafter sometimes referred to as the
"delivery date"), Lessee will make available to Lessor, at Lessor's Facility,
IMTT-Bayonne, Foot of E. 22nd Street, Bayonne, New Jersey 07002 (hereinafter
sometimes referred to as the "Bayonne Facility"), fifty-seven thousand
(57,000)pounds of steam power per hour on a twenty-four (24) hour per day, seven
(7) day per week basis. All steam made available to Lessor shall be at a
pressure of not less than 155 p.s.i.g., saturated, when delivered to Lessor,
such delivery shall be made in conformity with the provisions of the Steam Sales
Agreement.
B. in addition to the rent set forth in Section 3A, Lessee shall
comply with all of the obligations set forth in Article 6 and Article 18 of this
Agreement, which obligations shall be collectively referred to as additional
rental.
C. For any period of the Base Term or any Renewal Term of this Lease
during which (i) this Lease remains in effect, and (ii) the Steam Sale Agreement
has been terminated solely be reason of Lessor's breach of either Article 15.1.B
or 15.1.D of the Steam Sale Agreement, Lessee shall not be liable to Lessor for
any further rental for the Premises over and above that provided in Article 3.B
above.
<PAGE>
-4-
EXHIBIT 1
ARTICLE 4
USE OF PREMISES
AND OWNERSHIP OF IMPROVEMENTS
4.1 Use Limited.
The Demised Premises shall be used only for the erection,
construction, operation, maintenance, modification and replacement of a
Cogeneration Facility as contemplated in the Steam Sale Agreement, consisting of
steam boilers, turbine, generator and all appurtenant structures and equipment
to be operated by Lessee for the purpose of producing steam and electricity
(sometimes referred to herein as the "Cogeneration Facility').
4.2 Safe and Lawful Use.
Lessee shall not user occupy, suffer or permit the Demised Premises or
any part thereof to be used during the term hereof in any manner or occupied for
any purpose contrary to any applicable and duly adopted laws, ordinances, rules
and any public authority regulations nor in derogation, violation or in non-
conformity with any safety codes and/or recognized Industry Safety Standards and
guidelines applicable to Lessee's operation on the premises. Lessee shall use,
maintain and occupy the Demised Premises in a careful, safe, lawful and proper
manner and will not commit nor permit any public or private nuisance to be
committed on the Demised Premises. Lessee shall not use nor permit the use of
the Demised Premises in any way which will injure the reputation of the same or
which shall constitute interference with Lessor's Business or a nuisance,
annoyance or inconvenience to the Lessor or any neighbors of Lessor or which
shall damage Lessor or any neighbors of Lessor.
<PAGE>
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EXHIBIT 1
A. Lessee shall be responsible for obtaining and maintaining all
necessary government authorizations, licenses, permits and certificates for its
utilization of the Demised Premises and shall carry on its operations in
compliance with all such authorizations, licenses, permits and certificates.
B. Lessee shall have the right to contest by appropriate legal
proceedings diligently conducted in good faith, in the name of the Lessee, or
Lessor (if legally required and consented to by Lessor), or both (if legally
required and consented to by Lessor), without cost or expense to Lessor, the
validity or application of any law, ordinance, order, rule, regulation, or
requirement of the nature referred to in Section 4.2. if by the terms of any
such law, ordinance, order, rule, regulation or requirement, compliance
therewith may legally be delayed pending the prosecution of any such proceeding,
Lessee may delay such compliance therewith until the final determination of such
proceeding.
C. Lessor agrees to execute and deliver any appropriate papers or
other instruments which may be necessary or proper to permit Lessee to so
contest the validity or application of any such law, ordinance, order, rule,
regulation or requirement and to fully cooperate with Lessee in such contest;
all at Lessee's expense.
4.3 Effect on Lessor's Insurance.
Lessee shall put nothing on the Demised Premises nor undertake any
activity which would forfeit Lessor's insurance on its Bayonne Facility or the
insurance required hereunder. Should any installation made or action taken by
Lessee, whether authorized or
<PAGE>
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EXHIBIT 1
unauthorized under this Lease, increase the premium of any of Lessor's insurance
policies on its Bayonne Facility or the insurance required hereunder, then
Lessee is obligated to pay such increased premiums on Lessor's insurance
policies. Should the Lessee's occupancy or business render the Lessor unable to
secure insurance on its Bayonne Facility, then Lessee hereby grants to Lessor
the option to (i) immediately cancel this Lease, Lessee waiving all delays, and
agreeing to terminate its operations at once, if notified by Lessor to do so, or
(ii) to require Lessee, upon written notice from Lessor, to immediately take
such action as is necessary to permit Lessor to secure insurance on its
Facility.
4.4 Ownership of Improvements.
Lessee warrants that it will be the owner of any and all buildings,
improvements, facilities or other property erected, installed or located on the
Demised Premises by it. Lessor agrees that same shall remain the sole property
of the Lessee and Lessor shall have no legal or equitable ownership interest
therein.
ARTICLE 5
TAXES
5.1 Payment of Taxes.
Lessee shall be responsible for all taxes relating to the Demised
Premises and any buildings or improvements erected thereon by Lessee, as well
as all equipment and/or fixtures located thereon by Lessee.
5.2 Compliance and Evidence of Payment.
Lessee shall be deemed to have complied with the covenants of
<PAGE>
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EXHIBIT 1
this Article regarding all taxes if payment of such taxes shall have been made
either within any period allowed by law or by the governmental authority
imposing the same during which payment is permitted without penalty or interest
or before the same shall become a lien upon the Demised Premises provided Lessee
pays any and all penalties, late charges and/or interest in connection
therewith, and Lessee shall produce and exhibit to Lessor, if requested to do so
in writing by Lessor, satisfactory evidence of such payment. Notwithstanding the
foregoing Lessee shall promptly pay all such taxes where no legal delay has
been obtained.
5.3 Tax Appeals.
Lessee or its designees shall have the right with Lessor's knowledge
and consent, to contest or review all such taxes by legal proceedings, or in
such other manner as it may deem suitable which, if necessary, may be in the
name of and with the cooperation of the Lessor and Lessor shall execute all
documents necessary to accomplish the foregoing. Notwithstanding the foregoing
Lessee shall promptly pay all such taxes where no legal delay has been obtained.
5.4 Proration
The parties hereto understand and agree that the real property taxes
relating to the Demised Premises shall be prorated proportionately between
Lessor and Lessee for the first and last year of this Lease.
5.5 Refunds and Rebates.
Any refunds or rebates on account of the taxes paid by Lessee under
the provisions of this Lease shall belong to Lessee. Any such
<PAGE>
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EXHIBIT 1
refunds received by Lessor are to be received by the Lessor in trust and paid
to Lessee forthwith. Lessor will, upon the request of Lesseer sign any receipts
which may be necessary to secure the payment of any such refund or rebate, and
will pay over to Lessee the refund or rebate as received by Lessor.
ARTICLE 6
UTILITY EXPENSES
Lessee shall contract separately for and pay when due all the rents or
charges for utilities, including but not limited to electricity, gas, water,
sewerage and sewer assessments, used by the Lessee, which are or may be
assessed or imposed upon the Demised Premises or which are or may be charged to
the Lessor by the suppliers thereof during the term hereof, and if not paid,
such rents or charges shall be added to and become payable as additional rent
with the installment of rent next due or within 30 days of demand therefor,
whichever occurs sooner.
ARTICLE 7
REMEDIES UPON LESSEE'S DEFAULT
If there should occur any default on the part of the Lessee in the
performance of any conditions or covenants herein contained, or if during the
term hereof the Demised Premises or any part thereof shall be or become
abandoned or deserted, vacated or vacant, or should the Lessee be evicted by
summary proceedings or otherwise, the Lessor, in addition to any other remedies
herein contained or as may be permitted by law, including but not limited to
Distress and/or Landlord's Lien Proceedings, may either by force or otherwise,
without
<PAGE>
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EXHIBIT 1
being liable for prosecution therefor, or for damages, re-enter the said
Premises and the same have and again posess and enjoy; and, as agent for the
Lessee or otherwise, re-let the Demised Premises and receive the rents therefor
and apply the same, first to the payment of such expenses, reasonable attorney
fees and costs, as the Lessor may have been put to in re-entering and
repossessing the same and in making such repairs and alterations as may be
necessary, and second to the payment of the rents due hereunder. The Lessee
shall remain liable for such rents as may be in arrears and also the rents as
may accrue subsequent to the re-entry by the Lessor, to the extent of the
difference between the rents reserved hereunder and the rents, if any, received
by the Lessor during the remainder of the unexpired term hereof, after deducting
the aforementioned expenses, fees and costs, the same to be paid as such
deficiencies arise and are ascertained each month.
ARTICLE 8
NOW-PERFORMANCE BY LESSOR
This Lease and the obligation of the Lessee to pay the rent
hereunder, and to comply with the covenants and conditions hereof, shall not be
affected, curtailed, impaired or excused because of the Lessor's inability to
supply any service or material called for herein, by reason of any rule, order,
regulation or preemption by any governmental entity, authority, department,
agency or subdivision or for any delay which may arise by reason of negotiations
for the adjustment of any fire or other casualty loss or because of strikes or
other labor trouble or for any cause beyond the control of the Lessor.
<PAGE>
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EXHIBIT 1
Notwithstanding the preceding sentence, should Lessor's inability to supply any
service or material called for herein proximately result in Lessee's breach of
this Agreement or the Steam Sale Agreement, then such breach shall be excused by
Lessor and Lessor shall not be entitled to terminate either such Agreement or
seek damages thereunder for such breach.
ARTICLE 9
CONDITION AND MAINTENANCE
The Demised Premises are accepted by the Lessee in their present
condition, subject to all conditions that may be revealed by survey and
inspection. Lessor makes no warranty as to the condition of the Demised Premises
and Lessor shall not be required to make any improvements, repairs or
replacements to the Demised Premises, whether major or minor, ordinary or
extraordinary, structural or non-structural, or necessitated by decay, neglect,
wear and tear or abuse.
ARTICLE 10
LIENS
If any mechanics', materialmen's or other liens shall be created or
filed against the Demised Premises by reason of labor performed or materials
furnished to the Lessee in the erection, construction, completion, alteration,
repair or addition to any building or improvement, the Lessee shall within
thirty (30) days thereafter, at the Lessee's own cost and expense, cause such
lien or liens to be satisfied, removed, cancelled, erased and discharged of
record together with any Notices of Intention that may have been filed
<PAGE>
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EXHIBIT 1
either by payment thereof or by bonding the lien in accordance with the laws of
the State of New Jersey. Should Lessee fail to comply with the foregoing Lessor
may at its option have the lien removed by bonding same, all at Lessee's
expense. Failure to do so shall entitle the Lessor to resort to such remedies
as are provided herein in the case of any default of this Lease, in addition
to such as are permitted by law. Lessee shall at no time cause or permit a
mortgage or any other security device of any nature to be inscribed against the
Demised Premises.
ARTICLE 11
INSURANCE
The Lessor's and Lessee's obligations concerning insurance are set
forth in Article 14 of the Steam Sale Agreement and are incorporated herein by
reference.
ARTICLE 12
ASSIGNMENT
Lessee is not permitted to rent, sublet, assign or grant use or
possession of the Demised Premises to any other party without the written
consent of the Lessor and then only in accordance with the terms of this Lease.
ARTICLE 13
EMINENT DOMAIN
13.1 Distribution of Award.
If the Demised Premises and/or attendant rights-of-way or other land
rights shall be taken or condemned, in whole or in part, by any competent
authority, the parties hereto agree to cooperate in
<PAGE>
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EXHIBIT 1
applying for and in prosecuting any claim for such taking and further agree that
the aggregate net award, after a pro rata deduction of all expenses and costs,
including attorneys' fees, incurred in connection therewith, payable to both
Lessor and Lessee (or if required, to any Mortgagee) shall be distributed as
follows: (1) the portion of the award (or moneys received) relating to the
taking of the Cogeneration Facility or the expense of dismantling and moving the
Cogeneration Facility shall be paid to the Lessee; and (2) the portion of the
award (or moneys received) relating to the value of the land constituting the
Demised Premises shall be paid to the Lessor.
13.2 Partial Taking.
In the event of a partial taking of the Demised Premises and/or
attendant rights-of-way, the Lessee has the option to terminate this Lease if
such partial taking in any way makes the continuation of normal operations at
the Cogeneration Facility impossible or impractical.
ARTICLE 14
TERMINATION
14.1 Lessor's Right to Terminate.
Lessor shall have the right to terminate this Lease upon the
occurrence of any of the following events:
A. The Lessee shall fail to make timely payment of any of the rent
pursuant to Article 3.A when due and payables, which failure exceeds an
aggregate of 1080 hours for any given Annual Period as defined in 1.3 of the
Steam Sale Agreement;
B. The Lessee shall fail to perform any of the covenants of
<PAGE>
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EXHIBIT 1
this Lease to be kept and performed by it other than the payment of rent covered
in Paragraph A above, which failure continues for a period of thirty (30) days
after written notice of such non-performance;
C. Termination of the Steam Sale Agreement, unless occasioned by
reason of Lessor's intentional breach of such Agreement;
D. The material shutdown or closure of Lessor's Bayonne Facility,
provided, however, that a sale or other disposition of the Bayonne Facility
which does not result in a material change in use of such Facility shall not be
deemed to constitute a shutdown or closure;
E. Lessee's material interference with Lessor's business operation at
its Bayonne Facility, which interference continues for a period of thirty (30)
days after written notice of such interference;
F. There is a taking or condemnation with respect to the Demised
Premises, whether partial or entire, such that the continuation of normal
operations of Lessor's Bayonne Facility and/or the Cogeneration Facility is
impossible or impractical; termination is to be effective as set forth in
Article 11 of the Steam Sales Agreement;
G. Destruction of the Lessor's Bayonne Facility in part or in whole
such that the continuation of normal operation of Lessor's Bayonne Facility is
impossible or impractical; or
H. Lessor's Plant is damaged or destroyed by a cause which constitutes
a Force Majeure pursuant to Section 20.1, such that Lessor's Plant cannot be
made operational at normal production capacity within two (2) years of the
occurrence of the Force Majeure.
<PAGE>
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EXHIBIT 1
14.2 Lessee's Right to Terminate.
Lessee shall have the right to terminate this Lease upon the
occurrence of the following events:
A. Lessor shall fail to perform any of the covenants of this Lease by
it to be kept and performed, which failure continues for a period of thirty (30)
days after written notice of such non-performance;
B. Lessee terminates the Steam Sale Agreement by reason of Lessor's
breach under Article 15 of the Steam Sale Agreement;
C. The Cogeneration Facility is damaged or destroyed by a cause which
constitutes a Force Majeure pursuant to Section 20.1, such that the Facility
cannot be made operational at normal production capacity within two (2) years
of the occurrence of the Force Majeure; or
D. There is a partial taking or condemnation with respect to the
Demised Premises such that the continuation of normal operations at the
Cogeneration Facility is impossible or impractical, termination is to be
effective as set forth in Article 11 of the Steam Sale Agreement.
14.3 Effective Date of Termination.
Termination of this Lease shall be valid only if the terminating party
provides written notice of its intent to terminate to the other party. Such
termination shall be effective from date of receipt of notice of termination.
14.4 Conditions of Demised Premises at Termination.
At the termination of this Lease, for any reason, Lessee
<PAGE>
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EXHIBIT 1
shall, at its sole cost, remove any such buildings, improvements, facilities
or other property from the Demised Premises within nine (9) months of the
termination and shall restore the Demised Premises to its same condition prior
to the commencement of this Lease and shall repair any damage to the Demised
Premises.
ARTICLE 15
QUIET ENJOYMENT
15.1 Lessee's Possession.
Lessor covenants and agrees with Lessee that so long as the Lessee
keeps and performs all of the covenants and conditions by the Lessee to be kept
and performed, the Lessee shall have quiet and undisturbed and continued
possession of the Premises, free from any claims against the Lessor and all
persons claiming under, by or through the Lessor.
15.2 Access by Lessor.
Lessor, its agents and representatives, at all reasonable times, may
enter the Demised Premises for any purpose.
ARTICLE 16
ATTENDANT LAND RIGHTS
In connection with the Lease of the Demised Premises and for so long
as this Lease shall remain effectives, Lessor hereby grants to Lessee all
attendant rights of way and other land rights required for Lessee: (1) to
install or erect any equipment or other property to be used by Lessee to
interconnect with Lessor or any third-party purchasers of steam or electrical
power, or to otherwise transmit or receive steam or electrical power to or from
the Cogeneration Facility
<PAGE>
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EXHIBIT 1
as contemplated in Articles 5 and 9 of the Steam Sale Agreement; and (2) to
arrange for the provision of normal utility services to the Cogeneration
Facility. Notwithstanding the foregoing Lessor shall retain the right to
designate the location of all such rights-of-way and/or other land rights.
Furthermore, any rights-of-way and/or other land rights so granted shall not
constitute nor be deemed to constitute the granting of a permanent servitude,
easement, right-of-way, right of passage and/or any other permanent land rights
whatsoever and shall terminate with this Lease. Lessor agrees to execute any and
all documents, agreements and instruments and to take all other actions, in
order to effectuate the same, all at Lessee's cost and expense. Lessor shall
allow Lessee and its business invitees, and licensees reasonable ingress and
egress over Lessor's property to the Demised Premises.
ARTICLE 17
MORTGAGE PRIORITY
This lease shall not be a lien against the Demised Premises in respect
to any mortgages that may hereafter be placed upon the Demised Premises. The
recording of such mortgages shall have preference and precedence and be superior
and prior in lien to this Lease, irrespective of the date of re~ording and the
Lessee agrees to execute any instruments, without cost, which may be deemed
necessary or desirable, to further effect the subordination of this Lease to any
such mortgage of mortgages. A refusal by the Lessee to execute such instruments
shall entitle the Lessor to the option of cancelling this Lease, and the term
hereof is hereby expressly limited accordingly.
<PAGE>
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EXHIBIT 1
ARTICLE 18
REIMBURSEMENT OF LESSOR
If the Lessee shall fail or refuse to comply with and perform any
conditions and covenants of this Lease, the Lessor may, if the Lessor so
elects, carry out and perform such conditions and covenants, at the cost and
expense of the Lessee, and the said cost and expense shall be payable on
demand, or at the option of the Lessor, shall be added to the installment of
rent due immediately thereafter but in no case later than one (1) month after
such demand, whichever occurs sooner, and shall be due and payable as such.
This remedy shall be in addition to such other remedies as the Lessor may have
hereunder by reason of the breach by the Lessee of any of the covenants and
conditions in this Lease contained.
ARTICLE 19
NON-WAIVER BY LESSOR
The various rights, remedies, options and elections of the Lessor,
expressed herein, are cumulative, and the failure of the Lessor to enforce
strict performance by the Lessee of the conditions and covenants of this Lease
or to exercise any election or option or to resort or have recourse to any
remedy herein conferred or the acceptance by the Lessor of any installment of
rent after any breach by the Lessee in any one or more instances, shall not be
construed or deemed to be a waiver or a relinquishment for the future by the
Lessor of any such conditions and covenants, options, elections or remedies, but
the same shall continue in full force and effect.
<PAGE>
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EXHIBIT 1
ARTICLE 20
MISCELLANEOUS
20.1 Force Majeure.
The definitions, rights and obligations of the parties concerning
force majeure set forth in Article 12 of the Steam Sale Agreement are
incorporated herein by reference.
20.2 Duplicates; Recordation.
The parties will at any time, at the request of either one, promptly
execute duplicate originals of an instrument, in recordable form, which will
constitute a short form of Lease, setting forth a description of the Demised
Premises, the term of this Lease and any other portions thereof, excepting the
rental provisions, as either Party may request.
20.3 Consent Not to be Unreasonably Withheld.
Whenever the Lessee requests any consent, permission, or approval
which may be required or desired by the Lessee pursuant to the provisions
hereof, the Lessor shall not unreasonably withhold or postpone the grant of such
consent, permission, or approval.
20.4 Covenants Running with Land.
All covenants, promises, conditions, and obligations herein contained
or implied by law are covenants running with the land and shall attach and bind
and inure to the benefit of the Lessor and Lessee and their respective heirs,
legal representatives, successors, and assignst except as otherwise provided
herein.
20.5 No Waiver.
No waiver of a breach of any of the covenants in this Lease
<PAGE>
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EXHIBIT 1
shall be construed to be a waiver of any succeeding breach of the same covenant.
20.6 Notice.
A. 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.
B. Service
(1) Means of Service
Service of a notice may be accomplished by personal service,
telegram or registered or certified mail.
(2) Date of Service
(a) Mail
If a notice is sent by registered or certified mail, it
shall be deemed served within three (3) days, excluding Saturdays, Sundays or
legal Federal holidays, except as otherwise demonstrated by a signed receipt.
(b) Telegram
If a notice is served by telegram, it shall be deemed
served eighteen (18) hours after delivery to the telegram company.
(3) Addresses
Notices may be sent to the parties at the following addresses:
<PAGE>
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EXHIBIT 1
(a) Lessee: Cogen Technologies NJ, Inc.
14614 Falling Creek Drive
Suite 212
Houston, Texas 77068
Attn: Mr. Robert C. McNair
President
or
Cogen Technologies NJ, Inc.
Foot of E. 22nd Street
Bayonne, New Jersey 07002
Attn: Plant Manager
(b) Lessor: IMTT-Bayonne
Foot of E. 22nd Street
Bayonne, New Jersey 07002
Attn: Glynn Esteves
or
International-Matex Tank Terminals
Ninth Floor
321 St. Charles Avenue
New Orleanss, Louisiana 70130
Attn: Thomas B. Coleman
Partnership Manager
20.7 Amendments.
No amendment of modification of the terms of this Lease shall be
binding on either the Lessor or Lessee unless reduced to writing and signed by
both Parties.
20.8 Choice of Law.
This Lease shall be governed by and construed in accordance with the
laws of the State of New Jersey.
20.9 Severability.
Should Articles 3, 4, 8 and 11 of this Lease, or any one of them, or
any substantial portion of any one of them, for any reason, be declared invalid
or unenforceable by final and unappealable order of
<PAGE>
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EXHIBIT 1
any court or regulatory body having jurisdiction thereover, this Lease shall be
automatically terminated on the date such order becomes final and unappealable.
Should any other part of this Lease, for any reason be declared invalid, such
decision shall not affect the validity of the remaining portions, which
remaining portions shall remain in force and effect as if this Lease 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 Lease without including therein any such part, parts or portion
which may for any reason be hereafter declared invalid. Notwithstanding the
foregoing sentence, should any term or provision of this Lease, with the
exception of Articles 3, 4, 8 and/or 11, be found invalid by any court or
regulatory body having jurisdiction thereover, the Parties shall immediately
renegotiate such term or provision of the Lease to eliminate such invalidity.
20.10 Other Agreements.
This Lease supercedes any and all oral or written agreements and
understandings heretofore made relating to the subject matters herein, and
together with the Steam Sale Agreement, this Lease constitutes the entire
agreement and understanding of the parties relating to the subject matters
herein.
20.11 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 affect the meaning, content or scope
of this Lease.
<PAGE>
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EXHIBIT 1
20.12 Definitions.
The definition of various terms found in Article 1 of the Steam Sale
Agreement shall apply to the use of those same terms in this Lease, unless a
different meaning shall be expressly stated or shall be apparent from the
context.
IN WITNESS WHEREOF the parties have entered into this Lease
Agreement to be signed at New Orleans, Louisiana, in quadruplicate
original as of the date first written above.
WITNESSES: BAYONNE INDUSTRIES, INC.
/s/ J. Suzanne Lambert BY: /s/ Thomas B. Coleman
- ------------------------- ------------------------
THOMAS B. COLEMAN
President
IMTT-BAYONNE
Lessor
/s/ J. Suzanne Lambert BY: Thomas B. Coleman
- ------------------------- ------------------------
THOMAS B. COLEMAN
COGEN TECHNOLOGIES NJ, INC.
Lessee
/s/ J. Suzanne Lambert BY: Robert C. McNair
- ------------------------- ------------------------
ROBERT C. MCNAIR
President
<PAGE>
EXHIBIT 1
EXHIBIT A
At this point Exhibit A to the Lease (The Steam Sale Agreement) and
the attachments thereto are not made a part hereof as Exhibit A and this
agreement, with attachments, are one and the same.
<PAGE>
EXHIBIT 2
Tne Monthly Steam Charge to be paid by Buyer to Seller is to be determined
pursuant to the following formula (the "Formula"):
P = $27.5k I + $.478 ES + 1.19 FS - X/12 - C
Where:
(1) P = Monthly Steam Charge to be paid by Buyer to Seller.
(2) I = an inflation adjustment factor to be applied to maintenance and
manpower cost, which factor is to be calculated annually, as the
ratio of the average monthly labor scale paid by Buyer for all
labor at its Plant during the preceding calendar year relative to
the average monthly labor scale paid by Buyer for all labor at its
Plant in 1984. Any such adjustment shall be implemented as of
April 1 of each year of the Agreement. The resultant figure after
adjustment shall be used as "I" in the Formula for the next
succeeding year; again subject to an end-of-the-year adjustment.
(3) E = an inflation adjustment factor to be applied to non-fuel
utilities cost, which factor is to be calculated annually as the
ratio of the average monthly rate paid by Buyer for all
electricity and water used at its Plant during the preceding
calendar year relative to the average monthly rate paid by Buyer
for all electricity and water used at its Plant in 1984. Any such
adjustment shall be implemented as of April 1 of each year of the
Agreement. The resultant figure after adjustment shall be used as
"E" in the Formula for the next succeeding year; again subject
to an end-of-the-year adjustment.
(4) F = the price seller pays for gas per cubic foot as of the first day
of each month during the Agreement.
(5) S = total Buyer demand for steam up to the Maximum Steam Production.
(6) C = cumulative sun of daily credits as defined in Addendum 4 and
Addendum 5.
(7) X = assured savings to Buyer taken as $464k for the first year of
the Agreement, to be annually adjusted if Buyer demand varies
across tiers set forth in Addendum 1.
(8) k = times one thousand.
[See Addendum 3 for a detailed explanation of the Formula.]
<PAGE>
EXHIBIT 2
ADDENDUM 1: Assured Savings to Buyer
The assured savings (term "X" in the Formula) to Buyer are based on a three-tier
analysis as follows:
Buyer Demand Assured Savings to Buyer
------------ ------------------------
(term "X" in Formula)
Equal to or greater than
285,000 K lbs./year ...................................... $464k/year
Between 120,000 K lbs. and
285,000 K lbs./year ...................................... $294k/year
Below 120,000 K lbs./year
(after 4th year) ......................................... $124k/year
During the first year the Formula will be based on a prorated share of the
$464k savings (1/12th per month) see Addendum 2 for the computation of the
$464k savings figure. If Buyer demand has fallen below the aforementioned
threshholds at year-end, Buyer will pay to Seller an amount equal to the
difference between $464k and the applicable savings as set forth above. The
savings to which Buyer was actually entitled in the previous year will be used
as term "X" in the Formula for the following year; again, subject to end-of-
the-year adjustment pursuant to above three-tier analysis.
ADDENDUM-2: Basis for Calculation of 15% Savings from 1984
R = maintenance ................................. $75k/year
L = operating manpower .......................... $255k/year
U = non-fuel utilities, water,
electricity and chemicals ................... $215k/year
F\o\ = fuel costs: Unit cost of gas ................ $.00475/cubic foot
e = operating efficiency
(Btu in steam/Btu consumed gas) ............. 84%
S\o\ = total Buyer steam demand .................... 450,000 K lbs.
Total 1984 operating and fuel costs then amounted to:
R + L + U + F\o\S\o\e =
75k + 255k + 215k (.00475 x 450,000k)/.84 = 3.090k
Computed 15% savings on 3,090k: $464k/year
ADDENDUM 3: Explanation of the Formula
Buyer's Monthly Steam Charge payment to Seller, in thousands of dollars, is to
be determined by the Formula, which Formula includes supplementary credits to
be allowed Buyer as shown in Addendum 4 and
<PAGE>
EXHIBIT 2
Addendum 5. The basis of this payment is illustrated most clearly in an
annualized version of the Formula. Quite simply, the annual steam charge would
equal: Buyer's 1984 maintenance and manpower costs (corrected for wage scale
changes) + Buyer's 1984 non-fuel utilities costs (as a function of Buyer demand
and corrected for inflation) + Buyer's fuel cost equivalent (based on an
experienced 1984 boiler Btu conversion efficiency of 84%) less the assured
savings to Buyer less credits defined in Addendum 4 and Addendum 5. The assured
savings consist of $464k per year savings which represents 1.5% of the 1984
Buyer costs for generating 450,000 K lbs. of steam (see Addendum 3), i.e.: (in
dollars)
AP = (R + L) I + (U/S\o\) ES + (l/e) FS - X - C
= (75k + 255k) I + (215k/450,000k) ES + (1/.84) FS - X - C
= 330k I + .478 ES + 1.19 PS - X - C
Note that when the fixed costs of the annual payment are apportioned monthly,
one obtains the prime operational formula for the Agreement, i.e., the
Formula:
P = 27.5k I + .478 ES + 1.19 FS - X/12 - C
ADDENDUM 4: Credit to Buyer for Maintaining Buyer's Steam Producing Facilities
When Section 3.5.B of the Agreement is invoked, Buyer is entitled to deduct a
credit for the prorata costs of maintenance of staffing by two men for standby
operations as follows:
(75k + [2/6] 255k) I = 160k I/year or $438 I/day
This defines a component of term "C" in the Formula as:
$438 I dB
where "dB" represents the number of days in which Section 3.5.B of the Agreement
is operative.
ADDENDUM 5: Credit to Buyer for Production of Steam from Buyer's Steam Producing
Facility
When Section 3.5.C of the Agreement is invoked, Buyer is entitled to deduct a
credit allowing recovery of the costs of maintenance and of staffing by the two
men for standby operations and an additional staffing of four men for firing and
steam production, and the costs of utilities and fuel during steam production,
as follows:
<PAGE>
EXHIBIT 2
.438 I d\C\* + ([4/6] 255k I x d\C\/365) + (215k/450,00k E M + (F M)/.84
= (.438 + .466) d\C\ I + 0.478 E M + 1.19 F M
This defines a second component of term "C" in the Formula as:
0.904 d\C\ I + 0.478 E M + 1.19 F M
where
"d\C\" = the number of days in which Section 3.5.B of the Agreement is
operative.
"M" = steam obtained by Buyer from Buyer's Steam Producing Facility or any
source other than Seller during a period when Section 3.5.C of the
Agreement is invoked.
* As in Addendum 4.
<PAGE>
AMENDMENT TO
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
<PAGE>
WHEREAS, Cogen Technologies NJ, Inc. ("Seller") and IMTT-Bayonne ("Buyer")
entered into an "Agreement for the Sale of Steam and Electricity from a
Cogeneration Plant" ("Agreement") dated June 13, 1985; and,
WHEREAS, the Buyer and Seller wish to make certain minor technical changes
to the Agreement.
NOW, THEREFORE, pursuant to Article 18 of the Agreement, the Buyer and
Seller agree as of this 22nd day of May, 1986, that the following changes shall
be made to the Agreement and are hereby incorporated therein by reference, with
the Articles in this Amendment corresponding to the Articles in the Agreement:
ARTICLE 1
On page 1, line 10, Section 1.2, substitute "Steam Sale Agreement" in lieu
of "Steam Sales Agreement".
On page 1, line 15, Section 1.3, substitute "Date of Initial Commercial
Operation" in lieu of "Initial Delivery Date".
On page 1, line 17, Section 1.3, substitute "Date of Initial Commercial
Operation" in lieu of "Initial Delivery Date".
On page 1, line 23, Section 1.6, delete "Buyer's" immediately preceding
"Steam Producing Facilities".
<PAGE>
On page 2, line 2, Section 1.7, substitute "waste heat boilers, turbines,
generators" in lieu of "boiler, turbine, generator".
On page 2, line 4, Section 1.7, delete "steam and electricity" and
substitute in lieu thereof "electricity, steam or other forms of useful thermal
output".
On page 2, delete Section 1.10 and substitute the following in lieu thereof:
1.10 "Date of Initial Commercial Operation" means 12:01 a.m. on
the day Seller designates in writing as the Initial Date of Commercial
Operation of the Cogeneration Facility.
On page 2, delete Section 1.13 and substitute the following in lieu
thereof:
1.13 "Ground Lease" or "Lease Agreement" means that certain lease
agreement between Seller, Buyer, and Bayonne Industries, Inc. for the
site upon which Seller's Cogeneration Facility will be constructed and
operated, dated as of the 22nd day of May, 1986.
In connection with the preceding deletion and substitution of Section 1.13,
Exhibit 1 to the Agreement has been intentionally deleted from the Agreement.
On page 3, line 10, Section 1.15, substitute ", good engineering practices
and applicable law." in lieu of "and good engineering practices."
On page 3, insert new Sections 1.20, 1.21, 1.22, 1.23, 1.24, 1.25, 1.26,
1.27, 1.28, 1.29 and 1.30 as follows:
<PAGE>
1.20 "Financier" means any person lending money for the construction and
operation of the Cogeneration Facility and any person providing funds for
refinancing or take-out of any such loans, and the nominee or designee of any
such person.
1.21 "Purchase and Sale Agreement" means that certain agreement between
Cogen Technologies NJ, Inc., as Buyer, and Bayonne Industries, Inc. and IMTT-
Bayonne, as Seller, dated as of May 22, 1986, for the sale to Cogen Technologies
NJ, Inc. of certain of Bayonne Industries, Inc.'s assets, including the Steam
Producing Facilities and the emissions permit and other governmental
authorizations necessary to Operate the Steam Producing Facilities, including
all exhibits and amendments thereto that may be made from time to time.
1.22 "Note" means the promissory note dated May 22, 1986, of Cogen
Technologies NJ, Inc. payable to Bayonne Industries, Inc. in the principal
amount of $2,600,000.00.
1.23 "Security Agreement" means that certain security agreement dated as of
May 22, 1986, between Cogen Technologies NJ, Inc. and Bayonne Industries, Inc.
executed and delivered by Cogen Technologies NJ, Inc. as security for payment of
the Note, including all exhibits and amendments thereto that may be made from
time to time.
1.24 "Option Agreement" means that certain option agreement dated as of May
22, 1986, between Cogen Technologies NJ, Inc. and Bayonne Industries, Inc.,
including all exhibits and amendments thereto that may be made from time to
time.
1.25 "SPF Lease" means that certain Steam Producing Facilities Lease
Agreement dated as of May 22, 1986, between Cogen Technologies NJ, Inc., as
lessor, and IMTT-Bayonne, as lessee, pursuant to which the Steam Producing
Facilities will be leased to IMTT-Bayonne, including all exhibits and
<PAGE>
amendments thereto that may be made from time to time.
1.26 "Easement" means that certain easement dated as of May 22, 1986, from
Bayonne Industries, Inc. (BI) and IMTT-Bayonne (IMTT) to Cogen Technologies NJ,
Inc. (Cogen) pursuant to which BI and IMTT grant to Cogen ingress and egress
over the Bayonne Facility to the boiler house in which the Steam Producing
Facilities are situated, including all exhibits and amendments thereto that may
be made from time to time, and any other easements, rights of way or licenses
that may be granted to Cogen under the Ground Lease.
1.27 "Rent Note" means that certain promissory note dated May 22, 1986, of
Cogen Technologies NJ, Inc., payable to Bayonne Industries, Inc. as lessor under
the Ground Lease in the principal amount of $600,000.00.
1.28 "Monthly Steam Charge" means the amount that Buyer shall pay for
steam purchased from Seller under this Agreement as determined in accordance
with Article 3 of this Agreement and including, for this purpose, Exhibit 2 to
this Agreement.
1.29 "Monthly Electricity Charge" means the amount that Buyer shall pay for
electricity purchased from Seller under this Agreement as determined in
accordance with Section 4.2 of this Agreement.
1.30 "Bayonne Industries, Inc." means a New Jersey corporation having its
principal place of business at the Foot of East 22nd Street, Bayonne, New Jersey
07002.
ARTICLE 2
On page 4, line 6, insert the following after "Seller":
, and concurred with by Buyer in writing
<PAGE>
ARTICLE 3
On page 4, line 11, Section 3.1, paragraph A, substitute "Date of Initial
Commercial Operation" in lieu of "Initial Delivery Date".
On page 4, delete lines 22 through 26, and substitute the following in lieu
thereof:
Should the steam requirements at Buyer's Plant exceed, for any
reason, the Maximum Steam Production to be sold to Buyer pursuant to
Section 3.1.A, Buyer shall acquire its Excess Steam Requirements
exclusively from Seller and Seller shall use best efforts to supply
steam to Buyer to meet Buyer's Excess Steam Requirements up to a maximum
amount of 170,000 lbs. of steam per hour, subject to the following
conditions:
(1) Buyer recognizes that Seller has contracted with Jersey
Central Power & Light Company and that Seller may first satisfy its
obligations and exercise its rights under the agreement between the
Seller and Jersey Central Power & Light Company as determined by Seller,
prior to satisfying Buyer's Excess Steam Requirements;
(2) Buyer recognizes that Seller contemplates entering into
an agreement with Exxon Company, U.S.A. (Exxon) and that Seller may
first satisfy its obligations to Exxon under any agreement with it for
the supply of steam, as determined by Seller, prior to satisfying
Buyer's Excess Steam Requirements; and
(3) Seller's requirement to use its best efforts to meet
Buyer's Excess Steam Requirements shall be limited to the extent that
Seller is capable of doing so from its Cogeneration Facility, from the
Steam Producing Facilities, or from any
<PAGE>
other party with which Seller has a then existing contractual
relationship who is willing under that relationship to sell steam to
Seller.
On page 5, delete lines 2 through 4, and substitute the following in lieu
thereof:
For all steam delivered to Buyer pursuant to Section 3.1, Buyer
shall pay Seller a Monthly Steam Charge as determined by Exhibit 2 to
this Agreement, except that to the extent any Excess Steam Requirements
are provided to Buyer by Seller through the purchase of steam by Seller
from any other party, the Monthly Steam Charge with regard to those
amounts of steam shall be equal to the costs or expenses incurred by
Seller in purchasing and delivering such steam to Buyer.
On page 5, line 15, Section 3.5, delete "Buyer's" immediately preceeding
"Steam Producing Facilities."
On page 5, lines 16 through 25, and on page 6, lines 1 through 12, delete
paragraphs A, B, and C of Section 3.5 and substitute the following in lieu
thereof:
A. Buyer shall be entitled to a credit against the Monthly Steam
Charge, which credit shall be determined in accordance with Section 3.2
and Exhibit 2, Addendum 4 during any period in which Buyer is the
Obligated Party, as that term is defined in the SPF Lease, which period
occurs after the Date of Initial Commercial Operation.
B. If at any time, by reason of Seller's failure to furnish steam in
accordance with this Agreement, Buyer is required to produce steam by
utilization of the Steam Producing Facilities, then Buyer shall be
entitled to a credit against the Monthly Steam Charge up to 90,000 lbs.
per hour of steam produced at the Steam Producing Facilities, which
credit shall
<PAGE>
apply to no more than 450,000 K lbs. per Annual Period, and shall be
determined in accordance with Exhibit 2, Addendum 5.
On page 6, line 17, Section 3.6, substitute "regulatory commission" in
lieu of "Regulatory Commission".
ARTICLE 4
---------
On page 6, line 22, Section 4.1, paragraph A, substitute "Date of Initial
Commercial Operation" in lieu of "Initial Delivery Date".
On page 6, lines 24 and 25, substitute "offer to Buyer the opportunity to
purchase from Seller all of the electricity requirements at Buyer's Plant" in
lieu of "require Buyer to purchase from Seller electricity, produced by the
Cogeneration Facility, for use at Buyer's Plant".
On page 7, line 1, delete "and amounts of such purchases of" and delete
lines 2 through 6 in their entirety, and substitute "of such offers of
electricity to Buyer" in lieu thereof.
On page 7, lines 7 and 8, substitute "Buyer has accepted any offer" in lieu
of "Seller elects to require Buyer".
On page 7, lines 21 and 22, substitute "is providing electricity to Buyer"
in lieu of "elects to require Buyer to purchase electricity from Seller pursuant
to Section 4.1.A".
On page 8, line 1, insert the following immediately preceding "Seller":
<PAGE>
If, at any time, Seller makes an offer to sell electricity to Buyer and
Buyer accepts such offer,
On page 8, line 1, delete "at all times".
On page 8, delete Section 4.2 (Notice) in its entirety and redesignate
Section "4.3" as "4.2".
On page 9, line 12, redesignate Section "4.4" as "4.3".
On page 9, 1ine 17, substitute "Alternate Power Source" in lieu of
"source".
On page 9, line 18, redesignate Section "4.5" as "4.4".
On page 9, line 22, substitute "regulatory commission" in lieu of
"Regulatory Commission".
ARTICLE 5
---------
On page 10, line 4, Section 5.1, paragraph A, insert "subject to Section
3.1.C," after "(1)" and immediately preceding "in".
On page 10, line 5, insert ", in each case" after "Buyer" and immediately
preceding "to".
On page 10, lines 8 and 9, delete "Buyer's steam purchases pursuant to
Section 3.1.A or".
On page 10, line 14, substitute "Subject to Buyer's compliance with Section
5.2 hereof, construct" in lieu of "Construct".
On page 11, line 6, substitute "Subject to Buyer's compliance with Section
5.2 hereof, construct" in lieu of "Construct".
<PAGE>
On page 11, line 15, substitute "Subject to Buyer's compliance with Section
5.2 hereof, construct" in lieu of "Construct".
On page 11, line 26, delete "and".
On page 12, line 6, delete "Facility." and substitute the following in lieu
thereof:
Facility; and
H. Comply with the provisions of
Article 6.3 of the Ground Lease, subject to
the provisions of Article 17 thereof, each
of which is incorporated by reference and
made a part hereof and shall be deemed a
part of this Agreement notwithstanding any
termination of the Ground Lease which may
occur prior to the termination of this
Agreement.
On page 12, line 16, delete "and".
On page 12, line 20, delete "permits." and insert the
following in lieu thereof:
permits; and
E. Comply with the provisions of Article 6.3 of the Ground Lease,
subject to the provisions of Article 17 thereof, each of which is
incorporated by reference and made a part hereof and shall be deemed a
part of this Agreement notwithstanding any termination of the Ground
Lease which may occur prior to the termination of this Agreement.
ARTICLE 6
---------
On page 13, line 1, substitute "Parties" in lieu of "parties".
<PAGE>
ARTICLE 7
---------
On page 14, delete lines 6 through 13 in their entirety.
On page 14, line 14, redesignate paragraph "E" as "D".
ARTICLE 10
----------
On page 16, substitute the following in lieu of lines 7 through 9:
This Agreement shall be effective upon the date of execution and shall
continue in effect for a Base Term of ten (10) Annual Periods.
10.2 Termination of Agreement. Notwithstanding the preceding
paragraph, if the Date of Initial Commercial Operation of the
Cogeneration Facility has not occurred prior to January 31, 1988, Buyer
may thereafter terminate this Agreement by providing Seller and each
Financier thirty (30) days written notice, unless prior to the expiration
of such thirty-day period, Seller has commenced a program of continuous
construction of the Cogeneration Facility and does not, of its own
volition, subsequently discontinue such construction program.
On page 16, line 10, redesignate Section "10.2." as "10.3."
On page 16, line 13, Section 10.3, insert "or Renewal Term" immediately
following "Base Term".
<PAGE>
ARTICLE 11
----------
On page 17, line 1, insert ", including any Financier," immediately
following "other".
On page 17, lines 2 and 3, delete the words *within three (3) years
after the date official notice of such intended taking or condemnation is
provided to the Parties or".
On page 17, line 4, delete ", whichever date is earlier".
On page 17, line 6, delete "performance by either Party under this"
and delete lines 7 and 8 in their entirety, and substitute "such notice is
given." in lieu thereof.
ARTICLE 12
----------
On page 17, line 24, Section 12.1, insert the following immediately after
"forseeable":
and, in the case of Seller, shall also
include the failure of Buyer or Bayonne
Industries, Inc. to comply with the
provisions of Article 2.4 of the Purchase
and Sale Agreement or Article 5.1 of the
SPF Lease, which failure renders Seller
unable to Operate the Steam Producing
Facilities or any part thereof.
ARTICLE 13
----------
On page 19, line 2, Section 13.1A.(2), insert ", other than by an event of
Force Majeure" immediately following "caused".
On page 19, line 4, Section 13.1A.(2), delete "Buyer's" immediately
preceding "Steam Producing Facilities".
<PAGE>
On page 19, line 21, Section 13.1B., insert ", other than by an event of
Force Majeure" immediately following "caused".
On page 20, delete lines 15 through 21 in their entirety.
On page 20, line 22, redesignate paragraph "C" as "B".
ARTICLE 14
----------
On page 21, delete Section 14.1 and substitute the following in lieu
thereof:
14.1 Responsibility of Parties. Each Party shall provide and
maintain, for the joint benefit of the Parties (and mortgagees, if
any) during the entire term of this Agreement, public liability
insurance against claims for bodily injury, death, or property
damage occurring on or about the Cogeneration Facility and such
portions of Buyer's Plant where Seller carries on any activities
under this Agreement, regardless of the jurisdiction. The Parties
shall also provide and maintain Worker's Compensation Insurance in
statutory limits. Either Party shall have the right, from time to
time, to make such reasonable requirements with reference to
insurance that will reasonably cover liabilities to which the
Parties may be exposed by virtue of this Agreement, but in no event
will the Buyer require that the Seller carry limits in excess of
those carried by the Buyer.
On page 21, delete Section 14.2 (Changes in Insurance Requirements) in its
entirety.
On page 21, line 25, redesignate Section "14.3" as "14.2".
<PAGE>
On page 22, line 4, delete "All" and substitute "To the extent permitted by
law and commercially available, all" in lieu thereof.
On page 22, line 5, insert "," after "mortgagees" and before "if".
On page 22, line 7, substitute "thirty (30)" in lieu of "sixty (60)".
On page 22, line 15, insert the following immediately after the word
"therefor":
; provided, however, that if either Party cannot deliver a renewal or
replacement policy and proof of payment therefor within the period
provided, such Party shall deliver to the other Party a binder or
certificate of insurance and proof of payment as soon as possible
ARTICLE 15
----------
On page 23, line 5, insert the following immediately after "non-
performance":
; provided, however, that this Agreement shall not terminate if such
Party shall diligently commence to cure such default within such thirty
(30) day period and for so long as such Party diligently continues such
efforts.
On page 24, lines 15 and 16, delete "pursuant to Article 16" and substitute
the following in lieu thereof:
and shall be excused and relieved of all obligations under this
Agreement and shall be entitled to pursue all available legal and
equitable remedies for breach of this Agreement.
<PAGE>
On page 24, line 21, Section 15.3, insert the following immediately
following "refuse":
"to take delivery of steam or refuse"
On page 25, immediately after line 7, insert a new Section 15.5 as follows:
15.5 Notice to Financiers and Opportunity to Cure.
A. Buyer shall look only to Seller or to any successor of Seller
under Section 19.3 to satisfy all obligations hereunder. No Financier
shall have any obligation to satisfy any obligation or indebtedness of
Seller to Buyer, except the obligations and indebtedness to Buyer
required under the terms of this Agreement.
B. Notwithstanding the provisions of Section 15.5A, a Financier
shall be liable to the Buyer for uninsured liabilities only to the
extent such liabilities represent defaults or breaches hereunder caused
by Financier's actions. Financier's liability to Lessor for uninsured
liabilities which have not been caused by Financier's actions shall be
limited to the extent of such Financier's interest in the Cogeneration
Facility.
C. Seller shall promptly notify the Buyer of the names and
addresses of all Financiers. Notwithstanding Sections 10.2 and 15.1,
Buyer shall not terminate this Agreement until it has given thirty (30)
days' written notice of any breach thereof to each of such Financiers,
and Buyer hereby agrees to promptly notify all such Financiers of any
breach. If Buyer fails to give such notice, Buyer shall not be liable
for damages to any Financier as a result of such failure, but any
termination of this Agreement shall be of no force and effect.
Thereafter, Buyer shall not terminate this Agreement as a result of any
<PAGE>
such breach if within such thirty (30) day period any Financier has
either:
(i) cured the breach if it can be cured by payment of money; or,
(ii) if the breach cannot be so cured, caused the initiation of and is
diligently pursuing proceedings to give the Financier possession of
the Cogeneration Facility, or has diligently commenced to cure the
breach, and for so long as the Financier diligently continues such
efforts.
D. If a Financier is prohibited by any process or injunction issued
by any court or by reason of any action by any court having jurisdiction
over any bankruptcy or insolvency proceeding involving the Seller or by
an automatic stay thereunder from curing such breach (other than a
breach that may be cured by the payment of money), the time specified
above in Section 15.5C shall be extended for the period of such
prohibition.
E. Nothing in this Agreement shall require a Financier to cure any
default hereunder in advance of entering the Cogeneration Facility with
the purpose of continuing to operate the Cogeneration Facility. Actions
by a Financier against the Cogeneration Facility under a mortgage or
other security right or encumbrance shall not in themselves be deemed an
election by Financier to assume Seller's obligations hereunder.
ARTICLE 16
----------
Article 16 (Termination for Breach) is deleted in its entirety and the
Table of Contents is amended by adding "[deleted]* after "Termination for
Breach".
<PAGE>
ARTICLE 19
----------
On page 27, substitute the following in lieu of lines 23 through 27:
19.1 This Agreement shall be binding upon and inure to the benefit of
the Parties and any permitted assignees as provided herein.
19.2 Except as is expressly set forth in this Agreement, neither the
rights nor the obligations under this Agreement may be assigned,
pledged, hypothecated or otherwise transferred.
19.3 Seller is expressly permitted to assign this Agreement as
provided in this Section 19.3. Seller may assign this Agreement to Cogen
Technologies NJ Venture, provided that such assignment shall be of no
force and effect unless and until Cogen Technologies NJ Venture shall
have assumed in writing all of Seller's obligations under the following
instruments and notes, and shall have agreed in writing to cure any
existing defaults and breaches hereunder and thereunder:
(1) The Ground Lease
(2) The Purchase and Sale Agreement
(3) The Option Agreement
(4) The SPF Lease
(5) The Note
(6) The Security Agreement
(7) The Rent Note
Seller may assign this Agreement to any Financier which shall be
obligated hereunder only as provided in Articles 21.6 and 21.7 of the
Ground Lease.
19.4 Buyer is expressly permitted to assign this Agreement to any
person or entity, provided that such assignment shall be of no force and
effect unless and until such person or entity shall have assumed in
writing all of Buyer's obligations under this Agreement and under the
agreements
<PAGE>
referred to in Section 19.3, with the exception of the Note and the Rent
Note, and shall have agreed in writing to cure any defaults and breaches
hereunder and thereunder. In the event that the Bayonne Facility is
assigned, sold, transferred, leased or subleased to any other party,
which action would affect Buyer's or Bayonne Industries, Inc.'s ability
to fulfill their respective obligations under this Agreement, the
Purchase and Sale Agreement, the Easement or the SPF Lease, Buyer may
not do so unless the assignee, buyer, transferee, lessee or sublessee
assumes Buyer's and Bayonne Industries, Inc.'s obligations under the
foregoing agreements.
19.5 Notwithstanding any such assignment by Seller or Buyer, the
assignor shall remain fully liable for its obligations hereunder.
ARTICLE 22
----------
On page 29, line 1, delete "together with the Lease Agreement this
Agreement".
EXHIBIT 2
---------
On page 3, Addendum 4, substitute "Section 3.5.A" in lieu of "Section 3.5.B"
whenever it appears.
On page 3, delete lines 30 through 36, and substitute the following in lieu
thereof:
ADDENDUM 5: Credit to Buyer for Production of Steam from Buyer's Steam
Producing Facilities and Price for Steam in Excess of 450,000 K
lbs./Year
<PAGE>
This Addendum applies to the following circumstances:
1. When Section 3.5.8 is invoked, Buyer
is entitled to deduct a credit allowing
recovery for the costs described below.
2. When the Seller has delivered 450,000
K lbs. of steam in any Annual Period, the
Monthly Steam Charge for any steam
delivered to the Buyer for the remainder of
that Annual Period shall allow for the
recovery by Seller of the costs described
below.
This addendum provides for the recovery of the costs
of maintenance and of staffing by two men for
standby operations and an additional staffing
of four men for firing and steam production, and
the costs of utilities and fuel during steam
production, as follows:
On page 4, Addendum 5, the definition of "d\C\" is amended to read as
follows:
"d\c\" = the number of days in which this
Addendum 5 is operative
On page 4, Addendum 5, in the definition of "M", delete "when Section 3.5C
of the Agreement is involved" and insert in lieu thereof "in which this Addendum
5 is operative".
Except as hereinabove amended, the Agreement shall remain in full force and
effect without any further amendment, modification, or alteration.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to
Agreement duly executed in quadruplicate original by their respective officers
thereunto duly authorized as of the day and year first set forth above.
(SEAL) ATTEST: COGEN TECHNOLOGIES NJ, INC.
/s/ JOHN B. WING BY: /s/ ROBERT C. MCNAIR
- -------------------------------- -------------------------------
John B. Wing Robert C. McNair
Assistant Secretary President
WITNESS: IMTT-BAYONNE
/s/ BERTRAND F. ARTIGUES BY: /s/ RICHARD B. JURISICH
- -------------------------------- -------------------------------
Bertrand F. Artigues Richard B. Jurisich
Secretary
<PAGE>
Agreements: IMTT Steam Sale Agreement
and Amendment thereto, both
dated June 13, 1985
Steam Producing Facilities
Lease Agreement dated
May 22, 1986
CONSENT TO ASSIGNMENT
---------------------
WHEREAS, Cogen Technologies NJ Venture, a general partnership
organized under the laws of the State of New Jersey (the "Borrower"), has
entered into a Security Agreement and Assignment dated as of December 15, 1988
(the "Security Agreement") with The Prudential Insurance Company of America
(the "Lender"), pursuant to which the Borrower has assigned all its rights,
title and interests in and to certain Assigned Agreements (all capitalized terms
used herein and defined in the Security Agreement shall have the same meaning
when used herein unless otherwise defined herein); and
WHEREAS, the Borrower and the undersigned are parties to an Agreement
for the Sale of Steam and Electricity from a Cogeneration Plant as amended to
date, dated June 13, 1985 (the "Steam Sale Agreement"), by and between Cogen
Technologies NJ, Inc. and IMTT-Bayonne and a Steam Producing Facilities Lease
Agreement, dated May 22, 1986 (the "SPF Lease"), between Cogen Technologies NJ,
Inc. and IMTT-Bayonne (both as assigned to Cogen Technologies NJ Venture
pursuant to the Amended and Restated Joint Venture Agreement dated as of August
28, 1986) (the Steam Sale Agreement and the SPF Lease are sometimes hereinafter
collectively called the "Agreements") relating to the Cogeneration Facility (as
defined in the Steam Sale Agreement) which Agreements are included within the
Assigned Agreements; and
WHEREAS, the undersigned is agreeable to consenting to the assignment
by the Borrower to the Lender of the Agreements as provided in the Security
Agreement;
NOW, THEREFORE, in order to satisfy its obligation to permit the
Borrower to assign the Agreements to a "Financier" as defined in and pursuant to
the provisions relating
<PAGE>
to assignment as set forth in the Agreements, the undersigned hereby:
1. Agrees that:
(a) To the best of its knowledge the execution and delivery of the
Agreements and this Consent to Assignment, and the performance by it of its
obligations thereunder and hereunder, are within its powers, have been duly
authorized, have received all necessary governmental approvals (if any shall
BE REQUIRED) AND DO NOT AND WILL NOT CONTRAVENE OR CONFLICT WITH ANY PROVISION
of law or of any agreement binding upon it or of its Articles of Incorporation
or By-laws.
(b) The Agreements and this Consent to Assignment are its legal, valid and
binding obligations and are enforceable against it in accordance with their
terms.
(c) The Agreements are in full force and effect and no default on its part
or, to the best of its knowledge, on the part of the Borrower exists
thereunder.
2. Agrees with the Lender that until it receives notice from the
Lender that the Security Agreement has been terminated (i) it will not agree to
any modification, amendment or supplement of the Agreements without the prior
written consent of the Lender, (ii) it will not terminate either Agreement by
reason of any default thereunder by the Borrower without giving the Lender
notice of such default and the same opportunity to cure such defaults as is set
forth in the Agreements for a "Financier", (iii) it will deliver to the Lender a
copy of each demand, notice or other communication given by it to the Borrower
pursuant to the Agreements, (iv) it will not, without the prior written consent
of the Lender, acknowledge or consent to any sale or pledge of, or any other
assignment or part of a security interest by the Borrower of, any of the right,
title or interest of the Borrower in either Agreement, (v) upon execution and
delivery of this Agreement, it will pay all amounts payable by it to the
Borrower under the Agreements directly to the institution and account set forth
on Exhibit A hereto, unless notified otherwise by the Lender, and (vi) in the
event that the Lender succeeds to the interest of Borrower under the Agreements
by reason of the exercise of its rights under the Security Agreement the
undersigned will accept performance by the Lender or its successors or assigns
under such Agreements notwithstanding any restriction set forth in such
Agreements on the assignability of the Borrower's rights, but subject to
paragraph 6 hereof.
<PAGE>
3. Reconfirms our consent to the assignment of the Agreements to the
Borrower by Cogen Technologies NJ, Inc.
4. This Consent to Assignment shall be governed by and in accordance
with the laws of the State of New York and shall be binding on, and inure to the
benefit of, the undersigned and the Lender and their successors and assigns.
5. Agrees with the Lender and the Borrower that all references to the
"Ground Lease" contained in the SPF Lease and the Steam Sale Agreement shall
refer to the Site Lease dated October 18, 1986, by and between Bayonne
Industries, Inc. and IMTT-Bayonne and Cogen Technologies NJ Venture and that the
SPF Lease and the Steam Sale Agreement are hereby amended to the extent
necessary to incorporate such a reference.
6. Notwithstanding anything to the contrary contained herein, the
consent granted by the undersigned and evidenced hereby and the rights of Lender
hereunder are and shall be expressly limited to those rights conferred upon a
Financier (as defined in the Agreements) set forth in Sections 15.5 and 19.3 of
the Steam Sale Agreement and Section 14.3 of the SPF Lease; provided, however,
that the provisions of Section 14.3 of the SPF Lease and Section 19.3 of the
Steam Sale Agreement referencing and incorporating Sections 21.6 and 21.7 of the
"Ground Lease," shall be interpreted as indicated in the Consent to Assignment
of the Site Lease and the Purchase and Sale Agreement, by Bayonne Industries,
Inc. and IMTT-Bayonne dated as of even date herewith.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Consent to
Assignment as of December 15, 1988.
IMTT-BAYONNE
By [signature appears here]
The undersigned hereby acknowledges
and agrees to the provisions set forth in
paragraph 5 above.
COGEN TECHNOLOGIES NJ VENTURE
by: Cogen Technologies NJ, Inc.
Managing Venturer
By [signature appears here]
<PAGE>
STATE OF LOUISIANA )
) ss.:
PARISH OF ORLEANS )
On this 27th day of December, 1988 before me personally came Richard
B. Jurisich, Sr., to me known, who, being by me duly sworn, did depose and say
that he resides at New Orleans, Louisiana, that he is the Chief Operating
Officer of IMTT-Bayonne, the partnership described in and which executed the
above instrument; and that he signed his name thereto by order of the
Partnership Committee of said partnership as the free act and deed of IMTT-
Bayonne and his free act and deed in his said capacity.
/s/ Bertrand F. Artigues
----------------------------
Notary Public
Bertrand F. Artigues
<PAGE>
EXHIBIT A
Midlantic National Bank
499 Thornall Street
Edison, New Jersey 08818
ABA No: 021200012
Attention: Michael Davoron
Account No: 10107290
Wire transfers only required with respect to payments made under the
IMTT Steam Sale Agreement and Amendment thereto, both dated June 13, 1985.
<PAGE>
EXHIBIT 10.55
AGREEMENT
BETWEEN
COGEN TECHNOLOGIES NJ VENTURE
("SELLER")
AND
EXXON COMPANY, U.S.A.
("BUYER")
FOR THE SALE OF STEAM
FROM
A COGENERATION PLANT
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS.............................................................. 1
1.1 "Agreement".............................................. 1
1.2 "Annual Period".......................................... 1
1.3 "Btu".................................................... 1
1.4 "Buyer's Plant" or "Plant"............................... 2
1.5 "Buyer's Steam Producing Facilities"..................... 2
1.6 "Cogeneration Facility" or "Seller's Facility"........... 2
1.7 "Date of Initial Commercial Operation"................... 2
1.8 "Deliverable Steam"...................................... 2
1.9 "K lbs."................................................. 2
1.10 "Party" or "Parties"..................................... 2
1.11 "Point of Delivery"...................................... 2
1.12 "p.s.i.g."............................................... 2
1.13 "Steam Interconnection Facilities"....................... 2
1.14 "Financier".............................................. 2
ARTICLE 2
TERM..................................................................... 3
2.1 Term of Agreement........................................ 3
2.2 Notice of Termination.................................... 3
ARTICLE 3
BASIC RIGHTS AND OBLIGATIONS............................................. 3
3.1 General.................................................. 3
3.2 Annualized Average Calculation........................... 4
ARTICLE 4
SALE OF STEAM............................................................ 5
4.1 Scheduling............................................... 5
4.2 Buyer's Furnishing Steam to Seller....................... 5
4.3 Monthly Steam Charge..................................... 5
4.4 Adjustment to Monthly Steam Charge....................... 6
4.5 Recalculation of Price................................... 6
ARTICLE 5
OTHER RIGHTS AND OBLIGATIONS OF PARTIES.................................. 6
5.1 Other Rights and Obligations of Seller................... 6
5.2 Other Rights and Obligations of Buyer.................... 7
5.3 Limitation on Seller's Liabilities....................... 7
<PAGE>
COPY MISSING
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 13
LIABILITY................................................................ 16
13.1 Liability of Seller...................................... 16
13.2 Specific Performance..................................... 16
13.3 Liability of Buyer....................................... 16
ARTICLE 14
INDEMNIFICATION.......................................................... 16
14.1 Indemnification by Seller................................ 16
14.2 Indemnification by Buyer................................. 16
14.3 (Deleted)................................................ 17
ARTICLE 15
ARBITRATION OF DISPUTES.................................................. 17
15.1 Notice................................................... 17
15.2 Arbitration Procedures................................... 17
15.3 Decision................................................. 17
15.4 Expenses................................................. 18
ARTICLE 16
BREACH OF CONTRACT....................................................... 18
16.1 Definition............................................... 18
16.2 Remedies for Breach...................................... 19
16.3 Parties' Rights and Obligations.......................... 19
16.4 Waiver of Breach......................................... 19
16.5 Notice to Financiers and Opportunity to Cure............. 19
ARTICLE 17
17.1 (Deleted)................................................ 21
17.2 (Deleted)................................................ 21
ARTICLE 18
NOTICE AND SERVICE....................................................... 21
18.1 Notice................................................... 21
18.2 Service.................................................. 21
ARTICLE 19
AMENDMENTS............................................................... 22
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 20
SUCCESSORS AND ASSIGNS................................................... 22
20.1 Release.................................................. 22
20.2 Assignment............................................... 22
ARTICLE 21
CHOICE OF LAW............................................................ 23
ARTICLE 22
SEVERABILITY AND RENEGOTIATION........................................... 23
22.1 Severability............................................. 23
22.2 Renegotiation............................................ 23
ARTICLE 23
OTHER AGREEMENTS......................................................... 23
ARTICLE 24
CAPTIONS................................................................. 24
ARTICLE 25
COUNTERPARTS............................................................. 24
ARTICLE 26
BUSINESS STANDARDS....................................................... 24
ATTEST:.................................................................. 25
APPENDIX A
APPENDIX B
APPENDIX C
EXHIBIT 1
<PAGE>
AGREEMENT entered into this 27th day of February, 1987, by and between COGEN
TECHNOLOGIES NJ VENTURE ("Seller"), a New Jersey venture, and EXXON COMPANY,
U.S.A. ("Buyer"), a division of Exxon Corporation, a New Jersey corporation
(collectively "Parties").
WHEREAS, Buyer owns and operates a Terminal Facility located at Bayonne, New
Jersey ("Buyer's Plant" or "Plant"), which Plant utilizes steam for industrial
purposes;
WHEREAS, Seller plans to construct and operate a facility for the cogeneration
of steam and electricity ("Seller's Facility" or "Cogeneration Facility") in
proximity of Buyer's Plant;
WHEREAS, Buyer desires to purchase certain quantities of steam for the operation
of its Plant and other uses as deemed appropriate 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;
NOW, THEREFORE, in consideration of the mutual covenants contained herein and
other valuable consideration, receipt of which is hereby acknowledged, the
Parties hereby agree as follows:
ARTICLE 1
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:
1.1 "Agreement" means this contract, including all exhibits an amendments
thereto that may be made from time to time.
1.2 "Annual Period" means any one of a succession of consecutive 12-month
periods, the first of which shall begin on the Date of Initial Commercial
Operation, if such date is the first day of a calendar month, or
otherwise on the first day of the month immediately following the month
in which the Date of Initial Commercial Operation occurs.
1.3 "Btu" means British Thermal Unit.
1.4 "Buyer's Plant" or "Plant" means the Buyer's Terminal Facility located at
Bayonne, New Jersey, an all appurtenant property owned by Buyer at that
location, including Buyer's steam supply system beginning at the Point of
Delivery.
<PAGE>
..2..
1.5 "Buyer's Steam Producing Facilities" means the existing boilers and
appurtenant structures and equipment located at Buyer's Plant and
presently operated by Buyer for the purpose of producing steam for
industrial use at Buyer's Plant and for sale to customers.
1.6 "Cogeneration Facility" or "Seller's Facility" means the boilers,
turbines, generators and all appurtenant structures, equipment and real
property interests owned or leased and operated by Seller for the purpose
of producing steam and electricity.
1.7 "Date of Initial Commercial Operation" means 12:01 a.m. on the day Seller
designates as the initial date of commercial operation of the Cogeneration
Facility.
1.8 "Deliverable Steam" means steam at the "Point of Delivery" at a minimum
pressure of 150 p.s.i.q. and a minimum temperature of 425 degrees F. and
having a minimum enthalpy of 1231 BTU/lb. produced by the Cogeneration
Facility.
1.9 "K lbs." means 1,000 pounds of steam mass.
1.10 "Party" or "Parties" means the signatories to this Agreement and their
permitted successors and assigns.
1.11 "Point of Delivery" means the point as shown in Exhibit 1 where Seller's
steam supply system connects to Buyer's steam pipeline, or the steam
pipeline system of any other person acting as agent for Seller for this
purpose.
1.12 "p.s.i.g." means pound per square inch gauge.
1.13 "Steam Interconnection Facilities" means those facilities required for the
receipt or delivery of steam at Buyer's Point of Delivery, including
service stop valves, meter stop values, primary and secondary service
pressure reducing values, meter supports, protection devices, meters and
remote meter readouts, pipe systems, pipelines, and other facilities
required to connect Buyer's Plant to the Cogeneration Facility in order to
effectuate the purposes of this Agreement.
1.14 "Financier" means any individual(s) or entity(ies) lending money to Seller
for:
(i) the construction of the Cogeneration Facility:
(ii) the establishment and/or maintenance of working capital
requirements; and/or
<PAGE>
..3..
(iii) the refinance of take-out of any such loan(s).
ARTICLE 2
TERM
2.1 Term of Agreement. This Agreement shall be effective upon its execution
and shall continue for base term of five (5) Annual Periods from the Date
of Initial Commercial Operation and shall continue thereafter, unless
terminated at the end of the base term or until otherwise terminated, as
provided herein.
2.2 Notice of Termination. Beginning one year prior to the end of the base
term, either party may notify the other by written notice of its desire to
terminate this Agreement, whereupon the parties shall negotiate a mutually
acceptable effective date for termination of this Agreement. If the
Parties fail to negotiate a mutually acceptable termination date, this
Agreement shall terminate effective one (1) year after the date of such
notice. If Buyer's Plant is permanently shut down or sold, this Agreement
shall terminate on the effective date of such shutdown or sale.
ARTICLE 3
BASIC RIGHTS AND OBLIGATIONS
3.1 General. Subject to the terms and conditions set forth in this Agreement
and commencing with the Date of Initial Commercial Operation, the Parties
agree that:
A. Buyer agrees to purchase from Seller 35,000 pounds per hour of
Deliverable Steam averaged on an annualized basis during all times
that Seller has a minimum of 50,000 pounds per hour of Deliverable
Steam available for Buyer. The calculation period for the annual
average shall be from November 1 through October 31. The 35,000 pound
per hour average is based on Buyer's current operation and steam
demand and may be modified as provided for in Article 3.2.
B. Buyer agrees to advise Seller in advance of its desire to purchase
Deliverable Steam in excess of 50,000 pounds per hour, which Seller is
not obligated to supply under this Agreement.
<PAGE>
..4..
C. Seller agrees to use best efforts to advise Buyer of changes in
Deliverable Steam availability.
D. Buyer agrees that Seller has obligations and rights to supply steam to
IMTT-Bayonne and electricity to Jersey Central Power & Light Company,
which obligations and rights come before any right Buyer may have
under this Agreement to receive Deliverable Steam from Seller except
that Seller shall not provide steam to IMTT-Bayonne during any hour in
excess of 57,000 pounds per hour, unless Seller has first made
available during such hour 50,000 pounds per hour to Buyer under this
Agreement.
3.2 Annualized Average Calculation.
A. Any hour that Seller does not have at least 50,000 pounds per hour of
Deliverable Steam available for Buyer shall be excluded from the
annual average calculation. Any steam purchased by Buyer from Seller
during any such hour shall also be excluded from the annual average
calculation. If this occurs between September 1 and May 31 of any
year, then Buyer shall be credited for 15,000 pounds for each hour of
unavailability. At Buyer's discretion, the provisions of this
paragraph may be waived with written notice to Seller within thirty
(30) days of the date of such waiver so long as such waiver applies to
each of the foregoing provisions of this paragraph (3.2A).
B. Any hour that Buyer's steam demand, including sales by Buyer, is under
75,000 pounds per hour shall also be excluded from the annualized
average calculation, along with any steam purchase by Buyer from
Seller during the same period. If this occurs between September 1 and
May 31 of any year, then Buyer shall also be credited for 15,000
pounds for each such hour as provided herein (3.2B).
C. The 35,000 pound per hour annual average is based on Buyer's 1986
actual and projected steam demand for its operation, including outside
sales. Buyer shall have the right to reduce the 35,000 pound per hour
annual average to the extent that Buyer demonstrates that there are
changes in Buyer's operation, including outside sales, which will
result in lower annual steam requirements, provided, however, that in
such event, Seller's 50,000 pounds per hour minimum Deliverable Steam
obligation shall be reduced on a pro rata basis. (See Appendix C.)
Such right may be exercised no earlier than sixty (60) days after
Buyer presents supporting documentation to Seller.
<PAGE>
5
ARTICLE 4
SALE OF STEAM
4.1 Scheduling. Commencing with the Date of Initial Commercial Operation and
thereafter during the term of this Agreement, Buyer shall give Seller its
best estimate of its expected steam requirements for the next calendar
year, at least by September 24 of the preceding calendar year.
At least thirty (30) days in advance, Seller shall notify Buyer of any
planned outages which will result in an interruption of steam deliveries to
Buyer.
4.2 Buyer's Furnishing Steam to Seller. In the event that Seller is unable to
produce steam at the Cogeneration Facility, by reason of Force Majeure,
Buyer may, at its sole option, supply Seller with steam subject to the
terms of this Article 4.2 so that Seller may fulfill its obligation to
furnish steam to third parties. Seller shall verbally notify the Buyer's
Shift Superintendent as soon as practical of the time at which Seller
requests to receive steam from Buyer. Such verbal notice to be confirmed in
writing within two (2) days, shall include the following:
(i) an estimate of the period during which Seller expects to request steam
from Buyer; and
(ii) the amount of steam that Seller desires from Buyer.
Steam purchased from Buyer by Seller shall be measured, billed and
collected in the same manner provided for tales by Seller to Buyer under
this Agreement. Pricing basis shall be per Appendix A plus ten percent.
Buyer's decision to supply steam to Seller shall be conditioned upon the
following:
(i) any sale of steam to Seller under this Article 4.2 shall not interfere
with Buyer's normal operations; and
(ii) any sale of steam to Seller under this Article 4.2 shall not result
in any liability to Buyer.
4.3 Monthly Steam Charge. Buyer shall pay Seller a Monthly Steam Charge which
shall be equal to the steam charge calculated according to Appendix B,
subject to adjustment in order according to Article 4.4.
<PAGE>
6
4.4 Adjustment to Monthly Steam Charge. The following adjustments may apply to
the calculations made in Article 4.3 and shall be made in the order listed:
A. If the price per thousand pounds of Deliverable Steam as calculated in
Appendix B is not at least $0.50 less then the incremental cost of
steam calculated in Appendix A, then Seller's price shall be adjusted
by Seller to be $0.50 less than the incremental cost as calculated in
Appendix A.
B. If the steam delivered by Seller fails to conform to the specifications
for steam contained in Article 1.8 for more than one hour after Seller
has been notified by Buyer of such non-conforming deliveries, then
(i) Buyer may, at its sole option, continue to accept delivery of
steam to the extent usable by it, and
(ii) the Monthly Steam Charge shall be reduced in proportion to the
extent that the steam taken by Buyer falls short, as determined on
a Btu basis, of the specifications for Deliverable Steam in
Article 1.8.
4.5 Recalculation of Price. Buyer reserves the right to convert, at its sole
option, Buyer's Steam Producing Facilities to fuels other than low sulfur
fuel oil. Buyer shall provide Seller with written notice of such
conversion a minimum of 120 days prior to converting to an alternate fuel.
Within ninety (90) days prior to the conversion, the Parties will establish
the Monthly Steam Charge per Article 4.3.
ARTICLE 5
OTHER RIGHTS AND OBLIGATIONS OF PARTIES
5.1 Other Rights and Obligations of Seller.
In addition to other rights or obligations of Seller specified in this
Agreement, Seller shall:
A. Have the right to use steam produced at the Cogeneration Facility first
for purposes; of sales to IMTT-Bayonne under the terms and conditions
of the Agreement between Cogen Technologies NJ, Incorporated ("Seller")
and IMTT-Bayonne ("Buyer") for the Sale of Steam and Electricity from a
Cogeneration Plant, dated June 13, 1985, as amended as of May 22, 1986;
to produce electric energy to
<PAGE>
7
sell to Jersey Central Power & Light Company under the terms and
conditions of the Agreement for Purchase of Electric Power between
Cogen Technologies NJ, Incorporated and Jersey Central Power & Light
Company, dated October 29, 1985, as may be amended, and to put its
obligations and rights under those agreements ahead of its obligations
to the Buyer under this Agreement except that Seller shall not provide
steam to IMTT-Bayonne during any hour in excess of 57,000 pounds per
hour, unless Seller has first made available during such hour 50,000
pounds per hour to Buyer under this Agreement.
B. Have the right to sell any and all steam produced at the Cogeneration
Facility and not purchased by Buyer pursuant to this Agreement to any
other person on such terms and conditions as Seller and such person
shall agree, without interference by Buyer, except that such sale shall
not be conducted in such manner as to interfere with Buyer's steam
purchases under this Agreement or with Buyer's reasonable and normal
operation of its Plant.
C. Have the right to own, operate and maintain all Steam Interconnection
Facilities necessary for the delivery of steam from its Facility to and
including the Point of Delivery.
D. Have the obligation to cause steam to be treated with a neutralizing
amine equal to Nalco Triacamine so as to be reasonably compatible with
steam produced in Buyer's Steam Producing Facilities.
5.2 Other Rights and Obligations of Buyer.
In addition to other rights or obligations of Buyer specified in this
Agreement, Buyer shall:
A. Have the right to own, operate and maintain all Steam Interconnection
Facilities necessary for the receipt of steam from the Point of
Delivery to its Plant.
B. Have the obligation to provide and install a valve for the Seller to
interconnect the Steam Interconnection Facilities at the Point of
Delivery.
5.3 Limitation an Seller's Liabilities. If the Seller does not make
Deliverable Steam available to Buyer under this Agreement by reason of
carrying out its obligations or exercising its rights under its
Agreements with IMTT-Bayonne or Jersey Central Power & Light Company,
described in Article 5.1A, or by reason of Force Majeure, such failure
shall not be a cause of breach or otherwise subject Seller to any
liability, damages, or penalty under this Agreement. If, after the end of
<PAGE>
8
any Force Majeure period which continues for more than six (6) months,
Buyer must obtain alternate sources of steam due to operational
necessities, end is required to enter take-or-pay commitments to do so,
Buyer shall be relieved of any take-or-pay obligations under this
Agreement for a period c up to twelve (12) months to the extent the new
take-or-pay commitment overlaps with the take-or-pay commitment under this
Agreement.
ARTICLE 6
MEASUREMENT AND METERING
6.1 Units of Measurement. For the purposes of this Agreement, steam shall
measured in units of K lbs. of steam mass.
6.2 Seller's Measuring Equipment and Stations. Seller shall:
(i) own, operate and maintain a steam measuring station and all measuring
equipment necessary to permit an accurate determination of the
quantity and quality as determined by pressure and temperature of
steam delivered to Buyer;
(ii) 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; and
(iii) provide for the installation of a remote meter readout for Buyer's
use in Buyer's Steam Producing Facilities at no cost to Buyer.
6.3 Buyer. Buyer may own, maintain and operate, at its sole expense, steam
measuring equipment, provided that such equipment shall be operated and
maintained in a manner that does not interfere with the Seller's Steam
Interconnection Facilities or with the operation of Seller's measuring
equipment.
6.4 Measurements and Adjustments. Seller's meters shall be used for quantity
measurement under this Agreement, except that, in the event one of Seller's
meters is out of service or registers inaccurately, measurement shall be
determined by:
A. Using the registration of any check meter or meters of Buyer, if
installed and accurately registering; or
<PAGE>
9
B. In the absence of an installed and accurately registering meter, 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
and an ascertainable percentage of error, estimating by reference to
quantities measured during periods under similar conditions then the
Seller's meter was registering accurately.
6.5 Testing and Corrections
A. Testing. The accuracy of Seller's measuring equipment shall be tested
and verified by Seller on a quarterly basis in Buyer's presence. 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. Seller shall bear the cost of the testing of Seller's
measuring equipment done on a quarterly basis. In the event that either
Party requests a testing of its own or of the other Party's measuring
equipment more frequently than on an annual basis, the Party requesting
the testing shall bear the cost of the testing.
C. Corrections of Steam Measuring Equipment. If, upon testing, any steam
measuring equipment is found to be in error by not more than plus or
minus one-half of one percent (1/2%) at a flowrate corresponding to
the average hourly flow rate 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. If, upon testing, any
steam measuring equipment shall tie found to be inaccurate by an amount
exceeding plus or minus one-half of one percent (1/2%) at a flowrate
corresponding to the average hourly flowrate for the period since the
last preceding test, 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.
6.6 Maintenance. Each Party shall have the right to be present whenever the
other Party reads, cleans, changes, repairs, inspects, tests, cali-
<PAGE>
10
brates, or adjusts the equipment used in measuring or checking the
measurement of steam delivered to Buyer. Each Party shall give timely
notice to the other Party in advance of taking any of such actions.
6.7 Records. 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 7
BILLING AND RECORDS
7.1 Monthly Bill to Buyer. On or before the tenth (10th) day of each month,
Seller shall prepare and deliver to Buyer a statement setting forth the
Monthly Steam Charge, as set forth in Article 4.3, if any, for the
preceding month. The billing statement shall also set forth the amount of
steam actually taken by Buyer during such month, and Seller's unit costs of
fuel, chemicals, and water for the billed period. Each billing statement
shall clearly identify this contract and the original shall be mailed to:
Exxon Company, U.S.A.
Attn: Accounts Payable Section Supervisor
Bayonne Plant
Post Office Box 4629
Houston, Texas 77210-4629
A. Seller's Documents. Seller warrants that all documents, includinq invoices,
financial settlements, billings and reports submitted by Seller in support
of costs, shall truly reflect the facts about the activities and
transactions to which they pertain, and Seller represents that in any
further recording or reporting made by Buyer for whatever purpose, Buyer may
rely upon all such documents and the data therein as being complete and
accurate. Seller further agrees to promptly notify Buyer upon discovery of
any instance where Seller has failed to comply with the provisions of this
paragraph.
7.2 Monthly Bill to Seller. In the event that Seller purchases steam from Buyer
pursuant to Article 4.2, Buyer shall on or before the tenth (10th) day of
the month prepare and deliver to Seller a statement setting forth the
Monthly Steam Charge,, as determined in accordance with Article 4.2, for the
preceding month. The billing statement shall also
<PAGE>
11
set forth the amount of steam actually taken by Seller during such month.
The original of each billing statement shall be mailed to:
Cogen Technologies NJ Venture
c/o Cogen Technologies NJ, Inc, Managing Venturer
14614 Falling Creek Drive
Suite 212
Houston, Texas 77068
Attn: Mr. Robert C. McNair, President
A. Buyer's Documents: Buyer warrants that all documents, including
invoices, financial settlements, fillings and reports submitted by Buyer
in support of costs, shall truly reflect the facts about the activities
and transactions to which they pertain, and Buyer represents that in
any further recording or reporting made by Seller for whatever purpose,
Seller may rely upon all such documents and the data therein as being
complete and accurate. Buyer further agrees to promptly notify Seller
upon discovery of any instance where Buyer has failed to comply with the
provisions of this paragraph.
7.3 Payment and Interest on Late Payment.
A. Payment. Buyer shall, within thirty (30) days of the receipt of Seller's
statement, pay Seller for all amounts billed pursuant to Article 7.1. If
Seller owes Buyer any amounts due under Article 4.2, Buyer shall offset
the amount owed to Seller, as set forth on the billing statement
received pursuant to Article 7.1, against the amount owed to Buyer by
Seller, as set forth on the billing statement received pursuant to
Article 7.2. If this offsetting results in a negative balance, Seller
shall, within thirty (30) days of the receipt of Buyer's statement, pay
Buyer in the amount of the negative balance. If a dispute should arise
over amounts or quantities billed, the billed amount shall be paid
within the time specified in this Article 7.3.A. Adjustments for
discrepancies in billing identified through meter verifications or
through other means as identified in Article 6.4 and Article 6.5 or by
an audit as indicated in Article 7.4, which would result in
reimbursement of billed amounts to Buyer will be reimbursed by Seller
within thirty (30) days' notice to Seller from Buyer that such amount is
due.
B. Interest. If either Party fails to pay all or a portion of the amounts
billed within the time stated in this Article 7.3, such Party shall owe
interest on the unpaid portion of the bill, which interest shall accrue
monthly at the maximum legal rate of interest, from the due date until
paid. The maximum legal rate of
<PAGE>
12
interest as applied to this Article 7 shall be identified as two percent
(2110) over the prime rate as recorded by the Federal Reserve Bank of
New York City, New York on the day that 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.
7.4 Audit. Both Seller and Buyer shall keep, in accordance with generally
accepted accounting practices, books, records and accounts, including all
invoices, receipts, charts, computer printouts, punchcards or magnetic
tapes related to the volume or price of steam sales made under this
Agreement. Authorized representatives of both Buyer and Seller will be
permitted, upon reasonable notice, to inspect such books, records, accounts
and other documents for the prior three (3) year period, and to make copies
thereof, as necessary to audit and verify the completeness and accuracy of
charges contained in invoices for steam sales, or for any other reasonable
purpose. If an audit indicates errors in invoices, appropriate adjustments
shall be made in accordance with Article 7.3A.
ARTICLE 8
TAXES
Seller shall be solely responsible for any use, property, income or other taxes
relating to the Cogeneration Facility and its components or appurtenances and
the sale of steam produced therein. Buyer shall be solely responsible for any
sales, use, property, income or other taxes relating to the Buyer's Plant, its
components or appurtenances and the sale of the products produced therein, as
well as any sales taxes imposed on the sale to Buyer of steam produced by the
Cogeneration Facility.
ARTICLE 9
LAND RIGHTS
9.1 General. During the term of this Agreement, each Party grants to the other
Party reasonable ingress and egress over property owned or leased by such
Party to the extent the other Party deems such ingress and egress necessary
in order to examine, test, calibrate or maintain the Steam Interconnection
Facilities and to read meters, except that
<PAGE>
13
(i) such access to the Buyer's Plant shall be limited to the property
where the Steam Interconnection Facilities are installed and those
requesting access to Buyer's Plant shall follow Buyer's security
procedures,
(ii) such access shall not disrupt or otherwise interfere with the normal
operations of a Party's business, and reasonable notice shall be
provided except in the case of an emergency, and
(iii) this shall not be deemed to establish in a Party any easement or
servitude over the to ar Party's land, and shall expire with the
expiration of this Agreement.
9.2 Scope of Rights. The rights granted under this Article to the Parties shall
extend to the directors, officers, employees, agents or representatives of
the Parties, as well as independent contractors engaged by the Parties in
connection with their duties and obligations under this Agreement.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
10.1 Representations and Warranties of Buyer. Buyer hereby represents and
warrants to Seller as follows:
A. Buyer is a Division of Exxon Corporation, a corporation duly organized
and existing in good standinq under the laws of the State of New Jersey
and is duly qualified to do business in the State of New Jersey.
B. Buyer 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 or has been threatened against Buyer that would
affect the validity or enforceability of this Agreement or the ability
of Buyer to fulfill its commitments hereunder.
D. No prior consent, approval, authorization, or permit of any
Governmental Authority is necessary for the Buyer to enter and perform
this Agreement or to carry out the transactions contemplated herein.
<PAGE>
14
10.2 Representations and Warranties of Seller. Seller hereby represents and
warrants to Buyer as follows:
A. Seller is a general partnership duly organized and existinq in, good
standing under the laws of the State of New Jersey and is duly
qualified to do business in the State of New Jersey.
B. Seller 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 or has been threatened against Seller that would
affect the validity or enforceability of this Agreement or the ability
of Seller to fulfill its commitments hereunder.
D. No prior consent, approval, authorization, or permit of any
Governmental Authority is necessary for the Seller to enter and perform
this Agreement or to carry out the transactions contemplated herein.
ARTICLE 11
EMINENT DOMAIN
11.1 Termination. If Seller's Coqeneration Facility or Buyer's Plant shall be
taken, condemned, or otherwise conveyed pursuant to a condemnation
proceeding, in whole or in part, by any competent authority and such
action renders the performance by either Party under this Agreement
impossible, impracticable or unduly onerous, either Party may elect to
terminate this Agreement by giving written notice to the other Party
within three (3) months before the effective date of such taking or
condemnation. If such notice of termination is given, this Agreement shall
terminate as of the effective date of such taking or condemnation.
11.2 Rights of Parties. In the event that this Agreement is terminated by
either Party pursuant to Article 11.1, the Parties shall have no rights,
obligations or interests pursuant to this Agreement as of the date of such
termination, except that the Parties shall remain obligated to pay all
sums due to one another under this Agreement as of the date of such
termination.
<PAGE>
15
ARTICLE 12
FORCE MAJEURE
12.1 Definition. "Force Majeure" means unforeseeable causes beyond the
reasonable control of and without the fault or negligence of the Party
claiming Force Majeure. It shall include failure or interruption of
services due to causes beyond that Party's control, including but not
limited to war, sabotage, strikes, lockouts, acts of God, or any Federal
or State Law or any order, rule, regulation or request of a Governmental
Authority (whether valid or invalid).
12.2 Burden of Proof. The burden of proof as to whether a Force Majeure has
occurred shall be upon the Party claiming the Force Majeure.
12.3 Effect of Force Majeure. If either Party is rendered wholly or partly
unable to perform its obligations under this Agreement because of Force
Majeure, that Party shall be excused from whatever performance is affected
by the Force Majeure to the extent so affected, provided that:
A. The non-performing Party, within fifteen (15) days after the
occurrence of the Force Majeure, gives the other Party written notice
describing the particulars of the occurrence;
B. The suspension of performance be of no greater scope and of no longer
duration than is required by the Force Majeure;
C. No obligations of either Party that arose before the occurrence of the
Force Majeure shall be excused as a result of such occurrence; and
D. The non-performing Party use its best efforts to remedy its inability
to perform, which best efforts, in the case of a strike by the non-
performinq Party's employees, shall be limited to the obligation to
bargain in good faith with such employees or their representative to
remove the cause of the strike. If the occurrence of the Force Majeure
is due to governmental action, the non-performing Party may, at its
sole option, decide whether to contest said action.
<PAGE>
16
ARTICLE 13
LIABILITY
13.1 Liability of Seller. Seller shall not be liable for any cost, expense or
damage incurred by Buyer, including loss of profits, resulting from, an
interruption in Seller's delivery of steam to Buyer, except to the extent
that Seller sells steam to any other person, which steam Buyer had a right
to purchase under the terms of this Agreement.
13.2 Specific Performance. In addition to any of the rights and remedies
referred to in this Agreement, Buyer and Seller shall each have the right
to seek the specific performance by the other Party of any of its
obligations under this Agreement, including but not limited to the remedy
of any breach of this Agreement regardless of whether or not Buyer or
Seller, as the case may be, has been placed in default.
13.3 Liability of Buyer. Should Buyer fail to annually average steam purchases
as defined in Articles 3.1 and 3.2, then Buyer shall be liable to pay
Seller for such steam purchases as if Buyer had purchased and accepted
delivery of all such steam from Seller under this Agreement. Buyer shall
not be restricted from procuring steam from sources other than Seller.
ARTICLE 14
INDEMNIFICATION
14.1 Indemnification by Seller. Seller agrees to protect, indemnify and hold
harmless Buyer and its directors, officers, employees, agents and
representatives against and from any and all loss, claims, actions or
suits, including reasonable costs and attorneys' fees, for or on account
of injury, bodily or otherwise, to, or death of, persons, or for damage
to, or destruction of, property belonging to Buyer, Seller, or others,
resulting from, or arising out of or connected with the ownership
maintenance or operation of Seller's Facility excepting only such injury
or harm as may be caused by the malfunction of Buyer's Plant or the fault,
negligence or willful acts of Buyer, its directors, officers, employees,
agents or representatives.
14.2 Indemnification by Buyer. Buyer agrees to protect, indemnify and hold
harmless Seller and its directors, officers, employees, agents and
representatives against and from any and all loss, claims, actions or
suits, including reasonable costs and attorneys' fees, for or on ac-
<PAGE>
17
count of injury, bodily or otherwise, to, or death of, persons, or for
damage to, or destruction of, property belonging to Buyer, Seller, or
others, resulting from, or arising out of or in any way connected with
the ownership, maintenance or operation of Buyer's Plant, excepting only
such injury or harm as may be caused by the malfunction of Seller's
Facility or by the fault, negligence, or willful acts of Seller, its
directors, officers, employees, agents or representatives.
14.3 (Deleted)
ARTICLE 15
ARBITRATION OF DISPUTES
15.1 Notice. In the event a dispute arises between the Parties with respect to
the interpretation of, or performance under, this Agreement, either Party
may give notice in writing to the other of its desire to submit such
dispute to arbitration. Within forty-five (45) days after the receipt of
such notice by the other Party, the Parties shall appoint a single
arbitrator, from a list of eight obtained from the American Arbitration
Association. If the Parties fail to agree on an arbitrator within ten (10)
days, either Party may request the American Arbitration Association to
appoint an arbitrator. An arbitrator so appointed shall have full
authority to act pursuant to this Article. Nothing herein shall require
arbitration of the disputes described above if either Party does not agree
to such arbitration; however, both Parties shall be bound to arbitrate
as soon as hearings have commenced pursuant to Article 15.2 below.
15.2 Arbitration Procedures. Within fifteen (15) days of his or her
appointment, the arbitrator so appointed shall commence hearings on the
dispute at such reasonable time and place in New Jersey as shall be
established by the arbitrator. The then current rules of the American
Arbitration Association for the conduct of commercial arbitration
proceedings shall govern the conduct of such hearings and the resolution
of the dispute, except that if such rules shall conflict with the then
current laws of the State of New Jersey relating to arbitration, the laws
of New Jersey shall govern.
15.3 Decision. The arbitrator shall fix a reasonable time after completion of
the hearing within which the Parties shall make their final submissions of
their respective positions and shall make his decision within thirty (30)
days after such submissions, unless, for good cause to be certified by him
in writing, he shall extend such time. The decision of the arbitrator
shall be rendered in writing and in duplicate, and
<PAGE>
18
one copy shall be delivered promptly to each Party. The award of the
arbitrator shall be final except as otherwise provided by applicable law.
Judgment upon such award may be entered on behalf of the prevailing Party
in any court having jurisdiction thereof, and application may be made by
such Party to any such court for judicial acceptance of such award and an
order of enforcement.
15.4 Expenses. The expenses of arbitration shall be borne equally by both
Parties.
ARTICLE 16
BREACH OF CONTRACT
16.1 Definition. 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 make payment of any amounts due the other
Party 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, or a breach of this Agreement by either Party, which
failure or breach continues for a period of thirty (30) days after
notice of such nonperformance or breach;
C. 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 bankrupt 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 filinq; or
D. 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
<PAGE>
19
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 as it may hereafter be amended, or pursuant to any
other similar state statute applicable to such Party, as is 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 creditor; 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.
16.2 Remedies for Breach. In the event of a breach of this Agreement, the non-
breaching Party may terminate this Agreement upon written notice to the
other Party, and may avail itself of any other remedies provided by law.
16.3 Parties' Rights and Obligations. Unless and until this Agreement has been
terminated, neither Party shall refuse to make, suspend or delay any of
the payments required under this Agreement as a result of any breach or
alleged breach by the other Party.
16.4 Waiver of Breach. Either Party may waive breach by the other Party,
provided that no waiver by or on behalf of 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.
16.5 Notice to Financiers and Opportunity to Cure.
A. Buyer shall look only to Seller or to any successor of Seller under
Article 20 to satisfy all obligations hereunder. No Financier shall
have any obligation to satisfy any obligation or indebtedness of
Seller to Buyer, except the obligations and indebtedness of Financier
to Buyer required under the terms of this Agreement.
B. Notwithstanding the provisions of Article 16.5A, a Financier shall be
liable to the Buyer for the uninsured liabilities only to the extent
such liabilities represent defaults or breaches hereunder
<PAGE>
20
caused by Financier's actions. Financier's liability to the Buyer for
uninsured liabilities which have not been caused by Financier's
actions shall be limited to the extent of such Financier's interest in
the Cogeneration Facility. However, if financier exercises his rights
under Article 16.5C, this limitation shall no longer be applicable.
C. Seller shall promptly notify the Buyer of the names and addresses of
all Financiers. Buyer shall not terminate this Agreement until it has
given thirty (30) days' written notice of any breach thereof to each
of such Financiers, and Buyer hereby agrees to promptly notify all
Financiers of any breach. If Buyer fails to give such notice, Buyer
shall not be liable for damages to any Financier as a result of such
failure, but any termination of this Agreement shall be of no force
and effect. Thereafter, Buyer shall not terminate this Agreement as a
result of any such breach if within such thirty (30) day period any
Financier has either:
(i) cured the breach if it can be cured by payment of money; or
(ii) if the breach cannot be so cured, caused the initiation of and
is diligently pursuing proceedings to give the Financier
possession of the Cogeneration Facility, or has diligently
commenced to cure the breach, and for so long as the Financier
diligently continues such efforts.
D. If a Financier is prohibited from curing such breach by any of the
following proceedings,
1. any process or injunction issued by any court,
2. any action by any court having jurisdiction over any bankruptcy or
insolvency proceeding involving the Seller, or
3. any automatic stay issued by a court referred to in Article 16.5D2
above,
the time specified above in Section 16.5C shall be extended for the
period of such prohibition.
E. Nothing in this Agreement shall require a Financier to cure any
default hereunder in advance of entering the Cogeneration Facility
with the purpose of continuing to operate the Cogeneration Facility.
Actions by a Financier against the Cogeneration Facility under a
mortgage or other security right or encumbrance shall not in
themselves be deemed an election by Financier to assume Seller's
obligations hereunder.
<PAGE>
21
ARTICLE 17
17.1 (Deleted)
17.2 (Deleted)
ARTICLE 16
NOTICE AND SERVICE
18.1 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.
18.2 Service.
A. Means of Service. Service of a notice may be accomplished by personal
service, telegram or registered or certified mail.
B. Date of Service.
(i) Mail. 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.
(ii) Telegram. If a notice is served by telegram, it shall be deemed
served eighteen (18) hours after delivery to the telegram
company.
C. Addresses. Notices shall be sent to the Parties at the following
addresses:
(i) Seller: Cogen Technologies NJ Venture
c/o Cogen Technologies NJ Inc.
Managing Venturer
14614 Falling Creek Drive
Suite 212
Houston, Texas 77068
Attn: Mr. Robert C. McNair, President
and
<PAGE>
22
Cogen Technologies NJ Venture
Foot of East 22nd Street
Bayonne, New Jersey 07002
Attn: Plant Manager
(ii) Buyer: Exxon Company, U.S.A.
250 East 22nd Street
Bayonne, New Jersey 07002
Attn: Plant Manager
ARTICLE 19
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 20
SUCCESSORS AND ASSIGNS
20.1 Release. The 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 except under
the following condition: consent to the release is given in writing by the
other Party, or, if the other Party has theretofore assigned, pledged, or
otherwise transferred its interest in this Agreement, then by such other
Party's assignee, pledgee or transferee.
20.2 Assignment. Either Party may assign its rights and obligations under this
Agreement with the consent of the other Party, which consent shall not be
unreasonably withheld. Any assignment without the con sent of the non-
assigninq party may, at the option of that party, be treated as a breach
of this Agreement. However, Seller is expressly permitted to assign this
Agreement to any Financier lending money for the construction and
operation of the Cogeneration Facility and Buyer expressly consents to
Seller's assignment of this Agreement to General Electric Power Funding
Corporation, which assignments shall not operate to release Seller from
any of its obligations under this Agree-
<PAGE>
23
ment. If such assignment or deleqation is solely for the purposes of security
to obtain financing, Buyer shall be provided a copy of such assignment.
ARTICLE 21
CHOICE OF LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of New Jersey.
ARTICLE 22
SEVERABILITY AND RENEGOTIATION
22.1 Severability. Should any part of this Agreement, for any reason, be
declared invalid, such decision shall not affect the validity of the
remaining 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 portions which
may for any reason be hereafter declared invalid.
22.2 Renegotiation. Notwithstanding the provisions of Articles 22.1, 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 such term, or provision of the Agreement to
eliminate such invalidity.
ARTICLE 23
OTHER AGREEMENTS
This Agreement supercedes 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.
<PAGE>
24
ARTICLE 24
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 affect the meaning, content or scope of this
Agreement.
ARTICLE 25
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.
ARTICLE 26
BUSINESS STANDARDS
Seller, in performing its obligation under this Agreement, shall establish and
maintain appropriate business standards, procedures and controls including
these necessary to avoid any real or apparent impropriety or adverse impact on
the interests of Buyer, Exxon Corporation, or its affiliates. Seller agrees to
comply with all laws and lawful regulations applicable to any activities carried
out under this Agreement and/or any amendments to it.
<PAGE>
25
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 VENTURE
By: /s/ Robert C. McNair
--------------------------------
Robert C. McNair
President
Cogen Technologies NJ, Inc.
Managing Venturer
ATTEST: EXXON COMPANY, U.S.A.
A Division of Exxon Corporation
By: /s/ Andy F. Icken
--------------------------------
Andy F.Icken
Manager
Marketing Specialty Products
<PAGE>
APPENDIX A
EXXON INCREMENTAL COST PER KLB STEAM
Definitions Units
- ----------- -----
PAP = Platts Oilgram NY Spot monthly average price $/Bbl
for No.6, 0.3 wt% sulfur fuel oil - low pour
contract cargo price - use midrange value
BWP = Bayonne city water price $/kcuft
EIFC = Exxons incremental fuel cost $/klb
EIWC = Exxons incremental water cost $/klb
EICC = Exxons incremental chemical cost $/klb
ETIC = Exxons total incremental cost $/klb
* AF = Market price for alternate fuel $/MBtu
Formulas Frequency of Calculation Units
- -------- ------------------------ -----
EIFC = 0.23 * PAP Monthly by Seller $/klb
EIWC = 0.0172 * BWP Monthly by Seller $/klb
EICC = 0.15 Annually by Buyer $/klb
ETIC = EIFC + EIWC + EICC Monthly by Seller $/klb
SAMPLE CALCULATION
PAP = $15.00 per barrel
BWP = $13.50 per kcuft
EICC = $ 0.15 per klb
EIFC = 0.23 * $15.00 = $3.43
EIWC = 0.0172 * $13.00 = $0.23
EICC = $0.15 * = $0.15
-----
ETIC = $3.81 per klb
* If Buyer elects to use an alternate fuel, then EIFC will be recalculated
based on AF and a constant boiler efficiency of 89%. If plant gas is used, AF
will be Exxon's sales price to any 3rd party. If natural gas is used, AF will
be the price Exxon pays for the fuel.
<PAGE>
APPENDIX B
COGEN BILLING PRICE CALCULATION
Definitions Units
- ----------- -----
GP = Gas price based on actual bills for month $/MBTU
BWP = Bayonne city water price $/kcuft
CFC = COGEN fuel cost $/klb
CWC = COGEN water cost $/klb
CCC = COGEN chemical cost $/klb
CMS = COGEN metered steam klb/month
Formulas Frequency of Calculation Units
- -------- ------------------------ -----
CFC = 1.4460 * GP Monthly by Seller $/klb
CWC = 0.0259 * BWP Monthly by Seller $/klb
CCC = 0.15 Annually by Seller $/klb
Billing Price = (CFC + CWC + CCC) * CMS
SAMPLE CALCULATION
- ------------------
GP = $ 2.44 per MBTU
BWF = $13.50 per kcuft
CCC = $ 0.15 per klb
CMS = 25,000 klb.
CFC = 1.4460 * $ 2.44 = $3.53
CWC = 0.0259 * $13.50 = $0.35
CCC = $ 0.15 * = $0.15
-----
Price per klb = $4.03 per klb
Steam $4.03 * 25,000 = $100,697
Charge
<PAGE>
APPENDIX C
ANNUALIZED AVERAGE CALCULATION - 3.2C
The 35,000 pound per hour annual average and the 50,000 pound per hour supply
requirement shall be adjusted as shown below:
Definitions: Units
- ------------ -----
A = Buyer's Contract base annual average lb/hr
B = Buyer's 1986 annual average lb/hr
C = Buyer's adjusted annual average lb/hr
X = Buyer's new base annual average lb/hr
W = Seller's Contract base supply requirement lb/hr
Y = Seller's new supply requirement lb/hr
Formulas
- --------
X = C * A / B
Y = C * W / B
SAMPLE CALCULATION
A = 35,000 Constant
B = 107,700 Constant
W = 50,000 Constant
C = 80,000
X = 25,998 lb/hr new base annual average
Y = 37,140 lb/hr new supply requirement
<PAGE>
ASSIGNMENT AGREEMENT
ASSIGNMENT (this "Assignment"), dated as of February 27, 1987, among
COGEN TECHNOLOGIES NJ VENTURE, a New Jersey joint venture (the "Borrower"), and
GENERAL ELECTRIC POWER FUNDING CORPORATION, a New York corporation (the
"Lender").
W I T N E S S E T H
WHEREAS, the Lender has entered into a Construction Loan Agreement (as
supplemented, amended, or otherwise modified from time to time, the "Loan
Agreement"), dated as of September 8, 1986, with the Borrower for the purpose of
financing the cost of constructing and equipping a 165 megawatt gas-fired
cogeneration plant to be located at Bayonne, New Jersey; and
WHEREAS, it is a condition to the making of loans under the Loan
Agreement that the Borrower shall have executed and delivered this Assignment
whereby the Borrower, in order to provide security for the full payment when due
of all amounts payable under the Loan Agreement, shall assign to the Lender. (to
the extent set forth herein) all of its rights, title and interests in, to and
under certain agreements described below relating to the design, construction
and operation of the Project (as defined in the Loan Agreement) in accordance
with the terms of this Assignment;
NOW, THEREFORE, in order to induce the Lender to make loans to the
Borrower under the Loan Agreement, the parties hereto agree as follows:
SECTION 1. Certain Defined Terms
1.1 For purposes of this Assignment capitalized terms not otherwise
defined shall have the meanings set forth in the Loan Agreement.
1.2 As used in this Assignment, the following terms shall have the
meanings set forth below:
<PAGE>
Page 2
"Assigned Agreements" shall mean that agreement described Exhibit A
attached hereto.
"Assigned Property" shall have the meaning specified in Section
2.1(c).
"Assigned Rights" shall mean all of the rights and property assigned
to the Lender hereunder.
"Secured Obligations" shall have the meaning specified in Section 2.1.
1.3 All terms defined in this Assignment shall have the same defined
meanings when used in any notice certificate, report or other document made or
delivered pursuant to or in connection with this Assignment, unless the context
shall otherwise require. Each reference herein to the Borrower and the Lender
shall be deemed to include their respective successors and assigns.
SECTION 2. Assignment of Rights, Title and
Interest in, to and under the
Assigned Agreements
2.1 As security for the payment and performance of the Borrower's
obligations under the Loan Agreement, including the repayment of all Advances
made under the Loan Agreement, the payment of all amounts payable under the
Note, and the performance of all obligations of the Borrower (including the
payment of all amounts due) hereunder and under the other Security Documents
(collectively the "Secured Obligations") the Borrower hereby assigns, transfers,
conveys and sets over to the Lender (the "Secured Party") and grants to the
Secured Party a continuing security interest in, all the Borrower's rights,
title and interests in, to and under the Assigned Agreements and all proceeds
thereof, including without limitation:
(a) all payments due and to become due under the Assigned Agreements,
whether as contractual obligations, damages payable to the Borrower for any
breach thereunder, or otherwise;
(b) all of the Borrower's claims, rights, powers or privileges and
remedies under any Assigned Agreement; and
<PAGE>
Page 3
(c) all of the Borrower's rights under any Assigned Agreement (i) to
make determinations, (ii) to exercise any election (including, but not
limited to, election of remedies) or option or to give or receive any
notice, consent, waiver or approval together with full power and authority
to demand, receive, enforce, collect or give receipt for any of the
foregoing or any property which is the subject of any of the Assigned
Agreements, (iii) to amend, modify or supplement any Assigned Agreement,
(iv) to enforce or execute any checks, or other instruments or orders, (v)
to file any claims and (vi) to take any action which (in the opinion of the
Secured Party) may be necessary or advisable in connection with any of the
foregoing (the Borrower's rights, title and interests in, to and under the
Assigned Agreements, together with all of the foregoing in this Section
2.1, the "Assigned Property").
Concurrently with its execution and delivery after the date hereof of any
Project Document, (i) the Borrower shall execute and deliver to the Secured
Party a supplement to this Assignment, in form and substance satisfactory to the
Secured Party, confirming the grant to the Secured Party of such Assigned
Agreement pursuant to this Assignment (and the validity of the representations
and warranties set forth with respect thereto in Section 2.3) and (ii) the
Borrower shall cause each other party to such Project Document to execute and
deliver a Consent, consenting to such grant (said Consent being set forth in
Section 20.2 of the Assigned Agreements described in Exhibit A).
2.2 The Borrower hereby expressly agrees that it will observe and
perform all of its obligations under the Assigned Agreements and will not enter
into or consent to any amendment, modification, supplement or waiver to any of
the terms, of the Assigned Agreements without the prior written consent of the
Secured Party. The Borrower agrees in any event to furnish to the Secured Party
as soon as possible (and in any event within 10 days after the execution
thereof) a signed counterpart of each amendment, modification or supplement to
any Assigned Agreement. Except as provided above in this Section 2.2, until the
occurrence and continuance of an Event of Default, or an event which, with the
lapse of time or the giving of notice or both, would constitute an Event of
Default, the Borrower may exercise all of its rights, powers, privileges and
remedies under the Assigned Agreements including the right to receive any and
all moneys due or to become due thereunder.
<PAGE>
Page 4
2.3 The Borrower hereby represents and warrants with respect to the
Assigned Agreements that as of the date of this Assignment (and as of the date
of any supplement hereto referred to in Section 2.1):
(a) they are in full force and effect and there is no breach or
default thereunder, and
(b) they have not been transferred or assigned in whole or in part,
save for the assignment herein contained, and no Lien arising by, through,
or under the Borrower exits with respect to any of them or any obligation
payable or performable thereunder.
2.4 It is hereby expressly agreed that, anything contained herein to
the contrary notwithstanding, the Borrower shall remain liable under the
Assigned Agreements to perform all the obligations assumed by it thereunder and
the Secured Party shall not have any obligation or liability thereunder by
reason of or arising out of the assignments herein contained, nor shall the
Secured Party be required or obligated in any manner to perform or fulfill any
obligations of the Borrower under the Assigned Agreements or pursuant thereto,
or to make any payment, or, unless and until indemnified to its satisfaction, to
present or file any claim, or to take any other action to enforce any right
assigned to it hereunder or to which it may be entitled pursuant hereto at any
time or times.
2.5 The Borrower hereby undertakes that, notwithstanding the
assignments herein contained, it shall punctually perform all its obligations
under the Assigned Agreements and in particular, but without limiting the
generality of the foregoing, it shall fully and punctually pay all moneys due
and payable by it under the Assigned Agreements.
2.6 If the Borrower shall fail to do so in a full and timely fashion,
the Secured Party shall be entitled but not obliged to perform, itself or
through its nominee(s), all or any of the Borrower's obligations under the
Assigned Agreements without thereby releasing the Borrower from its obligations
thereunder.
2.7 The Borrower hereby irrevocably appoints the Secured Party as its
attorney-in-fact to do in its name all acts which it could do in relation to the
Assigned Agreements and in particular, but without limiting the generality of
the foregoing, to ask, require, demand, receive, compound and forgive any and
all moneys and claims for moneys due and
<PAGE>
Page 5
to become due under or arising out of any of the Assigned Agreements, to
endorse any checks or other instruments or orders in connection therewith and to
file any claims or to take any action or institute any proceedings which the
Secured Party may deem to be necessary or advisable in the circumstances, which
appointment is coupled with an interest. Except insofar as necessary to effect
compliance with the provisions of Section 4.04(c) of the Loan Agreement, the
Secured Party shall not exercise any of the powers granted pursuant to the
foregoing sentence until the earliest of the breach of the Borrower's
obligations hereunder or under any other Security Document or the occurrence of
an Event of Default under the Loan Agreement.
2.8 If an Event of Default shall have occurred and be continuing, the
Secured Party may exercise with respect to the Assigned Property those rights
set forth in Section 3 hereof.
SECTION 3. Remedies and Application of Proceeds
Upon the occurrence of any Event of Default and during the existence
thereof, the Secured Party shall have all rights of a secured party under the
Uniform Commercial Code to enforce the assignments and security interests
contained herein and in addition shall have the right (a) to enforce all
remedies, rights, powers and privileges of the Borrower under any or all of the
Assigned Rights, (b) to sell any or all of the Assigned Property at public or
private sale upon at least 10 days' prior written notice and/or (c) to
substitute itself or any nominee or agent in lieu of the Borrower as a party to
any of the Assigned Agreements. In the event that the Secured Party shall bring
any suit, or shall take any other action, to enforce any of it's rights
hereunder, the Borrower shall pay on demand the Secured Party's reasonable
expenses (including attorney's fees) in so enforcing such rights, and such
expenses shall be included in any judgment obtained in connection therewith.
Unless otherwise specified herein, all amounts received hereunder as a result of
any exercise of rights or remedies created hereby shall be applied in accordance
with the Loan Agreement. All of the Secured Obligations are secured ratably and
pari passu by this Assignment.
<PAGE>
Page 6
SECTION 4. Miscellaneous
4.1 Further Assurances. The Borrower hereby undertakes, at its own
expense, to accomplish any appropriate filings (including the filing of
financing statements) relative to the assignments herein contained and execute,
sign, deliver, do and (if required) make any appropriate filings in connection
with such further assurance, instrument, document, act or thing as in the
opinion of the Secured Party may be necessary or desirable for the purpose of
more effectually assigning the Assigned Rights and/or perfecting the assignments
herein contained and/or enabling the Secured Party to enjoy the full benefit of
the assignments and the rights and the powers herein granted to the Secured
Party.
4.2 Payments. All moneys collected or received by the Secured Party in
respect of the Assigned Rights or the Assigned Agreements, and any and all
moneys received by the Secured Party in any proceedings pursuant to this
Assignment, unless otherwise specified herein, shall be dealt with by the
Secured Party as provided in the Loan Agreement.
4.3 Binding Effect. All of the covenants, warranties, undertakings and
agreements of the Borrower hereunder shall bind the Borrower, its successors and
assigns and shall inure to the benefit of the Secured Party, its successors and
assigns, whether so expressed or not.
4.4 Notices. Any notice or other communication shall be deemed to have
been sufficiently given if given as provided in, and to the addresses provided
in, the Loan Agreement.
4.5 No Waiver; Cumulative Remedies. No failure to exercise, and no
delay in exercising, any right, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude or require any other or future exercise thereof or
the exercise of any other right, power or privilege. All rights, powers and
remedies granted to any party hereto and all other agreements, instruments and
documents executed in connection with this Assignment shall be cumulative, may
be exercised singly or concurrently and shall not be exclusive of any rights or
remedies provided by law.
4.6 Survival of Agreements. All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Assignment.
<PAGE>
Page 7
4.7 Headings. The section and subsection headings used in this
Assignment are for convenience only and shall not affect the construction of
this Assignment.
4.8 Severability. In case any one or more of the provisions contained
in this Assignment shall be invalid, illegal or unenforceable in any respect
under any law, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby.
4.9 Execution of Counterparts. This Assignment may be executed in
any number of counterparts. All such counterparts shall be deemed to be
originals and shall together constitute but one and the same instrument.
4.10 Governing Law. This Assignment shall be governed by, and construed
and interpreted in accordance with, the laws of the State of New York.
4.11 Illegality. In the event that it should transpire that by reason
of any law or regulation in force or to become in force, or by reason of a
ruling of any court whatsoever, or by any other reason whatsoever, the
assignments herein contained are either wholly or partly defective, the Borrower
hereby undertakes to furnish the Secured Party with alternative assignments
and security and/or to do all such other acts as, solely in the opinion of the
Secured Party, shall be required in order to ensure and give effect to the full
intent and spirit of this Assignment.
4.12 Waivers, Amendments, Supplements and Other Modifications. The
provisions of this Assignment may be waived, amended, supplemented or otherwise
modified from time to time, in whole or in part, only by a writing signed by the
Borrower and Secured Party.
IN WITNESS WHEREOF, this Assignment has been executed and delivered as
of the date and year first above written.
ADDRESS: COGEN TECHNOLOGIES NJ VENTURE
14614 Falling Creek Drive By: COGEN TECHNOLOGIES NJ,
Suite 212 INC., Managing Venturer
Houston, Texas 77068
By /s/ Robert C. McNair
--------------------------
Title: President
<PAGE>
Page 8
ADDRESS: GENERAL ELECTRIC POWER
FUNDING CORPORATION
Building 2, Room 708
One River Road
Schenectady, New York 12345 By: /s/ ???
--------------------------
<PAGE>
AMENDMENT TO AGREEMENT
BETWEEN
COGEN TECHNOLOGIES NJ VENTURE
AND
EXXON COMPANY, U.S.A.
FOR
THE SALE OF STEAM
<PAGE>
AMENDMENT TO AGREEMENT
BETWEEN
COGEN TECHNOLOGIES NJ VENTURE
AND
EXXON COMPANY, U.S.A.
FOR
THE SALE OF STEAM
AGREEMENT entered into this 21st day of August, 1988 (hereinafter, "Agreement"),
by and between COGEN TECHNOLOGIES NJ VENTURE ("Seller"), a New Jersey venture,
and EXXON COMPANY, U.S.A. ("Buyer"), a division of Exxon Corporation, a New
Jersey corporation (collectively, "Parties").
WHEREAS, Seller and Buyer entered into a contract dated February 27, 1987, for
the sale of steam from a facility for the cogeneration of steam and electricity
("Seller's Facility") in proximity to Buyer's Terminal Facility located at
Bayonne, New Jersey ("Buyer's Plant") ("February Agreement");
WHEREAS, the Parties now desire to increase the amount of steam sold by Seller
to Buyer, to adjust the steam charge calculations in certain respects, and to
revise the priority of steam purchases 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;
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 1
---------
DEFINITIONS
-----------
All capitalized terms when used herein shall have the meanings set forth in the
February Agreement or this Agreement, unless a different meaning shall be
expressly stated or apparent from the context herein.
ARTICLE 2
---------
EFFECT OF AMENDMENT
-------------------
Except as specifically provided herein, the February Agreement shall govern
performance by the Parties.
ARTICLE 3
---------
BASIC RIGHTS AND OBLIGATIONS
----------------------------
3.1 General
-------
(A) Paragraph A. of Article 3.1 of the February Agreement is amended to
read as follows:
<PAGE>
A. Buyer agrees to purchase from Seller 50,000 pounds per hour of
Deliverable Steam averaged on an annualized basis during all times
that Seller has a minimum of 65,000 pounds per hour of Deliverable
Steam available for Buyer. The calculation period for the annual
average shall be from November 1 through October 31. The 50,000
pound per hour average is based on Buyer's current operation and
steam demand and may be modified as provided for in Article 3.2.
(B) Paragraph B. of Article 3.1 of the February Agreement is amended to
read as follows:
B. Buyer agrees to advise Seller in advance of its desire to purchase
Deliverable Steam in excess of 65,000 pounds per hour, which
Seller is not obligated to supply under this Agreement.
(C) Paragraph D. of Article 3.1 of the February Agreement is amended to
read as follows:
D. Buyer agrees that Seller has obligations and rights to supply
steam to IMTT-Bayonne and to ICI Americas, Inc., and electricity
to Jersey Central Power & Light Company, which obligations and
rights come before any right Buyer may have under this Agreement
to receive Deliverable Steam from Seller except that Seller shall
not provide steam during any hour to IMTT-Bayonne in excess of
57,000 pounds per hour nor to ICI Americas, Inc., in excess of
20,000 pounds per hour, unless Seller has first made available
during such hour 65,000 pounds per hour to Buyer under this
Agreement.
3.2 Annualized Average Calculation
------------------------------
(A) Paragraph A. of Article 3.2 of the February Agreement is amended to
read as follows:
A. Any hour that Seller does not have at least 65,000 pounds per hour
of Deliverable Steam available for Buyer shall be excluded from
the annual average calculation. Any steam purchased by Buyer from
Seller during any such hour shall also be excluded from the annual
average calculation. If this occurs between September 1 and May 31
of any year, then Buyer shall be credited for 15,000 pounds for
each hour of unavailability. At Buyer's discretion, the provisions
of this paragraph may be waived with written notice to Seller
within thirty (30) days of the date of such waiver so long as such
waiver applies to each of the foregoing provisions of this
paragraph (3.2A).
(B) Paragraph C. of Article 3.2 of the February Agreement is amended to
read as follows:
<PAGE>
C. The 50,000 pound per hour annual average is based on Buyer's
1987 actual steam demand for its operation, including outside
sales. Buyer shall have the right to reduce the 50,000 pound per
hour annual average to the extent that Buyer demonstrates that
there are changes in Buyer's operation, including outside sales,
which will result in lower annual steam requirements, provided,
however, that in such event, Seller's 65,000 pounds per hour
minimum Deliverable Steam obligation shall be reduced on a pro
rata basis. (See Appendix C.) Such right may be exercised no
earlier than sixty (60) days after Buyer presents supporting
documentation to Seller.
ARTICLE 4
---------
SALE OF STEAM
-------------
4.1 Adjustment to Monthly Steam Charge
----------------------------------
Paragraph A. of Article 4.4 of the February Agreement is amended to read as
follows:
A. If the price per thousand pounds of Deliverable Steam as
calculated in Appendix B is not at least $0.50 less than the
lowest incremental cost of steam calculated in Appendix A, then
Seller's price shall be adjusted by Seller to be $0.50 less than
the lowest incremental cost as calculated in Appendix A.
4.2 Recalculation of Price
----------------------
Article 4.5 of the February Agreement, regarding recalculation of price, is
deleted.
ARTICLE 5
---------
OTHER RIGHTS AND OBLIGATIONS OF PARTIES
---------------------------------------
5.1 Other Rights and Obligations of Seller
--------------------------------------
Paragraph A. of Article 5.1 of the February Agreement is amended to read as
follows:
A. Have the right first to use steam at the Cogeneration Facility for
purposes of sales to IMTT-Bayonne under the terms and conditions
of the Agreement between Cogen Technologies NJ, Incorporated
("Seller") and IMTT-Bayonne ("Buyer") for the Sale of Steam and
Electricity from a Cogeneration Plant, dated June 13, 1985, as
amended as of May 22, 1986, to use steam produced at the
Cogeneration Facility for purposes of sales to ICI Americas, Inc.,
to produce electric energy to sell to Jersey Central Power & Light
Company under the terms and conditions of the Agreement for
Purchase of Electric Power between Cogen
<PAGE>
Technologies, NJ, Incorporated and Jersey Central Power & Light
Company, dated October 29, 1985, as may be amended, and to put its
obligations and rights under those agreements ahead of its
obligations to Buyer under this Agreement except that Seller shall
not provide steam during any hour to IMTT-Bayonne in excess of
57,000 pounds per hour or to ICI Americas, Inc., in excess of
20,000 pounds per hour, unless Seller has first made available
during such hour 65,000 pounds per hour to Buyer under this
Agreement.
5.2 Limitation on Seller's Liabilities
----------------------------------
Article 5.3 of the February Agreement is amended to read as follows:
5.3 Limitation on Seller's Liabilities
----------------------------------
If the Seller does not make Deliverable Steam available to Buyer under
this Agreement by reason of carrying out its obligations or exercising
its rights with regard to IMTT-Bayonne, ICI Americas, Inc., or Jersey
Central Power & Light Company, described in Article 5.1A, or by reason
of Force Majeure, such failure shall not be a cause of breach or
otherwise subject Seller to any liability, damages, or penalty under
this Agreement. If, after the end of any Force Majeure period which
continues for more than six (6) months, Buyer must obtain alternate
sources of steam due to operational necessities, and is required to
enter take-or-pay commitments to do so, Buyer shall be relieved of any
take-or-pay obligations under this Agreement for a period of up to
twelve (12) months to the extent the new take-or-pay commitment
overlaps with the take-or-pay commitment under this Agreement.
ARTICLE 6
---------
APPENDICES
----------
Appendices A and C to the February Agreement are deleted and replaced by
Appendices A and C attached hereto.
ARTICLE 7
---------
COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts, and each
executed counterpart shall have the same force and effect is an original
instrument.
<PAGE>
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 VENTURE
By: /s/ Robert C. McNair
-----------------------------
Robert C. McNair, President
Cogen Technologies NJ, Inc.
Managing Venturer
ATTEST: EXXON COMPANY, U.S.A.
(a division of Exxon Corporation)
By: /s/ Andy F. Icken 8/21/88
-----------------------------
Andy F. Icken, Manager
Marketing Specialty Products
<PAGE>
APPENDIX A
EXXON INCREMENTAL COST PER KLB STEAM
Definitions Units
- ------------------------------------------------------------- -------
PAP = Platts Oilgram NY Spot monthly average price for No. 6, $/Bbl
0.3 wt% sulfur fuel oil - low pour cargo price - use
midrange value
AF = Cost of gas from PSE&G's Gas Assistance Program (GAP). $/MBtu
If the GAP is discontinued, the Cogeneration Inter-
ruptible Gas (CIG) rate shall be used. If neither the
GAP nor CIG rate is available, Buyer shall propose an
alternate gas pricing basis, subject to Seller's prior
consent, which consent shall not be unreasonably with
held.
BWP = Bayonne city water price $/kcuft
EIFC = Exxon's incremental fuel cost $/klb
EIWC = Exxon's incremental water cost $/klb
EICC = Exxon's incremental chemical cost $/klb
ETIC = Exxon's incremental cost of steam $/klb
Formulas Frequency of Calculation Units
- ---------------------- ------------------------ -----
EIFCOil = 0.23 * PAP Monthly by Seller $/klb
EIFCGas = 1.4592 * AF Monthly by Seller $/klb
EIWC = 0.0172 * BWP Monthly by Seller $/klb
EICC = 0.15 Annually by Buyer $/klb
Calculation of ETIC
- -------------------
Exxon's incremental cost of steam for purposes of Article 4.4A is the lowest of
ETIC\Oil\ or ETIC\Gas\, where ETIC\Oil\ = EIFC\Oil\ + EIWC + EICC and ETIC\Gas\
= EIFC\Gas\ + EIWC + EICC. The formulas for both ETIC\Oil\ and ETIC\Gas\ shall
be calculated on a monthly basis by Seller in $/klb.
<PAGE>
APPENDIX A
Sample Calculation
- ------------------
PAP = $18.50 per barrel
BWP = $21.00 per kcuft
EICC = $ 0.15 per klb
AF = $ 2.87 per MBtu
EIFC\Oil\ = 0.23 * $18.50 = $4.26
EIWC = 0.0172 * $21.00 = $0.36
EICC = 0.15 = $0.15
-----
ETIC\Oil\ = $4.77
EIFC\Gas\ = 1.4592 * $2.87 = $4.19
EIWC = 0.0172 * $21.00 = $0.36
EICC = 0.15 = $0.15
-----
ETIC\Gas\ = = $4.70
The cost of steam from Appendix A to be used in determining whether an
adjustment to the monthly steam charge is appropriate pursuant to Article 4.4A
shall be the lower of (ETIC\Oil\ - $.50) or (ETIC\Gas\ - $.50) (ie., under
Sample Calculation, cost of steam from Appendix A = $4.70 - .50 = $4.20/klb).
<PAGE>
APPENDIX C
ANNUALIZED AVERAGE CALCULATION - 3.2C
The 50,000 pound per hour annual average and the 65,000 pound per hour supply
requirement shall be adjusted as shown below:
Definitions Units
----------- -----
A = Buyer's Contract base annual average lb/hr
B = Buyer's 1987 annual average lb/hr
C = Buyer's adjusted annual average lb/hr
X = Buyer's new base annual average lb/hr
W = Seller's Contract base supply requirement lb/hr
Y = Seller's new supply requirement lb/hr
Formulas
- --------
X = C * A/B
Y = C * W/B
Sample Calculation
- ------------------
A = 50,000 Constant
B = 107,700 Constant
W = 65,000 Constant
C = 80,000
X = 37,140 lb/hr new base annual average
Y = 48,282 lb/hr new supply requirement
<PAGE>
[Letterhead of PSE&G appears here]
EXHIBIT 10.56
October 10, 1986
Mr. Robert C. McNair
President
Cogen Technologies NJ, Inc.
Managing Venturer
Cogen Technologies NJ Venture
14614 Falling Creek Drive
Suite 212
Houston, Texas 77068
Re: AGREEMENT FOR GAS SERVICE
UNDER RATE SCHEDULE CIG
COGEN TECHNOLOGIES NJ VENTURE
BAYONNE, NEW JERSEY
Dear Mr. McNair:
This Agreement is intended to confirm the understandings and agreement
between Cogen Technologies NJ Venture, a New Jersey Joint Venture under New
Jersey partnership laws (referred to herein as "Cogen") and Public Service
Electric and Gas Company (referred to herein as "PSE&G") relative to the
determination of Cogen's obligation to make payment to PSE&G pursuant to Special
Provision (c) of PSE&G's Rate Schedule CIG, which is incorporated herein by
reference, and other relevant terms and conditions. In certain respects this
Agreement supercedes the provisions of Rate Schedule CIG; however, except in
those specific instances, gas service to Cogen hereunder shall at all times be
subject to and consistent with all applicable terms and conditions of PSE&G's
Tariff for Gas Service and Rate Schedule CIG.
In consideration of the mutual promises and obligations contained herein,
the parties to this Agreement agree to the following procedures, terms and
conditions:
1. PSE&G will install the necessary facilities to provide, and will
provide, up to a maximum of 3,000 MCF/hr. of gas to your site in
Bayonne, New Jersey (the "Site"). No initial payment will be required
for this installation, subject, however, to the conditions below. It is
presently anticipated that the pipeline and appurtenant facilities
required for
<PAGE>
-2-
the provision of gas service hereunder will be ready for initial service
to Cogen by April 12, 1988.
2. As a result of (i) the uncertainties associated with the price of CIG
gas, (ii) the projected cost of the high pressure gas main required to
be installed in order to provide service, and (iii) the projected gas
usage by Cogen during the first twelve (12) months of operation, sixteen
(16) months after initial usage of gas service an amount equal to the
actual cost of the facilities as determined by PSE&G, less 10% of the
annual revenue (as defined in paragraph 4 below) resulting from this
service, plus interest on this difference, shall be paid to PSE&G by
Cogen. Should 10% of the annual revenue equal or exceed the cost of
facilities, no payment will be required. This paragraph 2 shall
supersede anything in Rate Schedule CIG appearing to the contrary,
including, without limitation, Special Provision (c) set forth on First
Revised Sheet No. 38 thereof.
3. A month is defined as a billing period in accordance with Section 8.7 of
our Standard Terms and Conditions for Gas Service (copy attached).
4. The annual revenue referred to in paragraph 2 above shall be the
aggregate of the maximum revenues received by PSE&G for any twelve of
the first sixteen months after initial usage of service.
5. The interest referred to in the paragraph 2 above shall be calculated
based on the prime rate at Chase Manhattan Bank, N. A., plus 1%.
Interest shall accrue from the time that PSE&G begins construction of
the required facilities until such time as any required payment is made.
6. If for any reason this project is unable to commence operation, Cogen
shall be responsible for payment in full for the total cost incurred by
PSE&G in pursuit of its obligations hereunder for any and all facilities
constructed by and/or expenses incurred by PSE&G, or for which any
financial obligations or expenses have been incurred. Provided, however,
that in the event the project is unable to commence operation, PSE&G
shall use reasonable efforts to find some other use for the facilities
constructed or for which financial obligations have been incurred, and
to the extent PSE&G can use such facilities for another purpose, Cogen's
responsibility for the payment of the total cost of such facilities
shall be reduced accordingly.
<PAGE>
-3-
7. As security for the above obligations, Cogen shall enter into an
irrevocable letter(s) of credit in favor of PSE&G on terms and
conditions acceptable to PSE&G, which letter(s) of credit shall be
executed by a commercial bank authorized to transact business in the
State of New Jersey and acceptable to PSE&G. The letter(s) of credit
will require the issuer to honor demands for payment made by PSE&G on
compliance with the terms and conditions specified in the letter(s) of
credit. The letter(s) of credit shall also be used to secure any payment
due to PSE&G from Cogen under paragraph 2 above in the event Cogen does
not make the payment if required by the terms of paragraph 2.
Cogen shall establish such letter(s) of credit for and same shall be
issued to PSE&G within thirty (30) days of execution of this Agreement.
PSE&G shall not be obligated to order any equipment or materials
required for construction of the gas facilities until such letter(s) of
credit has been issued to it in acceptable form or fails to do so. In
the event Cogen fails to establish for and have issued to PSE&G a
letter(s) of credit consistent with the above requirements, PSE&G may
suspend further performance under this Agreement until such letter(s) of
credit is (are) established for and issued to PSE&G.
The total amount to be secured ultimately by the letter(s) of credit
shall be $4.6 million. This Agreement contemplates that the letter(s) of
credit shall be provided according to Schedule A of this Agreement which
schedule establishes the amounts to be secured and the dates by which
the letter(s) shall be provided.
Before PSE&G can demand payment from the bank providing said letter(s)
of credit, it shall send a bill to Cogen for all costs, expenses and
other financial obligations incurred relative to the pipeline and
appurtenant facilities. If said bill is not paid within 30 days from the
date thereof, PSE&G may then at any time demand payment under said
letter(s) of credit from bank.
Once gas service to Cogen commences, the outstanding amount under the
letter(s) of credit may be reduced by Cogen over the ensuing 16 month
period to reflect the extent to which actual gas revenue has reduced the
potential liability of Cogen under this Agreement. Within 30 days
following the end of each three billing months commencing with the start
of gas
<PAGE>
-4-
service, PSE&G will advise Cogen in writing of the extent to which the
total $4.6 million amount or any subsequently reduced amount as secured
by the letter(s) of credit may be reduced as a result of actual gas
revenue. There will be a final reconciliation within 30 days following
the conclusion of the sixteen (16) month period.
In calculating the amount by which the letter of credit may be reduced
at the given intervals, the amount of any reduction will be equal to the
current face amount of the letter of credit less the actual cost of the
facilities as determined by PSE&G plus 10% of the cumulative revenue
received by PSE&G for gas service rendered to Cogen commencing with the
start of gas service, except that in any calculation occurring after the
twelfth billing month, including the final reconciliation, the "annual
revenue" as defined in paragraph 4 of this Agreement shall be used in
lieu of the "cumulative revenue" above. In the event the result of this
calculation is zero, or a negative amount, no reduction in the amount of
the letter of credit will occur.
8. The making of a payment by Cogen will not give it any interest in the
facilities, such ownership being vested exclusively in PSE&G.
9. Notwithstanding anything herein appearing to the contrary, Cogen
reserves the right to notify PSE&G in writing to suspend the performance
of the work of PSE&G in installing the gas facilities contemplated
hereunder, at any time prior to the completion thereof, for any reason,
including, without limitation, the occurrence of am Imminent Suspension
Event, Suspension Event or a Matured Suspension Event as such terms are
defined in the Construction Loan Agreement between Cogen Technologies NJ
Venture and General Electric Power Funding Corporation, relating to
financing of the contemplated cogeneration project at Cogen's Bayonne,
New Jersey site.
10. With regard to Cogen's obligations to be a qualifying facility under
Rate Schedule CIG, Cogen shall provide PSE&G with a copy of its
qualifying facility certification as granted by the Federal Energy
Regulatory Commission before service under Rate Schedule CIG is
supplied. Cogen is obligated to maintain its QF status. In the event
that Cogen makes any modification to its cogeneration facility or to its
operation of such facility that differs
<PAGE>
-5-
from the representations contained in Cogen's application for qualifying
facility certification, Cogen shall furnish PSE&G, upon request, a
recertification order of the Commission, or, in the alternative, at
Cogen's discretion, an opinion of counsel that the cogeneration facility
still qualifies as a qualifying facility under the Federal Energy
Regulatory Commission's rules.
11. It is acknowledged that Cogen may assign this Agreement to a third party
which has provided financing for the project, provided Cogen has
requested in writing of PSE&G a consent to such assignment explaining
the reasons therefor; however, any such assignment shall be subject to
assignee accepting in writing all of the terms and conditions of this
Agreement. Such assignment agreement shall be provided to PSE&G for
review and approval prior to its effectiveness. Consent by PSE&G shall
not be unreasonably withheld.
12. In the event PSE&G files for and/or proposes any future changes in its
Rate Schedule CIG, it shall advise Cogen in writing within fourteen (14)
days from the date of such filing.
My signature below confirms PSE&G's agreement with all the terms and
conditions of this Agreement, and your signature at the indicated location will
similarly confirm Cogen's agreement with all the terms and conditions contained
herein. Accordingly, please sign this agreement and return it to me along with
the signed Application for CIG, which is attached.
Very truly yours,
/s/ Louis L. Rizzi
-------------------------------
Louis L. Rizzi
Vice President--Customer and
Marketing Services
Accepted:
/s/ Robert McNair
- ------------------------------
R. McNair--President
Cogen Technologies NJ, Inc.
Managing Venturer
On behalf of Cogen Technologies NJ Venture
<PAGE>
SCHEDULE A
Total Amount of $ To Be
Date Letter(s) of Credit Due Secured by Letter(s) of Credit
- ---------------------------- ------------------------------
November 10, 1986 450,000
February 1, 1987 850,000
April 1, 1987 1,350,000
May 1, 1987 2,850,000
June 1, 1987 3,150,000
July 1, 1987 3,500,000
August 1, 1987 4,200,000
September 1, 1987 4,600,000
<PAGE>
APPLICATION FOR RATE SCHEDULE CIG
COGENERATION INTERRUPTIBLE SERVICE
TO PUBLIC SERVICE ELECTRIC AND GAS COMPANY:
Cogen Technologies N J Venture
requests Public Service Electric and Gas Company (PSE&G) to supply gas service
under Rate Schedule Cogeneration Interruptible Service (CIG) at
Foot of E. 22nd Street, Bayonne
for a maximum annual requirement of 176,000,000 therms
and a maximum hourly requirement of 30,000 therms, for the operation of the
following equipment:
Four gas turbines, one steam turbine, supplementary firing equipment.
Upon acceptance by PSE&G, it is understood and agreed that:
(1) Customer shall take and pay for the service in accordance with Rate Schedule
CIG and the Standard Terms and Conditions referred to therein and in
accordance with any changes or modification thereof as provided in Section
14 of the Standard Terms and Conditions for Gas Service.
(2) Customer shall obtain approval from PSE&G before making any changes in the
connected equipment served under this provision and a new application will
be required.
(3) Rate Schedule CIG will become effective on the date service is provided.
(4) Customer shall provide a 120 volt source of electric for the operation of
the gas metering equipment.
(5) Customer shall pay to Public Service $ * as a contribution towards
facilities in accordance with the terms of Special Provision (c) Rate
Schedule CIG.
(6) Gas supplied in excess of the quantity described in Special Provision (m)
shall be billed under Rate Schedule LVG except as specified under Special
Provision (e).
(7) Customer shall provide Public Service with their Qualifying Facilities
Certification as granted by the Federal Energy Regulatory Commission before
service is supplied.
* See attached letter agreement.
<PAGE>
(8) Customer shall file, with Public Service, a monthly report of the
kilowatthours produced and volume of other fuels used by the cogeneration
facility.
(9) Customer shall install, maintain and make accessible for reading by Public
Service such electric meters as necessary for determining the volume of gas
applicable to Rate Schedule CIG.
Accepted:
Public Service Electric and Cogen Technologies
Gas Company N J Venture
By /s/ Louis L. Rizzi By /s/ Robert McNair
------------------------------- --------------------------------
Title: Vice President--Customer President
and Marketing Services Cogen Technologies NJ, Inc.
Date: 10/10/86 Managing Venturer
<PAGE>
EXHIBIT 10.57
5/23/88
AGREEMENT
ENTERED into this 1st day of June , 1988 between Cogen
Technologies NJ Venture, (hereinafter designated as "Cogen"), party of the first
part and the City of Bayonne, a municipal corporation of the State of New Jersey
(hereinafter designated as the "City"), party of the second part.
WITNESSED:
On July 16, 1987 Cogen and the City executed an Option Agreement committing
the City to secure and reserve, for future use, 1.5 million gallons per day of
potable water for Cogen's proposed cogeneration facility in the City of Bayonne.
That Option Agreement will remain in full force and effect until September 30,
1988 or until the proposed cogeneration facility begins commercial operation,
which ever occurs sooner.
This agreement between Cogen and the City will take immediate effect upon
the expiration of the Option Agreement and concerns a commitment by Cogen to
purchase, and of the City to secure, reserve and supply 1.5 million gallons per
day of potable water, for use in Cogen's cogeneration facility.
The City will charge Cogen a fee for the water it uses based upon standard
water use rates.
<PAGE>
5/23/88
Cogen is obligated, at the minimum, to pay the City for 1.25 million
gallons of water per day at standard water use rates whether or not it uses this
quantity of water. Cogen is also obligated to pay the City out-of-pocket
expenses for up to 250,000 gallons of water per day for water it does not use.
Cogen will be billed for water monthly with payment due within 30 days
after receipt of each bill.
The City is aware that the Cogen facility cannot operate without the supply
of potable water and will utilize its best efforts to insure a continuous
supply.
This contract shall run for a period of thirty (30) years beginning on the
date of contract execution.
It is expressly agreed that Cogen shall be permitted to assign this
agreement, including assignments to Cogen's lenders who shall be entitled to
succeed to Cogen's interest hereunder, provided that any assignment will not
relieve Cogen of its obligations to the City under this agreement.
This contract can be modified or superseded only by a written instrument
executed by the City and Cogen.
IN WITNESS WHEREOF, the party of the first part has caused this agreement
to be executed in its corporate name by its President, attested by its Secretary
and its corporate seal to be hereunto affixed, the day and year first above
written, and the party of the second part has caused this agreement to be
-2-
<PAGE>
5/23/88
executed in its corporate name by the Mayor, attested by the City Clerk,
approved by the Director of the Law Department, and its corporate seal to be
hereunto affixed the day and year first above written.
COGEN TECHNOLOGIES NJ VENTURE
By: Cogen Technologies NJ, Inc.,
Managing Venturer
Attest:
By: /s/ MARY ANN MCLENDON By: /s/ ROBERT C. MCNAIR
----------------------------- -----------------------------
Asst. Secretary Robert C. McNair
President
CITY OF BAYONNE
Attest:
By By /s/ DENNIS P. COLLINS
------------------------------ ------------------------------
Robert F. Sloan Dennis P. Collins
City Clerk Mayor
APPROVED AS TO FORM:
By: /s/ ROBERT F. SLOAN
------------------------------
Robert F. Sloan
Acting Law Director
-3-
<PAGE>
EXHIBIT 10.58
LEASE AGREEMENT
BETWEEN
BAYONNE INDUSTRIES, INC.
AND
IMTT-BAYONNE
("LESSOR")
AND
COGEN TECHNOLOGIES NJ VENTURE
("LESSEE")
October 18, 1986
Record and return to: Prepared by
Martin L. Wiener, Esq. Ross D. Ain, Esq.
Kimmelman, Wolff & Van Ness, Feldman, Sutcliffe
Samson & Curtis
280 Corporate Center 1050 Thomas Jefferson St., N.W.
5 Becker Farm Road Seventh Floor
Roseland, New Jersey 07068 Washington, D.C. 20007
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE 1
DEFINITIONS .................................................. 2
ARTICLE 2
DEMISED PREMISES.............................................. 6
ARTICLE 3
TERM ......................................................... 7
3.1 Base Term ........................................... 7
3.2 Termination ......................................... 7
3.3 Renewal of Lease Agreement........................... 7
3.4 Extension Upon Termination........................... 8
ARTICLE 4
RENT.......................................................... 8
4.1 Base Term Rent....................................... 8
4.2 Renewal Term Rent ................................... 9
4.3 Additional Rent ..................................... 10
ARTICLE 5
USE OF PREMISES
AND OWNERSHIP OF IMPROVEMENTS................................. 10
5.1 Use Limited.......................................... 10
5.2 Safe and Lawful Use.................................. 11
5.3 Maintenance of Governmental Authorizations........... 11
5.4 Lessee's Right to Contest............................ 12
-i-
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
5.5 Effect on Lessor's Insurance ........................ 12
5.6 Ownership of Improvements ........................... 13
5.7 Security Arrangement ................................ 13
ARTICLE 6
QUIET ENJOYMENT .............................................. 14
6.1 Lessee's Possession ................................. 14
6.2 Access by Lessor .................................... 14
6.3 Access by Lessee for Steam Interconnection .......... 14
ARTICLE 7
TAXES ........................................................ 15
7.1 Payment of Taxes .................................... 15
7.2 Compliance and Evidence of Payment .................. 16
7.3 Tax Appeals ......................................... 16
7.4 Proration ........................................... 16
7.5 Refunds and Rebates ................................. 17
ARTICLE 8
UTILITY EXPENSES ............................................. 17
ARTICLE 9
REIMBURSEMENT ................................................ 18
9.1 Reimbursement of Lessor.............................. 18
9.2 Reimbursement of Lessee.............................. 18
-ii-
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE 10
PRIOR USE; ENVIRONMENTAL RESPONSIBILITY ...................... 19
10.1 Prior Use of Demised Premises ...................... 19
10.2 Environmental Damage Responsibility ................ 19
ARTICLE 11
LIENS ........................................................ 20
ARTICLE 12
INSURANCE..................................................... 21
12.1 Responsibility of Lessee ........................... 21
12.2 Conditions Concerning Insurance Carriers ........... 21
ARTICLE 13
PERMITTED ENCUMBRANCES ON LEASEHOLD
INTERESTS AND IMPROVEMENTS ................................... 22
ARTICLE 14
EMINENT DOMAIN ............................................... 23
14.1 Distribution of Award............................... 23
14.2 Partial Taking ..................................... 24
ARTICLE 15
TERMINATION................................................... 24
15.1 Lessor's Right to Terminate......................... 24
15.2 Lessee's Right to Terminate......................... 25
15.3 Prepaid Rent Nonrefundable ......................... 26
-iii-
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
15.4 Notice to Financiers and Opportunity to Cure ....... 27
15.5 Written Notice of Termination ...................... 29
15.6 Condition of Demised Premises at Termination ....... 29
ARTICLE 16
REMEDIES UPON LESSEE'S BREACH ................................ 29
ARTICLE 17
ATTENDANT LAND RIGHTS ........................................ 31
ARTICLE 18
MORTGAGE PRIORITY ............................................ 32
ARTICLE 19
NONWAIVER .................................................... 33
ARTICLE 20
FORCE MAJEURE ................................................ 33
20.1 Definition ......................................... 33
20.2 Burden of Proof .................................... 34
20.3 Effect of Force Majeure ............................ 34
20.4 Prepaid Rent Nonrefundable ......................... 34
ARTICLE 21
SUCCESSORS AND ASSIGNS ....................................... 35
ARTICLE 22
MISCELLANEOUS ................................................ 39
22.1 Duplicates; Recordation ............................ 39
-iv-
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
22.2 Consent Not to be Unreasonably Withheld............ 40
22.3 Termination of Preexisting Lease................... 40
22.4 Covenants Running with Land........................ 40
22.5 Notice............................................. 40
22.6 Amendments......................................... 41
22.7 Choice of Law...................................... 41
22.8 Severability....................................... 42
22.9 Other Agreements................................... 42
22.10 Captions........................................... 42
22.11 Counterparts....................................... 43
Exhibits
- --------
A. Property Description
B. Map of Demised Premises
C. Example of GNP Deflator Adjustment
-v-
<PAGE>
THIS LEASE AGREEMENT made and entered into as of October 18, 1986, by and
between Bayonne Industries, Inc., a New Jersey corporation, and IMTT-Bayonne, a
Delaware partnership (collectively referred to as the "Lessor"), and Cogen
Technologies NJ Venture, a New Jersey general partnership, and its successors
and assigns (the "Lessee").
WHEREAS, Lessor, IMTT-Bayonne, operates a tank terminal facility located at
Bayonne, New Jersey ("Lessor's Plant" or "Bayonne Facility"), which Plant
utilizes steam for industrial purposes;
WHEREAS, Lessor, Bayonne Industries, Inc., is the owner of the property
whereon the Bayonne Facility is located and IMTT-Bayonne leases such property
from Bayonne Industries, Inc.;
WHEREAS, IMTT-Bayonne and Lessee have entered into an Agreement for the
Sale of Steam and Electricity from a Cogeneration Facility (the "Steam Sale
Agreement");
WHEREAS, Lessor and Cogen Technologies NJ, Inc. entered into a lease
agreement dated May 22, 1986 covering certain property owned by Bayonne
Industries, Inc., which lease was assigned to Lessee;
WHEREAS, Lessee now desires to lease certain other property owned by
Bayonne Industries, Inc. at the same tank terminal facility in lieu of the
premises originally leased and Lessor and Lessee have agreed to modify their
arrangements under the former lease by execution of this superseding Lease
Agreement so as to allow for such change in location as well as to reflect
certain
<PAGE>
-2-
technical changes arising by reason of such change in location; and
WHEREAS, therefore, the Lessor desires to lease to Lessee the land upon
which the Cogeneration Facility will be located;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein and other valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Lessor and Lessee agree as follows:
ARTICLE 1
---------
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:
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 entity.
1.2 "Annual Period" means any one of a succession of consecutive 12-month
periods, the first of which shall begin on May 22, 1986 if such date is the
first day of a calendar month, or otherwise on the first day of the month
immediately following the month in which such execution occurs.
<PAGE>
-3-
1.3 "Bayonne Facility" means the tank terminal facility located at Bayonne,
New Jersey, and all appurtenant property owned or leased at that location by
IMTT, BI, or any Affiliates thereof.
1.4 "BI" means Bayonne Industries, Inc., a New Jersey corporation having
its principal place of business at the Foot of East 22nd Street, Bayonne, New
Jersey 07002.
1.5 "Boiler House" means the building located at the Bayonne Facility that
houses the Steam Producing Facilities except that interior portion of the
building unrelated to the Steam Producing Facilities.
1.6 "Cogen" means Cogen Technologies NJ, Inc., a Delaware corporation,
having its principal place of business at 14614 Falling Creek Drive, Suite 212,
Houston, Texas 77068.
1.7 "Cogeneration Facility" means the waste heat boilers, gas and steam
turbines, generators and all appurtenant structures, equipment including
interconnection facilities, owned or leased and operated by Lessee for the
purpose of producing electricity, steam or other forms of useful thermal output,
but such term does not include real property interests.
1.8 "Date of Initial Commercial Operation" means 12:01 A.M. on the day
Lessee designates in writing as the initial date of commercial operation of the
Cogeneration Facility.
1.9 "Easement" means that certain easement to be executed from BI and IMTT
to Lessee pursuant to which BI and IMTT grant to
<PAGE>
-4-
Lessee ingress and egress over the Bayonne Facility to the Boiler House,
including all exhibits and amendments thereto that may be made from time to
time, and any other easements, rights of way or licenses that may be granted to
Lessee under this Lease Agreement.
1.10 "Financier" means any person lending money for the construction and
operation of the Cogeneration Facility, any person providing funds for
refinancing, or take-out of any such loans, and the nominee or designee of any
such person.
1.11 "IMTT" means IMTT-Bayonne, a Delaware partnership.
1.12 "Lease Agreement" or "Ground Lease" means this contract, including
all exhibits and amendments thereto that may be made from time to time.
1.13 "Leasehold Improvements" means the Cogeneration Facility and any
other improvements constructed or placed on the Demised Premises by Lessee.
1.14 "Note" means the promissory note of Cogen dated MAY 22, 1986, payable
to Bayonne Industries, Inc. in the principal amount of $2,600,000.00, the
payment of which has been assumed by Lessee.
1.15 "Option Agreement" means that certain option agreement dated May 22,
1986 between Lessee, as assignee of Cogen, and BI, including all exhibits and
amendments thereto that may be made from time to time.
<PAGE>
-5-
1.16 "Party" or "Parties" means the signatories of this Lease Agreement and
their permitted successors and assigns.
1.17 "Prime Rate" means the interest rate (sometimes referred to as the
"Base Rate") for large commercial loans to creditworthy entities published by
First National Bank of Chicago, or its successor bank, as such rate may be in
effect from time to time.
1.18 "Purchase and Sale Agreement" means that certain agreement dated May
22, 1986 pursuant to which Cogen purchases and Lessor sells the Steam Producing
Facilities, including all exhibits and amendments thereto that may be made from
time to time.
1.19 "Rent Note" means the promissory note of Cogen dated May 22, 1986,
payable to BI in the principal amount of $600,000.00, the payment of which has
been assumed by Lessee.
1.20 "Security Agreement" means that certain agreement dated May 22, 1986
between Lessee, as assignee of Cogen, and BI executed and delivered by Cogen as
security for the payment of the Note, including all exhibits and amendments that
may be made from time to time.
1.21 "SPF Lease" means that certain Steam Producing Facilities Lease
Agreement dated May 22, 1986 between Lessee, assignee of Cogen, as lessor, and
IMTT, as lessee, pursuant to which the Steam Producing Facilities will be leased
to IMTT, including all exhibits and amendments thereto that may be made from
time to time.
<PAGE>
-6-
1.22 "Steam Producing Facilities" means the existing boilers and
appurtenant structures and equipment located inside the Boiler House, and all
additions, replacements, improvements, substitutions, and increments thereto,
but not including the Boiler House, located at the Bayonne Facility and operated
for the purpose of producing steam for industrial purposes at the Bayonne
Facility.
1.23 "Steam Sale Agreement" means, that certain agreement between Lessee,
as assignee of Cogen, and IMTT dated June 13, 1985, for the sale of steam and
electricity from a cogeneration plant, including all exhibits and amendments
thereto that may be made from time to time.
ARTICLE 2
---------
DEMISED PREMISES
----------------
Upon the terms and conditions hereinafter set forth, and in consideration
of the payment of the rents and the prompt performance by the Lessee of the
covenants and agreements contained herein, the Lessor does lease, let, and
demise to the Lessee and the Lessee hereby leases from the Lessor, that certain
real property situated in the County of Hudson, State of New Jersey, as
described in Exhibit A hereto and as more fully shown on Exhibit B hereto
attached (hereinafter referred to as the "Demised Premises").
<PAGE>
-7-
ARTICLE 3
---------
TERM
----
3.1 Base Term. This Lease Agreement shall be effective upon the date of
execution and shall continue in effect for a Base Term of twenty (20) Annual
Periods after the May 22, 1986.
3.2 Termination. Notwithstanding the preceding paragraph, if the Date of
Initial Commercial Operation of the Cogeneration Facility has not occurred prior
to the last day of the month which is twenty (20) months following May 22, 1986,
Lessor may thereafter terminate this Lease Agreement by providing Lessee and
each Financier thirty (30) days written notice, unless prior to the expiration
of such thirty (30) day period, Lessee has commenced a program of continuous
construction of the Cogeneration Facility and does not, of its own volition,
subsequently discontinue such construction program.
3.3 Renewal of Lease Agreement. Upon the expiration of the Base Term, this
Lease Agreement shall automatically be extended for two (2) succeeding terms
(hereinafter referred to as the "Renewal Terms"), unless Lessee elects to
terminate this Lease Agreement at the expiration of the Base Term or the first
Renewal Term. In the event that this Lease Agreement terminates during the Base
Term pursuant to Article 15, Lessee shall not owe Lessor Renewal Term rent
pursuant to Article 4.2. The first Renewal Term shall be for two (2) Annual
Periods and the second Renewal
<PAGE>
-8-
Term shall be for ten (10) Annual Periods. Termination of this Lease Agreement
pursuant to this Article 3.3 shall be valid only if Lessee provides written
notice of its intent to terminate to Lessor at least nine (9) months prior to
the expiration of the Base Term or the first Renewal Term. Upon expiration of
the second Renewal Term, this Lease Agreement may be continued thereafter by
mutual agreement of the Parties.
3.4 Extension Upon Termination. Upon any termination of this Lease
Agreement, it shall be automatically extended for one additional twelve (12)
month period solely for the purposes described in Article 15.6.
ARTICLE 4
---------
RENT
----
4.1 Base Term Rent. This Lease Agreement is made for and in consideration
of a rental amount of Six Hundred Thousand Dollars ($600,000.00) which is due
upon the execution of this Lease Agreement, and payable by delivery to BI of a
promissory note (the Rent Note) with Lessee as maker, due and payable, in full,
twenty-four (24) months from May 22, 1986 bearing interest at the rate of one
percent (1%) over the Prime Rate, with interest, due from May 22, 1986 until
paid and said interest being payable monthly commencing thirty (30) days from
May 22, 1986. In the event that Lessee elects to terminate
<PAGE>
-9-
this Lease Agreement for any reason on or before November 22, 1986, and Lessee
pays to Lessor a certified check made to the order of BI in the sum of Sixty
Thousand Dollars ($60,000.00), the above-described Rent Note shall be returned
to Lessee marked "paid" or "cancelled".
4.2 Renewal Term Rent.
A. For the Renewal Terms, Lessee shall pay to Lessor beginning upon,
the first day of the first calendar month of the Renewal Term and upon the first
day of each succeeding calendar month for the duration of the Renewal Term a
rental amount of Five Thousand Dollars ($5,000.00) per month, to be adjusted as
provided in Article 4.2B.
B. The Renewal Term Rent shall be adjusted upward at an annual
percentage rate equal to the annual percentage increase in the GNP Deflator, if
any, which has occurred during the immediately preceding calendar year,
commencing with calendar year 1988 and for each year thereafter. The increase,
if any, will be implemented at the beginning of each Renewal Term Annual Period.
In no event will the Renewal Term Rent ever be adjusted downward or decreased,
provided, however, that in the event of a decrease in the GNP Deflator, the
Renewal Term Rent will not be adjusted upward until the GNP Deflator has
exceeded a level equal to that in the year immediately preceding the year(s) in
which the GNP Deflator decreased.
<PAGE>
-10-
C. The GNP Deflator is defined as the percentage which when divided
into the then current Gross National Product will yield Gross National Product
in 1982 dollars (or constant dollars for the then applicable base year). GNP
Deflator percentages are published by the U.S. Department of Commerce in its
bulletin "Survey of Current Business" and/or the Federal Reserve Bulletin. An
example of the operation of the GNP Deflator is attached as Exhibit C.
4.3 Additional Rent. In addition to the rent set forth in Articles 4.1 and
4.2, Lessee shall comply with all of the obligations to pay taxes set forth in
Article 7 and to make payments set forth in Article 8 and Article 9 of this
Lease Agreement, which obligations shall be collectively referred to as
"Additional Rent." Any payments made by a Financier pursuant to Article
21.7(2)(i) shall also be Additional Rent.
ARTICLE 5
---------
USE OF PREMISES
---------------
AND OWNERSHIP OF IMPROVEMENTS
-----------------------------
5.1 Use Limited. The Demised Premises shall be used (i) only for the
erection, construction, operation, maintenance, modification, reconstruction,
and replacement of the Cogeneration Facility or (ii) with the consent of Lessor,
for any other lawful use.
<PAGE>
-11-
5.2 Safe and Lawful Use. Lessee shall not use, occupy, suffer or permit the
Demised Premises or any part thereof to be used during the term hereof in any
manner or occupied for any purpose contrary to any applicable and duly adopted
laws, ordinances, rules and any public authority regulations nor in derogation,
violation or in nonconformity with any safety codes and recognized industry
safety standards and guidelines applicable to Lessee's operation on the Demised
Premises. Lessee shall use, maintain and occupy the Demised Premises in a
careful, safe, lawful and proper manner and will not commit nor permit any
public or private nuisance to be committed on the Demised Premises. Lessee shall
not use nor permit the use of the Demised Premises in any way which will injure
the reputation of the same or which shall constitute an unreasonable
interference with Lessor's business or a nuisance, annoyance or inconvenience to
the Lessor or any neighbors of Lessor or which shall damage Lessor or any
neighbors of Lessor. The safe and lawful erection, construction, operation,
maintenance, modification, reconstruction, or replacement of a Cogeneration
Facility shall not be construed to constitute a nuisance, annoyance or
inconvenience on the Demised Premises.
5.3 Maintenance of Governmental Authorizations. Lessee shall be responsible
for obtaining and maintaining all necessary government authorizations, licenses,
permits and certificates for its utilization of the Demised Premises and shall
carry on its
<PAGE>
-12-
operations in compliance with all such authorizations, licenses, permits and
certificates.
5.4 Lessee's Right to Contest.
A. Lessee shall have the right to contest by appropriate legal
proceedings diligently conducted in good faith, in the name of the Lessee, or
Lessor (if legally required and consented to by Lessor), or both (if legally
required and consented to by Lessor) without cost or expense to Lessor, the
validity or application of any law, ordinance, order, rule, regulation or
requirement of the nature referred to in Articles 5.2 and 5.3. If by the terms
of any such law, ordinance, order, rule, regulation or requirement, compliance
therewith may legally be delayed pending the prosecution of any such proceeding,
Lessee may delay such compliance therewith until the final determination of such
proceeding.
B. Lessor agrees to execute and deliver any appropriate papers or other
instruments which may be necessary or proper to permit Lessee to so contest the
validity or application of any such law, ordinance, order, rule, regulation or
requirement and to fully cooperate with Lessee in such contest, all at Lessee's
expense.
5.5 Effect on Lessor's Insurance. Except with regard to the permitted uses
under Article 5.1, Lessee shall put nothing on the Demised Premises nor
undertake any activity which would forfeit Lessor's insurance on its Bayonne
Facility or the
<PAGE>
-13-
insurance required hereunder. Should any installation made or action taken by
Lessee, whether authorized or unauthorized under this Lease Agreement, increase
the premium of any of Lessor's insurance policies on its Bayonne Facility or the
insurance required hereunder, then Lessee is obligated to pay such increased
premiums on Lessor's insurance policies. Should the Lessee's operation and
maintenance of the Cogeneration Facility be conducted in an unsafe manner so as
to render the Lessor unable to secure insurance on its Bayonne Facility, then
Lessee hereby grants to Lessor the right to require Lessee, upon written notice
from Lessor, to immediately take such action as is necessary to operate and
maintain the Cogeneration Facility in a safe manner.
5.6 Ownership of Improvements. Lessee warrants that it or its assignees will
be the owner of any Leasehold Improvements erected, installed, or located on the
Demised Premises by it. Lessor agrees that same shall be the sole property of
the Lessee, and Lessor shall have no legal or equitable ownership interest
therein.
5.7 Security Arrangement. Lessor reserves the right from time to time during
the Base Term of this Lease or any renewal thereof, to require Lessee, at
Lessee's expense, to take such actions, implement such procedures and/or erect
such improvements as Lessor, in its sole discretion, may deem necessary and/or
desirable to assure the security of the Bayonne Facility by
<PAGE>
-14-
reason of ingress and egress to, from and over the Bayonne Facility by Lessee,
its agents, servants, employees, invitees and/or any other persons utilizing
such rights of ingress and egress to gain access to and from the Demised
Premises.
ARTICLE 6
---------
QUIET ENJOYMENT
---------------
6.1 Lessee's Possession. Lessor warrants that it has good title to the
Demised Premises free and clear of all liens and encumbrances other than those
set forth in Title Report No. 8624-60149 of Chicago Title Insurance Company.
Lessor covenants and agrees with Lessee that so long as the Lessee keeps and
performs all of the covenants and conditions required to be kept and performed
by the Lessee, the Lessee shall have quiet and undisturbed and continued
possession of the Demised Premises, free from any claims against the Lessor and
all persons claiming under, by or through the Lessor.
6.2 Access by Lessor. Lessor, its agents and representatives, at all
reasonable times, may enter the Demised Premises to inspect the same for the
purposes of ascertaining compliance with terms of this Lease Agreement.
6.3 Access by Lessee for Steam Interconnection. Lessee shall have the right
to enter, at reasonable times, the premises of the Lessor in order to construct,
operate, and maintain steam or electric interconnection facilities necessary to
carry out the
<PAGE>
-15-
Steam Sale Agreement and any other steam agreement with Exxon Company, U.S.A. or
any other person, or any other electric power sales arrangements, but only in
accordance with the provisions of Article 17 of this Lease Agreement.
ARTICLE 7
---------
TAXES
-----
7.1 Payment of Taxes. Lessee shall be responsible for all taxes relating to
the Demised Premises and any buildings or improvements erected thereon by
Lessee, as well as all equipment and/or fixtures located thereon by Lessee.
Lessor shall deliver to Lessee promptly after receipt copies of all tax bills
relating to the tax lot of which the Demised Premises are a portion together
with a calculation made in accordance with Article 7.4 of the taxes owed by
Lessor on the nonleased portion of the tax lot. Lessee shall thereafter promptly
pay to Lessor Lessee's pro rata share of such taxes. Such payment shall be made
to a special account of Lessor, disbursements therefrom to be made in accordance
with an agreement among Lessor, Lessee, and the bank in which such account shall
be established, which shall provide that withdrawals therefrom shall be made
solely to the order of the taxing authority for the payment of Lessee's pro rata
share of taxes. Thereafter, Lessor shall be responsible) to remit to the
responsible tax authorities payment of taxes for the entire tax lot of which the
Demised Premises are a portion.
<PAGE>
-16-
7.2 Compliance and Evidence of Payment. Lessor shall be deemed to have
complied with the covenants of this Article regarding all taxes if payment of
such taxes shall have been made either within any period allowed by law or by
the governmental authority imposing the same during which payment is permitted
without penalty or interest or before the same shall become a lien upon the
Demised Premises provided Lessee pays any and all penalties, late charges and/or
interest in connection therewith, and Lessor shall produce and exhibit to
Lessee, if requested to do so in writing by Lessee, satisfactory evidence of
such payment. Notwithstanding the foregoing and subject only to Article 7.1,
Lessor shall promptly pay all such taxes where no legal delay has been obtained.
7.3 Tax Appeals. Lessee or its designees shall have the right, with
Lessor's knowledge and consent, to contest or review all such taxes by legal
proceedings, or in such other manner as it may deem suitable which, if
necessary, may be in the name of and with the cooperation of the Lessor and
Lessor shall execute, all documents necessary to accomplish the foregoing.
Notwithstanding the foregoing and subject only to Article 7.1, Lessor shall
promptly pay all such taxes where no legal delay has been obtained.
7.4 Proration. The Parties hereto understand and agree that the real
property taxes relating to the Demised Premises shall be prorated
proportionately between Lessor and Lessee:
<PAGE>
-17-
(i) for the first and last year of this Lease Agreement, and (ii) to the extent
that the Demised Premises are not a separately assessed tax lot, based upon the
respective percentages of the acreage of the tax lot compared to the acreage
leased herein. All taxes relating to Leasehold Improvements of Lessee shall be
solely for the account of Lessee. All taxes relating to leasehold improvements
of Lessor shall be solely for the account of Lessor.
7.5 Refunds and Rebates. Any refunds or rebates on account of the taxes
paid with respect to the Demised Premises shall be prorated in accordance with
the provisions of Article 7.4(ii). Any such refunds received by Lessor or Lessee
a part of which are for the benefit of the other shall be received by either
Party in trust and paid forthwith to the Party entitled to such portion of the
refund. Lessee will, upon the request of Lessor, sign any receipts which may be
necessary to secure the payment of any such refund or rebate.
ARTICLE 8
---------
UTILITY EXPENSES
----------------
Lessee shall contract separately for and pay when due all the rents or
charges for utilities, including but not limited to electricity, gas, water,
sewerage and sewer assessments, used by the Lessee, which are or may be assessed
or imposed upon the Demised Premises and if not paid, such rents or charges
shall
<PAGE>
-18-
become payable as Additional Rent with the installment of rent next due or
within thirty (30) days of demand therefor, whichever occurs sooner.
ARTICLE 9
---------
REIMBURSEMENT
-------------
9.1 Reimbursement of Lessor. If the Lessee shall fail or refuse to comply
with and perform any conditions and covenants of this Lease Agreement, the
Lessor may (but shall be under no obligation to) carry out and perform such
conditions and covenants, for the account of the Lessee. Any cost or expense so
incurred by Lessor shall be payable on demand or shall be added, to the
installment of rent due immediately thereafter. This remedy shall be in addition
to such other remedies as the Lessor may have hereunder by reason of the breach
by the Lessee of any of the covenants and conditions of this Lease Agreement.
9.2 Reimbursement of Lessee. If the Lessor shall fail or refuse to comply
with and perform any conditions and covenants of this Lease Agreement, the
Lessee may (but shall be under no obligation to) carry out and perform such
conditions and covenants, for the account of the Lessor. Any cost and expense
paid by Lessee shall be payable by Lessor on demand. This remedy shall be in
addition to such other remedies as the Lessee may have hereunder by reason of
the breach by the Lessor of any of the covenants and conditions of this Lease
Agreement.
<PAGE>
-19-
ARTICLE 10
----------
PRIOR USE; ENVIRONMENTAL RESPONSIBILITY
---------------------------------------
10.1 Prior Use of Demised Premises. Lessor makes no warranty that the
Demised Premises are suitable for Lessee's purposes; however, Lessor has no
knowledge that the Demised Premises are unsuitable for Lessee's purposes. If the
Demised Premises cannot be used for Lessee's purposes as specified in Article 5,
then Lessee may cancel this Lease Agreement without liability or penalty to
either Party.
10.2 Environmental Damage Responsibility. Lessor agrees that Lessee shall
be liable only for any environmental loss, damage, cost, or expense arising from
its construction, operation, and maintenance of the Cogeneration Facility and
Lessor shall not be entitled to claim any right of contribution or otherwise
hold Lessee liable for any environmental losses, damages, costs, or expenses
which result from actions which occurred prior to the effective date of this
Lease Agreement or which occurred or occurs by reason of actions of the Lessor
or other parties beyond the reasonable control of the Lessee. Lessee and Lessor
shall cooperate with each other to assist in the defense of any claim made
against one or both of the Parties to this Lease Agreement which relates to
environmental damage not caused by the Parties, Including pursuing any third
parties. Unless prohibited by any applicable insurance policy carried by either
Party, Lessor and Lessee agree to subrogate the other
<PAGE>
-20-
Party to any rights that they may have against third parties with respect to
environmental liability in connection with the Demised Premises.
ARTICLE 11
----------
LIENS
-----
If any mechanics', materialmen's or other liens shall be filed against the
Demised Premises by reason of labor performed or materials furnished to the
Lessee in the erection, construction, completion, alteration, repair or addition
to any building or improvement, the Lessee shall within thirty (30) days
thereafter, at the Lessee's own cost and expense, cause such lien or liens to be
satisfied, removed, cancelled, erased and discharged of record together with any
Notices of Intention that may have been filed either by payment thereof or by
bonding the lien in accordance with the laws of the State of New Jersey. Should
Lessee fail to comply with the foregoing, Lessor may at its option have the lien
removed by bonding same, all at lessees expense. Failure to do so shall entitle
the Lessor to resort to such remedies as are provided herein in the case of any
default of this Lease Agreement, in addition to such as are permitted by law.
Lessee shall at no time cause or permit a mortgage or any other security device
of any nature to be inscribed against the Demised Premises except as otherwise
provided in Article 13 with regard to Lessee's leasehold interest.
<PAGE>
-21-
ARTICLE 12
----------
INSURANCE
---------
12.1 Responsibility of Lessee. Lessee shall provide and maintain, for the
joint benefit of the Lessee and Lessor (and mortgagees, if any) during the
entire term of this Lease Agreement, public liability insurance against claims
for: (1) bodily injury and death occurring on or about the Demised Premises; (2)
property damage; and (3) for any claims or acts that Lessee or Lessor can be
held legally liable for, regardless of the jurisdiction. Lessee shall also
provide and maintain Worker's Compensation Insurance in statutory limits. Lessor
shall have the right, from time to time, to make such reasonable requirements
with reference to insurance that will reasonably cover liabilities to which the
Lessor may be exposed by virtue of this Lease Agreement, but in no event will
Lessor require that Lessee carry limits in excess of those carried by Lessor.
Any insurance called for hereunder shall also provide coverage for any claims
resulting from Lessee's use of any of Lessor's land pursuant to Article 17
hereof.
12.2 Conditions Concerning Insurance Carriers. Insurance companies issuing
policies required in this Lease Agreement shall be qualified to do business in
New Jersey and shall have a financial rating of A12 or better according to
"Best's Insurance Reports, Fire and Casualty," edition current at the inception
date of each policy. To the extent permissible by law, all
<PAGE>
-22-
insurance policies required to be furnished by the Lessee hereunder shall name
both Lessee and Lessor (and mortgagees, if any) as named insureds and each such
policy shall be non-cancellable with respect to Lessor without thirty (30) days
written notice to the Lessor. The policy or policies of insurance or certified
copies thereof shall be delivered to Lessor, together with evidence of the
payment of the premiums therefor, not less than fifteen (15) days prior to the
commencement of the term of this Lease Agreement or the date when the Lessee
shall enter into possession of the Demised Premises, whichever occurs sooner. At
least fifteen (15) days prior to the expiration or termination date of any
policy, Lessee shall deliver a renewal or replacement policy with proof of the
payment of the premium therefor; provided, however, that in the event that
Lessee cannot deliver a renewal or replacement policy within such period, Lessee
shall deliver to Lessor a binder or certificate of insurance as soon as
possible.
ARTICLE 13
----------
PERMITTED ENCUMBRANCES ON
-------------------------
LEASEHOLD INTERESTS AND IMPROVEMENTS
------------------------------------
Lessee may, at any time and from time to time during the term of this Lease
Agreement and without the consent of Lessor, encumber Lessee's interest in the
leasehold estate created by this Lease Agreement to any Financier by way of a
lien, leasehold
<PAGE>
-23-
mortgage or deed of trust containing such provisions as Lessee shall deem fit
and proper. The rights of Lessor will remain superior to those of such
Financiers in all instances except those in which Lessee encumbers Leasehold
Improvements placed upon the Demised Premises by Lessee. Lessee is hereby
specifically granted the right to encumber the Leasehold Improvements and Lessor
hereby subordinates any rights that it may have against said Leasehold
Improvements in favor of a Financier, it being understood that nothing in this
Article 13 shall adversely affect any rights of Lessor or any Financier under
Articles 21.6 and 21.7 of this Lease Agreement.
ARTICLE 14
----------
EMINENT DOMAIN
--------------
14.1 Distribution of Award. If the Demised Premises and/or attendant rights
of way or other land rights shall be taken or condemned, in whole or in part, by
any competent authority, the Parties hereto agree to cooperate in applying for
and in prosecuting any claim for such taking and further agree that the
aggregate net award, after a pro rata deduction of all expenses and costs,
including attorneys' fees, incurred in connection therewith, payable to both
Lessor and Lessee (or if required, to any mortgagee) shall be distributed as
follows: (1) the portion of the award (or moneys received) relating to the
taking of the Cogeneration Facility or the expense of dismantling and moving
<PAGE>
-24-
the Cogeneration Facility shall be paid to the Lessee; (2) the portion of the
award (or moneys received) relating to the value of the Demised Premises for
the remainder of the Base Term of this Lease Agreement shall be paid to Lessee;
and (3) the portion of the award (or moneys received) relating to the value of
the land constituting the Demised Premises shall be paid to the Lessor.
14.2 Partial Taking. In the event of a partial taking of the Demised
Premises and/or attendant rights of way, and if such partial taking renders the
continuation of normal operations at the Cogeneration Facility impossible,
impracticable, or unduly onerous, Lessee may elect to terminate this Lease
Agreement by giving notice to the Lessor within three (3) months after such
taking or condemnation. If such notice of termination is given, this Lease
Agreement shall terminate as of the date on which such notice is given.
ARTICLE 15
----------
TERMINATION
-----------
15.1 Lessor's Right to Terminate. Lessor shall have the right to terminate
this Lease Agreement upon the occurrence of any of the following events:
A. The Lessee shall fail to make timely payment of any of the rent
pursuant to Articles 4, 7, 8, 9, and 21.7(2)(i) when due and payable, which
failure continues for thirty (30) days after written notice thereof; or
<PAGE>
-25-
B. The Lessee shall fall to perform any of the covenants or
obligations of this Lease Agreement required to be kept and performed by
Lessee,' other than the payment of rent covered in Paragraph A above, which
failure continues for a period of thirty (30) days after written notice of such
non-performance; provided, however, that this Lease Agreement shall not
terminate if Lessee shall diligently commence to cure such default within such
thirty (30) day period and for so long as Lessee diligently continues such
efforts.
15.2 Lessee's Right to Terminate. Lessee shall have the right to terminate
this Lease Agreement upon the occurrence of any of the following events:
A. Lessor shall fail to perform any of the covenants or obligations of
this Lease Agreement required to be kept and performed by Lessor, which failure
continues for a period of thirty (30) days after written notice of such non-
performance; provided, however, that this Lease Agreement shall not terminate if
Lessor shall diligently commence to cure such default within such thirty (30)
day period and for so long as Lessor diligently continues such efforts;
B. Lessee terminates the Steam Sale Agreement by reason of Lessor's
breach under Article 15 of the Steam Sale Agreement;
C. The Cogeneration Facility is damaged or destroyed such that the
Cogeneration Facility cannot be made operational at
<PAGE>
-26-
normal production capacity within two (2) years after the occurrence;
D. There is a partial taking or condemnation with respect to the
Demised Premises or any building or improvement thereon such that the
continuation of normal operations at the Cogeneration Facility is impossible,
impracticable or unduly onerous;
E. Lessee fails to receive or maintain the authorizations necessary to
lawfully construct, operate and maintain the Cogeneration Facility;
F. For any reason on or before November 22, 1986, provided Lessee pays
Sixty Thousand Dollars ($60,000.00) to Lessor on or before such date; or
G. The Demised Premises cannot be used for Lessee's purposes as
specified in Article 5.
15.3 Prepaid Rent Nonrefundable. In the event that Lessee terminates this
Lease Agreement pursuant to Articles 15.2 A, B, C, D, E OR G, Lessee shall not
be entitled to any prepaid rent called for by this Lease Agreement. However,
this Article 15.3 shall not preclude Lessee from the recovery from Lessor of any
damages due as the result of a breach of this Lease Agreement.
<PAGE>
-27-
15.4 Notice to Financiers and Opportunity to Cure.
A. Lessor shall look only to Lessee or to any successor of Lessee
under Article 21.3 to satisfy all obligations hereunder. No Financier shall have
any obligation to satisfy any obligation or indebtedness of Lessee to Lessor,
except the obligations and indebtedness to Lessor required under the terms of
this Lease Agreement.
B. Notwithstanding the provisions of Article. 15.4A, a Financier shall
be liable to the Lessor for uninsured liabilities only to the extent such
liabilities represent defaults or breaches hereunder caused by Financier's
actions. Financier's liability to Lessor for uninsured liabilities which have
not been caused by Financier's actions shall be limited to the extent of such
Financier's interest in the Cogeneration Facility.
C. Lessee shall promptly notify the Lessor of the names and addresses
of all Financiers. Notwithstanding Article 3.2 or Article 15.1, Lessor shall not
terminate this Lease Agreement until it has given thirty (30) days written
notice of any breach thereof to each of such Financiers, and Lessor hereby
agrees to promptly notify all such Financiers of any breach. If Lessor fails to
give such notice, Lessor shall not be liable for damages to any Financier as a
result of such failure, but any termination of this Lease Agreement shall be of
no force and effect. Thereafter, Lessor shall not terminate this Lease Agreement
as a result of any such breach if within such thirty (30) day period any
Financier has either:
<PAGE>
-28-
(i) cured the breach if it can be cured by payment of money; or
(ii) if the breach cannot be so cured, caused the initiation of
and is diligently pursuing proceedings to give the Financier
possession of the Demised Premises or has diligently commenced to cure
the breach and for so long as the Financier diligently continues such
efforts.
D. If a Financier is prohibited by any process or injunction issued by
any court or by reason of any action by any court having jurisdiction of any
bankruptcy or insolvency proceeding involving the Lessee or by an automatic stay
thereunder from curing such breach (other than a breach that may be cured by the
payment of money), the time specified above in Article 15.4C shall be extended
for the period of such prohibition.
E. Nothing in this Lease Agreement shall require a Financier to cure
any default hereunder in advance of entering upon the Demised Premises with the
purpose of continuing to operate the Cogeneration Facility thereon. Actions by a
Financier against Leasehold Improvements under a mortgage or other security
right or encumbrance shall not in themselves be deemed an election by Financier
to continue operation of the Cogeneration Facility.
<PAGE>
-29-
15.5 Written Notice of Termination. Termination of this Lease Agreement
shall be valid only if the terminating Party provides written notice of its
intent to terminate to the other Party.
15.6 Condition of Demised Premises at Termination. At the termination of
this Lease Agreement, for any reason, Lessee shall, at its sole cost, remove all
Leasehold Improvements from the Demised Promises and any personal property owned
by Lessee and located at the Bayonne Facility within twelve (12) months of the
termination and shall restore the Demised Premises to its same condition prior
to the commencement of this Lease Agreement, with the exception of any
foundation laid at or near ground level, and shall repair any damage to the
Demised Premises caused during the term of this Lease Agreement. In the event
Lessee's Leasehold Improvements are not so removed, all such Leasehold
Improvements shall be deemed abandoned to Lessor without any payment being due
from Lessor, reserving to Lessor all rights for damages resulting from Lessee's
failure to remove Leasehold Improvements and restore the Demised Premises as
described above.
ARTICLE 16
----------
REMEDIES UPON LESSEE'S BREACH
-----------------------------
If there should occur any event under Article 15.1 which results in Lessor
terminating this Lease Agreement, or if during the term hereof the Demised
Premises or any part thereof shall be
<PAGE>
-30-
or become abandoned or deserted, vacated or vacant, or should the Lessee be
evicted by summary proceedings or otherwise, the Lessor, in addition to any
other remedies herein contained or as may be permitted by law, including but not
limited to Distress and/or Landlord's Lien Proceedings, may either by force or
otherwise, without being liable for prosecution therefor, or for damages, re-
enter the said Demised Premises and the same have and again possess and enjoy;
and, as agent for the Lessee or otherwise, re-let the Demised Premises and
receive the rents therefor and apply the same, first to the payment of such
expenses, reasonable attorney fees and costs, as the Lessor may have been put to
in re-entering and repossessing the same and in making such repairs and
alterations as may be necessary, and second to the payment of rents due
hereunder. The Lessee shall remain liable for such rents as may be in arrears
and also the rents as may accrue subsequent to the re-entry by the Lessor, to
the extent of the difference between the rents reserved hereunder and the rents,
if any, received by the Lessor during the remainder of the unexpired term
hereof, after deducting the aforementioned expenses, fees and costs, the same to
be paid as such deficiencies arise and are ascertained each month.
<PAGE>
-31-
ARTICLE 17
----------
ATTENDANT LAND RIGHTS
---------------------
In connection with this Lease Agreement of the Demised Premises and for so
long as this Lease Agreement shall remain effective, Lessor hereby grants to
Lessee all attendant rights of way and other land rights required for Lessee:
(1) to install or erect any equipment or other property to be used by Lessee to
interconnect with Lessor or any third-party purchasers of steam or electrical
power, or to otherwise transmit or receive steam or electrical power to or from
the Demised Premises; and (2) to arrange for the provision of normal utility
services to the Cogeneration Facility. Notwithstanding the foregoing, Lessor
shall retain the right to designate the location of all such rights of way
and/or other land rights. Lessor shall commit such rights of way and/or land
rights otherwise granted to writing in recordable form and shall provide that
the term thereof shall extend for a period of twelve (12) months following the
termination of this Lease Agreement solely for the purposes set forth in Article
15.6. Lessor shall grant Lessee and its business invitees and licensees an
easement for reasonable ingress and egress over Lessor's property to the Demised
Premises, which ingress and egress shall not unreasonably interfere with the
operation and use of Lessor's Plant. Lessor reserves the right, at any time
during the Base Term of this Lease or any renewal thereof, to, on one or more
occasions, at
<PAGE>
-32-
Lessee's expense, relocate the aforementioned easement for ingress and egress,
provided Lessor gives Lessee prior written notice of such requirement to
relocate sufficient to allow Lessee to do so without disruption of Lessee's
continuous right to ingress and egress to and from the Demised Premises and the
Boiler House. The status of title for any alternate easement for ingress and
egress shall not have any greater liens or encumbrances than those which may
exist with respect to the easement granted concurrently herewith. All such
grants of attendant rights-of-way and other land rights must be in writing to be
of effect and Lessor agrees to execute any and all documents, agreements and
instruments and to take all other actions, in order to effectuate the same, all
at Lessee's cost and expense.
ARTICLE 18
----------
MORTGAGE PRIORITY
-----------------
This Lease Agreement shall be a prior lien against the Demised Premises
with respect to any mortgages that may hereafter be placed upon the Demised
Premises. The recording of this Lease Agreement shall have preference and
precedence and be superior and prior in lien to any mortgage on the Demised
Premises.
<PAGE>
-33-
ARTICLE 19
----------
NONWAIVER
---------
The various rights, remedies, options, and elections of the Lessor and
Lessee, expressed herein, are cumulative, and the failure of the Lessor or
Lessee to enforce strict performance the other Party of the conditions and
covenants of this Lease Agreement or to exercise any election or option or to
resort or have recourse to any remedy herein conferred or the acceptance by the
Lessor of any installment of rent after any breach by the Lessee in any one or
more instances, shall not be construed or deemed to be a waiver or a
relinquishment for the future by the Lessor of any such conditions and
covenants, options, elections, or remedies, but the same shall continue in full
force and effect.
ARTICLE 20
----------
FORCE MAJEURE
-------------
20.1 Definition. "Force Majeure" means unforeseeable causes beyond the
reasonable control of and without the willful fault or negligence of the Party
claiming Force Majeure. It shall include failure to perform due to causes beyond
that Party's control, including but not limited to war, sabotage, acts of God,
riots, drought or accidents not reasonably foreseeable.
<PAGE>
-34-
20.2 Burden of Proof. The burden of proof as to whether a Force Majeure
has occurred shall be upon the Party claiming the Force Majeure.
20.3 Effect of Force Majeure. If either Party is rendered wholly or partly
unable to perform its obligations under this Lease Agreement because of Force
Majeure, that Party shall be excused from whatever performance is affected by
the Force Majeure to the extent so affected, provided that: (1) the
non-performing Party, within one (1) week after the occurrence of the Force
Majeure, gives the other Party written notice describing the particulars of the
occurrence; (2) the suspension of performance shall be of no greater scope and
of no longer duration than is required by the Force Majeure; and (3) no
obligations of either Party that matured before the occurrence of the Force
Majeure shall be excused as a result of such occurrence.
20.4 Prepaid Rent Nonrefundable. In the event that this Lease Agreement is
terminated or suspended pursuant to the provisions of this Article 20, Lessee
shall not be entitled to any refund of the prepaid rent called for by this Lease
Agreement.
<PAGE>
-35-
ARTICLE 21
----------
SUCCESSORS AND ASSIGNS
----------------------
21.1 This Agreement shall be binding upon and inure to the benefit of the
Parties and any permitted assignees as provided herein.
21.2 Except as is expressly set forth in this Lease Agreement, neither the
rights nor the obligations under this Lease Agreement may be assigned, pledged,
hypothecated or otherwise transferred.
21.3 Lessee is expressly permitted to assign this Agreement as provided in
this Article 21.3. Lessee may assign this Agreement to any person or entity, but
only with the consent of Lessor, provided that such assignment shall be of no
force and effect unless and until any such person or entity shall have assumed
in writing all of Lessee's obligations under the following instruments and
notes, and shall have agreed in writing to cure any existing defaults and
breaches hereunder and thereunder:
(1) The Steam Sale Agreement
(2) The Purchase and Sale Agreement
(3) The Option Agreement
(4) The SPF Lease
(5) The Note
(6) The Security Agreement
(7) The Rent Note
<PAGE>
-36-
Lessee may assign this Agreement to any Financier which shall be obligated
hereunder only as provided in Articles 21.6 and 21.7 of this Lease Agreement.
21.4 Lessor is expressly permitted to assign this Lease Agreement to any
person or entity, provided that such assignment shall be of no force and effect
unless and until such person or entity shall have assumed in writing all of
Lessor's obligations under this Lease Agreement and under the agreements
referred to in Article 21.3, with the exception of the Note and the Rent Note,
and shall have agreed in writing to cure any defaults and breaches hereunder and
thereunder. In the event that the Bayonne Facility is assigned, sold,
transferred, leased or subleased to any other party, which action would affect
Lessor's ability to fulfill its obligations under the Steam Sale Agreement, the
Purchase and Sale Agreement, the Easement or the SPF Lease, the Lessor may not
do so unless the assignee, buyer, transferee, lessee or sublessee assumes
Lessor's obligations under the foregoing agreements.
21.5 Notwithstanding any such assignment by Lessor or Lessee, the assignor
shall remain fully liable for its obligations hereunder.
21.6 No Financier succeeding to Lessee's rights under this Lease Agreement
by reason of the exercise of its remedies against Lessee under a leasehold
mortgage or security agreement shall be required to cure any defaults under, or
assume Lessee's
<PAGE>
-37-
obligations under, any agreement (other than this Lease Agreement, the Rent
Note, the first $2,400,000.00 of installments of principal, with interest
thereon, under the Note, and the obligations under Article 21.7 (2) of this
Lease Agreement) in order to succeed to Lessee's interest under this Lease
Agreement. If a Financier does not cure defaults under, and assume Lessee's
obligation under, all such other agreements, no subsequent assignee of a
Financier shall be obligated to do so and Lessor shall not be obligated to such
Financier or any subsequent assignee of a Financier under any of such
agreements. A Financier shall be entitled to the rights accorded to a Financier
under Article 15 of this Lease Agreement in performing its obligations under
Articles 21.6 and 21.7.
21.7 During the period beginning on the date of execution of this Lease
Agreement and ending at the expiration of the Base Term of the Steam Sale
Agreement as specified therein, a Financier may not assume Lessee's obligations
and rights under this Lease Agreement, unless, within ninety (90) days following
the date on which it has commenced the exercise of its remedies against Lessee,
the Financier either:
(1) assumes all of the Lessee's obligations under the agreements
referred to in Article 21.3 in which event any termination of any
such instrument by Lessor or any exercise by Lessor of its rights
thereunder shall be null and void and such instruments shall be
reinstated, or
<PAGE>
-38-
(2) agrees to pay to Lessor on or before the beginning of each
remaining Annual Period, up to the end of the Tenth Annual Period
following the Date of Initial Commercial Operation, the amount of
$500,000.00 as Additional Rent for such period, except that:
(i) with respect to the Annual Period during which such Financier
has commenced its remedies against Lessee, the amount payable
shall be determined by multiplying $500,000.00 by a factor,
which shall be equal to one (1) minus a fraction the
numerator of which is the number of k lbs. of steam which was
furnished by Lessee to Lessor under the Steam Sale Agreement
during such Annual Period up to and including the expiration
of such ninety (90) day period (but in no event greater than
450,000 k lbs. for purposes of this calculation), and the
denominator of which is 450,000 k lbs. of steam; and
(ii) the Financier may terminate this Lease Agreement and its
obligations hereunder prior to the end of the Tenth Annual
Period following the Date of Initial Commercial Operation by
giving written notice to the
<PAGE>
-39-
Lessor of its election to terminate the Lease Agreement 90
days prior to the beginning of any remaining Annual Period
for which it would otherwise be obligated to pay rent under
this Article 21.7 (2) and thereafter, the Financier shall
have no future obligation to pay any further rent under this
Article 21.7 (2).
If within such ninety (90) day period, the Financier does not assume all of
Lessee's obligations referred to in Article 21.7 (1) or does not agree to pay
the Additional Rent pursuant to Article 21.7 (2), this Lease Agreement shall
terminate effective as of the end of such ninety (90) day period.
ARTICLE 22
----------
MISCELLANEOUS
-------------
22.1 Duplicates; Recordation. The Parties will at any time, at the request
of either Party, promptly execute duplicate originals of an instrument, in
recordable form, which will constitute a short form of this Lease Agreement,
setting forth a description of the Demised Premises, the term of the Lease
Agreement and any other portions thereof, excepting the rental provisions, as
either Party may request.
<PAGE>
-40-
22.2 Consent Not to be Unreasonably Withheld. Whenever the Lessee requests
any consent, permission, or approval which may be required or desired by the
Lessee pursuant to the provisions hereof, the Lessor shall not unreasonably
withhold or postpone the grant of such consent, permission, or approval.
22.3 Termination of Preexisting Lease. By executing this Lease Agreement,
BI and IMTT hereby terminate any leasehold interest that may exist with regard
to the Demised Premises and such leasehold interest shall hereafter be of no
force and effect.
22.4 Covenants Running with Land. All covenants, promises, conditions, and
obligations herein contained or implied by law are covenants running with the
land and shall attach and bind and inure to the benefit of the Lessor and Lessee
and their respective successors and assigns, except as otherwise provided
herein.
22.5 Notice. All notices, including communications and statements which are
required or permitted under the terms of this Lease Agreement, shall be in
writing, except as otherwise provided. Service of a notice may be accomplished
by personal service, telegram or registered or certified mail. If a notice is
sent by registered or certified mail, it shall be deemed served within three (3)
days, excluding Saturdays, Sundays or legal Federal holidays, except as
otherwise demonstrated by a signed receipt. If a notice is served by telegram,
it shall be
<PAGE>
-41-
deemed served eighteen (18) hours after delivery to the telegram company.
Notices may be sent to the Parties at the following addresses:
(a) Lessee: Cogen Technologies NJ Venture
c/o Cogen Technologies NJ, Inc.,
Managing Venturer
14614 Falling Creek Drive
Suite 212
Houston, Texas 77068
Attn: Mr. Robert C. McNair
President
With information copy to:
Cogan Technologies NJ, Inc.
Foot of E. 22nd Street
Bayonne, New Jersey 07002
Attn: Plant Manager
(b) Lessor: IMTT-Bayonne
Foot of E. 22nd Street
Bayonne, New Jersey 07002
Attn: Glynn Esteves
or
International-Matex Tank Terminals
Ninth Floor
321 St. Charles Avenue
New Orleans, Louisiana 70130
Attn: Mr. Thomas B. Coleman
Partnership Manager
22.6 Amendments. No amendment or modification of the terms of this Lease
Agreement shall be binding on either the Lessor or Lessee unless reduced to
writing and signed by both Parties.
22.7 Choice of Law. This Lease Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey.
<PAGE>
-42-
22.8 Severability. Should any part of this Lease Agreement, for any reason,
be declared invalid, such decision shall not affect the validity of the
remaining portions, which remaining portions shall remain in force and effect as
if this Lease 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 Lease Agreement without
including therein any such part, parts or portion which may for any reason be
hereafter declared invalid. Notwithstanding the foregoing sentence, should any
term or provision of this Lease Agreement, be found invalid by any court or
regulatory body having jurisdiction thereover, the Parties shall immediately
renegotiate such term or provision of the Lease Agreement to eliminate such
invalidity.
22.9 Other Agreements. This Lease Agreement supersedes any and all oral or
written agreements and understandings heretofore made relating to the subject
matters herein, and this Lease Agreement constitutes the entire agreement and
understanding of the Parties relating to the subject matters herein.
22.10 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 affect the meaning, content or
scope of this Lease Agreement.
<PAGE>
-43-
22.11 Counterparts. This Lease Agreement may be signed in one or more
counterparts, each of which shall be an original and all of which, taken
together, shall constitute one instrument.
IN WITNESS WHEREOF the Parties have entered into this Lease Agreement as of
the date first written above.
(SEAL)
ATTEST: BAYONNE INDUSTRIES, INC.
/s/ BERTRAND F. ARTIGUES BY: /s/ RICHARD B. JURISICH
- --------------------------------- -----------------------------
Bertrand F. Artigues Richard B. Jurisich
Assistant Secretary Executive Vice President/
Secretary
WITNESS: IMTT-BAYONNE
/s/ BERTRAND F. ARTIGUES BY: /s/ RICHARD B. JURISICH
- --------------------------------- -----------------------------
Bertrand F. Artigues Richard B. Jurisich
Secretary
(SEAL) COGEN TECHNOLOGIES NJ VENTURE
ATTEST: BY: COGEN TECHNOLOGIES NJ, INC.,
MANAGING VENTURES
/s/ JOE M. BOLLINGER BY: /s/ ROBERT C. MCNAIR
- --------------------------------- ------------------------------
Joe M. Bollinger Robert C. McNair
Assistant Secretary President
<PAGE>
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, duly commissioned and
qualified in and for said Parish and State, personally came and appeared Richard
B. Jurisich, to me known, who declared and acknowledged to me, Notary, and the
undersigned competent witnesses that he is the Executive Vice President of
Bayonne Industries, Inc., that as such duly authorized officer, by and with the
authority of the Board of Directors of said corporation, he signed and executed
the foregoing instrument, as the free and voluntary act and deed of the said
corporation, for and on behalf of the said corporation and for the objects and
purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal and
the said appearer and the said witnesses have hereunto affixed their signatures
this 18th day of October, 1986.
WITNESSES:
/s/ SIGNATURE APPEARS HERE
- --------------------------
/s/ SIGNATURE APPEARS HERE /s/ RICHARD B. JURISICH
- -------------------------- -------------------------------
RICHARD B. JURISICH
Executive Vice-President
/s/ BERTRAND F. ARTIGUES
---------------------------
NOTARY PUBLIC
BERTRAND F. ARTIGUES
Embossed hereon is my Orleans Parish,
State of the Notary Public Seal
My Commission is issued for life.
<PAGE>
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, duly commissioned and
qualified in and for said Parish and State, personally came and appeared Richard
B. Jurisich, to me known, who declared and acknowledged to me, Notary, and the
undersigned competent witnesses that he is the Secretary of IMTT Bayonne, that
as such duly authorized officer, by and with the authority of the Partnership
Committee of said partnership, he signed and executed the foregoing instrument,
as the free and voluntary act and deed of the said partnership, for and on
behalf of the said partnership and for the objects and purposes therein set
forth.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal and
the said appearer and the said witnesses have hereunto affixed their signatures
this 18th day of October, 1986.
WITNESSES:
/s/ SIGNATURE APPEARS HERE
- --------------------------
/s/ SIGNATURE APPEARS HERE /s/ RICHARD B. JURISICH
- -------------------------- -------------------------------
RICHARD B. JURISICH
Executive Vice-President
/s/ BERTRAND F. ARTIGUES
---------------------------
NOTARY PUBLIC
BERTRAND F. ARTIGUES
Embossed hereon is my Orleans Parish,
State of the Notary Public Seal
My Commission is issued for life.
<PAGE>
THE STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
BE IT REMEMBERED, that, on this 20th day of October, 1986, before me,
the subscriber, a Notary Public of the State of Texas, personally appeared
ROBERT C. McNAIR, who, I am satisfied, is the person who has signed the within
instrument as President of Cogan Technologies NJ, Inc., a partner of Cogan
Technologies NJ Venture, the partnership named herein, and I having first made
known to him the contents thereof, he thereupon acknowledged that the said
instrument made by the partnership and sealed with its seal, was signed, sealed
and delivered by him in behalf of such partner and is the voluntary act and deed
of the partnership, made by virtue of authority from the partnership.
[SEAL APPEARS HERE] /s/ ELAINE A. CAMPBELL
----------------------------------
Elaine A. Campbell
Notary in and for Harris County, TX
My Commission expires: 7/27/89
<PAGE>
EXHIBIT A
DESCRIPTION OF A PORTION OF
---------------------------
PROPERTY OWNED BY
-----------------
BAYONNE INDUSTRIES
------------------
CITY OF BAYONNE, HUDSON COUNTY, NEW JERSEY
------------------------------------------
TO BE LEASED BY
---------------
GENERAL ELECTRIC COMPANY
------------------------
BEGINNING at a point in a northeasterly corner of the herein described parcel,
all as shown on a map entitled "Proposed Access Easement and Lease Area for
Bayonne Industries", dated as revised to October 14,1986, prepared by Hirth
Weidener Associates, said point also being the termination of course number 27
of a twenty (20) foot wide access easement and running; thence,
1. South 36 degrees 03' 14" East, distant 40.99 feet to a point in the most
easterly Line of the herein described tract; thence,
2. South 5 degrees 33' 58" West, along said easterly line, distant 192.22 feet
to a point being the southeasterly corner of the herein described tract;
thence,
3. North 84 degrees 26' 02" West, along the southerly line of the proposed
leased area, distant 609.64 feet to a point; thence,
4. North 5 degrees 33' 58" East, along the westerly line of the herein
described parcel, said line being parallel with and distant 16 feet easterly
from the easterly wall of an existing one story metal building, distant
312.03 feet to a point; thence,
5. North 51 degrees 31' 01" East, distant 47.43 feet to a point in the
northerly line of the herein described parcel; thence,
6. South 84 degrees 26' 02" East, along said northerly line, distant 429.71
feet to a point; thence,
7. South 5 degrees 33' 58" West, distant 95.00 feet to a point; thence,
8. South 84 degrees 26' 02" East, distant 94.51 feet to the above described
point or place of BEGINNING.
Containing 4.463 acres of land.
The above described parcel is a portion of Bayonne Industries property to be
leased by General Electric Company, all as shown on the previously described
map.
Revised October 17, 1986
<PAGE>
EXHIBIT C
---------
GNP DEFLATOR
------------
Example
Current rate Revised rate
------------ ------------
$5,000 $5,204
Calculations
------------
Billions of Dollars
1983 1984
----------- ----------
I. Gross National Product
A. Current dollars $3,401.6 $3,774.7
B. Constant (in this
case 1982) dollars 3,275.2 3,492.0
II. Deflator (A/B) 1.038593 1.080956
III. Percentage increase
1.080956 -- 1.038593 0.042363
-------------------- = -------- 0.040789
1.038593 1.038593
IV. Comments
A. The revised rate is the percentage increase as calculated above and
applied to the current rate.
B. See U. S. Dept. of Commerce, Bureau of Economic Analysis publication
"Survey of Current Business" for December, 1985, Tables 1.1 and 1.2,
page 20.
C. See "Federal Reserve Bulletin" for February, 1986, Table 2.16, page A51.
<PAGE>
EXHIBIT 10.59
EASEMENT
FROM
BAYONNE INDUSTRIES, INC.
AND IMTT-BAYONNE
TO
COGEN TECHNOLOGIES NJ VENTURE
OCTOBER 20, 1986
Record and return to: Prepared by:
/s/ Meir Jeremy Ostow, Esq.
-------------------------------
Martin L. Wiener, Esq. Meir Jeremy Ostow, Esq.
Kimmelman, Wolff & Samson Kimmelman, Wolff & Samson
280 Corporate Center 280 Corporate Center
5 Becker Farm Road 5 Becker Farm Road
Roseland, New Jersey 07068 Roseland, New Jersey 07068
<PAGE>
EASEMENT
THIS EASEMENT, made as of this 20th day of October, 1986, by and between
BAYONNE INDUSTRIES, INC. ("BI"), a New Jersey corporation having an office
at the Foot of East 22nd Street, Bayonne, New Jersey 07002, and IMTT-BAYONNE
("IMTT"), a Delaware partnership having its principal place of business at The
Foot of East 22nd Street, Bayonne, New Jersey 07002 (collectively "Grantor") and
COGEN TECHNOLOGIES NJ VENTURE, a New Jersey general partnership, c/o Cogen
Technologies NJ, Inc., Managing Venturer having an office at 14614 Falling Creek
Drive, Suite 212, Houston, Texas 77068 ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantor has previously sold to Grantee certain boilers and
appurtenant structures and equipment (the "Steam Producing Facilities") located
in a certain boiler house owned by BI and leased to IMTT (the "Boiler House");
and
WHEREAS, the Boiler House is located on land owned by BI and leased to IMTT
("Bayonne Facility"); and
WHEREAS, Grantor and Grantee have entered into a Lease Agreement dated
October 18, 1986 (the "Lease Agreement") whereby Grantor has leased to Grantee a
portion of the Bayonne Facility (the "Demised Premises"); and
<PAGE>
2
WHEREAS, pursuant to a certain steam sale agreement dated June 13, 1985, as
amended, and steam producing facilities lease dated May 22, 1986 between IMTT
and Grantee, as assignee of Cogen Technologies NJ, Inc. (collectively the
"Agreements"), Grantee has certain rights and obligations with regard to the
operation and maintenance of the Steam Producing Facilities; and
WHEREAS, in order to operate and maintain the Steam Producing Facilities
and exercise its rights and carry out its obligations under the Agreements, it
will be necessary for Grantee to enter upon the Bayonne Facility and the Boiler
House; and
WHEREAS, the Lease Agreement requires Grantor to provide Grantee ingress
and egress to the Demised Premises;
NOW, THEREFORE, in consideration of the sum of $1.00 and for other good and
valuable consideration, receipt of which is hereby acknowledged by Grantor,
(i) Grantor hereby grants, bargains, sells and conveys unto Grantee and its
successors and assigns a non-exclusive easement and right-of-way over the
Bayonne Facility and in and about the Boiler House as particularly described in
Exhibit A annexed hereto and incorporated herein by reference; and
<PAGE>
3
(ii) hereby grants unto Grantee and its successors and assigns a non-
exclusive license to enter into and use those areas of the Boiler House in which
the Steam Producing Facilities are located and all structure appurtenant thereto
required by Grantee in order to operate and maintain the Steam Producing
Facilities and exercise its rights under the Agreements.
The grant of this Easement is conditioned upon Grantee and its successors
and assigns agreement to repair any damage to the Bayonne Facility resulting
from Grantee's actions under this Easement.
The Easement, rights-of-way and licenses granted hereunder shall be deemed
covenants running with the land for the benefit of Grantee and its successors
and assigns as permitted under the Agreements, but not for the benefit of any
other party, and shall terminate and be of no further force and effect from and
after twelve (12) months after the date of termination of the Lease Agreement in
accordance with their terms.
<PAGE>
4
IN WITNESS WHEREOF, the Grantor hereto has caused this Easement to be
signed and attested by its duly authorized corporate officers on the day and
year first above written.
[SEAL]
ATTEST: BAYONNE INDUSTRIES, INC.
/s/ Bertrand F. Artigues /s/ Richard B. Jurisich
- ---------------------------- -----------------------------
Bertrand F. Artigues Richard B. Jurisich
Assistant Secretary Executive Vice President/
Secretary
WITNESS: IMTT-BAYONNE
/s/ Bertrand F. Artigues /s/ Richard B. Jurisich
- ---------------------------- -----------------------------
Bertrand F. Artigues Richard B. Jurisich
Secretary
<PAGE>
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, duly commissioned and
qualified in and for said Parish and State, personally came and appeared Richard
B. Jurisich, to me known, who declared and acknowledged to me, Notary, and the
undersigned competent witnesses that he is the Secretary of IMTT Bayonne, that
as such duly authorized officer, by and with the authority of the Partnership
Committee of said partnership, he signed and executed the foregoing instrument,
as the free and voluntary act and deed of the said partnership, for and on
behalf of the said partnership and for the objects and purposes therein set
forth.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal and
the said appearer and the said witnesses have hereunto affixed their signatures
this 20th day of October, 1986.
WITNESSES:
/s/ MARGARET E. TROSCLAIR
- -----------------------------
MARGARET E. TROSCLAIR
/s/ RICHARD B. JURISICH
/s/ CAROLE F. BLACKLEDGE -----------------------------
- ----------------------------- RICHARD B. JURISICH
CAROLE F. BLACKLEDGE Secretary
/s/ CHARLES B. JOHNSON
-----------------------------
NOTARY PUBLIC
CHARLES B. JOHNSON
<PAGE>
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, duly commission and
qualified in and for said Parish and State, personally came and
appeared Richard B. Jurisich, to me known, who declared and
acknowledged to me, Notary, and the undersigned competent witnesses
that he is the Executive Vice President of Bayonne Industries, Inc.,
that as such duly authorized officer, by and with the authority of the
Board of Directors of said corporation, he signed and executed the
foregoing instrument, as the free and voluntary act and deed of the
said corporation, for and on behalf of the said corporation and for the
objects and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal and the said appearer and the said witnesses have hereunto affixed their
signatures this 20th day of October, 1986.
WITNESSES:
/s/ MARGARET E. TROSCLAIR
- -----------------------------
MARGARET E. TROSCLAIR
/s/ RICHARD B. JURISICH
/s/ CAROLE F. BLACKLEDGE -----------------------------
- ----------------------------- RICHARD B. JURISICH
CAROLE F. BLACKLEDGE Secretary
/s/ CHARLES B. JOHNSON
-----------------------------
NOTARY PUBLIC
CHARLES B. JOHNSON
<PAGE>
DESCRIPTION OF A PROPOSED ACCESS EASEMENT
THROUGH LANDS OF BAYONNE INDUSTRIES
CITY OF BAYONNE, HUDSON COUNTY, NEW JERSEY
BEGINNING at a point in the southerly right-of-way line of East Twenty-second
Street where the same is intersected by the westerly line of lands now or
formerly Southern Cotton Oil Company, as shown on a map entitled "Map Showing
Proposed Access Easement for Bayonne Industries, City of Bayonne, Hudson County,
New Jersey" revised dated October 23, 1986, prepared by Hirth Weidener
Associates and running; thence,
1. South 5 degrees 38' 40.8" West, along said westerly line of lands now or
formerly Southern Cotton Oil Company, distant 248.18 feet to a point;
thence,
2. South 84 degrees 21' 19.2" East, along the southerly line of the aforesaid
Southern Cotton Oil Company, distant 19.87 feet to a point in the easterly
line of a proposed 20 foot wide access easement; thence,
3. South 3 degrees 17' 01" East, along said easterly line, distant 281.10 feet
to a point; thence,
4. South 4 degrees 36' 12" East, continuing along the same, distant 303.68 feet
to a point; thence,
5. South 12 degrees 36' 58" East, still along the same, distant 233.20 feet to
a point; thence,
6. South 6 degrees 27' 25" East, still along the said easterly line of a
proposed 20 foot wide access easement, distant 185.47 feet to a point in the
northerly line of lands now or formerly Bayonne Industries and the southerly
line of the Central Railroad of New Jersey, Constable Hook Branch; thence,
7. North 84 degrees 21' 19" West, along said southerly line of the Central
Railroad of New Jersey, distant 20.46 feet to a point in the westerly line
of the proposed 20 foot wide access easement; thence,
8. North 6 degrees 27' 25" West, along said westerly line, distant 180.10 feet
to a point; thence,
9. North 12 degrees 36' 58" West, still along the same, distant 233.53 feet to
a point; thence,
10. North 4 degrees 36' 12" West, continuing said westerly line, distant 305.31
feet to a point; thence,
11. North 3 degrees 17' 01" West, still along said westerly line of the 20 foot
wide access easement, distant 223.38 feet to a point; thence,
EXHIBIT A
<PAGE>
12. North 34 degrees 49' 18" West, distant 161.13 feet to a point in the
easterly line of lands now or formerly Kenrich Petrochemicals, Inc.; thence,
13. North 7 degrees 19' 21.8" East, along said easterly line of lands now
or formerly Kenrich Petrochemicals, Inc., distant 184.69 feet to a point in
the southerly right-of-way line of Hook Road; thence,
14. South 82 degrees 41' 49.2" East, along said southerly right-of-way line,
distant 20.07 feet to a street line jog; thence,
15. North 5 degrees 38' 40.8" East, distant 1.92 feet to a point in the
southerly right-of-way line of the aforesaid East Twenty-second Street;
thence,
16. South 84 degrees 21' 19.2" East, distant 70.00 feet to the above described
point or place of BEGINNING.
The above description is intended to be an easement having a variable to 20 foot
width which crosses lands of Bayonne Industries from East Twenty-second Street
in a southerly direction to the southerly line of Central Railroad of New
Jersey, Constable Hook Branch, all is shown on the above recited map.
The crossing of the lands of Central Railroad of New Jersey, Constable Hook
Branch by courses 6 and 8 does not imply ownership in said lands and is subject
to crossing agreement cited under Rights and Easements as number 10 on the
aforementioned map.
Revised October 23, 1986
EXHIBIT A
<PAGE>
DESCRIPTION OF A PROPOSED 20 FOOT WIDE ACCESS EASEMENT
THROUGH LANDS OF
BAYONNE INDUSTRIES
CITY OF BAYONNE, HUDSON COUNTY, NEW JERSEY
BEGINNING at a point in the southerly right-of-way line of Central Railroad of
New Jersey, Constable Hook Branch, where the same is intersected by the westerly
line of a proposed 20 foot wide access easement, said point of beginning being
the following courses and distances from where the southerly right-of-way line
of Hook Road is intersected by the easterly line of lands now or formerly
Kenrich Petrochemicals, Inc. and from said point running; thence,
A. South 7 degrees 19' 21.80" West, along said easterly line of lands now or
formerly Kenrich Petrochemicals, Inc., distant 184.69 feet to a point;
thence,
B. South 34 degrees 49' 18" East, distant 161.13 feet to a point; thence,
C. South 3 degrees 17' 01" East, distant 223.38 feet to a point; thence,
D. South 4 degrees 36' 12" East, distant 305.31 feet to a point; thence,
E. South 12 degrees 36' 58" East, distant 233.53 feet to a point; thence,
F. South 6 degrees 27' 25" East, distant 180.10 feet to a point and the place
of BEGINNING and running; thence,
1. South 84 degrees 21' 19" East, along said southerly line of the Central
Railroad of New Jersey, Constable Hook Branch, distant 20.46 feet to a
point; thence,
2. South 6 degrees 27' 25" East, along the easterly line of the proposed
easement, distant 40.99 feet to a bend point; thence,
3. South 51 degrees 15' 32" East, distant 167.90 feet to a point; thence,
4. South 88 degrees 43' 55" East, along the northerly line of said access
easement, distant 240.55 feet to a point; thence,
5. South 62 degrees 22' 50" East, continuing along the same, distant 128.36
feet to a point; thence,
6. South 5 degrees 41' 10" West, along the easterly line of said access
easement, distant 570.09 feet to a point; thence,
7. South 28 degrees 32' 04" East, still along said easterly line of the
proposed access easement, distant 524.82 feet to a point; thence,
EXHIBIT A
<PAGE>
8. South 66 degrees 07' 15" West, distant 29.69 feet to a point in the easterly
side of a proposed boiler building easement; thence,
9. North 23 degrees 15' 59" West, along said easterly line of said boiler house
lease, distant 20.00 feet to a point; thence,
10. North 66 degrees 07' 15" East, 20 foot offset and parallel with course 8
above, distant 7.78 feet to a point; thence,
11. North 28 degrees 32' 04" West, along the westerly line of proposed access
easement, 20 foot distant and at right angles from course number 7, distant
486.75 feet to a point; thence,
12. South 72 degrees 49' 49" West, along the southerly line of proposed access
easement, distant 195.77 feet to a point; thence,
13. North 22 degrees 10' 53" West, continuing along said access easement,
distant 266.51 feet to a point; thence,
14. North 82 degrees 57' 54" West, along the southerly line of said access
easement, distant 359.51 feet to a point; thence,
15. North 59 degrees 19' 12" West, continuing the same, distant 161.75 feet to a
point; thence,
16. North 79 degrees 44' 18" West, still along said access easement, distant
118.33 feet to a point; thence,
17. North 5 degrees 33' 58" East, along said access easement, distant 50.98 to a
point; thence,
18. South 84 degrees 26' 02" East, along the southerly line of the proposed
lease parcel, distant 20.00 feet to a point; thence,
19. South 5 degrees 33' 58" West, distant 32.56 feet; thence,
20. South 79 degrees 44' 18" East, along the northerly line of the proposed
access easement, distant 103.50 feet to a point; thence,
21. South 59 degrees 19' 12" East, still along said northerly line, distant
161.16 feet to a point; thence,
22. South 82 degrees 57' 54" East, continuing said northerly line, distant
331.80 feet to a point of intersection; thence,
23. North 4 degrees 47' 49" East, along the westerly line of a proposed 20 foot
wide access easement, distant 263.91 feet to a point; thence,
EXHIBIT A
<PAGE>
24. North 4 degrees 22' 54" West, continuing the same, distant 155.20 feet to a
point in the southwesterly line of said access easement; thence,
25. North 51 degrees 15' 32" West, along the same, distant 144.48 feet to a
point; thence,
26. South 44 degrees 40' 00" West, 181.65 feet to a point in the northeasterly
side of the previously described proposed lease parcel; thence,
27. North 36 degrees 03' 14" West, along said northeasterly line, distant 17.51
feet to a bend point; thence,
28. North 84 degrees 26' 02" West, along the same, distant 3.50 feet to a point
in the northwesterly line of the proposed access easement; thence,
29. North 44 degrees 40' 00" East, along the same, distant 178.96 feet to a
point; thence,
30. North 51 degrees 15' 32" West, still along said access easement, distant
2.89 feet to an angle point; thence,
31. North 6 degrees 27' 25" West, still along the westerly line of the proposed
access easement, distant 53.52 feet to a point in the southerly boundary of
the Central Railroad of New Jersey, Constable Hook Branch; said point being
the above described point or place of BEGINNING.
Excluding there from the following parcel which is totally surrounded by said
access easements as shown on the previously described map beginning a point in a
northerly line of a 20 foot wide access easement where the same is intersected
by the easterly line of 20 foot wide access easement and running; thence,
1. North 4 degrees 47' 49" East, parallel with and distant from course number
23 previously described, distant 266.29 feet to a point; thence,
2. North 4 degrees 22' 54" West, still along the same and parallel with course
number 24 previously described, distant 145.38 feet to a point; thence,
3. South 88 degrees 43' 55" East, parallel with and distant 20 foot from course
number 4 previously described, distant 233.89 feet to a point; thence,
4. South 62 degrees 22' 50" East, parallel with and 20 foot distant from course
number 5 above, distant 110.17 feet to a point; thence,
5. South 5 degrees 41' 10" West, continuing along the same being 20 foot
distant from and parallel with course number 6 previously described, distant
545.11 feet; thence,
EXHIBIT A
<PAGE>
6. South 72 degrees 49' 49" West, parallel with and 20 foot distant from course
number 12 previously described, distant 183.54 feet to a point; thence,
7. North 22 degrees 10' 53" West, 20 foot distant from and parallel with course
number 13 previously described, distant 259.92 feet to a point; thence,
8. North 82 degrees 57' 54" West, parallel with and distant 20 feet at right
angles to course number 14 previously described, distant 15.23 feet to above
described point or place of BEGINNING.
Revised October 23, 1986
EXHIBIT A
<PAGE>
FIRST AMENDMENT
TO
EASEMENT
FROM
BAYONNE INDUSTRIES, INC.
AND IMTT-BAYONNE
TO
COGEN TECHNOLOGIES NJ VENTURE
DECEMBER 15, 1988
Record and Return to: Prepared by:
Martin L. Wiener, Esq. Martin L. Wiener, Esq.
Kimmelman, Wolff & Samson Kimmelman, Wolff & Samson
5 Becker Farm Road 5 Becker Farm Road
Roseland, New Jersey 07068 Roseland, New Jersey 07068
<PAGE>
FIRST AMENDMENT TO EASEMENT
THIS FIRST AMENDMENT TO EASEMENT (this "First Amendment"), made as of
the 15th day of December, 1988, by and between BAYONNE INDUSTRIES, INC. ("BI"),
a New Jersey corporation having an office at the Foot of East 22nd Street,
Bayonne, New Jersey 07002, and IMTT-BAYONNE ("IMTT"), a Delaware partnership
having its principal place of business at the Foot of East 22nd Street, Bayonne,
New Jersey 07002 (BI and IMTT herein together called "Grantor"), and COGEN
TECHNOLOGIES NJ VENTURE, a New Jersey general partnership, c/o Cogen
Technologies NJ, Inc., Managing Venturer, having an office at 1600 Smith Street,
Suite 5000, Houston, Texas 77002 ("Grantee"),
W I T N E S S E T H
WHEREAS, Grantor, as "Grantor" therein, executed and delivered unto
Grantee, as "Grantee" therein, that certain Easement dated as of October 20,
1986 (the "Original Easement"), recorded in Deed Book 3634, Page 59 in the
Hudson County Register's Office, Hudson County, New Jersey, to which Original
Easement and its record reference is here made for all purposes; and
WHEREAS, under the Original Easement, Grantor granted unto Grantee a
non-exclusive access easement and right-of-way over a certain tract of land (the
"Original Access Tract"),
<PAGE>
being more particularly described in Exhibit A attached hereto and made a part
hereof for all purposes; and
WHEREAS, Grantor and Grantee desire to amend the Original Easement so
as to change the location of the access easement granted therein;
NOW, THEREFORE, for and in consideration of the premises and mutual
promises contained herein, Grantor and Grantee covenant and agree that,
effective as of the date first above written, the Original Easement shall be
amended by deleting the reference to and description of the Original Access
Tract and replacing it with a reference to and description of that certain tract
of land (the "Revised Access Tract"), being more particularly described in
Exhibit B attached hereto and made a part hereof for all purposes.
In furtherance of the foregoing, Grantor hereby grants, bargains, sells
and conveys unto Grantee and its successors and assigns a non-exclusive easement
and right-of-way over and upon the Revised Access Tract, and Grantee releases
and relinquishes in favor of Grantor any right, title, or interest of Grantee in
or to the Original Access Tract.
Except as specifically provided herein, the Original Easement shall
continue in full force and effect, and Grantor and Grantee ratify, adopt, and
confirm the Original Easement as amended hereby.
<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this First Amendment to be
signed and attested by its duly authorized corporate officers on the day and
year first above written.
(SEAL]
ATTEST: BAYONNE INDUSTRIES, INC.
By: /s/ Bertrand F. Artigues By: /s/ Richard B. Jurisich
-------------------------- ------------------------
Name: Bertrand F. Artigues Name: Richard B. Jurisich
Title: Assistant Secretary Title: Vice President
WITNESSES: IMTT-BAYONNE
/s/ Margaret E. Trosclair By: /s/ Richard B. Jurisich
- --------------------------- ----------------------------
Margaret E. Trosclair Name: Richard B. Jurisich
Title: Chief Operating Officer
/s/ Carole F. Blackledge "GRANTOR"
- ---------------------------
Carole F. Blackledge COGEN TECHNOLOGIES NJ VENTURE
By: Cogen Technologies NJ, Inc.,
Managing Venturer
By: /s/ Lawrence Thomas
Name: Lawrence Thomas
Title: Vice President
"GRANTEE"
<PAGE>
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, duly commissioned and
qualified in and for said Parish and State, personally came and appeared RICHARD
B. JURISICH, to me known, who declared and acknowledged to me, Notary and the
undersigned competent witnesses that he is the Vice President of BAYONNE
INDUSTRIES, INC., a New Jersey corporation, that as such duly authorized
officer, by and with the authority of the Board of Directors of said
corporation, he signed and executed the foregoing instrument, as the free and
voluntary act and deed of said corporation, for and on behalf of the said
corporation and for the objects and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal and
the said appearer and the said witnesses have hereunto affixed their signatures
this 28th day of December, 1988.
WITNESSES:
/s/ Margaret E. Trosclair By: /s/ Richard B. Jurisich
- --------------------------- ---------------------------
Margaret E. Trosclair Name: Richard B. Jurisich
Title: Vice President
/s/ Carole F. Blackledge
- ---------------------------
Carole F. Blackledge
/S/ SIGNATURE APPEARS HERE
----------------------------------
NOTARY PUBLIC
<PAGE>
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, duly commissioned and
qualified in and for said Parish and State, personally came and appeared RICHARD
B. JURISICH, to me known, who declared and acknowledged to me, Notary, and the
undersigned competent witnesses that he is the Chief Operating Officer of IMTT-
BAYONNE, that as such duly authorized officer, by and with the authority of the
Partnership Committee of said partnership, he signed and executed the foregoing
instrument, as the free and voluntary act and deed of said partnership, for and
on behalf of the said partnership and for the objects and purposes therein set
forth.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal and
the said appearer and the said witnesses have hereunto affixed their signatures
this 28th day of December, 1988.
WITNESSES:
/s/ Margaret E. Trosclair By: /s/ Richard B. Jurisich
- --------------------------- -----------------------------
Margaret E. Trosclair Name: Richard B. Jurisich
Title: Chief Operating Officer
/s/ Carole F. Blackledge
- ---------------------------
Carole F. Blackledge
/S/ SIGNATURE APPEARS HERE
----------------------------------
NOTARY PUBLIC
<PAGE>
STATE OF NEW YORK
COUNTY OF NEW YORK
BEFORE ME, the undersigned Notary Public, duly commissioned and
qualified in and for said County and State, personally came and appeared
LAWRENCE THOMAS, to me known, who declared and acknowledged to me, Notary, and
the undersigned competent witnesses that he is the Vice President of Cogen
Technologies NJ, Inc. a Delaware corporation, Managing Venturer of COGEN
TECHNOLOGIES NJ VENTURE, a New Jersey general partnership, that as such duly
authorized officer, by and with the authority of the Board of Directors of said
corporation, he signed and executed the foregoing instrument, as the free and
voluntary act and deed of said corporation, for and on behalf of the said
corporation, in said corporation's capacity as Managing Venturer of the
aforementioned partnership, as the voluntary act and deed of said partnership,
for and on behalf of said partnership, and for the objects and purposes therein
set forth.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal and
the said appearer and the said witnesses have hereunto affixed their signatures
this 29th day of December, 1988.
WITNESSES:
/S/ SIGNATURE APPEARS HERE By: /s/ LAWRENCE THOMAS
- ------------------------------- Name: Lawrence Thomas
Title: Vice President
/S/ SIGNATURE APPEARS HERE
- -------------------------------
/S/ SIGNATURE APPEARS HERE
-------------------------------
NOTARY PUBLIC
<PAGE>
DESCRIPTION OF A PROPOSED ACCESS EASEMEMT
THROUGH LANDS OF BAYONNE INDUSTRIES
CITY OF BAYONNE, HUDSON COUNTY, NEW JERSEY
BEGINNING at a point in the southerly right-of-way line of East Twenty-second
Street where the same is intersected by the westerly line of lands now or
formerly Southern Cotton Oil Company, as shown an a map entitled "Map Showing
Proposed Access Easement for Bayonne Industries, City of Bayonne, Hudson
County, New Jersey" revised dated October 23, 1986, prepared by Hirth Weidner
Associates and running; thence,
1. South 5 degrees 38' 40.8" West, along said westerly line of lands now or
formerly Southern Cotton Oil Company, distant 248.18 feet to a point;
thence,
2. South 84 degrees 21' 19.2" East, along the southerly line of the aforesaid
Southern Cotton Oil Company, distant 19.87 feet to a point in the easterly
line of a proposed 20 foot wide access easement; thence,
3. South 3 degrees 17' 01" East, along said easterly line, distant 281.10 feet
to a point; thence,
4. South 4 degrees 36' 12" East, continuing along the same, distant 303.68 feet
to a point; thence,
5. South 12 degrees 36' 58" East, still along the same, distant 233.20 feet to
a point; thence,
6. South 6 degrees 27' 25" East, still along the said easterly line of a
proposed 20 foot wide access easement, distant 185.47 feet to a point in the
northerly line of lands now or formerly Bayonne Industries and the southerly
line of the Central Railroad of New Jersey, Constable Hook Branch; thence,
7. North 84 degrees 21' 19" West, along said southerly line of the Central
Railroad of New Jersey, distant 20.46 feet to a point in the westerly line
of the proposed 20 foot wide access easement; thence,
8. North 6 degrees 27' 25" West, along said westerly line, distant 180.10 feet
to a point; thence,
9. North 12 degrees 36' 58" West, still along the same, distant 233.53 feet to
a point; thence,
10. North 4 degrees 36' 12" West, continuing said westerly line, distant 305.31
feet to a point; thence,
11. North 3 degrees 17' 01" West, still along said westerly line of the 20 foot
wide access easement, distant 223.38 feet to a point; thence,
EXHIBIT A
<PAGE>
12. North 34 degrees 49' 18" West, distant 161.13 feet to a point in the
easterly line of lands now or formerly Kenrich Petrochemicals, Inc.; thence,
13. North 7 degrees 19' 21.8" East, along said easterly line of lands now or
formerly Kenrich Petrochemicals, Inc., distant 184.69 feet to a point in the
southerly right-of-way Line of Hook Road; thence,
14. South 82 degrees 41' 49.2' East, along said southerly right-of-way line,
distant 20.07 feet to a street line jog; thence,
15. North 5 degrees 38' 40.8" East, distant 1.92 feet to a point in the
southerly right-of-way line of the aforesaid East Twenty-second Street;
thence,
16. South 84 degrees 21' 19.2" East, distant 70.00 feet to the above described
point or place of BEGINNING.
The above description is intended to be an easement having a variable to 20 foot
width which crosses lands of Bayonne Industries from East Twenty-second Street
in a southerly direction to the southerly line of Central Railroad of New
Jersey, Constable Hook Branch, all is shown on the above recited map.
The crossing of the lands of Central Railroad of New Jersey, Constable Hook
Branch by courses 6 and 8 does not imply ownership in said lands and is subject
to crossing agreement cited under Rights and Easements as number 10 on the
aforementioned map.
Revised October 23, 1986
EXHIBIT A
<PAGE>
DESCRIPTION OF A PROPOSED 20 FOOT WIDE ACCESS EASEMENT
THROUGH LANDS OF
BAYONNE INDUSTRIES
CITY OF BAYONNE, HUDSON COUNTY, NEW JERSEY
BEGINNING at a point in the southerly right-of-way line of Central Railroad of
New Jersey, Constable Hook Branch, where the same is intersected by the westerly
line of a proposed 20 foot wide access easement, said point of beginning being
the following courses and distances from where the southerly right-of-way line
of Hook Road is intersected by the easterly line of lands now or formerly
Kenrich Petrochemicals, Inc. and from said point running; thence,
A. South 7 degrees 19' 21.8" West, along said easterly line of lands now or
formerly Kenrich Petrochemicals, Inc., distant 184.69 feet to a point;
thence,
B. South 34 degrees 49' 18" East, distant 161.13 feet to a point; thence,
C. South 3 degrees 17' 01" East, distant 223.38 feet to a point; thence,
D. South 4 degrees 36' 12" East, distant 305.31 feet to a point; thence,
E. South 12 degrees 36' 58" East, distant 233.53 feet to a point; thence,
F. South 6 degrees 27' 25" East, distant 180.10 feet to a point and the place
of BEGINNING and running; thence,
1. South 84 degrees 21' 19" East, along said southerly line of the Central
Railroad of New Jersey, Constable Hook Branch, distant 20.46 feet to a
point; thence,
2. South 6 degrees 27' 25" East, along the easterly line of the proposed
easement, distant 40.99 feet to a bend point; thence,
3. South 51 degrees 15' 32" East, distant 167.90 feet to a point; thence,
4. South 88 degrees 43' 55" East, along the northerly line of said access
easement, distant 240.55 feet to a point; thence,
5. South 62 degrees 22' 50" East, continuing along the same, distant 128.36
feet to a point; thence,
6. South 5 degrees 41' 10" West, along the easterly Line of said access
easement, distant 570.09 feet to a point; thence,
7. South 28 degrees 32' 04" East, still along said easterly line of the
proposed Access easement, distant 524.82 feet to a point; thence,
EXHIBIT A
<PAGE>
8. South 66 degrees 07' 15" West, distant 29.69 feet to a point in the
easterly. side of a proposed boiler building easement; thence,
9. North 23 degrees 15' 59" West, along said easterly line of said boiler house
lease, distant 20.00 feet to a point; thence,
10. North 66 degrees 07' 15" East, 20 foot offset and parallel with course 8
above, distant 7.78 feet to a point; thence,
11. North 28 degrees 32' 04" West, along the westerly line of proposed access
easement, 20 foot distant and at right angles from course number 7, distant
486.75 feet to a point; thence,
12. South 72 degrees 49' 49" West, along the southerly line of proposed access
easement, distant 195.77 feet to a point; thence,
13. North 22 degrees 10' 53" West, continuing along said access easement,
distant 266.51 feet to a point; thence,
14. North 82 degrees 57' 54" West, along the southerly line of said access
easement, distant 359.51 feet to a point; thence,
15. North 59 degrees 19' 12" West, continuing the same, distant 161.75 feet to a
point; thence,
16. North 75 degrees 44' 18" West, still along said access easement, distant
118.33 feet to a point; thence,
17. North 5 degrees 33' 58" East, along said access easement, distant 50.98 to a
point; thence,
18. South 84 degrees 26' 02" East, along the southerly line of the proposed
lease parcel, distant 20.00 feet to a point, thence,
19. South 5 degrees 33' 58" West, distant 32.56 feet; thence,
20. South 79 degrees 44' 18" East, along the northerly line of the proposed
access easement, distant 103.50 feet to a point; thence,
21. South 59 degrees 19' 12" East, still along said northerly line, distant
161.16 feet to a point; thence,
22. South 82 degrees 57' 54" East, continuing said northerly line, distant
331.80 feet to a point of intersection; thence,
23. North 4 degrees 47' 49" East, along the westerly line of a proposed 20 foot
wide access easement, distant 263.91 feet to a point; thence,
EXHIBIT A
<PAGE>
24. North 4 degrees 22' 54" West, continuing the same, distant 155.20
feet to a point in the southwesterly line of said access easement; thence,
25. North 51 degrees 15' 32" West, along the same, distant 144.48 feet to a
point; thence,
26. South 44 degrees 40' 00" West, 181.65 feet to a point in the northeasterly
side of the previously described proposed lease parcel; thence,
27. North 36 degrees 03' 14" West, along said northeasterly line, distant 17.51
feet to a bend point; thence,
28. North 84 degrees 26' 02" West, along the same, distant 3.50 feet to a point
in the northwesterly line of the proposed access easement; thence,
29. North 44 degrees 40' 00" East, along the same, distant 178.96 feet to a
point; thence,
30. North 51 degrees 15' 32" West, still along said access easement, distant
2.89 feet to an angle point; thence,
31. North 6 degrees 27' 25" West, still along the westerly line of the proposed
access easement, distant 53.52 feet to a point in the southerly boundary of
the Central Railroad of New Jersey, Constable Hook Branch; said point being
the above described point or place of BEGINNING.
Excluding there from the following parcel which is totally surrounded by said
access easements as shown on the previously described map beginning a point in a
northerly line of a 20 foot wide access easement where the same is intersected
by the easterly line of 20 foot wide access easement and running; thence,
1. North 4 degrees 47' 49" East, parallel with and distant from course number
23 previously described, distant 266.29 feet to a point; thence,
2. North 4 degrees 22' 54" West, still along the same and parallel with course
number 24 previously described, distant 145.38 feet to a point; thence,
3. South 88 degrees 43' 55" East, parallel with and distant 20 foot from course
number 4 previously described, distant 233.89 feet to a point;
thence,
4. South 62 degrees 22' 50" East, parallel with and 20 foot distant from course
number 5 above, distant 110.17 feet to a point; thence,
5. South 5 degrees 41' 10" West, continuing along the same being 20 foot
distant from and parallel with course number 6 previously described, distant
545.11 feet; thence,
EXHIBIT A
<PAGE>
6. South 72 degrees 49' 49" West, parallel with and 20 foot distant from course
number 12 previously described, distant 183.54 feet to a point; thence,
7. North 22 degrees 10' 53" West, 20 foot distant from and parallel with course
number 13 previously described, distant 259.92 feet to a point; thence,
8. North 82 degrees 57' 54" West, parallel with and distant 20 feet at right
angles to course number 14 previously described, distant 15.23 feet to above
described point or place of BEGINNING.
Revised October 23, 1986
EXHIBIT A
<PAGE>
BEGINNING at a point in the southerly right-of -way line of East Twenty-second
Street where the same is intersected by the westerly line of lands now or
formerly Southern Cotton Oil Company, as shown on a map entitled "Map Showing
Proposed Access Easement for Bayonne Industries, City of Bayonne, Hudson County,
New Jersey" revised dated October 23, 1986. prepared by Hirth Weidener
Associates and running; thence,
(1) South 5 degrees 38 minutes 40.8 seconds West, along said westerly line of
lands now or formerly Southern Cotton Oil Company, distant 248.18 feet to a
point; thence
(2) South 84 degrees 21 minutes 19.2 seconds East, along the southerly line of
the aforesaid Southern Cotton Oil Company, distant 19.87 feet to a point in the
easterly line of a proposed 20 foot wide access easement; thence,
(3) South 3 degrees 17 minutes 01 seconds East, along said easterly line,
distant 281.10 feet to a point; thence,
(4) South 4 degrees 36 minutes 12 seconds East, continuing along the same,
distant 303.68 feet to a point; thence.
(5) South 12 degrees 36 minutes 58 seconds East, still along the same, distant
233.20 feet to a point; thence.
(6) South 6 degrees 27 minutes 25 seconds East, still along the said easterly
line of a proposed 20 foot wide access easement, distant 185.47 feet to a point
in the northerly Line of lands now or formerly Bayonne Industries and the
southerly line of the Central Railroad of New Jersey, Constable Hook Branch;
thence,
(7) North 84 degrees 21 minutes 19 seconds West, along said southerly line of
the Central Railroad of New Jersey, distant 20.46 feet to a point in the
westerly line of the proposed 20 foot wide access easement; thence,
(8) North 6 degrees 27 minutes 25 seconds West, along said westerly line,
distant 180.10 feet to a point; thence,
EXHIBIT B
<PAGE>
(9) North 12 degrees 36 minutes 58 seconds West, still along the same, distant
233.53 feet to a point; thence,
(10) North 4 degrees 36 minutes 12 seconds West, continuing said westerly line,
distant 305.31 feet to a point; thence,
(11) North 3 degrees 17 minutes 01 seconds West, still along said westerly line
of the 20 foot wide access easement, distant 223.38 feet to a point; thence,
(12) North 34 degrees 49 minutes 18 seconds West, distant 161.13 feet to a point
in the easterly line of lands now or formerly Kenrich Petrochemicals, Inc.;
thence,
(13) North 7 degrees 19 minutes 21.8 seconds East, along said easterly line of
lands now or formerly Kenrich Petrochemicals, Inc., distant 184.69 feet to a
point in the southerly right-of-way line of Hook Road; thence.
(14) South 82 degrees 41 minutes 49.2 seconds East, along said southerly right-
of-way line, distant 20.07 feet to a street line jog; thence,
(15) North 5 degrees 38 minutes 40.8 seconds East, distant 1.92 feet to a point
in the southerly right-of-way line of the aforesaid East Twenty-second Street;
thence,
(16) South 84 degrees 21 minutes 19.2 seconds East, distant 70.00 feet to the
above described point or place of BEGINNING.
THE above description is intended to be an easement having a variable to 20
foot width which crosses lands of Bayonne Industries from East Twenty-second
Street in a southerly direction to the southerly Line of Central Railroad of New
Jersey, Constable Hook Branch, all is shown on the above recited map.
THE crossing of the lands of Central Railroad of New Jersey, Constable Hook
Branch by courses 6 and 8 does not imply ownership in said land and is subject
to crossing agreement cited under Rights and Easements as number 10 on the
aforementioned map. Revised October 23, 1986.
EXHIBIT B
<PAGE>
DESCRIPTION OF A PROPOSED ACCESS EASEMENT
THROUGH LANDS OF
BAYONNE INDUSTRIES
CITY OF BAYONNE, HUDSON COUNTY, NEW JERSEY
BEGINNING at a point in the southerly right-of-way line of Central Railroad of
New Jersey, Constable Hook Branch, where the same is intersected by the westerly
line of a proposed access easement, said point of beginning being the following
courses and distances from where the southerly right-of-way line of Hook Road is
intersected by the easterly line of lands now or formerly Kenrich
Petrochemicals, Inc. and from said point running; thence.
A. South 7 degrees 19' 21.8" West, along said easterly line of lands nor or
formerly Kenrich Petrochemicals, Inc. distant 184.69 feet to a point;
thence,
B. South 34 degrees 49' 18" East, distant 161.13 feet to a point; thence,
C. South 3 degrees 17' 01" East, distant 223.38 feet to a point; thence,
D. South 4 degrees 36' 12" East, distant 305.31 feet to a point; thence,
E. South 12 degrees 36' 58" East, distant 233.53 feet to a point; thence,
F. South 6 degrees 27' 25" East, distant 180-10 feet to a point and the place
of BEGINNING and running; thence,
1. South 6 degrees 27' 25" East, along the easterly line of the said proposed
access easement, 26.96 feet to a point; thence,
2. South 34 degrees 36' 14" West, continuing along the easterly line of said
proposed access easement, 14.77 feet to a point on a curve to the right;
thence,
3. Along a nontangent curve to the right having a chord bearing South 67
degrees 47' 46" West, a chord length of 46.82 feet, a radius of 37.78
feet, an arc length of 50.49 feet, to a point; thence,
4. North 81 degrees 21' 30" West, along the southerly line of said proposed
access easement, 319.40 feet to a point of curvature; thence,
EXHIBIT B
<PAGE>
5. Along a nontangent curve to the left, having a chord bearing of South 66
degrees 24' 31" West, a chord length of 60.84 feet, a radius of 52.01 feet,
an arc length of 64.99 feet to a point; thence,
6. South 10 degrees 47' 52" West, distant 24.28 feet to a point on the
northerly line of a proposed lease area, containing 4.463 acres as shown on
a map entitled "Proposed Access Easement and Lease Area for Cogen
Technologies/New Jersey Venture" dated as revised December 20, 1988 and
prepared by Hirth Weidener Associates; thence,
7. North 84 degrees 26' 02" West, along said northerly line, 23.14 feet to a
point; thence,
8. North 2 degrees 29' 37" East, departing said northerly line, 19.61 feet to
a point; thence,
9. Along a nontangent curve to the right, having a chord bearing of North 60
degrees 10' 57" East, a chord length of 101.61 feet, a radius of 72.74
feet, an arc length of 112.49 feet, to a point; thence,
10. South 81 degrees 04' 02" East, along the northerly line of said proposed
access easement, 286.32 feet to a point; thence,
11. Along a nontangent curve to the left having a chord bearing of North 80
degrees 18' 53" East, a chord length of 34.50 feet, a radius of 33.71 feet,
an arc length of 36.22 feet to a point; thence,
12. North 45 degrees 31' 12" East, 35.38 feet to a point in the southerly line
of Central Railroad of New Jersey, Constable Hook Branch; thence,
13. South 84 degrees 21' 19" East, along the said southerly line of Central
Railroad of New Jersey, Constable Hook Branch, 16.78 feet to the point and
place of BEGINNING.
December 1988
EXHIBIT B
<PAGE>
DESCRIPTION OF A PROPOSED 20 FOOT WIDE ACCESS
EASEMENT
THROUGH LANDS OF
BAYONNE INDUSTRIES
CITY OF BAYONNE, HUDSON COUNTY, NEW JERSEY
BEGINNING at a point in the southerly right-of-way line of Central Railroad of
New Jersey, Constable Hook Branch, where the same is intersected by the westerly
line of a proposed 20 foot wide access easement, said point of beginning being
the following courses and distances from where the southerly right-of-way line
of Hook Road is intersected by the easterly line of lands now or formerly
Kenrich Petrochemicals, Inc. and from said point running; thence.
A. South 7 degrees 19' 21.8" West, along said easterly line of lands now or
formerly Kenrich Petrochemicals, Inc. distant 184.69 feet to a point;
thence,
B. South 34 degrees 49' 18" East, distant 161.13 feet to a point; thence,
C. South 3 degrees 17' 01" East, distant 223.38 feet to a point; thence,
D. South 4 degrees 36' 12" East, distant 305.31 feet to a point; thence,
E. South 12 degrees 36' 58" East, distant 233.53 feet to a point; thence,
F. South 6 degrees 27' 25" East, distant 180.10 feet to a point and the place
of BEGINNING and running; thence,
1. South 84 degrees 21' 19" East, along said southerly line of the Central
Railroad of New Jersey, Constable Hook Branch, distant 20.46 feet to a
point; thence,
2. South 6 degrees 27' 25" East, along the easterly line of the proposed
easement, distant 40.99 feet to a bend point; thence,
3. South 51 degrees 15' 32" East, distant 167.90 feet to a point; thence,
4. South 88 degrees 43' 55" East, along the northerly line of said access
easement, distant 240.55 feet to a point; thence,
5. SOUTH 62 degrees 22' 50" East, continuing along the same, distant 128.36
feet to a point; thence,
EXHIBIT B
<PAGE>
6. South 5 degrees 41' 10" West, along the easterly line of said access
easement, distant 570.09 feet to a point; thence,
7. South 28 degrees 32' 04" East, still along said easterly line of the
proposed access easement, distant 524.82 feet to a point; thence,
8. South 66 degrees 07' 15" West, distant 29.69 feet to a point in the
easterly side of a proposed boiler building easement; thence,
9. North 23 degrees 15' 59" West, along said easterly line of said boiler
house lease, distant 20.00 feet to a point; thence,
10. North 66 degrees 07' 15" East, 20 foot offset and parallel with course 8
above, distant 7.78 feet to a point; thence,
11. North 28 degrees 32' 04" West, along the westerly line of proposed access
easement, 20 foot distant and at right angles from course number 7, distant
486.75 feet to a point; thence,
12. South 72 degrees 49' 49" West, along the southerly line of proposed access
easement, distant 195.77 feet to a point; thence,
13. North 22 degrees 10' 53" West, continuing along said access easement,
distant 266.51 feet to a point; thence,
14. North 82 degrees 57' 54" West, along the southerly line of said access
easement, parallel with and 20 foot distant from course number 5, distant
22.74 feet to a point; thence,
15. North 4 degrees 47' 49" East, along the westerly line of a proposed 20 foot
wide access easement, distant 283.92 feet to a point; thence,
16. North 4 degrees 22' 54" West, continuing the same, distant 155.20 feet to a
point in the southwesterly line of said access easement; thence,
17. North 51 degrees 15' 32" West, along the same distant 167.47 feet to a
point; thence,
18. North 6 degrees 27' 25" West, still along the westerly line of the proposed
access easement, distant 53.52 feet to a point in the southerly boundary of
the Central Railroad of New Jersey, Constable Hook Branch; said point being
the above described point or place of BEGINNING.
EXHIBIT B
<PAGE>
Excluding there from the following parcel which is totally surrounded by said
access easements as shown on the previously described map beginning at a point
in a northerly line of a 20 foot wide access easement where the same is
intersected by the easterly line of 20 foot wide access easement and running;
thence,
1. North 4 degrees 47' 49" East, parallel with and distant 20 feet from
course number 23 previously described, distant 266.29 feet to a point;
thence,
2. North 4 degrees 22' 54" West, still along the same and parallel with
course number 24 previously described, distant 145.38 feet to a point;
thence,
3. South 88 degrees 43' 55" East, parallel with and distant 20 foot from
course number 4 previously described, distant 233.89 feet to a point;
thence,
4. South 62 degrees 22' 50" East, parallel with and 20 foot distant from
course number 5 above, distant 110.17 feet to a point; thence,
5. South 5 degrees 41' 10" West, continuing along the same being 20 foot
distant from and parallel with course number 6 previously described,
distant 545.11 feet; thence,
6. South 72 degrees 49' 49" West, parallel with and 20 foot distant from
course number 12 previously described, distant 183.54 feet to a point;
thence,
7. North 22 degrees 10' 53" West, 20 foot distant from and parallel with
course number 13 previously described, distant 259.92 feet to a point;
thence,
8. North 82 degrees 57' 54" West, parallel with and distant 20 feet at right
angles to course number 14 previously described, distant 15.23 feet to the
above described point or place of BEGINNING.
Revised December 1988
EXHIBIT B
<PAGE>
BEGINNING at a point in the most southwesterly corner of the here described
parcel, said point being 741.86 feet as measured at right angles from the
bulkhead line located along the Kill van Kull and from said point running;
thence,
(1) North 23 degrees 15 minutes 59 seconds West, along the most westerly line of
the herein described tract, distant 155.81 feet to a point; thence,
(2) North 66 degrees 41 minutes 01 seconds East, along the northerly line of
said parcel, distant 98.30 feet to a point, said point being distant 456.52 feet
as measured at right angles from the easterly line of the overall tract; thence,
(3) South 23 degrees 15 minutes 59 seconds East, along said easterly line of the
herein described parcel, distant 155.81 feet to a point; thence,
(4) South 66 degrees 44 minutes 01 seconds West, along the southerly line of the
herein described parcel, distant 98.30 feet to the above described point or
place of BEGINNING.
THE above description is for a parcel of land 155.81 x 98.30 feet in which is
contained a boiler house building. Specifically excluded from said lease are
portions of the first and second floor which are to remain in the control of the
leasor.
EXHIBIT B
<PAGE>
OPTION AGREEMENT
BETWEEN
BAYONNE INDUSTRIES, INC.
AND
COGEN TECHNOLOGIES NJ, INC.
May 22, 1986
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE 1
DEFINITIONS....................................................... 2
ARTICLE 2
OPTIONS TO PURCHASE AND SELL...................................... 5
2.1 Option to Purchase........................................ 6
A. Grant of option to Purchase; Consideration
for Option............................................. 6
B. Purchase Price of Steam Producing Facilities........... 6
C. Exercise of Option..................................... 7
2.2 Option to Sell............................................ 7
A. Grant of Option to Sell; Consideration
for Option............................................. 7
B. Sale Price of Steam Producing Facilities............... 8
C. Exercise of Option..................................... 8
2.3 Closing of Sale........................................... 8
2.4 Title to Steam Producing Facilities;
Condition Thereof......................................... 9
2.5 Assurances of Cogen....................................... 10
2.6 Determination of Fair Market Value........................ 10
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BI.............................. 11
3.1 Organization and Good Standing............................ 11
3.2 Authority................................................. 11
3.3 No Violation of Other Agreements ......................... 12
-i-
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF COGEN .......................... 12
4.1 Organization and Good Standing .......................... 12
4.2 Authority ............................................... 12
4.3 No Violation of Other Agreements ........................ 13
ARTICLE 5
SUCCESSORS AND ASSIGNS ........................................... 13
ARTICLE 6
MISCELLANEOUS..................................................... 14
6.1 Notice................................................... 14
6.2 Amendments............................................... 15
6.3 Choice of Law............................................ 16
6.4 Other Agreements......................................... 16
6.5 Captions................................................. 16
-ii-
<PAGE>
OPTION AGREEMENT
----------------
THIS OPTION AGREEMENT dated as of May 22, 1986, by and between BAYONNE
INDUSTRIES, INC., a New Jersey corporation having its principal place of
business at the Foot of East 22nd Street, Bayonne, New Jersey 07002 ("BI") and
COGEN TECHNOLOGIES NJ, INC., a Delaware corporation having its principal place
of business at 1416 Falling Creek Drive, Suite 212, Houston, Texas 77068
("Cogen").
BACKGROUND
----------
Concurrently herewith, Cogen is acquiring the Steam Producing Facilities,
together with certain other assets from BI and IMTT. BI and IMTT are unwilling
to sell such assets to Cogen and Cogen is unwilling to purchase such assets from
BI and IMTT unless Cogen and BI execute and deliver this Agreement granting to
BI the option to reacquire the same from Cogen and granting to Cogen the option
to sell the same to BI, all in accordance with the provisions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto agree as
follows:
<PAGE>
-2-
ARTICLE 1
---------
DEFINITIONS
-----------
The following terms when used herein shall have the following meanings,
unless a different meaning shall be expressly stated or apparent from the
context:
"Agreement" means this option agreement, including all exhibits and
amendments thereto that may be made from time to time.
"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 entity.
"Annual Period" means any one of a succession of 12-month periods, the
first of which shall begin on the Date of Initial Commercial Operation if such
date is the first day of a calendar month, or otherwise on the first day of the
month immediately following the month in which the Date of Initial Commercial
Operation occurs.
"Bayonne Facility" means the tank terminal facility located at Bayonne, New
Jersey, and all appurtenant property owned or leased at that location by IMTT,
BI, or any Affiliates thereof.
"BI" means Bayonne Industries, Inc., a New Jersey corporation, having its
principal place of business at the Foot of East 22nd Street, Bayonne, New Jersey
07002.
<PAGE>
-3-
"Boiler House" means the building located at the Bayonne Facility that
houses the Steam Producing Facilities, except that interior portion of the
building unrelated to the Steam Producing Facilities.
"Cogen" means Cogen Technologies NJ, Inc., a Delaware corporation, having
its principal place of business at 14614 Falling Creek Drive, Suite 212,
Houston, Texas 77068.
"Cogeneration Facility" means the waste heat boilers, gas and steam
turbines, generators and all appurtenant structures, equipment, including
Cogen's interconnection facilities, and real property interests owned or leased
and operated by Cogen at the Bayonne Facility, for purposes of generating
electricity, steam, or other forms of useful thermal output.
"Date of Initial Commercial Operation" means 12:01 a.m. on the day that
Cogen designates in writing as the initial date of commercial operation of the
Cogeneration Facility.
"Easement" means that certain easement of even date herewith from BI and
IMTT to Cogen pursuant to which BI and IMTT grant to Cogen ingress and egress
over the Bayonne Facility and the Boiler House, as more particularly described
therein including all exhibits and amendments thereto that may be made from time
to time, and any other easements, rights of way or licenses that may be granted
to Cogen under the Ground Lease.
<PAGE>
-4-
"Financier" means any person lending money for the construction and
operation of the Cogeneration Facility, any person providing funds for the
refinancing or take-out of such loans and any nominee or designee of such
person.
"Governmental Authorization" means any governmental authorization, license,
permit, or certificate that is necessary to Operate and Maintain the Steam
Producing Facilities in compliance with all applicable federal, state and local
laws.
"Ground Lease" means that certain lease agreement of even date herewith
among BI and IMTT, as lessor, and Cogen, as lessee, for certain property located
in Bayonne, New Jersey, including all exhibits and amendments thereto as may be
made from time to time.
"IMTT" means IMTT-Bayonne, a Delaware partnership.
"Note" means the promissory note of even date herewith of Cogen, payable to
BI in the principal amount of $2,600,000.00.
"Option" means either the option herein granted to B to acquire the Steam
Producing Facilities or the option herein granted to Cogen to sell the Steam
Producing Facilities, or both.
"Option Commencement Date" means the date upon which either party to the
Steam Sale Agreement has given the other party thereto notice pursuant to
Section 10.3 of that Agreement, of its intent not to renew or extend the Base
Term or any Renewal Term of the Steam Sale Agreement.
<PAGE>
-5-
"Party" or "Parties" means the signatories to this Agreement and their
permitted successors and assigns.
"Purchase and Sale Agreement" means that certain agreement of even date
herewith pursuant to which Cogen purchases and BI and IMTT sell the Steam
Producing Facilities, together with certain other assets, including all exhibits
and amendments thereto that may be made from time to time.
"Rent Note" means that certain promissory note of even date herewith of
Cogen, payable to BI in the principal amount of $600,000.00.
"Security Agreement" means that certain security agreement of even date
herewith between Cogen and BI, executed and delivered by Cogen as security for
the payment of the Note, including all exhibits and amendments thereto that may
be made from time to time.
"SRI Lease" means that certain steam producing facilities lease agreement
of even date herewith between Cogen, as lessor, and IMTT, as lessee, pursuant to
which the Steam Producing Facilities will be leased to IMTT, including all
exhibits and amendments thereto that may be made from time to time.
"Steam Producing Facilities" means the existing boilers and appurtenant
structures and equipment located inside the Boiler House, including all
additions, replacements, improvements, substitutions, and increments thereto,
more particularly described in Exhibit A appended hereto, but not including the
<PAGE>
-6-
Boiler House, located at the Bayonne Facility and operated for the purpose of
producing steam for industrial purposes at the Bayonne Facility.
"Steam Sale Agreement" means that certain agreement between Cogen and IMTT
dated June 13, 1985, for the Sale of Steam and Electricity from a Cogeneration
Plant, including all exhibits and amendments thereto that may be made from time
to time.
ARTICLE 2
---------
OPTIONS TO PURCHASE AND SELL
----------------------------
2.1 Option to Purchase.
A. Grant of Option to Purchase; Consideration for Option. Cogen
hereby irrevocably grants to BI the option to purchase the Steam Producing
Facilities from Cogen, subject to the provisions hereof. In addition to the
consideration hereinabove recited, BI is hereby delivering to Cogen a check
payable to its order in the amount of $1,000.00, receipt of which is hereby
acknowledged as consideration for the grant of the Option.
B. Purchase Price of Steam Producing Facilities. The purchase price
for the Steam Producing Facilities shall be an amount equal to the greater of
(1) the fair market value of the Steam Producing Facilities
<PAGE>
-7-
(as hereinafter determined); or
(2) $200,000.00, but in no event greater than the Deferred Amount, as
such term is defined in the Note.
C. Exercise of Option.
(i) The Option shall be exercisable by BI no earlier than the Option
Commencement Date and may be exercised by BI only during the forty-five (45) day
period following the Option Commencement Date.
(ii) Notwithstanding the foregoing, BI may exercise the option at any
time (a) after the occurrence of an "Event of Default" by Cogen under the
Security Agreement and for so long as such "Event of Default" is continuing and
(b) after a termination of the Steam Sale Agreement pursuant to Section 10.2 of
that Agreement.
(iii) in order to exercise the Option, BI shall give written notice
thereof to Cogen.
2.2 Option to Sell.
A. Grant of Option to Sell; Consideration for Option. BI hereby
irrevocably grants to Cogen the option to sell the Steam Producing Facilities to
BI, subject to the provisions hereof. In addition to the consideration
hereinabove recited, Cogen is hereby delivering to BI a check payable to its
order in the amount of $1,000.00, receipt of which is hereby acknowledged as
consideration for the grant of the option.
<PAGE>
-8-
B. Sale Price of Steam Producing Facilities. The sale price for the
Steam Producing Facilities shall be an amount equal to the greater of
(1) the fair market value of the Steam Producing Facilities (as
hereinafter determined); or
(2) $200,000.00, but in no event greater than the Deferred Amount, as
such term is defined in the Note.
C. Exercise of Option.
-------------------
(i) The option shall be exercisable by Cogen no earlier than the
Option Commencement Date and may be exercised by Cogen only during the forty-
five (45) day period following the Option Commencement Date.
(ii) Notwithstanding the foregoing, Cogen may exercise the Option at
any time after the occurrence of an "Event of Default" by IMTT under the Steam
Sale Agreement or by BI or IMTT under the Ground Lease and for so long as such
an Event of Default is continuing.
(iii) In order to exercise the Option, Cogen shall give written
notice thereof to BI.
2.3 Closing of Sale. The closing of the sale of the Steam Producing
Facilities shall take place on the effective date of the termination of the
Steam Sale Agreement at 10:00 a.m. at the Bayonne Facility; provided, however,
that if
<PAGE>
-9-
the Option has been exercised pursuant to Article 2.1C (ii) (a) or 2.2C(ii),
the closing of the sale of the Steam Producing Facilities shall take place on
the next business day following the service of notice of the exercise of the
option at 10:00 a.m. at the Bayonne Facility. At the closing, Cogen shall
deliver to BI a bill of sale, substantially in the form delivered to Cogen on
the date hereof, and BI shall pay the purchase price by making a notation on the
Note that the purchase price has been paid by applying the same first to the
Deferred Principal Amount with any balance of the purchase price to the payment
of Deferred Interest; provided, however, that if on the closing, the fair market
value of the Steam Producing Facilities shall not have been determined as
hereinafter provided, a notation shall be made on the Note that the Deferred
Principal Amount has been paid and BI hereby agrees at the time the fair market
value is determined to make an additional notation on the Note that a portion of
the Deferred Interest has been paid if the fair market value shall be greater
than $200,000.
2.4 Title to Steam Producing Facilities; Condition Thereof. The Steam
Producing Facilities shall be conveyed to BI on the closing date referred to in
Article 2.3, free and clear of all liens, security interests, claims and
encumbrances, and in the same condition, ordinary wear and tear excepted, as the
same shall exist on the Date of Initial Commercial operation.
<PAGE>
-10-
2.5 Assurances of Cogen. At such time as the Option is exercised, Cogen
will perform any and all steps necessary to effectuate the transfer, issue or
reissue to BI of all Govern mental Authorizations with regard to the Steam
Producing Facilities so as to allow BI to Operate and Maintain the Steam
Producing Facilities and/or to evidence its ownership interest therein and shall
not take any act or omit to take any act the effect of which would be to limit
BI's ability to effectuate such transfer, issue or reissue; provided however,
that the failure of any such Governmental Authorization to be transferred,
issued or reissued due to no fault of Cogen shall not give rise to any liability
on the part of Cogen. In the event that any such Governmental Authorization
shall fail to be transferred, issued or reissued, Cogen hereby appoints BI as
its agent and attorney in fact to take all actions necessary effectuate such
transfer, issue or reissue and prospectively ratifies and approves any actions
taken pursuant to such authority.
2.6 Determination of Fair Market Value.
A. At the time when BI or Cogen exercises the option, it shall have an
appraisal of the fair market value of the Steam Producing Facilities (the
"Appraisal"), a copy thereof shall be delivered together with the notice of the
exercise of the Option. The Party receiving the notice shall have a period of
ten (10) business days to accept or reject the
<PAGE>
-11-
Appraisal. Failure to reject the Appraisal within such ten (10) day period shall
constitute acceptance thereof.
B. If at the time of the giving of a notice of the exercise of the
Option, an Appraisal is not available, BI and Cogen shall use their best efforts
within ten (10) days after the giving thereof to agree upon a mutually
acceptable appraiser. If they are unable to so agree, or if the Appraisal shall
have been rejected as provided in Article 2.6A, BI and Cogen shall each select
an appraiser and the two appraisers shall select a third appraiser, each of whom
shall determine the fair market value of the Steam Producing Facilities. The
fair market value for purposes of this Agreement shall be the average of the two
appraisals closest in an amount to each other, and the amount thus determined
shall be final and binding upon BI and Cogen.
ARTICLE 3
---------
REPRESENTATIONS AND WARRANTIES OF BI
------------------------------------
BI hereby represents and warrants to Cogen as follows:
3.1 Organization and Good Standing. BI is a corporation duly organized,
validly existing and in good standing under the laws of the State of New Jersey.
3.2 Authority. The execution, delivery and performance of the BI Documents
have been duly and validly authorized and approved by the board of directors
and, to the extent
<PAGE>
-12-
necessary, the shareholders of BI. Each of the BI Documents, as defined in the
Purchase and Sale Agreement, constitutes the valid and binding agreement of BI
enforceable against it in accordance with their respective terms.
3.3 No Violation of Other Agreements. The execution, delivery and
performance of the BI Documents by BI will not conflict with or cause a breach
of or default under any other agreement to which BI is a party or by which it or
the Steam Producing Facilities may be bound.
ARTICLE 4
---------
REPRESENTATIONS AND WARRANTIES OF COGEN
---------------------------------------
Cogen hereby represents and warrants to BI as follows:
4.1 Organization and Good Standing. Cogen is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
4.2 Authority. The execution, delivery and performance of the Cogen
Documents have been duly and validly authorized and approved by the board of
directors and, to the extent necessary, the shareholders of Cogen. Each of the
Cogen Documents, as defined in the Purchase and Sale Agreement, constitutes the
valid and binding agreement of Cogen enforceable against it in accordance with
its terms.
<PAGE>
-13-
4.3 No Violation of Other Agreements. The execution, delivery and
performance by Cogen of the Cogen Documents will not conflict with or cause a
breach of or default under any other agreement to which Cogen is a party or by
which its properties may be bound.
ARTICLE 5
---------
SUCCESSORS AND ASSIGNS
----------------------
5.1 This Agreement shall be binding upon and inure to the benefit of the
Parties and any permitted assignees as provided herein.
5.2 Except as is expressly set forth in this Agreement, neither the rights
nor the obligations under this Agreement may be assigned, pledged, hypothecated
or otherwise transferred.
5.3 Cogen is expressly permitted to assign this Agreement as provided in
this Article 5.3. Cogen may assign this Agreement to Cogen Technologies NJ
Venture, provided that such assignment shall be of no force and effect unless
and until Cogen Technologies NJ Venture shall have assumed in writing all of
Cogen's obligations under the following instruments and notes, and shall have
agreed in writing to cure any existing defaults and breaches hereunder and
thereunder:
(1) The Steam Sale Agreement
(2) The Ground Lease
(3) The Purchase and Sale Agreement
<PAGE>
-14-
(4) The SPF Lease
(5) The Note
(6) The Security Agreement
(7) The Rent Note
Cogen may assign this Agreement to any Financier which shall be obligated
hereunder only as provided in Articles 21.6 and 21.7 of the Ground Lease.
5.4 BI is expressly permitted to assign this Agreement to any person or
entity, provided that such assignment shall be of no force and effect unless and
until such person or entity shall have assumed in writing all of BI's
obligations under this Agreement and under the instruments referred to in
Article 5.3, with the exception of the Note and the Rent Note, and shall have
agreed in writing to cure any defaults and breaches hereunder and thereunder.
5.5 Notwithstanding any such assignment by BI or Cogen, the assignor shall
remain fully liable for its obligations hereunder.
ARTICLE 6
---------
MISCELLANEOUS
-------------
6.1 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. Service of a notice may be accomplished by
personal
<PAGE>
-15-
service, telegram or registered or certified mail. If a notice is sent by
registered or certified mail, it shall be deemed served within three (3) days,
excluding Saturdays, Sundays or legal Federal holidays, except as otherwise
demonstrated by a signed receipt. If a notice is served by telegram, it shall be
deemed served eighteen (18) hours after delivery to the telegram company.
Notices may be sent to the Parties at the following addresses:
(a) Cogen: Cogen Technologies NJ, Inc.
14614 Falling Creek Drive
Suite 212
Houston, Texas 77068
Attn: Mr. Robert C. McNair,
President
With information copy to:
Cogen Technologies NJ, Inc.
Foot of East 22nd Street
Bayonne, New Jersey 07002
Attn: Plant Manager
(b) BI: Bayonne Industries, Inc.
Foot of East 22nd Street
Bayonne, New Jersey 07002
Attn: Glynn Esteves
or
International-Matex Tank
Terminals
9th Floor
321 St. Charles Avenue
New Orleans, Louisiana 70130
Attn: Mr. Thomas B. Coleman,
Partnership Manager
6.2 Amendments. No amendment or modification of the terms of this Agreement
shall be binding on either BI or Cogen unless reduced to writing and assigned by
both Parties.
<PAGE>
-16-
6.3 Choice of Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey.
6.4 Other Agreements. This Agreement supersedes any and all oral or written
agreements and understandings heretofore made relating to the subject matters
herein, and together with the BI Documents and the Cogen Documents constitutes
the entire agreement and understanding of the Parties relating to the subject
matters herein.
6.5 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 affect the meaning, content or
scope of this Agreement.
<PAGE>
-17-
IN WITNESS WHEREOF, the Parties have entered into this Agreement to be
signed in quadruplicate original as of the date first written above.
[SEAL]
ATTEST: BAYONNE INDUSTRIES, INC.
/s/ BERTRAND F. ARTIGUES By: /s/ RICHARD B. JURISICH
- ---------------------------- ------------------------------
Bertrand F. Artigues, Richard B. Jurisich,
Assistant Secretary Executive Vice President/
Secretary
[SEAL]
ATTEST: COGEN TECHNOLOGIES NJ, INC.
/s/ JOHN B. WING By: /s/ ROBERT C. MCNAIR
- ---------------------------- ------------------------------
John B. Wing, Robert C. McNair,
Assistant Secretary President
<PAGE>
EXHIBIT 10.73
PURCHASE AND
SALE AGREEMENT
BETWEEN
BAYONNE INDUSTRIES, INC.
AND IMTT-BAYONNE,
AS SELLERS
AND
COGEN TECHNOLOGIES NJ, INC.
AS BUYER
MAY 22, 1986
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE 1
DEFINITIONS................................................................. 2
ARTICLE 2
PURCHASE AND SALE OF ASSETS................................................. 7
2.1 Purchase and Sale.................................................... 7
2.2 Payment and Security for Purchase Price.............................. 7
2.3 No Assumption of Liabilities......................................... 7
2.4 Assurances of Seller................................................. 7
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER.................................... 8
3.1 Organization and Good Standing....................................... 8
3.2 Authority............................................................ 8
3.3 No violation of Other Agreements..................................... 9
3.4 Title to Assets...................................................... 9
3.5 Operation of Assets.................................................. 9
3.6 Tax matters.......................................................... 9
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF COGEN..................................... 10
4.1 Organization and Good Standing....................................... 10
4.2 Authority............................................................ 10
4.3 No Violation of Other Agreements..................................... 10
4.4 Acquisition of Assets................................................ 11
-i-
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE 5
INDEMNIFICATION AND SET-OFF................................................. 11
5.1 Indemnification...................................................... 11
5.2 Right to Set-Off..................................................... 12
ARTICLE 6
RIGHT OF RECONVEYANCE....................................................... 13
6.1 Right of Cogen to Rescind............................................ 13
6.2 Closing of Reconveyance.............................................. 12
6.3 Transfer of Beneficial Interest in Insurance......................... 14
6.4 Transfer, Issue or Reissue of Governmental
Authorizations....................................................... 14
ARTICLE 7
SUCCESSORS AND ASSIGNS...................................................... 15
ARTICLE 8
MISCELLANEOUS............................................................... 16
8.1 Notice............................................................... 16
8.2 Amendments........................................................... 17
8.3 Choice of Law........................................................ 17
8.4 Termination of Preexisting Lease..................................... 17
8.5 Other Agreements..................................................... 18
8.6 Captions............................................................. 18
-ii-
<PAGE>
PURCHASE AND SALE AGREEMENT
---------------------------
THIS PURCHASE AND SALE AGREEMENT DATED AS OF MAY 22, 1986 by and between
BAYONNE INDUSTRIES, INC., a New Jersey corporation having its principal place of
business at the Foot of East 22nd Street, Bayonne, New Jersey 07002 ("BI") and
IMTT-BAYONNE, a Delaware partnership having its principal place of business at
the Foot of East 22nd Street, Bayonne, New Jersey 07002 ("IMTT") (collectively
"Seller") and COGEN TECHNOLOGIES NJ, INC., a Delaware corporation having its
principal place of business at 14614 Falling Creek Drive, Suite 212, Houston,
Texas 77068 ("Cogen"), as Buyer.
BACKGROUND
- ----------
Seller owns and/or has registered in its name certain Assets, including the
Steam Producing Facilities and the Emissions Permit attendant thereto. The Steam
Producing Facilities are presently leased by BI to IMTT and are utilized to
produce steam which is used by IMTT in connection with the operation of the
Bayonne Facility. BI is also the owner of the Boiler House in which the Steam
Producing Facilities are located.
IMTT and Cogen have entered into the Steam Sale Agreement pursuant to which
Cogen, commencing on the Date of Initial Commercial Operation, will be obligated
to provide steam to IMTT and pursuant to which IMTT is obligated to purchase
steam for use in the Bayonne Facility. Seller desires to sell and
<PAGE>
-2-
Cogen desires to purchase the Assets, subject to the terms and conditions
contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto agree as
follows:
ARTICLE 1
---------
DEFINITIONS
-----------
The following terms when used herein shall have the following meanings,
unless a different meaning shall be expressly stated or apparent from the
context:
"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 entity.
"Agreement" means this contract, including all exhibits and amendments
thereto that may be made from time to time.
"Assets" means collectively, the Steam Producing Facilities, together with
the Emissions Permit and all rights and privileges attendant thereto, and all
other Governmental Authorizations which BI and IMTT may have.
"Bayonne Facility" means the tank terminal facility located at Bayonne, New
Jersey, and all appurtenant property owned or leased at that location by IMTT,
BI, or any Affiliates thereof.
<PAGE>
-3-
"BI" means Bayonne Industries, Inc., a New Jersey corporation, having its
principal place of business at the Foot of East 22nd Street, Bayonne, New Jersey
07002.
"Bill of Sale" means the bill of sale for the Assets.
"Boiler House" means the building located at the Bayonne Facility that
houses the Steam Producing Facilities, except that interior portion of the
building unrelated to the Steam Producing Facilities.
"Cogen" means Cogen Technologies NJ, Inc., a Delaware corporation, having
its principal place of business at 14614 Falling Creek Drive, Suite 212,
Houston, Texas 77068.
"Cogen Documents" means this Agreement, the Note, the Rent Note, the
Security Agreement, the Lease, the Option Agreement and all other documents
executed and delivered by Cogen in connection herewith or therewith.
"Cogeneration Facility" means the waste heat boilers, gas and steam
turbines, generators and all appurtenant structures, equipment, including
Cogen's interconnection facilities, and real property interests owned or leased
and operated by Cogen at the Bayonne Facility, for purposes of generating
electricity, steam, or other forms of useful thermal output.
"Date of Initial Commercial Operation" means 12:01 a.m. on the day Cogen
designates in writing as the initial date of commercial operation of the
Cogeneration Facility.
<PAGE>
-4-
"Easement" means that certain easement of even date herewith from BI and
IMTT to Cogen pursuant to which BI and IMTT grant to Cogen ingress and egress
over the Bayonne Facility to the Boiler House, including all exhibits and
amendments thereto that may be made from time to time, and any other easements,
rights-of-way or licenses that may be granted to Cogen under the Ground Lease.
"Emissions Permit" means all permits to construct and certificates to
operate the Steam Producing Facilities in compliance with applicable air quality
standards of the State of New Jersey and the Federal Government and any emission
reduction credits related to the operation of the Steam Producing Facilities.
"Financier" means any person, lending money for the construction and
operation of the Cogeneration Facilities, any person providing funds for the
refinancing or take-out of such loans, and any nominee or designee of any such
person.
"Governmental Authorization" means any and all necessary governmental
authorization, license, permit or certificate that is necessary for the
operation and maintenance of the Steam Producing Facilities in compliance with
all applicable federal, state, and local laws.
"Ground Lease" means that certain lease agreement among BI and IMTT, as
lessor, and Cogen as lessee, of even date herewith for certain property located
in Bayonne, New Jersey, including
<PAGE>
-5-
all exhibits and amendments thereto as may be made from time to time.
"IMTT" means IMTT-Bayonne, a Delaware partnership.
"Note" means the promissory note of even date herewith of Cogen, payable to
BI in the principal amount of $2,600,000.00.
"Operate and Maintain" means the engineering, purchasing, repair,
supervision, training, inspection, testing, protection, operation, use,
management, replacement, and maintenance of and for the Steam Producing
Facilities in accordance with applicable industry standards, good engineering
practice and applicable law.
"Option Agreement" means that certain option agreement of even date
herewith between Cogen and BI, including all exhibits and amendments thereto
that may be made from time to time.
"Party" or "Parties" means the signatories to this Agreement and their
permitted successors and assigns.
"Prime Rate" means the interest rate (sometimes referred to as the "Base
Rate") for large commercial loans to creditworthy entities published by First
National Bank of Chicago, or its successor bank, as such rate may be in effect
from time to time.
"Rent Note" means the promissory note of even date herewith of Cogen,
payable to BI in the principal amount of $600,000.00.
<PAGE>
-6-
"SRF Lease" means that certain steam producing facilities lease agreement
of even date herewith between Cogen, as lessor, and IMTT, as lessee, pursuant to
which the Steam Producing Facilities will be leased to IMTT, including all
exhibits and amendments thereto that may be made from time to time.
"Security Agreement" means that certain security agreement of even date
herewith between Cogen and BI executed and delivered by Cogen as security for
the payment of the Note, including all exhibits and amendments thereto that may
be made from time to time.
"Seller Documents" means this Agreement, the Bill of Sale, the Lease, the
Option Agreement, the Easement, and all other documents executed and delivered
by Seller in connection herewith and therewith.
"Steam Producing Facilities" means the existing boilers and appurtenant
structures and equipment located inside the Boiler House, including all
additions, replacements, improvements, substitutions, and increments thereto,
more particularly described in Exhibit A appended hereto, but not including the
Boiler House, located at the Bayonne Facility and operated for the purpose of
producing steam for industrial purposes at the Bayonne Facility.
"Steam Sale Agreement" means that certain agreement between Cogen and IMTT
dated June 13, 1985, for the sale of steam and electricity from a cogeneration
plant, including all
<PAGE>
-7-
exhibits and amendments thereto that may be made from time to time.
ARTICLE 2
---------
PURCHASE AND SALE OF ASSETS
---------------------------
2.1 Purchase and Sale. Seller hereby sells and Cogen hereby purchases the
Assets for a purchase price of $2,600,000.00.
2.2 Payment and Security for Purchase Price. The payment of the purchase
price shall be evidenced by the Note and shall be secured as provided in the
Security Agreement. IMTT hereby assigns and transfers to BI any right that IMTT
may have to the purchase price of the Assets.
2.3 No Assumption of Liabilities. It is expressly understood and agreed by
the Parties that Cogen is not assuming any liabilities or obligations of Seller,
direct or indirect, matured or unmatured, contingent or fixed, known or unknown,
all of which shall remain the sole liability and obligation of Seller.
2.4 Assurances of Seller. Seller will perform any and all steps necessary
to effectuate the transfer, issue or reissue to Cogen of all Governmental
Authorizations with regard to all Assets so as to allow Cogen to operate and
Maintain such Assets in accordance with the SPF Lease as required thereunder
and/or to evidence its ownership interest therein and shall not
<PAGE>
-8-
take any act or omit to take any act the effect of which would be to limit
Cogen's ability to effectuate such transfer, issue or reissue; provided,
however, that the failure of any such Governmental Authorizations to be
transferred, issued or reissued due to no fault of Seller shall not void this
Agreement or the Bill of Sale or give rise to any liability on the part of
Seller.
ARTICLE 3
---------
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller hereby represents and warrants to Cogen as follows:
3.1 Organization and Good Standing. BI is a corporation duly organized,
validly existing and in good standing under the laws of the State of New Jersey
and IMTT is a partnership duly organized, validly existing and in good standing
under the laws of the State of Delaware. To the best of Seller's knowledge,
information, and belief, Seller has all requisite power and authority to own and
operate the Assets as of the date hereof.
3.2 Authority. The execution, delivery and performance of the Seller
Documents have been duly and validly authorized and approved by the board of
directors and, to the extent necessary, the shareholders of BI and by the
managing committee of IMTT. Each of the Seller Documents constitutes the valid
and binding agreement of Seller enforceable against it in accordance with their
respective terms.
<PAGE>
-9-
3.3 No Violation of Other Agreements. The execution, delivery and
performance of the Seller Documents by Seller will not conflict with or cause a
breach of or default under any other agreement to which BI or IMTT is a party or
by which it or the Assets may be bound. Seller has no reason to believe that any
consents or approvals of any other persons, firms, corporations, entities, or
governmental authorities are required in connection with the execution and
delivery of this Agreement by Seller or the consummation by it of the
transactions contemplated hereunder.
3.4 Title to Assets. Seller has good and marketable title to the Assets and
owns the same free and clear of all liens, claims, security interests and
encumbrances.
3.5 Operation of Assets. To the best of Seller's knowledge, information,
and belief, the Assets have been operated and maintained in compliance with all
laws, rules, regulations and orders of all governmental authorities and Seller
has not received any notice that there exists or is continuing any violations
under any of the foregoing. To the best of Seller's knowledge, information, and
belief, Seller has filed with the appropriate governmental authorities all
reports and notices required to be filed or given by it in connection with the
operation and use of its Assets as of the date hereof.
3.6 Tax matters. Seller has timely filed with appropriate governmental
authorities all tax returns with
<PAGE>
-10-
respect to the ownership, use and operation of the Assets and has timely paid
all amounts shown to be due thereon and there are not pending any suits, actions
or claims in respect of any such taxes or returns.
ARTICLE 4
---------
REPRESENTATIONS AND WARRANTIES OF COGEN
---------------------------------------
Cogen hereby represents and warrants to Seller as follows:
4.1 Organization and Good Standing. Cogen is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and to the best of Cogen's knowledge, information, and belief, Cogen has all of
the requisite power and authority to own and, upon transfer, issue or reissue of
the Governmental Authorizations, operate the Assets.
4.2 Authority. The execution, delivery and performance of the Cogen
Documents have been duly and validly authorized and approved by the board of
directors and, to the extent necessary, the shareholders of Cogen. Each of the
Cogen Documents constitutes the valid and binding agreement of Cogen enforceable
against it in accordance with its terms.
4.3 No Violation of Other Agreements. The execution, delivery and
performance by Cogen of the Cogen Documents will not conflict with or cause a
breach of or default under any other agreement to which Cogen is a party or by
which it or its
<PAGE>
-11-
properties may be bound. Cogen has no reason to believe that any consents or
approvals of any other persons, firms, corporations, entities, or governmental
authorities are required in connection with the execution or delivery of this
Agreement by Cogen.
4.4 Acquisition of Assets. Except for its reliance upon the accuracy of the
representations and warranties of Seller contained in Article 3 hereof, Cogen
represents and warrants that it is acquiring the Steam Producing Facilities in
an "as is" condition.
ARTICLE 5
---------
INDEMNIFICATION AND SET-OFF
---------------------------
5.1 Indemnification. Each Party agrees to and hereby does indemnify and
hold the other Party and its shareholders, partners, officers and directors,
agents and employees (each an "Indemnified Party") harmless from and against any
and all loss, cost, damage and expense (including reasonable attorney's fees and
expenses) suffered or incurred by any of them arising out of or relating to the
misrepresentation or breach of any warranty of such Party contained in this
Agreement. In case a claim may be asserted or action brought against any party
entitled to indemnification hereunder, such Indemnified Party shall promptly
notify the other Party in writing and such other Party shall assume the defense
thereof, including the
<PAGE>
-12-
employment of counsel satisfactory to the Indemnified Party and the payment
of all costs and expenses with respect thereto. Any one or more of the
Indemnified Parties shall at its cost have the right to employ separate counsel
in any such action and to participate in the defense thereof. The Party
obligated to indemnify under this Article 5 (the "Indemnifying Party") shall not
be liable for any settlement of any such claim or action effected without its
consent. The Indemnifying Party may not settle any such claim or action without
the consent of the Indemnified Party, which consent shall be conditioned upon
the Indemnifying Party demonstrating to the Indemnified Party that the
Indemnifying Party has sufficient financial means to make all payments under any
such settlement as and when due.
5.2 Right to Set-Off. In addition to any other remedies available to it,
Cogen shall have the right to set-off against any next payments due under the
Note the amount of all losses, costs, damages, or expenses (including reasonable
attorney's fees and expenses) suffered or incurred by it as a result of any
representation or warranty of Seller which is false or misleading in any
material respect, or as a result of the breach by the Seller of its convenants
and obligations contained in this Agreement, provided, however, that such
alleged breach or misrepresentation must first be recognized in a nonappealable
judgment by a court of competent jurisdiction.
<PAGE>
-13-
ARTICLE 6
---------
RIGHT OF RECONVEYANCE
---------------------
6.1 Right of Cogen to Rescind. Cogen shall have the unconditional right
upon written notice thereof to Seller, to elect to reconvey the Assets to Seller
at any time on or before the close of business on the date six (6) months from
the date of this Agreement.
6.2 Closing of Reconveyance. The closing of the reconveyance of the Assets
shall be held on the fifteenth (15th) business day after the giving of notice
referred to in Article 6.1 at 10:00 a.m. at the Bayonne Facility. At such
closing, Cogen shall deliver to BI a bank cashier's or certified check payable
to the order of BI in the amount of $240,000.00 together with a bill of sale,
substantially in form similar to that delivered on the date hereof, reconveying
the Assets to Seller against receipt of the Note marked "cancelled". In
addition, the Parties will execute and deliver documents or instruments
necessary or appropriate to effect the termination of the Steam Sale Agreement,
the Ground Lease, the Security Agreement, the SPF Lease, the Option Agreement,
and the Easement, provided, however, that notwithstanding such termination and
cancellation, each Party to the aforesaid agreements retains its respective
rights with regard to any breaches, defaults, or misrepresentations under such
agreements.
<PAGE>
-14-
6.3 Transfer of Beneficial Interest in Insurance. If during the period
from the date hereof to the date of the closing referred to in Article 6.2, the
Steam Producing Facilities shall suffer any damage, loss or destruction, and
Cogen exercises its rights under this Article 6 to reconvey the Assets, then
Cogen, in addition to the execution and delivery of the bill of sale referred to
in Article 6.2, shall at the same time execute and deliver to Seller an
instrument effective to assign to Seller all right, title and interest of Cogen
in and to any insurance proceeds relating to such damage, loss or destruction to
which Cogen may be entitled.
6.4 Transfer, Issue or Reissue of Governmental Authorizations. Upon any
reconveyance of the Assets pursuant to this Article 6, Cogen shall take all
steps necessary to effectuate the transfer, issue or reissue to Seller of all
Governmental Authorizations with regard to all Assets so as to allow Seller to
Operate and Maintain such Assets and/or to evidence its ownership interest
therein and shall not take any act or omit to take any act the effect of which
would be to limit Seller's ability to effectuate such transfer, issue or
reissue; provided, however, that the failure of any such Governmental
Authorizations to be transferred, issued or reissued due to no fault of Cogen
shall not void the reconveyance or give rise to any liability on the part of
Cogen.
<PAGE>
-15-
ARTICLE 7
---------
SUCCESSORS AND ASSIGNS
----------------------
7.1 This Agreement shall be binding upon and inure to the benefit of the
Parties.
7.2 Except as is expressly set forth in this Agreement, neither the rights
nor the obligations under this Agreement may be assigned, pledged, hypothecated
or otherwise transferred.
7.3 Cogen is expressly permitted to assign this Agreement as provided in
this Article 7.3. Cogen may assign this Agreement to Cogen Technologies NJ
Venture, provided that such assignment shall be of no force and effect unless
and until Cogen Technologies NJ Venture shall have assumed in writing all of
Cogen's obligations under the following instruments and notes, and shall have
agreed in writing to cure any existing defaults and breaches of Cogen hereunder
and thereunder:
(1) The Steam Sale Agreement
(2) The Ground Lease
(3) The Option Agreement
(4) The SPF Lease
(5) The Note
(6) The Security Agreement
(7) The Rent Note
Cogen may assign this Agreement to any Financier which shall be obligated
hereunder only as provided in Articles 21.6 and 21.7 of the Ground Lease.
<PAGE>
-16-
7.4 Seller is expressly permitted to assign this Agreement to any person or
entity, provided that such assignment shall be of no force and effect unless and
until such person or entity shall have assumed in writing all of Seller's
obligations under this Agreement and under the instruments referred to in
Article 7.3, with the exception of the Note and the Rent Note, and shall have
agreed in writing to cure any defaults and breaches hereunder and thereunder.
7.5 Notwithstanding any such assignment by Seller or Cogen, the assignor
shall remain fully liable for its obligations hereunder.
ARTICLE 8
---------
MISCELLANEOUS
-------------
8.1 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. Service of a notice may be accomplished by
personal service, telegram or registered or certified mail. If a notice is sent
by registered or certified mail, it shall be deemed served within three (3)
days, excluding Saturdays, Sundays or legal Federal holidays, except as
otherwise demonstrated by a signed receipt. If a notice is served by telegram,
it shall be deemed served eighteen (18) hours after delivery to the telegram
company. Notices may be sent to the Parties at the following addresses:
<PAGE>
-17-
(a) Cogen: Cogen Technologies NJ, Inc.
14614 Falling Creek Drive
Suite 212
Houston, Texas 77068
Attention: Mr. Robert C. McNair,
President
With information copy to:
Cogen Technologies NJ, Inc.
Foot of East 22nd Street
Bayonne, New Jersey 07002
Attention: Plant Manager
(b) Seller: Bayonne Industries, Inc.
Foot of East 22nd Street
Bayonne, New Jersey 07002
Attention: Glynn Esteves
or
International-Matex Tank
Terminals
321 St. Charles Avenue
New Orleans, Louisiana 70130
Attention: Mr. Thomas B. Coleman
Partnership Manager
8.2 Amendments. No amendment or modification of the terms of this Agreement
shall be binding on either Seller or Cogen unless reduced to writing and signed
by both parties.
8.3 Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.
8.4 Termination of Preexisting Lease. By executing this Agreement, BI and
IMTT hereby terminate any lease that may exist with regard to the Steam
Producing Facilities, which lease shall hereafter be of no force and effect.
<PAGE>
-18-
8.5 Other Agreements. This Agreement supersedes any and all oral or
written agreements and understandings heretofore made relating to the subject
matters herein, and together with the Seller Documents and the Cogen Documents
constitutes the entire agreement and understanding of the Parties relating to
the subject matters herein.
8.6 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 affect the meaning, content or
scope of this Agreement.
<PAGE>
-19-
IN WITNESS WHEREOF, the Parties have entered into this Agreement to be
signed in quadruplicate original as of the date first written above.
[SEAL]
ATTEST: BAYONNE INDUSTRIES, INC.
/s/ Bertrand F. Artigues By: /s/ Richard B. Jurisich
- ------------------------------ -------------------------------------
Bertrand F. Artigues, Richard B. Jurisich,
Assistant Secretary Executive Vice-President/
Secretary
WITNESS; IMTT-BAYONNE
/s/ Bertrand F. Artigues By: /s/ Richard B. Jurisich
- ------------------------------ -------------------------------------
Bertrand F. Artigues, Richard B. Jurisich,
Assistant Secretary Secretary
[SEAL]
ATTEST: COGEN TECHNOLOGIES NJ, INC.
/s/ John B. Wing By: /s/ Robert C. McNair
- ------------------------------ -------------------------------------
John B. Wing, Robert C. McNair,
Assistant Secretary President
<PAGE>
EXHIBIT 10.74
STEAM PRODUCING FACILITIES
LEASE AGREEMENT
BETWEEN
COGEN TECHNOLOGIES NJ, INC.
AND
IMTT-BAYONNE
DATED
MAY 22, 1986
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE 1
DEFINITIONS................................................................. 2
ARTICLE 2
TERMS OF THE LEASE.......................................................... 6
2.1 Equipment Leased...................................................... 6
2.2 Rent.................................................................. 6
2.3 Term.................................................................. 6
2.4 Termination........................................................... 7
ARTICLE 3
CONDITION OF STEAM PRODUCING FACILITIES..................................... 7
ARTICLE 4
OWNERSHIP AND OTHER RIGHTS.................................................. 8
4.1 Ownership and Inspection.............................................. 8
4.2 No Liens.............................................................. 8
4.3 Improvements.......................................................... 8
ARTICLE 5
USE OF FACILITIES........................................................... 8
5.1 Operation and Maintenance............................................. 8
5.2 Safe and Lawful Use................................................... 9
5.3 Right of the Non-Obligated Party to Contest
By Appropriate Legal Proceeding....................................... 11
5.4 Change of Obligated Party............................................. 12
5.5 Emergency Condition................................................... 13
-i-
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE 6
PAYMENT OF TAXES........................................................... 14
ARTICLE 7
INSURANCE AND RISK OF LOSS................................................. 14
7.1 Liability Insurance Coverage......................................... 14
7.2 Property and Business Interruption
Insurance Coverage................................................... 15
7.3 Conditions Concerning Insurance Carriers............................. 15
7.4 Risk of Loss......................................................... 16
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF IMTT..................................... 17
8.1 Organization and Good Standing....................................... 17
8.2 Authority............................................................ 17
8.3 No Violation of Other Agreements..................................... 17
ARTICLE 9
REPRESENTATIONS AND WARRANTIES OF COGEN.................................... 18
9.1 Organization and Good Standing....................................... 18
9.2 Authority............................................................ 18
9.3 No Violation of Other Agreements..................................... 18
9.4 Title to Steam Producing Facilities.................................. 18
9.5 Operability of the Steam Producing Facilities........................ 19
ARTICLE 10
QUIET ENJOYMENT............................................................ 19
-ii-
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE 11
DEFAULT AND REMEDIES THEREFOR............................................... 20
11.1 Default.............................................................. 20
11.2 Remedies............................................................. 20
ARTICLE 12
INDEMNIFICATION............................................................. 21
ARTICLE 13
FORCE MAJEURE............................................................... 22
13.1 Definition........................................................... 22
13.2 Burden of Proof...................................................... 22
13.3 Effect of Force Majeure.............................................. 22
ARTICLE 14
SUCCESSORS AND ASSIGNS...................................................... 23
ARTICLE 15
MISCELLANEOUS............................................................... 25
15.1 Notice............................................................... 25
15.2 Amendments........................................................... 26
15.3 Choice of Law........................................................ 26
15.4 Other Agreements..................................................... 26
15.5 Captions............................................................. 26
-iii-
<PAGE>
STEAM PRODUCING FACILITIES
LEASE AGREEMENT
THIS LEASE AGREEMENT, made as of this 22nd day of May, 1986, by and between
COGEN TECHNOLOGIES NJ, INC. a Delaware corporation having its principal place
of business at 14614 Falling Creek Drive, Suite 212, Houston, Texas 77068, as
lessor ("Cogen") and IMTT-BAYONNE, a Delaware partnership having its principal
place of business at Foot of East 22nd Street, Bayonne, New Jersey 07002, as
lessee ("IMTT ").
BACKGROUND
----------
BI and IMTT have this day entered into the Purchase and Sale Agreement
providing for the sale of the Steam Producing Facilities, together with certain
other assets, to Cogen. IMTT operates the Bayonne Facility and desires to enter
into this Lease with Cogen so that it is assured of the ability to have steam
available for its operations at the Bayonne Facility pursuant to terms of this
Lease and the Steam Sale Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto agree as
follows:
<PAGE>
-2-
ARTICLE 1
---------
DEFINITIONS
-----------
The following terms when used herein shall have the following meanings,
unless a different meaning shall be expressly stated or apparent from the
context:
"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 entity.
"Annual Period" means any one of a succession of consecutive 12-month
periods, the first of which shall begin on the Date of Initial Commercial
Operation, if such date is the first day of a calendar month, or otherwise on
the first day of the month immediately following the month in which the Date of
Initial Commercial Operation occurs.
"Bayonne Facility" means the tank terminal facility located at Bayonne, New
Jersey, and all appurtenant property owned or leased at that location by IMTT,
BI, or any Affiliates thereof.
"BI" means Bayonne Industries, Inc., a New Jersey corporation, having its
principal place of business at the Foot of East 22nd Street, Bayonne, New Jersey
07002.
"Boiler House" means the building located at the Bayonne Facility that
houses the Steam Producing Facilities, except that interior portion of the
building unrelated to the Steam Producing Facilities.
<PAGE>
-3-
"Cogen" means Cogen Technologies NJ, Inc., a Delaware corporation, having
its principal place of business at 14614 Falling Creek Drive, Suite 212,
Houston, Texas 77068.
"Cogeneration Facility" means the waste heat boilers, gas and steam
turbines, generators and all appurtenant structures, equipment, including
Cogen's interconnection facilities, and real property interests owned or leased
and operated by Cogen at the Bayonne Facility, for purposes of generating
electricity, steam, or other forms of useful thermal output.
"Date of Initial Commercial Operation" means 12:01 a.m. on the day Cogen
designates in writing as the initial date of commercial operation of the
Cogeneration Facility.
"Easement" means that certain easement of even date herewith from BI and
IMTT to Cogen, pursuant to which BI and IMTT grant to Cogen ingress and egress
over the Bayonne Facility to the Boiler House, including all exhibits and
amendments thereto that may be made from time to time, and any other easements,
rights of way or licenses that may be granted to Cogen under the Ground Lease.
"Financier" means any person lending money for the construction and
operation of the Cogeneration Facility, any person providing funds for
refinancing or take-out of such loans, and the nominee or designee of any such
person.
"Governmental Authorization" means any governmental authorization, license,
permit, or certificate that is
<PAGE>
-4-
necessary to Operate and Maintain the Steam Producing Facilities in compliance
with all applicable federal, state, and local laws.
"Ground Lease" means that certain agreement between BI and IMTT, as Lessor,
and Cogen, as Lessee, of even date herewith for certain property located in
Bayonne, New Jersey, including all exhibits and amendments thereto that may be
made from time to time.
"IMTT" means IMTT-Bayonne, a Delaware partnership.
"Lease" means this lease between Cogen, as lessor, and IMTT, as lessee,
pursuant to which the Steam Producing Facilities are leased to IMTT, including
all exhibits and amendments thereto that may be made from time to time.
"Note" means the promissory note of even date herewith of Cogen payable to
BI in the principal amount of $2,600,000.00.
"Obligated Party" means, from the date hereof until the Date of Initial
Commercial Operation, IMTT, and means, from the Date of Initial Commercial
Operation until the end of the Initial Term or any Extended Term of this Lease,
Cogen, except as otherwise modified as provided in Article 5.4.
"Operate and Maintain" means the engineering, purchasing, repair,
supervision, training, inspection, testing, protection, operation, use,
management, replacement, maintenance and improvement of and for the Steam-
Producing Facilities in accordance with applicable industry standards, good
engineering practice and applicable law.
<PAGE>
-5-
"Option Agreement" means that certain option agreement of even date
herewith between Cogen and BI, including all exhibits and amendments thereto
that may be made from time to time.
"Party" or "Parties" means the signatories to this Agreement and their
successors and assigns.
"Purchase and Sale Agreement" means that certain agreement of even date
herewith pursuant to which Cogen purchases and BI and IMTT sell the Steam
Producing Facilities together with certain other assets, including all exhibits
and amendments thereto that may be made from time to time.
"Rent Note" means that certain promissory note of even date herewith of
Cogen, payable to BI in the principal amount of $600,000.00.
"Security Agreement" means that certain security agreement of even date
herewith between BI and Cogen, executed and delivered by Cogen as security for
the payment of the Note, including all exhibits and amendments thereto that may
be made from time to time.
"Steam Producing Facilities" means the existing boilers and appurtenant
structures and equipment located inside the Boiler House, and all additions,
replacements, improvements, substitutions, and increments thereto, as more
particularly described in Exhibit A appended hereto, but not including the
Boiler House, located at the Bayonne Facility and operated for the purpose of
producing steam for industrial purposes at the Bayonne Facility.
<PAGE>
-6-
"Steam Sale Agreement" means that certain agreement between Cogen and IMTT
dated June 13, 1985, for the Sale of Steam and Electricity from a Cogeneration
Plant, including all exhibits and amendments thereto they may be made from time
to time.
ARTICLE 2
---------
TERMS OF THE LEASE
------------------
2.1 Equipment Leased. Cogen hereby leases to IMTT, and IMTT hereby leases
from Cogen, the Steam Producing Facilities pursuant to the terms and conditions
herein contained.
2.2 Rent. IMTT shall pay to Cogen as rent for the Steam Producing
Facilities the amount of the Ten Dollars ($10,00), plus other good and valuable
consideration as set forth herein, for the Initial Term hereof, payable in
advance, on the date hereof. The rent for any Extended Term shall be in the same
amount and shall be payable in advance on or before the first day of the
Extended Term.
2.3 Term. The term of this Lease shall commence on the date hereof and
shall continue for an initial period of ten (10) Annual Periods from the Date of
Initial Commercial Operation (the "Initial Term"); thereafter, the term of this
Lease shall be automatically extended for so long as the Steam Sale Agreement
shall remain in effect (the "Extended Term").
<PAGE>
-7-
2.4 Termination. This Lease shall terminate if, either during the Initial
Term or during the Extended Term, BI shall become the owner of the Steam
Producing Facilities pursuant to the Purchase and Sale Agreement, the Security
Agreement or the Option Agreement.
ARTICLE 3
---------
CONDITION OF STEAM PRODUCING FACILITIES
---------------------------------------
IMTT represents that it has thoroughly inspected the Steam Producing
Facilities and agrees that the Steam Producing Facilities are of a size, design,
capacity and manufacture such that they are suitable for IMTT's purpose, and
that same are in good order. Cogen makes no warranties or representations,
express or implied, except as to title of the Steam Producing Facilities as set
forth in Article 9.4 hereof, nor shall it be deemed to have made any such
warranties, representations as to the fitness, design or condition of or as to
the quality or capacity of the Steam Producing Facilities, or as to the material
components or workmanship of the Steam Producing Facilities, or any other
representation or warranties whatsoever, express or implied, with respect to
the Steam Producing Facilities.
<PAGE>
-8-
ARTICLE 4
---------
OWNERSHIP AND OTHER RIGHTS
--------------------------
4.1 Ownership and Inspection. The Steam Producing Facilities shall at all
times remain the property of Cogen, and Cogen shall have free access to the
Steam Producing Facilities at all reasonable times for the purpose of
inspection and for any other purpose contemplated by this Lease.
4.2 No Liens. IMTT shall keep the Steam Producing Facilities free and clear
of all liens and encumbrances.
4.3 Improvements. Any improvements made by an Obligated Party to the Steam
Producing Facilities in order to operate and Maintain such Facilities shall
remain the property of Cogen during the term of, and subsequent to the
termination of this Lease.
ARTICLE 5
---------
USE OF FACILITIES
-----------------
5.1 Operation and Maintenance. The Obligated Party shall Operate and
Maintain the Steam Producing Facilities, solely at its own expense except as may
be provided in Article 3.5.A of the Steam Sale Agreement. Prior to the earlier
of the Date of Initial Commercial Operation or the date that any Governmental
Authorization is transferred, issued or reissued to Cogen, IMTT or BI shall be
obligated to maintain al1 Governmental Authorizations. Beginning with the
execution of this
<PAGE>
-9-
Agreement, Cogen shall have the right to have any Governmental Authorization
transferred, issued, or reissued to it. Cogen shall become obligated to maintain
such Governmental Authorizations upon the earlier of such transfer, issue or
reissue, or the Date of Initial Commercial Operation. BI and IMTT shall perform
any and all steps necessary to effectuate the transfer, issue or reissue of all
Governmental Authorizations to Cogen and shall not take any act or omit to take
any act the effect of which would be to limit Cogen's rights or interfere with
the fulfillment of Cogen's obligations under this Article 5.1. To the extent
that a failure by Cogen to obtain the transfer, issue or reissue of any
Governmental Authorization is the result of a failure by IMTT or BI to act in
accordance with this Article 5.1 or with Article 2.4 of the Purchase and Sale
Agreement, Cogen shall not be responsible for the maintenance of such
Governmental Authorization or to carry out any other obligations hereunder for
which such Governmental Authorization is necessary in order to perform the same.
At such time as there is a change in the Obligated Party, the Party that was
formerly the Obligated Party shall take all steps required to cause all
Governmental Authorizations to be transferred, issued or reissued in the name of
the then Obligated Party.
5.2 Safe and Lawful Use. The Obligated Party shall not use, occupy suffer
or permit the Steam Producing Facilities or any part thereof to be used during
the term hereof in any
<PAGE>
-10-
manner or occupied for any purpose contrary to any applicable and duly adopted
laws, ordinances, rules and any public authority regulations, nor in derogation,
violation or in nonconformity with any safety codes and/or recognized industry
safety standards and guidelines applicable to the Operation and Maintenance of
the Steam Producing Facilities and shall be responsible for all taxes relating
to the Steam Producing Facilities. The Obligated Party shall Operate and
Maintain the Steam Producing Facilities in a careful, safe, lawful and proper
manner and shall not use or permit the use of the Steam Producing Facilities in
any way which will injure the reputation of the same or which shall constitute
an unreasonable interference with IMTT's or BI's business at the Bayonne
Facility or a nuisance, annoyance or inconvenience to IMTT or BI or any of
IMTT's or BI's neighbors or which shall damage IMTT or BI or any of IMTT's or
BI's neighbors. If an Obligated Party shall Operate and Maintain the Steam
Producing Facilities in a manner as heretofore operated and maintained or as may
be required by law, the same shall not be construed to be a nuisance, annoyance
or inconvenience. In particular, the Obligated Party shall:
A. cause all Governmental Authorizations to be transferred, issued or
reissued in its name upon becoming the Obligated Party, make any payment for
fees or other costs related thereto, maintain all Governmental Authorizations,
and
<PAGE>
-11-
keep such Authorizations safe from termination, cancellation, or voidance by
regulatory authorities;
B. have the right to contest by appropriate legal proceedings
diligently conducted in good faith, in its name, or if legally required, in the
name of the non-Obligated Party, at the sole cost of the Obligated Party, the
validity or Application of any law, ordinance, order, rule, regulation,
requirement, or tax of the nature referred to in this Article 5.2. If by the
terms of any such law, ordinance, order, ruler regulation, requirement, or tax,
compliance therewith may legally be delayed pending the prosecution of any such
proceeding, the Obligated Party may delay such compliance therewith until the
final determination of such proceeding. In connection with any such contest,
each Party shall execute and deliver any appropriate papers or other instruments
which may be necessary or proper to permit the Obligated Party to so contest the
validity or application of any such law, ordinance, order, rule, regulation,
requirement, or tax and to fully cooperate in such contest, all at the expense
of the Obligated Party.
5.3 Right of the Non-Obligated Party to Contest By Appropriate Legal
Proceeding. If the Obligated Party decides not to contest by appropriate legal
proceeding the validity or application of any law, ordinance, order, rule,
regulation, requirement, or tax of the nature referred to in Article 5.2,
<PAGE>
-12-
it shall give the non-Obligated Party written notice of its decision not to
contest by appropriate legal proceeding within sufficient time to permit the
non-Obligated Party to contest by appropriate legal proceeding the validity of
such law, ordinance, order, rule, regulation, or tax. The non-Obligated Party
may, but shall not be obligated to, contest by appropriate legal proceeding the
validity or application of any law, ordinance, order, rule, regulation,
requirement, or tax of the nature referred to in Article 5.2.
5.4 Change of Obligated Party.
A. At any time Cogen is the Obligated Party, it shall have the right,
which may be exercised in its sole discretion and without cause, to designate
IMTT as the Obligated Party to be effective sixty (60) days after giving written
notice to IMTT of such designation or an appropriately shorter time if time is
of the essence.
B. At any time Cogen is the Obligated Party, IMTT shall have the
right to substitute itself for Cogen as the obligated Party, with such
substitution to be effective sixty (60) days after giving written notice to
Cogen, or an appropriately shorter time if time is of the essence. IMTT may
exercise such right only in the event that Cogen is in default of its obligation
as an Obligated Party under Article 5.1 to Operate and Maintain the Steam
Producing Facilities.
<PAGE>
-13-
C. Notwithstanding any change in Obligated Parties pursuant to the
provisions of this Agreement, the relationship between Cogen and IMTT as lessor
and lessee under this Agreement shall not be vitiated.
5.5 Emergency Condition. When Cogen is the Obligated Party, IMTT shall have
the right, notwithstanding the fact that Cogen is the Obligated Party, to cause
the Steam Producing Facilities to be fired either by directing Cogen to do so or
by itself doing so safely and with legally qualified personnel in accordance
with industry standards, if (1) the Maximum Steam Production, as defined in
Section 1.14 of the Steam Sale Agreement, is not being supplied to IMTT by
Cogen, and (2) an emergency condition exists. As used herein, the term
"emergency condition" means a situation in which the Maximum Steam Production is
not available to IMTT on an instantaneous basis and is likely to result in loss
of property or business interruption. It is the intention of the Parties that
IMTT act as Cogen's agent under all Governmental Authorizations when IMTT acts
pursuant to this Article 5.5 and that Cogen shall take all steps necessary to
make IMTT its agent for said purpose and to permit IMTT to continue as such when
it acts pursuant to this Article 5.5. IMTT shall indemnify Cogen to the extent
that Cogen is held liable for any breach of applicable law caused by IMTT when
it operates the Steam Producing Facilities pursuant to this Article 5.5.
<PAGE>
-14-
ARTICLE 6
---------
PAYMENT OF TAXES
----------------
All local, state and federal taxes, and any assessments, or licensing fees
levied or imposed upon the Steam Producing Facilities, or in connection with
this Lease and/or the operation or use of the Steam Producing Facilities, shall
be paid by the Obligated Party. For purposes of determining which of the Parties
hereto is the Obligated Party for any such impost, tax or levy, all such
imposts, taxes and levies shall be pro-rated evenly over the period of time to
which they relate. In the event that a tax bill is delivered to the non-
Obligated Party, the non-Obligated Party shall forthwith deliver such tax bill
to the Obligated Party.
ARTICLE 7
---------
INSURANCE AND RISK OF LOSS
--------------------------
7.1 Liability Insurance Coverage. The non-Obligated Party shall have the
right, from time to time, to make such reasonable requirements of the Obligated
Party with reference to insurance that will reasonably cover liabilities to
which the non-Obligated Party may be exposed by virtue of this Lease, but in no
event will the non-Obligated Party require that the Obligated Party carry limits
or coverages in excess of those otherwise carried by IMTT with regard to the
Bayonne Facility.
<PAGE>
-15-
7.2 Property and Business Interruption Insurance Coverage. With respect to
the Steam Producing Facilities, the Obligated Party shall obtain or cause to be
obtained and at all time carry or cause to be carried insurance against loss or
damage by fire and risks embraced within "all-risk boiler and machinery
coverage" with companies licensed to do business in the State of New Jersey for
amounts sufficient to prevent the non-Obligated Party from being a coinsurer
within the policy and in any event, in an aggregate amount not less than one
hundred percent (100%) of the full insurable replacement coverage value of the
Steam Producing Facilities. The required insurance coverage may be effected
under combined single limit (as to public liability insurance), overall blanket
or excess coverage policies of the Obligated Party, and shall name the other
Party hereto as an additional insured. The foregoing policy or policies shall
also contain provisions insuring against loss of profits (business interruption)
and provide for cleanup and debris removal.
7.3 Conditions Concerning Insurance Carriers. Insurance companies issuing
policies required in this Lease shall be qualified to do business in New Jersey
and shall have a financial rating of A12 or better according to "Best's
Insurance Reports, Fire and Casualty," edition current at the inception date of
each policy. To the extent permissible by law, all insurance policies required
to be furnished by the
<PAGE>
-16-
Obligated Party hereunder shall name Cogen, BI and IMTT (and mortgagees, if any)
as named insureds and each such policy shall be noncancellable with respect to
the non-Obligated Party without thirty (30) days written notice to the non-
Obligated Party. The policy or policies of insurance or certified copies
thereof shall be delivered to the non-Obligated Party, together with evidence of
the payment of the premiums therefor, not less than fifteen (15) days prior to
the commencement of the term of this Lease or the date when IMTT shall enter
into possession of the Steam Producing Facilities, whichever occurs sooner. At
least fifteen (15) days prior to the expiration or termination date on any
policy, the Obligated Party shall deliver a renewal or replacement policy with
proof of the payment of the premium therefor; provided, however, that in the
event that the non-Obligated Party cannot deliver a renewal or replacement
policy within such period, the obligated Party shall deliver to the non-
Obligated Party a binder or certificate of insurance as soon as possible.
7.4 Risk of Loss. In the event of any loss, damage or destruction on or
with respect to the Steam Producing Facilities, the Obligated Party shall bear
the risk of all such loss, damage or destruction and shall be obligated to
repair and/or restore the Steam Producing facilities to their condition
immediately preceeding such loss, damage or destruction, regardless of the
sufficiency of the insurance coverage provided in compliance with this
Article 7.
<PAGE>
-17-
ARTICLE 8
---------
REPRESENTATIONS AND WARRANTIES OF IMTT
--------------------------------------
IMTT hereby represents and warrants to Cogen as follows:
8.1 Organization and Good Standing. IMTT is a partnership duly organized
and validly existing under the laws of the State of Delaware.
8.2 Authority. The execution, delivery and performance of this Lease has
been duly and validly authorized and approved by IMTT in accordance with the
terms of its partnership agreement. This Lease constitutes the valid and binding
agreement of IMTT enforceable against it in accordance with its terms.
8.3 No Violation of Other Agreements. The execution, delivery and
performance of this Lease by IMTT will not conflict with or cause a breach of or
default under any other agreement to which IMTT is a party or by which it may be
bound. IMTT has no reason to believe that any consents or approvals of any other
persons, firms, corporations, entities or governmental authorities are required
in connection with the execution and delivery of this Lease.
<PAGE>
-18-
ARTICLE 9
---------
REPRESENTATIONS AND WARRANTIES OF COGEN
---------------------------------------
Cogen hereby represents and warrants to IMTT as follows:
9.1 Organization and Good Standing. Cogen is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
9.2 Authority. The execution, delivery and performance of this Lease have
been duly and validly authorized and approved by the board of directors and, to
the extent necessary, the shareholders of Cogen and constitutes the valid and
binding agreement of Cogen enforceable against it in accordance with its terms.
9.3 No Violation of Other Agreements. The execution, delivery and
performance of this Lease by Cogen will not conflict with or cause a breach of
or default under any other agreement to which Cogen is a party or by which its
properties may be bound. Cogen has no reason to believe that any consents or
approvals of any other persons, firms, corporations, entities or governmental
authorities are required in connection with the execution and delivery of this
Lease.
9.4 Title to Steam Producing Facilities. Cogen has not taken any steps or
executed any documents to convey or encumber title to or to lease the Steam
Producing Facilities to any other party since the acquisition thereof from BI
other than as provided in the Security Agreement.
<PAGE>
-19-
9.5 Operability of the Steam Producing Facilities. Cogen agrees to Operate
and Maintain the Cogeneration Facility in a manner such that when the
Cogeneration Facility is not supplying IMTT with the maximum Steam Production,
as defined in Section 1.14 of the Steam Sale Agreement, the Steam Producing
Facilities may be used to produce steam up to the Maximum Steam Production
without violating any Governmental Authorizations.
ARTICLE 10
----------
QUIET ENJOYMENT
---------------
Cogen covenants and agrees with IMTT that so long as IMTT keeps and
performs all of the covenants and conditions required to be kept and performed
by it, IMTT (when it is the Obligated Party or during periods to which Article
5.5 applies) shall have quiet and undisturbed and continued possession of the
Steam Producing Facilities, free from any claims Against Cogen and all persons
claiming under, by or through Cogen. Cogen, its agents and representatives, at
all reasonable times, may enter the Steam Producing Facilities for the purpose
of inspecting the same and ascertaining compliance with the terms of this Lease.
<PAGE>
-20-
ARTICLE 11
----------
DEFAULT AND REMEDIES THEREFOR
-----------------------------
11.1 Default. If either of the Parties hereto shall fail to perform or
observe any of the covenants, conditions or agreements to be performed or
observed hereunder, and such failure shall continue unremedied for a period of
thirty (30) days after the giving of notice by the other Party of such failure
to perform or observe, then the Party so failing to perform or observe shall be
in default of this Lease (each such failure constituting an "Event of Default"
hereunder), provided, however, that a Party shall not be in default hereunder if
it diligently commences to cure such failure to perform or observe the
covenants, conditions or agreements hereunder within the thirty (30) day
period following notice by the other Party and for so long as it diligently
continues such efforts. Further, an Event of Default by Cogen under the Ground
Lease, the Steam Sale Agreement, or the Security Agreement shall constitute an
Event of Default on the part of Cogen hereunder.
11.2 Remedies. Upon the occurrence of an Event of Default hereunder, the
non-defaulting Party shall be entitled either (a) (i) to terminate this Lease
and (ii) to exercise any and all rights and remedies available to it at law and
in equity, or (b) to have the provisions of this Lease specifically enforced by
any court having equity jurisdiction,
<PAGE>
-21-
it being acknowledged and agreed that any such Event of Default will cause
immediate and irreparable injury to the nondefaulting Party and that money
damages will not provide an adequate remedy therefor.
ARTICLE 12
----------
INDEMNIFICATION
---------------
Each Party agrees to and hereby does indemnify and hold the other Party and
its shareholders, partners, officers and directors, agents and employees (each
an "Indemnified Party") harmless from and against any and all loss, cost, damage
and expenses (including reasonable attorney's fees and expenses) suffered or
incurred by any of them arising out of or relating to the misrepresentation or
breach of any warranty of such Party contained herein or for any failure of such
Party to comply with its covenants and obligations contained in this Lease. In
case a claim may be asserted or action brought against any party entitled to
indemnification hereunder, such Indemnified Party shall promptly notify the
other Party in writing and such other Party shall assume the defense thereof,
including the employment of counsel satisfactory to the Indemnified Party, the
payment of all costs and expenses with respect thereto. Any one or more of the
Indemnified Parties shall at its own cost have the right to employ separate
counsel in any such action and to participate in the defense thereof.
<PAGE>
-22-
The Party obligated to indemnify under this Article 12 (the "Indemnifying
Party") shall not be liable for any settlement of any such claim or action
effected without its consent. The Indemnifying Party may not settle such claim
or action without the consent of the Indemnified Party which consent shall be
conditioned upon the Indemnifying Party demonstrating to the Indemnified Party
that the Indemnifying Party has sufficient financial means to make all payments
under any such settlement as and when due.
ARTICLE 13
----------
FORCE MAJEURE
-------------
13.1 Definition. "Force Majeure" means unforseeable causes beyond the
reasonable control of and without the willful fault or negligence of the Party
claiming Force Majeure. It shall include failure to perform due to causes beyond
that Party's control, including but not limited to war, sabotage, acts of God,
riots, drought or accidents not reasonably forseeable.
13.2 Burden of Proof. The burden of proof as to whether a Force Majeure has
occurred shall be upon the Party claiming the Force Majeure.
13.3 Effect of Force Majeure. If either Party is rendered wholly or partly
unable to perform its obligations under this Lease because of Force Majeure,
that Party shall be
<PAGE>
-23-
excused from whatever performance is affected by the Force Majeure to the
extent so affected, provided that: (1) the nonperforming Party, within one (1)
week after the occurrence of the Force Majeure, gives the other Party written
notice describing the particulars of the occurrence; (2) the suspension of
performance shall be of no greater scope and of no longer duration than is
required by the Force Majeure; and (3) no obligations of either Party that
matured before the occurrence of the Force Majeure shall be excused as a result
of such occurrence.
ARTICLE 14
----------
SUCCESSORS AND ASSIGNS
----------------------
14.1 This Lease shall be binding upon and inure to the benefit of the
Parties and any permitted assignees as provided herein.
14.2 Except as is expressly set forth in this Lease, neither the rights nor
the obligations of any Party under this Lease may be assigned, pledged,
hypothecated or otherwise transferred.
14.3 Cogen is expressly permitted to assign this Agreement as provided in
this Article 14.3. Cogen may assign this Agreement to Cogen Technologies NJ
Venture, provided that such assignment shall be of no force and effect unless
and until Cogen Technologies NJ Venture shall have assumed in
<PAGE>
-24-
writing all of Cogen's obligations under the following instruments and notes,
and shall have agreed in writing to cure any existing defaults and breaches of
Cogen hereunder and thereunder:
(1) The Steam Sale Agreement
(2) The Ground Lease
(3) The Option Agreement
(4) Purchase and Sale Agreement
(5) The Note
(6) The Security Agreement
(7) The Rent Note
Cogen may assign this Agreement to any Financier which shall be obligated
hereunder only as provided in Articles 21.6 and 21.7 of the Ground Lease.
14.4 IMTT is expressly permitted to assign this Agreement to any person or
entity, provided that such assignment shall be of no force and effect unless and
until such person or entity shall have assumed in writing all of IMTT's
obligations under this Agreement and under the instruments referred to in
Article 14.3, with the exception of the Note and the Rent Note, and shall have
agreed in writing to cure any defaults and breaches hereunder and thereunder.
14.5 Notwithstanding any such assignment by IMTT or Cogen, the assignor
shall remain fully liable for its obligations hereunder.
<PAGE>
-25-
ARTICLE 15
----------
MISCELLANEOUS
-------------
15.1 Notice. All notices, including communications and statements which are
required or permitted under the terms of this Lease, shall be in writing, except
as otherwise provided. Service of a notice may be accomplished by personal
service, telegram or registered or certified mail. If a notice is sent by
registered or certified mail, it shall be deemed served within three (3) days,
excluding Saturdays, Sundays or legal Federal holidays, except as otherwise
demonstrated by a signed receipt. If a notice is served by telegram, it shall be
deemed served eighteen (18) hours after delivery to the telegram company.
Notices may be sent to the Parties at the following addresses:
(a) Cogen: Cogen Technologies NJ, Inc.
14614 Falling Creek Drive
Suite 212
Houston, Texas 77068
Attention: Mr. Robert C. McNair
President
With information copy to:
Cogen Technologies NJ, Inc.
Foot of East 22nd Street
Bayonne, New Jersey 07002
Attention: Plant Manager
(b) IMTT: International-Matex Tank Terminals
Ninth Floor
321 St. Charles Avenue
New Orleans, Louisiana 70130
Attention: Mr. Thomas B. Coleman,
Partnership Manager
or
<PAGE>
-26-
Bayonne Industries, Inc.
Foot of East 22nd Street
Bayonne, New Jersey 07002
Attention: Glynn Esteves
15.2 Amendments. No amendment or modification of the terms of this Lease
shall be binding on IMTT, BI (only with respect to Article 5.1), or Cogen unless
reduced in writing and signed by the Parties.
15.3 Choice of Law. This Lease shall be governed by and construed in
accordance with the laws of the State of New Jersey.
15.4 Other Agreements. This Lease supersedes any and all oral or written
agreements and leases and understandings heretofore made relating to the subject
matters herein, and together with the instruments and notes referred to in
Article 14.3 constitutes the entire agreement and understanding of the Parties
relating to the subject matters herein.
15.5 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 affect the meaning, content or
scope of this Lease.
<PAGE>
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IN WITNESS WHEREOF, the Parties have entered into this Agreement to be
signed in quadruplicate original as of the date first written above.
WITNESS: IMMT-BAYONNE
/s/ BERTRAND B. ARTIGUES By: /s/ RICHARD B. JURISICH
- -------------------------------- ---------------------------------
Bertrand B. Artigues Richard B. Jurisich,
Secretary
[SEAL]
ATTEST COGEN TECHNOLOGIES NJ, INC.
/s/ JOHN B. WING By: /s/ ROBERT C. MCNAIR
- -------------------------------- ---------------------------------
John B. Wing, Robert C. McNair,
Assistant Secretary President
BI with regard to Article 5.1.
[SEAL]
ATTEST: BAYONNE INDUSTRIES INC.
/s/ BERTRAND F. ARTIGUES By: /s/ RICHARD B. JURISICH
- -------------------------------- ---------------------------------
Bertrand F. Artigues Richard B. Jurisich
Assistant Secretary Executive Vice President/
Secretary
<PAGE>
Agreements: IMTT Steam Sale Agreement
and Amendment thereto, both
dated June 13, 1985
Steam Producing Facilities
Lease Agreement dated
May 22, 1986
CONSENT TO ASSIGNMENT
---------------------
WHEREAS, Cogen Technologies NJ Venture, a general partnership
organized under the laws of the State of New Jersey (the "Borrower"), has
entered into a Security Agreement and Assignment dated as of December 15, 1988
(the "Security Agreement") with The Prudential Insurance Company of America (the
"Lender"), pursuant to which the Borrower has assigned all its rights, title and
interests in and to certain Assigned Agreements (all capitalized terms used
herein and defined in the Security Agreement shall have the same meaning when
used herein unless otherwise defined herein); and
WHEREAS, the Borrower and the undersigned are parties to an Agreement
for the Sale of Steam and Electricity from a Cogeneration Plant as amended to
date, dated June 13, 1985 (the "Steam Sale Agreement"), by and between Cogen
Technologies NJ, Inc. and IMTT-Bayonne and a Steam Producing Facilities Lease
Agreement, dated May 22, 1986 (the "SPF Lease"), between Cogen Technologies NJ,
Inc. and IMTT-Bayonne (both as assigned to Cogen Technologies NJ Venture
pursuant to the Amended and Restated Joint Venture Agreement dated as of August
28, 1986) (the Steam Sale Agreement and the SPF Lease are sometimes hereinafter
collectively called the "Agreements") relating to the Cogeneration Facility (as
defined in the Steam Sale Agreement) which Agreements are included within the
Assigned Agreements; and
WHEREAS, the undersigned is agreeable to consenting to the assignment
by the Borrower to the Lender of the Agreements as provided in the Security
Agreement;
NOW, THEREFORE, in order to satisfy its obligation to permit the
Borrower to assign the Agreements to a "Financier" as defined in and pursuant to
the provisions relating
<PAGE>
to assignment as set forth in the Agreements, the undersigned hereby:
1. Agrees that:
(a) To the best of its knowledge the execution and delivery of the
Agreements and this Consent to Assignment, and the performance by it of its
obligations thereunder and hereunder, are within its powers, have been duly
authorized, have received all necessary governmental approvals (if any shall be
required) and do not and will not contravene or conflict with any provision of
law or of any agreement binding upon it or of its Articles of Incorporation or
By-laws.
(b) The Agreements and this Consent to Assignment are its legal, valid
and binding obligations and are enforceable against it in accordance with their
terms.
(c) The Agreements are in full force and effect and no default on its
part or, to the best of its knowledge, on the part of the Borrower exists
thereunder.
2. Agrees with the Lender that until it receives notice from the
Lender that the Security Agreement has been terminated (i) it will not agree to
any modification, amendment or supplement of the Agreements without the prior
written consent of the Lender, (ii) it will not terminate either Agreement by
reason of any default thereunder by the Borrower without giving the Lender
notice of such default and the same opportunity to cure such defaults as is set
forth in the Agreements for a "Financier", (iii) it will deliver to the Lender a
copy of each demand, notice or other communication given by it to the Borrower
pursuant to the Agreements, (iv) it will not, without the prior written consent
of the Lender, acknowledge or consent to any sale or pledge of, or any other
assignment or part of a security interest by the Borrower of, any of the right,
title or interest of the Borrower in either Agreement, (v) upon execution and
delivery of this Agreement, it will pay all amounts payable by it to the
Borrower under the Agreements directly to the institution and account set forth
on Exhibit A hereto, unless notified otherwise by the Lender, and (vi) in the
event that the Lender succeeds to the interest of Borrower under the Agreements
by reason of the exercise of its rights under the Security Agreement the
undersigned will accept performance by the Lender or its successors or assigns
under such Agreements notwithstanding any restriction set forth in such
Agreements on the assignability of the Borrower's rights, but subject to
paragraph 6 hereof.
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<PAGE>
3. Reconfirms our consent to the assignment of the Agreements to the
Borrower by Cogen Technologies NJ, Inc.
4. This Consent to Assignment shall be governed by and in accordance
with the laws of the State of New York and shall be binding on, and inure to the
benefit of, the undersigned and the Lender and their successors and assigns.
5. Agrees with the Lender and the Borrower that all references to the
"Ground Lease" contained in the SPF Lease and the Steam Sale Agreement shall
refer to the Site Lease dated October 18, 1986, by and between Bayonne
Industries, Inc. and IMTT-Bayonne and Cogen Technologies NJ Venture and that the
SPF Lease and the Steam Sale Agreement are hereby amended to the extent
necessary to incorporate such a reference.
6. Notwithstanding anything to the contrary contained herein, the
consent granted by the undersigned and evidenced hereby and the rights of Lender
hereunder are and shall be expressly limited to those rights conferred upon a
Financier (as defined in the Agreements) set forth in Sections 15.5 and 19.3 of
the Steam Sale Agreement and Section 14.3 of the SPF Lease; provided, however,
that the provisions of Section 14.3 of the SPF Lease and Section 19.3 of the
Steam Sale Agreement referencing and incorporating Sections 21.6 and 21.7 of the
"Ground Lease," shall be interpreted as indicated in the Consent to Assignment
of the Site Lease and the Purchase and Sale Agreement, by Bayonne Industries,
Inc. and IMTT-Bayonne dated as of even date herewith.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Consent to
Assignment as of December 15, 1988.
IMTT-BAYONNE
By /s/ RICHARD B. JURISICH
-----------------------------------
The undersigned hereby acknowledges
and agrees to the provisions set forth
in paragraph 5 above.
COGEN TECHNOLOGIES NJ VENTURE
By: Cogen Technologies NJ, Inc.
Managing Venturer
By [Signature appears here]
------------------------------------
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<PAGE>
STATE OF LOUISIANA )
) ss.:
PARISH OF ORLEANS )
On this 27th day of December, 1988 before me personally came Richard
B. Jurisich, Sr., to me known, who, being by me duly sworn, did depose and say
that he resides at New Orleans, Louisiana, that he is the Chief Operating
Officer of IMTT-Bayonne, the partnership described in and which executed the
above instrument; and that he signed his name thereto by order of the
Partnership Committee of said partnership as the free act and deed of IMTT-
Bayonne and his free act and deed in his said capacity.
/s/ BERTRAND F. ARTIGUES
--------------------------------
Notary Public
Bertrand F. Artigues
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<PAGE>
EXHIBIT A
---------
Midlantic National Bank
499 Thornall Street
Edison, New Jersey 08818
ABA No: 021200012
Attention: Michael Davoron
Account No: 10107290
Wire transfers only required with respect to payments made under the
IMTT Steam Sale Agreement and Amendment thereto, both dated June 13, 1985.
<PAGE>
EXHIBIT 10.75
MORTGAGE AND SECURITY AGREEMENT
KNOW ALL MEN BY THESE PRESENTS, that COGEN TECHNOLOGIES NJ VENTURE, a
joint venture and being also a New Jersey general partnership, with an address
of 1600 Smith Street, Suite 5000, Houston, Texas 77002 (hereinafter called
"Grantor"), for and in consideration of the PRUDENTIAL INSURANCE COMPANY OF
AMERICA (the "Lender") agreeing to loan to the Grantor up to the principal
amount of ONE HUNDRED TWENTY MILLION DOLLARS ($120,000,000), pursuant to the
Term Loan Agreement dated as of November 1, 1987, between the Grantor and the
Lender (as amended or modified from time to time, the "Loan Agreement" and all
capitalized terms used herein shall have the same definition provided in the
Loan Agreement unless otherwise specified herein) does hereby give, grant,
bargain, sell, assign, transfer and set over unto the Lender (called "Grantee")
the following described property, whether now owned or hereafter acquired
(collectively, the "Security"):
Section 1. Security.
---------
1.1 All right, title and interest of Grantor, whether now owned or
hereafter acquired, in and to certain real estate including the buildings and
improvements now or hereafter located thereon situated in the City of Bayonne,
in the County of Hudson and State of New Jersey, as more particularly described
in Schedu1e A, attached hereto and made a part hereof, and expressly including
herein all land, water rights, flowage rights and other real property interests
necessary to own and operate the cogeneration facility situated thereon
(hereinafter collectively called the "Premises") whether such rights, title and
interest are created or arise under and pursuant to the Lease Agreement ("Site
Lease") between Bayonne Industries, Inc. and IMTT-Bayonne as Lessor and Grantor
as Lessee dated October 18, 1986 and recorded in the office of the Hudson County
Register in Book 3634 at page 1 or the Easement ("Easement") from Bayonne
Industries, Inc. and IMTT - Bayonne as Grantor and Grantor hereunder as Grantee
thereunder dated October 20, 1986 and recorded in the office of the Hudson
County Register in Book 3634 at page 59, as either of the same may be from time
to time further amended or supplemented, or whether Grantor's rights therein
arise from its own ownership or otherwise.
1.2 All right, title and interest of Grantor, whether now owned or
hereafter acquired, in and to all personal property necessary to own and operate
said cogeneration facility whether tangible or intangible, and expressly
including herein all permits, governmental approvals and all
Record and Return To:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Prepared by: /s/ DAVID G. DIETZE
-------------------------------
Type or Print Name: David G. Dietze, Esq.
<PAGE>
other property and contract rights necessary for the construction and operation
of an approximately 165 megawatt gas-fired, combined cycle cogeneration facility
located on the Premises.
1.3 All right, title and interest of Grantor, whether now owned or
hereafter acquired, in and to all of the following articles now and hereafter
situated upon or within or being a part of the Premises, or used in connection
therewith: all improvements on or to be constructed on the Premises, all
building materials, supplies and all other tangible personal property intended
for use in construction of improvements of all kinds, plumbing, heating,
lighting, refrigerating, ventilating and air conditioning apparatus and
equipment, garbage incinerators and receptacles, elevators and elevator
machinery, boilers, tanks, motors, sprinkler and fire extinguishing systems,
door bell and alarm systems, screens, awnings, screen doors, storm and other
detachable windows and doors, mantels, built-in cases, counters, trees, hardy
shrubs and perennial flowers, turbines, generators, lightning arrestors,
switching equipment, relays, gates, electrical lines, conduits, and other
equipment, machinery, furniture, furnishings and fixtures, as well as all
articles of personal property now and hereafter affixed to, placed upon or used
in connection with construction upon said Premises of, or the operation of said
Premises for, a cogeneration facility, accessory uses, and all other purposes,
whether or not included in the foregoing enumeration. Also, all additions,
accessions, substitutions, and replacements of all the foregoing, together with
cash and non-cash proceeds thereof, all of which are covered by this Mortgage
and Security Agreement (hereinafter called "Mortgage") whether or not such
property is subject to prior conditional sale agreements, chattel mortgages or
other liens, Grantor hereby granting and conveying to Grantee, its successors
and assigns, a security interest therein to the extent of Grantor's interest
therein.
1.4 All right, title and interest of Grantor, whether now owned or
hereafter acquired, in, to and under all contracts and agreements with respect
to the acquisition of portions of or interests in the Premises, as they may be
amended from time to time, including without limitation, (a) the Assigned
Contracts (as defined in the Loan Agreement) and (b) all lease agreements, use
agreements and purchase agreements (including conditional sales agreements)
belonging to Grantor, or in which Grantor has any interest, related to real
estate or machinery, equipment and other personal property in the categories
hereinabove set forth,
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<PAGE>
under which Grantor is the lessee of, or entitled to use or purchase such real
estate or items, including without limitation of the generality of the foregoing
the Site Lease and the Easement, and Grantor agrees to execute and deliver to
Grantee specific separate assignments to Grantee of such leases and agreements
when requested by Grantee.
1.5 All right, title and interest of Grantor, whether now owned or
hereafter acquired, in, to and under all rents, profits, revenues, income,
royalties, bonuses, rights, title, interest and benefits relating to the
Premises, including without limitation those arising under any and all leases or
tenancies now existing or hereafter created with respect to the Premises or any
part thereof, including without limitation of the generality of the foregoing
the Site Lease and the Easement, with the right to receive and apply the same to
the Obligations (as hereafter defined), and Grantee may demand, sue for and
recover such payments or benefits, but shall not be required to do so; provided,
however, that except as provided in the Loan Agreement and the Project Documents
and so long as no Event of Default (as defined in Section 3 hereof) is in
existence the right to receive and retain such rents, issues, benefits and
profits is reserved to Grantor. To carry out the foregoing, Grantor agrees (1)
to execute and deliver to Grantee such additional assignments of leases and
rents applicable to the Premises as the Grantee may from time to time reasonably
request, while this Mortgage and the Obligations are outstanding, and further
(2) not to cancel, accept a surrender of, reduce the rentals under, anticipate
any rentals under, or modify any such leases or tenancies, or consent to an
assignment or further subletting thereof, in whole or in part, without Grantee's
prior written consent. Nothing herein shall obligate the Grantee to perform the
duties of the landlord or lessor under any such leases or tenancies unless and
until Grantee shall agree to do so in writing.
1.6 All right, title and interest of Grantor, whether now owned or
hereafter acquired, in, to and under all judgments, awards of damages and
settlements (insurance or otherwise) hereafter made as a result or in lieu of
any taking of the Premises or any interest therein or part thereof under the
power of eminent domain, including any award for change of grade of street or
for any damage to the Premises or the improvements thereon or any part thereof,
or the rights and easements appurtenant thereto or any part thereof.
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<PAGE>
As used in this Mortgage, the term "Obligations" shall mean all
indebtedness, liabilities and obligations of Grantor to the Lender arising
under, out of or in connection with the Loan Agreement, the Term Notes or the
Project Documents (as these terms are defined in the Loan Agreement), whether
now existing or hereafter incurred, direct or indirect, absolute or contingent,
secured or unsecured, matured or unmatured, joint or several, whether for
principal, interest, fees, expenses or otherwise, including, without limitation,
the principal amount of, and accrued interest and premium (if any) on, the Term
Notes and all other amounts due to Grantee from time to time.
TO HAVE AND TO HOLD the aforegranted and bargained Security, with all
the privileges and appurtenances thereof, to Grantee, its successors and
assigns, to its and their use and behoof forever; PROVIDED NEVERTHELESS, that if
Grantor pays to Grantee the sum of ONE HUNDRED TWENTY MILLION DOLLARS
($120,000,000), or so much thereof as is advanced under the Loan Agreement with
interest and premium thereon and other charges, if applicable, in accordance
with all the terms and conditions of the Loan Agreement, as the same may be
renewed, extended and modified from time to time, and in accordance with all the
terms and conditions of the Term Notes (as defined in the Loan Agreement) issued
and/or to be issued pursuant to the Loan Agreement and all other obligations are
paid and performed in full, then this Mortgage shall be void (and Grantee shall
execute and deliver to Grantor, at Grantor's expense, an appropriate recordable
release hereof), otherwise shall remain in full force.
Section 2. Grantor's Covenants. Grantor covenants and agrees with
Grantee as follows:
2.1 Grantor holds good and indefeasible leasehold interest in the Site
pursuant to the Site Lease and Easement and good and marketable title in fee
simple in those portions of the Premises not constituting the Site, free from
encumbrances, except for Permitted Liens and Permitted Exceptions, and has the
right and power to, and may lawfully, mortgage the same, and Grantor shall and
will warrant and defend the same to Grantee forever against the claims and
demands of all persons, except as aforesaid. Grantor hereby agrees to execute
and deliver, upon request of Grantee, such supplemental mortgages and security
agreements (each a "Mortgage Supplement") as are necessary, in the sole
discretion of Grantee, to make subject to the lien of this Mortgage Grantor's
interest in such real and personal property, and interests therein, as shall be
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<PAGE>
hereafter acquired by Grantor, with respect to the Premises. Such Mortgage
Supplements shall be executed and delivered to Grantee, its successors and
assigns, contemporaneously with or within ten (10) days after such request.
Grantor does hereby irrevocably constitute and appoint Grantee as its true and
lawful attorney-in-fact with full and irrevocable power and authority, coupled
with an interest, in the place and stead of Grantor and in the name of Grantor
for the purpose of executing such Mortgage Supplements and any and all
additional instruments which Grantee, in its sole discretion, deems necessary to
secure Grantee's right hereunder, in the event Grantor does not execute such
Mortgage Supplements in a timely manner.
2.2 Grantor shall pay all sums secured hereby when due and shall
perform all its obligations, covenants, agreements, terms, conditions and
warranties contained herein or otherwise constituting Obligations.
2.3 Except as permitted pursuant to Sections 8.3 and 9.2 of the Loan
Agreement, Grantor shall pay, when due, all taxes and assessments of every type
or nature levied or assessed against the Premises and any claim, lien or
encumbrance against the Premises which may be or become prior to this Mortgage.
2.4 Grantor shall keep the Premises insured as provided in the Loan
Agreement and the Site Lease.
2.5 Grantor (a) shall not remove, erect or demolish any building,
structure or improvement now or hereafter erected upon the Premises or alter the
design or structural character thereof and shall not remove, demolish or damage
any of the Security hereunder, unless in compliance with the Loan Agreement or
unless the Grantee shall first consent thereto in writing; (b) shall maintain
the Premises in such good condition and repair as is necessary for the Facility
to operate efficiently in accordance with the Performance Adequacy (as defined
in the Loan Agreement), or to meet any applicable requirements of insurance
policies and accepted industry standards for similar properties, provided,
however, that Grantor is not hereby required to make any replacement, repair,
betterment, renewal or addition not required by the Loan Agreement; (c) shall
not commit or suffer waste thereof; and (d) shall comply with all laws,
ordinances, regulations, covenants, conditions and restrictions affecting the
Premises including without limitation of the generality of the foregoing, any
requirements of the New Jersey Department of Environmental Protection or other
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<PAGE>
agency of federal, state or local government with respect to environmental
conditions on the Premises, and will not permit any violation thereof, to the
extent necessary to permit Grantor to continue to operate the Project in the
manner contemplated by the Loan Agreement.
2.6 Anything herein to the contrary notwithstanding, Grantor shall
remain liable under each contract, agreement or instrument included in the
Security (each of which is herein referred to as an "Assigned Agreement") to
observe and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with and pursuant to the terms and
provisions of each such Assigned Agreement. Grantee shall not have any
obligation or liability under any Assigned Agreement by reason of or arising out
of this Mortgage or the assignment to Grantee of any payment relating to any
Assigned Agreement, nor shall Grantee be required or obligated in any manner (a)
to perform or fulfill any of the obligations of Grantor under or pursuant to any
Assigned Agreement; (b) to make any payment, or to make any inquiries as to the
nature or the sufficiency of any payment received by it or the sufficiency of
any performance by any party under any Assigned Agreement; or (c) to present or
file any claim, or to take any action, to collect or enforce any performance or
the payment of any amounts which may have been assigned to it or to which it may
be entitled at any time or times.
2.7 At the request of Grantee, Grantor shall join with Grantee in
executing one or more financing statements pursuant to the Uniform Commercial
Code now in effect in the State of New Jersey, in form satisfactory to the
Grantee, and shall pay the cost of filing or recording same and of filing and
recording this Mortgage in all public offices wherever filing or recording is
deemed in the sole discretion of the Grantee to be necessary and desirable. In
addition, Grantor irrevocably authorizes Grantee to file at any time financing
statements without Grantor's execution thereof, indicating Grantee's security
interest hereunder.
2.8 At any time the then existing use or occupancy of the Premises
shall, pursuant to any zoning or other law, ordinance or regulation, be
permitted only so long as such use or occupancy shall continue, Grantor shall
not cause or permit such use or occupancy to be discontinued without the prior
written consent of Grantee provided, however, that the foregoing shall not apply
to any law, ordinance or regulation to the extent preempted by operation of the
Federal Power Act.
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<PAGE>
2.9 Upon written request therefor by Grantee to Grantor, Grantor shall
pay to Grantee on a monthly basis as hereafter set forth a sum equal to the
municipal and other governmental real estate and personal property taxes and
other assessments next due on the Premises described in this Mortgage and all
premiums next due for fire and other casualty insurance required of Grantor
hereunder, less all sums already paid therefor, divided by the number of months
to elapse not less than one (1) month prior to the date when said taxes and
assessments will become delinquent and when such premiums will become due.
Should there be insufficient funds so deposited with Grantee for,said taxes,
assessments and premiums when due, Grantor shall upon demand by Grantee promptly
pay to Grantee amounts necessary to make such payments in full; any surplus
funds may be credited toward future such taxes, assessments and premiums; if
Grantee shall have commenced foreclosure proceedings, Grantor agrees that
Grantee may apply such funds toward the payment of the Obligations without
causing thereby a waiver of any rights, statutory or otherwise, and specifically
such application shall not constitute a waiver of any rights statutory or
otherwise, of the right of foreclosure hereunder. Grantor hereby assigns to
Grantee all the foregoing sums so held hereunder for such purpose. In the event
Grantee requires Grantor to deposit funds with Grantee pursuant to this Section
2.9, Grantee shall use such funds to pay for all taxes, assessments and
insurance relating to the Premises to the extent funds are available therefor.
2.10 Grantor shall submit to Grantee for Grantee's examination and
approval in writing prior to the execution, delivery and commencement thereof,
all leases, tenancies and occupancies of the Premises and any part thereof; any
such leases, tenancies and occupancies not so approved shall not be valid; and
Grantor at its cost and expense, upon request of Grantee, shall cause any
parties in possession of the Premises under any such leases, tenancies and
occupancies not so approved to vacate the Premises immediately; and Grantor
acknowledges that Grantee may from time to time at its option enter upon the
Premises and take any other action in court or otherwise to cause such parties
to vacate the Premises; the costs and expenses of Grantee in so doing shall be
paid by Grantor to Grantee on demand thereof and shall be part of the
indebtedness secured by this Mortgage as costs and expenses incurred to preserve
and protect the Security; such rights of Grantee shall be in addition to all its
other rights as mortgagee, including the right of foreclosure, for breach by
Grantor of the requirements of this Mortgage.
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<PAGE>
2.11 Except for Permitted Liens, and except as permitted by Section
9.9 of the Loan Agreement, without Grantee's prior written consent, neither
Grantor nor any subsequent owner of the Premises shall assign, mortgage or
otherwise transfer or encumber the Premises or any part thereof, nor shall the
Premises or any part thereof pass from Grantor or from any subsequent owner
therefrom, either voluntarily, involuntarily, by operation of law or otherwise.
This condition shall continue until all the Obligations are satisfied.
Permission given or election not to foreclose or accelerate said indebtedness by
Grantee, its successors or assigns, as to any one such event, shall not
constitute a waiver of any rights of Grantee, its successors or assigns, as to
any subsequent such event as to which this condition shall remain in full force
and effect.
2.12 Except as expressly required under any of the Project Documents,
Grantor shall not initiate, join in or consent to any change in any private
restrictive covenant, zoning ordinance or other public or private restrictions
limiting or defining the uses which may be made of the Premises of any part
thereof.
2.13 If an Event of Default shall have occurred and be continuing
(whether before or after the exercise by Grantee of its right to obtain
possession of the Premises and to cause Grantor to surrender possession of the
Premises to Grantee), and if Grantor shall refuse to vacate the Premises upon
demand by Grantee, Grantor shall pay to the Grantee, in addition to the
obligations, the fair and reasonable rental value for the use and occupancy of
the Premises and, upon default of any such payment, shall vacate and surrender
possession of the Premises to Grantee, or its agent, attorney-in-fact or
receiver, and in default thereof may be evicted by any summary action or
proceeding provided by law for the recovery or possession of premises for
nonpayment of rent.
2.14 Full Performance Under the Site Lease. Grantor shall (a) fully
and promptly perform all terms, covenants and conditions required by the lessor
to be fulfilled or performed by the lessee under the Site Lease and Easement in
accordance with the terms thereof, and (b) enforce the performance or observance
of all terms, covenants, and conditions of the Site Lease and Easement required
by the lessor to be performed or observed by the lessee with respect to any
sublessee or assignee thereunder, in accordance with the terms of the Site Lease
and Easement. If Grantor shall fail to so fully perform, Grantee may, but
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<PAGE>
shall not be obligated to, take any action Grantee deems necessary or desirable
to prevent or to cure any default by Grantor in the performance of or compliance
with any of Grantor's covenants or obligations under the Site Lease. Grantor
shall, immediately upon receipt thereof, furnish to Grantee copies of notices of
default by the lessee under the Site Lease and Easement, received by Grantor
from the lessor under the Site Lease and Easement, whether or not the lessor is
required under the Lease to give any such notices to Grantee, and if any such
notices are given to Grantor orally by the lessor, Grantor shall immediately
furnish full particulars thereof to Grantee in writing. Upon receipt by Grantee
from the lessor under the Site Lease and Easement, or upon receipt from
Mortgagor, as aforesaid, of any such notice of default by the lessee under the
Site Lease and Easement, Grantee may rely thereon and take any action to cure
such default even though the existence or nature of such default shall be
questioned or denied by Grantor or by any party on behalf of Grantor. Grantor
hereby expressly grants to Grantee and agrees that Grantee shall have the
absolute and immediate right to enter in and upon the Premises or any part
thereof to such extent and as often as Grantee, in its sole discretion, deems
necessary or desirable in order to prevent or to cure any such default by
Grantor. Grantee may pay and expend such sums of money as Grantee in its sole
discretion deems necessary for any such purpose, and Grantor hereby agrees to
pay to Grantee, immediately and without demand, all such sums so paid and
expended by Grantee, together with interest thereon from the date of each such
payment at the Stipulated Interest Rate. All sums so paid and expended by
Grantee, and the interest thereon, shall be added to the Obligations secured by
this Mortgage and the Security. Grantor hereby assigns to Grantee all of
Grantor's rights, privileges and prerogatives as lessee under the Site Lease to
terminate, cancel, modify, change, supplement, alter or amend the Lease or any
leasehold rights, and any such termination, cancellation, modification, change,
supplement, alteration or amendment of the Site Lease and Easement or any
leasehold rights thereunder, and any sublease, assignment or transfer under or
with respect to the Site Lease and Easement or any such leasehold rights,
whether voluntary or involuntary, by action or law or otherwise, without the
prior written consent thereto by Grantee, shall be void and of no force and
effect. Without in any way limiting the effect of the provisions of the
preceding sentence, Grantor shall furnish to Grantee, simultaneously with the
giving thereof, copies of any notices of default by the lessor under the Site
Lease or Easement which Grantor may give to the Lessor. As further security,
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<PAGE>
Grantor does hereby deposit with Mortgagee its original executed copies of the
Site Lease and all amendments thereto and assignments thereof, to be retained by
Grantee until the Obligations are fully paid. Grantor represents and warrants
that the documents delivered to Grantee under this Section 2.14 are the original
executed Site Lease and Easement and all amendments thereto in their possession
or control. So long as there is no breach of or default under any of the
covenants or agreements herein contained to be performed by Grantor, or in the
performance by Grantor of any of the terms, covenants, and conditions in the
Site Lease and Easement contained, Grantee shall have no right to terminate,
cancel, modify, change, supplement, alter or amend the Lease or any leasehold or
easement rights.
Section 3. Default.
--------
3.1 Any Event of Default described in Section 10.1 of the Loan
Agreement shall constitute an Event of Default hereunder, including without
limitation any default or breach of any term, condition, covenant or agreement
contained or referred to herein to be performed by Grantor that shall continue
unremedied for the applicable period for cure set forth herein or in Section
10.1(g) of the Loan Agreement.
3.2 If an Event of Default shall occur and be continuing:
(a) Grantee is authorized at any time, without notice, in its sole
discretion, except as otherwise provided in the Loan Agreement, to enter
upon and take possession of the Premises or any part thereof, to perform
any acts Grantee deems necessary or proper to conserve the Security, and
to collect and receive all rents, issues and profits thereof, including
those past due as well as those accruing thereafter.
(b) Grantee shall be entitled to have a receiver appointed to enter
and take possession of the Premises, or any part thereof, to perform any
acts deemed necessary or proper to conserve the Security, and to collect
the rents, issues and profits therefrom and apply the same as the court
may direct.
(c) Grantee may, at its discretion, require that any and all personal
property constituting a portion of the Security hereunder be assembled and
made available to Grantee at a place reasonably convenient to the
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<PAGE>
parties to be designated by Grantee. Grantee agrees to give not less than
ten (10) days' notice to Grantor (which notice shall be deemed given three
days after mailing when mailed by registered or certified mail, return
receipt requested, postage prepaid, addressed to Grantor as provided in
Section 12.5 of the Loan Agreement), of the time and place of any public
sale of any of the personal property Security or of the time any private
sale or other intended disposition thereof, which provisions for notice
Grantor and Grantee agree are reasonable; provided, however, that nothing
herein shall preclude Grantee from proceeding as to both real and personal
property in accordance with Grantee's rights and remedies with respect to
the real property. Grantee shall have all of the remedies of a secured
party under the Uniform commercial Code as now in effect in the State of
New Jersey, and such further remedies as may from time to time hereafter
be provided in New Jersey for a secured party. Grantor agrees that all
rights of Grantee as to the personal property Security and as to the other
Security, and rights and interests appurtenant thereto, may be exercised
together or separately and further agrees that in exercising its power of
sale as to the personal property Security and as to the other Security,
and rights and interests appurtenant thereto, Grantee may sell the
personal property Security or any part thereof, either separately from or
together with the other Security, rights and interests appurtenant
thereto, or any part thereof, all as Grantee may in its discretion elect.
The reasonable expenses of pursuing, searching for, retaking, receiving,
holding, storing, safeguarding, insuring, accounting for, advertising,
preparing for sale or lease, selling, leasing, and the like, plus
reasonable attorneys' fees, fees for certified public accountants, fees
for auctioneers, fees for brokers and/or appraisers, fees for security
guards, fees for hazard insurance premiums or any other costs or
disbursements whatsoever incurred or contracted for by Grantee in
connection with the real and personal property constituting the Security
(including any of the foregoing incurred or contracted for by Grantee in
connection with any bankruptcy or insolvency proceedings involving
Grantor) shall all be chargeable to the real and personal property
mortgaged and/or in which a secured interest is granted under this
Mortgage, and then to Grantor. Subject to Section 12.4 hereof, Grantor
will be liable to Grantee and on demand shall pay to Grantee any
deficiency which may remain after such sale or other dispo-
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<PAGE>
sition, and Grantee agrees to remit to Grantor any surplus resulting
therefrom after payment in full of the Obligations and such expenses of
sale.
(d) To the extent permitted by law, Grantee or the receiver shall have
the right and power to take possession of all or any part of the property
constituting the Security hereunder, and to exclude the Grantor and all
persons claiming under the Grantor wholly or partly therefrom, and
thereafter to hold, store, and/or use, operate, manage and control the
same. Upon any such taking of possession, the Grantee may, from time to
time, at the expense of the Grantor, make all such repairs, replacements,
alterations, additions and improvements to and of said Security as the
Grantee may deem proper. In such case, the Grantee shall have the right to
manage and control said Security and to carry on the business and to
exercise all rights and powers of the Grantor in respect thereto as the
Grantee shall deem best, including the right to enter into any and all
such agreements with respect to the leasing and/or operation of said
Security or any part thereof as the Grantee may see fit; and the Grantee
shall be entitled to collect and receive all rents, issues, profits, fees,
revenues and other income of the same and every part thereof. Such rents,
issues, profits, fees, revenues and other income shall be applied to pay
the expenses of holding and operating the said Security and of conducting
the business thereof, and of all maintenance, repairs, replacements,
alterations, additions and improvements, and to make all payments which
the Grantee may be required or may elect to make, if any, for taxes,
assessments, insurance and other charges upon the said Security or any
part thereof, and all other payments which the Grantee may be required or
authorized to make under any provision of this Mortgage (including legal
costs and attorneys' fees). The remainder of such rents, issues, profits,
fees, revenues and other income shall be applied to the payment of the
obligations in such order or priority as the Grantee shall determine and,
unless otherwise provided by law or by a court of competent jurisdiction,
any surplus shall be paid over to the Grantor.
(e) Grantee shall have such rights and remedies as may be given to
grantee in the loan agreement, the term notes and the project documents,
including but not limited to, the right to enter the premises or make
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<PAGE>
inspections before and after any default, and after any Event of Default
the right to operate the Premises, or cause the Premises to be operated,
and the right to expend additional sums, necessary in the judgment of
Grantee, in order to operate the Premises, or cause the Premises to be
operated, so aforesaid; all such additional sums so expended, with
interest thereon at the rate of interest per annum that is at the
applicable interest rate or rates set forth in the Loan Agreement and the
Term Notes, shall be fully secured hereby as necessary to protect the
security of this Mortgage.
(f) If the lien of this Mortgage on any fixtures or personal property
shall be subject to a conditional sale agreement or chattel mortgage
covering such property, then in the event of any default hereunder all the
right, title and interest of the Grantor in and to any and all deposits
made thereon or therefor are hereby assigned to the Grantee, together with
the benefit of any payments now or hereafter made thereon.
(g) Grantee, at its option, is authorized to pay any claim, lien,
encumbrance, tax assessment or premium with respect to the Premises, with
right of subrogation thereunder, is authorized to make such repairs and
take such steps as it deems advisable to prevent or cure waste on the
Premises, and with respect to any action or proceeding, Grantee is
authorized to appear in the action or proceeding, retain counsel therein
at the reasonable expense of Grantor, and take such action therein as
Grantee deems reasonably advisable to protect its Security hereunder. For
any one or more of the above purposes Grantee may advance such sums of
money as it deems necessary. Grantee shall have no responsibility with
respect to the legality, validity and priority of any such claim, lien,
encumbrance, tax, assessment, premium, action or proceeding, or the amount
it deems necessary to be paid in satisfaction thereof, as long as it acts
reasonably; Grantor shall pay to Grantee, immediately and without demand,
all sums of money advanced or expended by Grantee pursuant to this
paragraph, together with interest on each such advancement at the
applicable interest rate or rates set forth in said Loan Agreement and
Term Notes and all such sums and such interest thereon shall be secured
hereby.
(h) Grantee shall have the right of foreclosure and any and all other
rights and remedies given to a
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<PAGE>
mortgagee and secured party under the law of New Jersey, this Mortgage,
the Loan Agreement and the Security Documents.
(i) Grantee shall be authorized to exercise any other right or
remedy afforded by law.
(j) Grantee shall be under no obligation whatsoever to proceed
first against any portion of the Security before proceeding against any
other portion of the Security. It is expressly understood and agreed that
all of the Security stands as equal security for all the Obligations and
that Grantee shall have the right to proceed against any and all of the
Security in any order, or simultaneously, as in its sole discretion it
shall determine. It is further understood and agreed that if at any time
Grantee shall have the right to sell or otherwise rely upon any of the
Security, it may do so in any order or simultaneously, in part or in
whole, as it in its sole discretion shall determine.
(k) Upon any sale made under or by virtue of this Section, whether
made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
the Grantee may bid for and acquire all or any part of the Security being
sold and, in lieu of paying cash therefor, may make settlement for the
purchase price by crediting upon the Obligations of Grantor secured by
this Mortgage the net proceeds of sale after deducting therefrom the
expenses of the sale and the costs of the action and any other sums which
the Mortgagee is authorized to deduct under this Mortgage, the Loan
Agreement or at law. The Grantee, upon so acquiring the Security or any
part thereof, shall be entitled to hold, rent, operate, manage or sell the
same in any manner provided by applicable laws.
Section 4. Future Advances. Upon request of Grantor, the Grantee may,
at its sole option, from time to time make further advances in accordance with
Section 12.8 of the Loan Agreement to Grantor to finance further improvements to
the Premises, including the expansion of the to include a fourth turbine to the
Facility. If by Grantee, Grantor shall execute and deliver to Grantee, one or
more notes or other agreements evidencing every such further advance which may
be made, and such notes or other agreements shall contain such terms and
conditions as the Grantee may require. Grantor shall pay
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<PAGE>
when due all such further advances with interest and other charges thereon, as
applicable. Said further advances, each note and agreement evidencing the same,
the Loan Agreement and the Term Notes shall all be secured hereby. All
provisions of this Mortgage shall apply to each further advance as well as to
all other indebtedness secured hereby, including, without limitation, all
indebtedness under the Loan Agreement and the Notes.
Section 5. No Waiver. No exercise by Grantee of any right or remedy
hereunder, or otherwise afforded by law, shall operate as a waiver, or preclude
the exercise, of any other right or remedy, including the right of foreclosure
by Grantee, if an Event of Default shall occur or be continuing.
No delay by Grantee in exercising any right or remedy hereunder, or
otherwise afforded by law, shall operate as a waiver thereof or preclude the
exercise thereof during the continuance of any default hereunder.
Section 6. Additional Rights of Grantee.
----------------------------
6.1 Without affecting the liability of Grantor or any other person
(except any person expressly released in writing) for performance of any
Obligations secured hereby or for performance of any obligation contained
herein, or in the Loan Agreement or the Term Notes, and without affecting the
rights of Grantee with respect to any collateral not expressly released in
writing, Grantor agrees that Grantee may at any time and from time to time,
either before or after the maturity of the Term Notes and without notice or
consent:
(a) Release any person liable for payment or for performance of
any of the Obligations;
(b) Make any agreement extending the time or otherwise altering the
terms of payment of all or any part of the Obligations, or modifying
or waiving any of the Obligations, or subordinating, modifying or
otherwise dealing with the lien or charge thereof;
(c) Exercise or refrain from exercising or waive any right Grantee
may have;
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<PAGE>
(d) Accept additional security of any kind; or
(e) Release or otherwise deal with any Security, or part or parts
thereof hypothecated hereby.
6.2 Grantee shall have the right to accelerate the maturity of the
obligations as provided in the Loan Agreement. In such event, in addition to and
not in limitation of any and all other rights and remedies of Grantee pursuant
hereto or under the Loan Agreement and the Project Documents or by law provided,
Grantee shall have the right to take possession of the Premises and foreclose
the lien hereof.
6.3 Upon the completion of any sale made by Grantee hereunder,
Grantee, or an officer of court empowered to do so, may execute and deliver to
the accepted purchaser a good and sufficient instrument, or good and sufficient
instruments, conveying, assigning and transferring all estate, claim, demand,
right, title and interest of Grantor in and to the property and rights sold.
Grantee, or such officer of the court, is hereby appointed the true and lawful
attorney-in-fact of Grantor to make all necessary conveyances, assignments,
transfers and deliveries of the Security and rights so sold and for that purpose
Grantee, or such officer of the court, may execute all necessary instruments of
conveyance, assignment and transfer, and may substitute one or more Persons with
like power to do so, Grantor hereby ratifying and confirming all that its
attorney-in-fact or such substitute or substitutes shall lawfully do by virtue
hereof. Nevertheless, Grantor, if so requested by Grantee, shall ratify and
confirm any such sale by executing and delivering to Grantee or such purchaser
all such instruments as may be advisable, in the judgment of Grantee, for the
purpose, and as may be designated in such request. Any sale or sales made
hereunder (whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or of a judgment of decree of foreclosure and
sale or otherwise), to the extent not prohibited by law, shall operate to divest
all the estate, claim, demand, right, title and interest whatsoever, whether at
law or in equity, of Grantor in and to the properties and rights so sold, and
shall be a perpetual bar both at law and in equity against Grantor and against
any and all persons claiming or who may claim the same, or any part thereof
from, through or under Grantor.
6.4 Upon any sale made hereunder (whether made under the power of sale
herein granted or under or by virtue
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of judicial proceedings or of a judgment or decree of foreclosure and sale or
otherwise), Grantee may bid for and acquire the property and rights sold and, in
lieu of paying cash therefor, may make settlement for the purchase price by
crediting upon the Obligations the proceeds of such sale remaining after
deducting therefrom (i) the costs and expenses to Grantee, its agents and
attorneys-in-fact and at law, and (ii) all expenses, liabilities and advances
made or incurred by Grantee under this Mortgage or any Security Document,
together with interest thereon per annum at the Stipulated Interest Rate on all
advances made by Grantee and (iii) all taxes or assessments required by law to
be paid out of the proceeds of such sale.
Section 7. Priority. Any agreement hereafter made by Grantor and
Grantee pursuant to this Mortgage shall be superior to the rights of the holder
of any intervening lien or encumbrance to the extent allowed by law.
Section 8. Notices.
--------
8.1 All notices, requests, demands, and other communications provided
for hereunder shall be given as provided in the Loan Agreement and shall be
deemed to have been given as provided therein.
8.2 Grantor hereby appoints, pursuant to Rule R.4:4-4 of the New
Jersey Court Rules, The Corporation Trust Company, 2828 West State Street,
Trenton, New Jersey 08608, as registered agent of the Managing Venturer, or, in
his absence or inability to serve, any other person permitted by law as agent to
receive service of process in connection with any suit or proceeding arising in
respect of this Mortgage.
Section 9. Waivers by Grantor.
-------------------
9.1 Grantor waives to the fullest extent permitted by law, on behalf
of itself and all Persons now or hereafter interested in the Premises or the
Security, all rights under all appraisement, homestead, moratorium, valuation,
exemption, stay, extension and marshalling statutes, laws or equities now or
hereafter existing and agrees to the fullest extent permitted by law, that no
defense based on any thereof will be asserted in any action enforcing this
Mortgage.
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<PAGE>
9.2 To the extent permitted by law, Grantor waives, on behalf of
itself and all Persons now or hereafter interested in the Security, all rights
of redemption from sale under any order or decree of foreclosure of this
Mortgage or under any power contained herein (including the power of sale) and
all notices of seizure.
Section 10. Power-of-Attorney. In addition to the powers-of-attorney
otherwise granted by specific references herein, Grantor does hereby irrevocably
constitute and appoint Grantee as its true and lawful attorney-in-fact with full
and irrevocable power and authority in the place and stead of the Grantor and in
the name of the Grantor or in the name of the Grantee, for the purpose of, upon
the occurrence and continuance of an Event of Default hereunder, carrying out
the terms of this Mortgage, to take any and all action and to execute any and
all instruments which may be necessary to accomplish the purposes of this
Mortgage. This power-of-attorney is a power coupled with an interest and shall
be irrevocable.
Section 11. Performance by Grantee of Grantor's Obligations. If
Grantor fails to perform or comply with any of its agreements contained herein
and the Grantee, as provided for by the terms of this Mortgage, shall perform or
comply, or otherwise cause performance or compliance, with such agreement, the
expenses of the Grantee incurred in connection with such performance or
compliance, together with interest thereon at a rate per annum equal to the
Stipulated Interest Rate shall be payable by Grantor to the Grantee on demand
and shall constitute obligations secured hereby.
Section 12. Miscellaneous.
--------------
12.1 The covenants and agreements herein contained shall bind, and the
benefits and advantages thereof shall inure to, the respective successors and
assigns of Grantee and the respective permitted successors and assigns of
Grantor, except that the Grantor may not assign or transfer any of its rights
under this Agreement without the prior written consent of the Grantee.
12.2 If any obligation or portion of this Mortgage is determined to
be invalid or unenforceable under law, it shall not affect the validity or
enforcement of the remaining obligations or portions hereof.
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<PAGE>
12.3 Wherever appropriate herein, the singular number shall include
the plural, the plural the singular, and the use of any gender shall be
applicable to all genders.
12.4 Notwithstanding anything to the contrary contained in this
Mortgage or in any of the Project Documents, no recourse under or upon any
obligation contained in this Mortgage 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 Mortgage,
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 Security;
provided, however, that nothing in this Section 12.4 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 Mortgage and the other Project
Documents.
12.5 To the extent that any obligation or portion of this Mortgage is
determined to conflict with any obligation or portion of the Loan Agreement,
such obligation or portion of the Loan Agreement shall govern.
12.6 Certain Rights of Grantee in the Event of Bankruptcy of Lessor
under Site Lease. The lien of this mortgage includes and attaches to all of
Grantor's rights and remedies at any time arising under or pursuant to section
365(h) of the Bankruptcy Code, 11 U.S.C. (S) 101 et seq. (the "Bankruptcy Code")
and any related provisions as the same, or any law replacing it, may be in
effect from time to time, including but not limited to all of Grantor's rights
to remain in possession of the mortgaged premises.
In the event of the filing by or against the Lessor under the Site
Lease ("Lessor") of a petition for relief under the Bankruptcy Code, Grantor
shall not without Grantee's prior written consent elect to treat the Site Lease
or Easement as terminated or to remain in possession of the mortgaged premises
under section 365(h)(1) of the Bankruptcy Code and any related provisions as the
same, or any law replacing it, may be in effect from time to time. Any such
election made without Grantee's prior written consent shall be void.
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<PAGE>
Grantor hereby unconditionally assigns, transfers and sets over to
grantee all of Grantor's claims and rights to the payment of damages arising
from any rejection by the Lessor of the Site Lease or Easement under the
Bankruptcy Code. Grantee shall have the right to proceed in its own name or in
the name of Grantor in respect to any claim, suit, action or proceeding relating
to the rejection of the Site Lease, including but not limited to the right to
file and prosecute, to the exclusion of Grantor, any proofs of claim,
complaints, motions, applications, notices and other documents, in any case in
respect of the Lessor under the Bankruptcy Code. This assignment constitutes a
present, irrevocable and unconditional ssignment of the foregoing claims, rights
and remedies, and shall continue in effect until all of the obligations shall
have been satisfied and discharged in full. Any amounts received by Grantee as
damages arising out of the rejection of the Site Lease or Easement as aforesaid
shall be applied first to all costs and expenses of Grantee (including but not
limited to attorneys' fees and expenses) incurred in connection with the
exercise of any of Grantee's rights or remedies under this Section 12.6 and then
to reduction of the Obligations.
If pursuant to seciton 365(h)(2) of the Bankruptcy Code as the same,
or any law replacing it, may be in effect from time to time, Grantor seeks to
offset against the rent or any other sums reserved in the Site Lease or Easement
the amount of any damages caused by the non-performance by the Lessor of any of
its obligations under the Lease after the rejection by the Lessor of such
obigations and the Site Lease or Easement under the Bankruptcy Code, Grantor
shall, prior to effecting such offset, give the Grantee notice of its intent so
to do, setting forth the amounts proposed to be so offset and the basis
therefor, and Grantor shall not effect any such offset unless it shall have
obtained the prior written consent of Grantee. Grantor shall indemnify and save
Grantee harmless from and against any and all claims, demands, actions, suits,
proceedings, damage, losses, costs and expenses of every nature whatsoever
(including but not limited to, attorneys' fees and expenses) arising from or
relating to any offset by Grantor against the rent reserved in the Site Lease or
Easement.
If any action, proceeding, motion or notice shall be commenced or
filed in respect of the Lessor in connection with any case under the Bankruptcy
code, the Grantee shall have the option, to the exclusion of Grantor,
exercisable upon notice from Grantee to Grantor, to conduct and control any such
litigation with counsel of Grantee's choice.
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Grantee may proceed in its own name or in the name of Grantor in connection with
any such litigation, and Grantor agrees to execute any and all powers,
authorizations, consents or other documents required by the Grantee in
connection therewith. Grantor shall, upon demand, pay to Grantee all costs and
expenses (including but not limited to attorneys' fees and expenses) paid or
incurred by Grantee in connection with the prosecution or conduct of any such
proceedings. Any such costs or expenses not paid by Grantor as aforesaid shall
be added to the Obligations and secured by this Mortgage and the Security.
Grantor shall not commence any action, suit, proceeding or case, or file any
application or make any motion, in respect of the Site Lease or Easement in any
such case under the Bankruptcy Code without the prior written consent of
Grantee.
Grantor shall promptly after obtaining knowledge thereof notify
Grantee by telephone of any filing by or against the Lessor of a petition under
the Bankruptcy Code. Grantor shall thereafter forthwith give written notice of
such filing to Grantee, setting forth any information available to Grantor as to
the date of filing, the court in which such petition was filed, and the relief
sought therein. Grantor shall promptly deliver to Grantee following receipt
thereof any and all notices, summonses, pleadings, applications and other
documents received by Grantor in connection with any such petition and any
proceedings relating thereto or in connection therewith.
12.7 Lien on Greater Estate. If Grantor shall, at any time before
payment in full of the obligations acquire fee title or any other greater estate
to the premises demised by the Site Lease and Easement, the lien of this
Mortgage shall separately attach, extend to, and cover and be a lien upon, such
fee title or other greater estate, and Grantor shall, upon request, execute such
documents and take such actions as Grantee deems necessary or advisable to
perfect or publicly record Grantee's rights therein.
12.8 Lessor waiver Under the Site Lease. No release or forebearance on
the part of the Lessor or any of the Grantor's obligations under the Site Lease,
pursuant to the Site Lease or otherwise, shall release Grantor from any of its
obligations to Grantee under this Mortgage.
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GRANTOR ACKNOWLEDGES RECEIPT OF A TRUE COPY
OF THIS MORTGAGE WITHOUT CHARGE.
IN WITNESS WHEREOF, Grantor has caused this instrument to be executed
under seal by its representative thereunto duly authorized, all as of the 15th
day of December, 1988.
ATTEST: COGEN TECHNOLOGIES NJ VENTURE
a New Jersey General Partnership
By Cogen Technologies NJ, Inc.
a Delaware corporation,
Managing Venture
/S/ LAWRENCE THOMAS
(SEAL) __________________________ By ______________________________
Vice President
Type or Print Name Lawrence Thomas
______________________________
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 29th day of December, 1988 before me personally came Lawrence
Thomas, to me known, who, being by me duly sworn, did depose and say that he
resides at 3826 Olympia, Houston, Texas 77019; that he is the Vice President of
Cogen Technologies NJ, Inc., the corporation described in and which executed the
above instrument; and that he signed his name thereto by order of the Board of
Directors of said corporation as the free act and deed of Cogen Technologies NJ,
Inc. and Cogen Technologies NJ Venture and his free act and deed in his said
capacity.
/S/ LEENA I. HILIVIRTA
_________________________________
Notary Public
Leena I. Hilivirta
Type or Print Name: _________________________________
Notary Public, State of New York
No. 31-4913776
Qualified in New York County
Commission Expires Dec. 7, 1989
<PAGE>
Schedule A
Leasehold interest of Grantor under the Lease Agreement dated October
20, 1986, recorded in the Office of The Hudson County, New Jersey, Register in
Book 3634 at Page 1, covering the parcel described below:
<PAGE>
Easements created under the Easement dated October 20, 1986 recorded in the
Office of The Hudson County, New Jersey Register in Book 3634 at Page 59, as
amended by First Amendment to Easement Agreement dated December 15, 1988 from
Bayonne Industries, Inc. and IMTT-Bayonne, as grantor, to Grantor hereunder, or
grantee, covering the parcels set forth below:
<PAGE>
ITEM NO. 4 - Continued TITLE NO. 8824-60268
FIRST - REVISED
TRACT I: (LEASEHOLD PARCEL)
BEGINNING at a point in a northeasterly corner of the herein described
parcel, all as shown on a map entitled "Proposed Access Easement and Lease Area
for Bayonne Industries", dated as revised to October 23, 1986, prepared by Hirth
Weidener Associates, said point also being the termination of course number 27
of a twenty (20) foot wide access easement and running; thence,
(1) South 36 degrees 03 minutes 14 seconds East, distant 77.29 feet to a
point in the most easterly line of the herein described tract; thence,
(2) South 5 degrees 33 minutes 58 seconds West, along said easterly line,
distant 192.22 feet to a point being the southeasterly corner of the herein
described tract; thence,
(3) North 84 degrees 26 minutes 02 seconds West, along the southerly line of the
proposed leased area, distant 609.64 feet to a point; thence,
(4) North 5 degrees 33 minutes 58 seconds East, along the westerly line of the
herein described parcel, said line being parallel with and distant 16 feet
easterly from the easterly wall of an existing one story metal building, distant
312.03 feet to a point; thence,
(5) North 51 degrees 31 minutes 01 seconds East, distant 47.43 feet to a point
in the northerly line of the herein described parcel; thence,
(6) South 84 degrees 26 minutes 02 seconds East, along said northerly line,
distant 429.71 feet to a point; thence,
(7) South 5 degrees 33 minutes 58 seconds West, distant 95.00 feet to a point;
thence,
(8) South 84 degrees 26 minutes 02 seconds East, distant 94.51 feet to the above
described point or place of BEGINNING.
The above described parcel is a portion of Bayonne Industries property
leased by Cogen Technologies NJ Venture, all as shown on the previously
described map. Revised October 23, 1986, and last revised December 15 1988.
- continued -
<PAGE>
ITEM NO. 4 - Continued TITLE NO. 8824-60268 - 2 -
FIRST - REVISED
TRACT II: (BOILERHOUSE ONLY)
BEGINNING at a point in the most southwesterly corner of the here described
parcel, said point being 741.86 feet as measured at right angles from the
bulkhead line located along the Kill Van Kull and from said point running;
thence,
(1) North 23 degrees 15 minutes 59 seconds West, along the most westerly line of
the herein described tract, distant 155.81 feet to a point; thence,
(2) North 66 degrees 44 Minutes 01 seconds East, along the northerly line of
said parcel, distant 98.30 feet to a point, said point being distant 456.52 feet
as measured at right angles from the easterly line of the overall tract; thence,
(3) South 23 degrees 15 minutes 59 seconds East, along said easterly line of the
herein described parcel, distant 155.81 feet to a point; thence,
(4) South 66 degrees 44 minutes 01 seconds West, along the southerly line of the
herein described parcel, distant 98.30 feet to the above described point or
place of BEGINNING.
THE above description is for a parcel of land 155.81 x 98.30 feet in which
is contained a boiler house building. Specifically excluded from said lease are
portions of the first and second floor which are to remain in the control of the
leasor.
TRACT III: (UPPER EASEMENT - B/T R.R. & EAST 22ND STREET)
BEGINNING at a point in the southerly right-of-way line of East "Twenty-
second Street where the same is intersected by the westerly line of lands now or
formerly Southern Cotton Oil Company, as shown on a map entitled "Map Showing
Proposed Access Easement for Bayonne Industries, City of Bayonne, Hudson County,
New Jersey" revised dated October 23, 1986, prepared by Hirth Weidener
Associates and running; thence.
(1) South 5 degrees 38 minutes 40.8 seconds West, along said westerly line of
lands now or formerly Southern Cotton Oil Company, distant 248.18 feet to a
point; thence,
- continued -
<PAGE>
ITEM NO. 4 - Continued TITLE NO. 8824-60268 - 3 -
FIRST - REVISED
(2) South 84 degrees 21 minutes 19.2 seconds East, along the southerly line or
the aforesaid Southern Cotton Oil Company, distant 19.87 feet to a point in the
easterly line of a proposed 20 foot wide access easement; thence,
(3) South 3 degrees 17 minutes 01 seconds East, along said easterly line,
distant 281.10 feet to a point; thence,
(4) South 4 degrees 36 minutes 12 seconds East, continuing along the same,
distant 303.68 feet to a point; thence,
(5) South 12 degrees 36 minutes 58 seconds East, still along the same, distant
233.20 feet to a point; thence,
(6) South 6 degrees 27 minutes 25 seconds East, still along the said easterly
line of a proposed 20 foot wide access easement, distant 185.47 feet to a point
in the northerly line of lands now or formerly Bayonne Industries and the
southerly line of the Central Railroad of New Jersey, Constable Hook Branch;,
thence,
(7) North 84 degrees 21 minutes 19 seconds West, along said southerly line of
the Central Railroad of New Jersey, distant 20.46 feet to a point in the
westerly line of the proposed 20 foot wide access easement; thence,
(8) North 6 degrees 27 minutes 25 seconds West, along said westerly line,
distant 180.10 feet to a point; thence,
(9) North 12 degrees 36 minutes 58 seconds West, still along the same, distant
233.53 feet to a point; thence,
(10) North 4 degrees 36 minutes 12 seconds West, continuing said westerly line,
distant 305.31 feet to a point; thence,
(11) North 3 degrees 17 minutes 01 seconds West, still along said westerly line
of the 20 foot wide access easement, distant 223.38 feet to a point; thence,
(12) North 34 degrees 49 minutes 18 seconds West, distant 161.13 feet to a point
in the easterly line of lands now or formerly Kenrich Petrochemicals, Inc.;
thence,
- continued -
<PAGE>
ITEM NO. 4 - Continued TITLE NO. 8824-60268 - 4 -
FIRST - REVISED
(13) North 7 degrees 1.9 minutes 21.8 seconds East, along said easterly line of
lands now or formerly Kenrich Petrochemicals. Inc., distant 184.69 feet to a
point in the southerly right-of-way line of Hook Road; thence,
(14) South 82 degrees 41 minutes 49.2 seconds East, along said southerly right-
of-way line, distant 20.07 feet to a street line jog; thence,
(15) North 5 degrees 38 minutes 40.8 seconds East, distant 1.92 feet to a point
in the southerly right-of-way line of the aforesaid East Twenty-second Street;
thence,
(16) South 84 degrees 21 minutes 19.2 seconds East, distant 70.00 feet to the
above described point or place of BEGINNING.
The above description is intended to be an easement having a variable to 20
foot width which crosses lands of Bayonne Industries from East Twenty-second
Street in a southerly direction to the southerly line of Central Railroad of New
Jersey, Constable Hook Branch, all is shown on the above recited map.
The crossing of the lands of Central Railroad of New Jersey, Constable Hook
Branch by courses 6 and 8 does not imply ownership in said lands and is subject
to crossing agreement cited under Rights and Easements as number 10 on the
aforementioned map. Revised October 23, 1986, and last revised December 15,
1988.
TRACT IV: LOWER EASEMENT (R.R. TO BOILERHOUSE)
BEGINNING at a point in the southerly right-of-way line of Central Railroad
of New Jersey, Constable Hook Branch, where the same is intersected by the
westerly line of a proposed 20 foot wide access easement, said point of
beginning being the following courses and distances from where the southerly
right-of-way line of Hook Road is intersected by the easterly line of lands now
or formerly Kenrich Petrochemicals, Inc. and from said point running; thence,
A. South 7 degrees 19 minutes 21.8 seconds West, along said easterly line of
lands now or formerly Kenrich Petrochemicals, Inc., distant 184.69 feet to a
point; thence,
- continued -
<PAGE>
ITEM NO. 4 - Continued TITLE NO. 8824-60268 - 5 -
FIRST - REVISED
B. South 34 degrees 49 minutes 18 seconds East, distant 161.13 feet to a Point;
thence,
C. South 3 degrees 17 minutes 01 seconds East, distant 223.38 feet to a point;
thence,
D. South 4 degrees 36 minutes 12 seconds East, distant 305.31 feet to a point;
thence,
E. South 12 degrees 36 minutes 58 seconds East, distant 233.53 feet to a point;
thence,
F. South 6 degrees 27 minutes 25 seconds East, distant 180.10 feet to a point
and the place of Beginning and running; thence,
(1) South 84 degrees 21 minutes 19 seconds East, along said southerly line of
the Central Railroad of New Jersey, Constable Hook Branch, distant 20.46 feet to
a point; thence,
(2) South 6 degrees 27 minutes 25 seconds East, along the easterly line of the
proposed easement, distant 40.99 feet to a bend point; thence,
(3) South 51 degrees 15 minutes 32 seconds East, distant 167.90 feet to a
point; thence,
(4) South 88 degrees 43 minutes 55 seconds East, along the northerly line of
said access easement, distant 240.55 feet to a point; thence,
(5) South 62 degrees 22 minutes 50 seconds East, continuing along the same,
distant 128.36 feet to a point; thence,
(6) South 5 degrees 41 minutes 10 seconds West, along the easterly line of said
access easement, distant 570.09 feet to a point; thence,
(7) South 28 degrees 32 minutes 04 seconds East, still along said easterly line
of the proposed access easement, distant 524.82 feet to a point; thence,
(8) South 66 degrees 07 minutes 15 seconds West, distant 29.69 feet to a point
in the easterly side of a proposed boiler building easement; thence,
(9) North 23 degrees 15 minutes 59 seconds West, along said easterly line of
said boiler house lease, distant 20.00 feet to a point; thence,
(10) North 66 degrees 07 minutes 15 seconds East, 20 foot offset and parallel
with course 8 above, distant 7.78 feet to a point; thence,
(11) North 28 degrees 32 minutes 04 seconds West, along the westerly line of
proposed access easement, 20 foot distant and at right angles from course
number 7, distant 486.75 feet to a
- continued -
<PAGE>
ITEM NO. 4 - Continued TITLE NO. 8824-60268 - 6 -
FIRST - REVISED
point; thence,
(12) South 72 degrees 49 minutes 49 seconds West, along the southerly line of
proposed access easement, distant 195.77 feet to a point; thence,
(13) North 22 degrees 10 minutes 53 seconds West, continuing along said access
easement, distant 266.51 feet to a point; thence,
(14) North 82 degrees 57 minutes 54 seconds West, along the southerly line of
said access easement, parallel with and 20 foot distant from course number 5,
distant 22.74 feet to a point; thence,
(15) North 4 degrees 47 minutes 49 seconds East, along the westerly line of a
proposed 20 foot wide access easement, distant 283.92 feet to a point; thence,
(16) North 4 degrees 22 minutes 54 seconds West, continuing along same, distant
155.20 feet feet to a point in the southwesterly line of said access easement;
thence,
(17) North 51 degrees 15 minutes 32 seconds West, along the same, distant 167.47
feet to a point; thence,
(18) North 6 degrees 27 minutes 25 seconds West, still along the westerly line
or the proposed access easement, distant 53.52 feet to a point in the southerly
boundary of the Central Rail Road of New Jersey, Constable Hook Branch; said
point being the above described point or place of BEGINNING.
EXCLUDING therefrom the following parcel which is totally surrounded by said
access easements as shown on the previously described map beginning a point in a
northerly line of a 20 foot wide access easement where the same is intersected
by the easterly line of 20 foot wide access easement and running; thence,
(1) North 4 degrees 47 minutes 49 seconds East, parallel with and distant 20
feet from course number 23 previously described, distant 266.29 feet to a point;
thence,
- continued -
<PAGE>
EXHIBIT 10.76
SECURITIES AGREEMENT AND ASSIGNMENT
SECURITY AGREEMENT AND ASSIGNMENT, dated as of December 15, 1988, made
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") pursuant to the Term Loan Agreement
dated as of November 1, 1987 (the "Loan Agreement") between the Borrower and the
Lender.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Loan Agreement the Lender has agreed, upon
the terms and subject to the conditions set forth therein, to make a loan to
finance the Project (as hereinafter defined); and
WHEREAS, the execution and delivery by the Borrower of this Security
Agreement is a condition to the Lender making its loan under the Loan Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the Borrower hereby agrees as follows:
1. Defined Terms. As used in this Security Agreement, terms defined in
Annex A to the Loan Agreement shall have their defined meanings when used
herein, terms defined in the foregoing paragraphs of this Security Agreement
shall have the meanings therein assigned, and the following terms shall have the
following meanings, unless the context otherwise requires:
"Accounts" shall mean any now existing and future: (a) accounts
receivable and any and all instruments, documents, contract rights,
chattel paper and general intangibles with respect to such accounts
receivable and including, without limitation, all accounts receivable
created by or arising from any sale of electric or steam power or
rendition of services by the Borrower to its customers or arising from any
sale or rendition of services by the Borrower made under any trade name or
style; (b) guarantees or collateral for any of the foregoing; (c)
insurance policies or rights relating to
<PAGE>
any of the foregoing; and (d) cash and non-cash proceeds of any of the
foregoing.
"Agreement" shall mean this Security Agreement.
"Assigned Agreements" shall have the meaning set forth in Section 3
hereof.
"Basic Contracts" shall mean all Assigned Contracts, including,
without limitation, all schedules, annexes, exhibits and similar documents
which are part of any such instrument and all documents incorporated by
reference therein or delivered pursuant thereto.
"Code" shall mean the Uniform Commercial Code as the same may from
time to time be in effect in the State of New York or any other applicable
jurisdiction.
"Collateral" shall have the meaning assigned to it in Section 2
hereof.
"Condemnation Proceeds" shall mean all compensation, awards, damages,
rights of action and proceeds arising from any taking by any lawful power
or authority by exercise of the right of condemnation or eminent domain
with respect to any of the Collateral, the Facility or the Site.
"Equipment" shall mean any "equipment" or "fixtures", as such terms
are defined in the Code, now or hereafter owned by the Borrower and, in
any event, shall mean and include, but shall not be limited to, all
machinery, equipment, furnishings, fixtures, vehicles, tools, supplies,
and other equipment of any kind and nature, wherever situated, whether now
or hereafter owned by the Borrower, and any and all additions,
substitutions and replacements of any of the foregoing, wherever located,
together with all attachments, components, parts, equipment and
accessories, improvements, upgrades, and accessories installed thereon or
affixed thereto.
"General Intangibles" shall mean any "general intangibles", as such
term is defined in Section 9-106 of the Code, now or hereafter owned by
the Borrower, and, in any event, shall mean and include, but not be
limited to, all contract rights, tax refunds, Insurance Proceeds, patent
rights, trademarks, copyrights, trade names, goodwill, registrations,
license rights, rights
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<PAGE>
in intellectual property, licenses, permits, corporate and other business
records, rights to refunds or indemnification and all other intangible
personal property of the Borrower of every kind and nature, but, excluding
operating accounts of Borrower other than those operating accounts subject
to the Disbursement Agreement.
"Insurance Proceeds" shall mean all of the Borrower's interest under
any policy of insurance affecting the Collateral or the Project,
including, without limitation, unearned premiums thereon.
"Obligations" shall mean all indebtedness, liabilities and obligations
of the Borrower to the Lender arising under or in connection with the Loan
Agreement, the Term Notes, this Security Agreement or any other Project
Document, whether now existing or hereafter incurred, direct or indirect,
absolute or contingent, matured or unmatured, joint or several and whether
for principal, interest, premium, fees, expenses or otherwise.
"Security Agreement if shall mean this Security Agreement and
Assignment, as the same may from time to time be amended, supplemented or
otherwise modified.
2. Grant of Security Interest. As collateral security for the prompt
and complete payment and performance when due of all the Obligations, and in
order to induce the Lender to make the Term Loan, the Borrower hereby assigns,
conveys, mortgages, pledges, hypothecates and transfers to the Lender, and
hereby grants to the Lender a continuing security interest in, all the
Borrower's right, title and interest in, to and under the following (all of such
right, title and interest being hereinafter collectively called the
"Collateral"):
(i) each of the Basic Contracts;
(ii) all Accounts of the Borrower, whether now or hereafter existing;
(iii) all Equipment, now or hereafter owned by the Borrower;
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<PAGE>
(iv) all rights and claims of the Borrower, now or hereafter existing,
under any indemnity, warranty or guaranty provided for or arising out of
or in connection with Equipment;
(v) all Permits, whether now or hereafter existing;
(vi) all General Intangibles, whether now or hereafter existing;
(vii) all Condemnation Proceeds;
(viii) all Insurance Proceeds;
(ix) all funds from time to time held in the Debt Service Reserve
Account; and
(x) to the extent not otherwise included, all proceeds and products
(including, without limitation, electric or steam power generated by
operation of the Facility) of any or all of the foregoing.
3. Limitations on Lender's Obligations. It is expressly agreed by the
Borrower that, anything herein to the contrary notwithstanding, the Borrower
shall remain liable under each Basic Contract and each other contract, agreement
or instrument, if any, included in the Collateral (each of which is herein
referred to as an "Assigned Agreement") to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all in
accordance with and pursuant to the terms and provisions of each such Assigned
Agreement. The Lender shall have no obligation or liability under any Assigned
Agreement by reason of or arising out of this Security Agreement or assignment
to the Lender of any payment relating to any Assigned Agreement, nor shall the
Lender be required or obligated in any manner to perform or fulfill any of the
obligations of the Borrower under or pursuant to any Assigned Agreement, or to
make any payment, or to make any inquiry as to the nature or the sufficiency of
any payment received by it or the sufficiency of any performance by any party
under any Assigned Agreement, or to present or file any claim, or to take any
action to collect or enforce any performance or the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
-4-
<PAGE>
4. Representations and Warranties. The Borrower hereby represents,
warrants and agrees that:
(a) The Borrower is the sole owner of each item of Collateral in
existence on the date hereof and will be the sole owner of such item of
Collateral hereafter acquired, having good and valid title thereto, free
and clear of any and all mortgages, liens, security interests,
encumbrances, claims or rights of others, except Permitted Liens and
Permitted Exceptions.
(b) No security agreement, financing statement, mortgage, equivalent
security or lien instrument or continuation statement covering all or any
part of the Collateral is on file or of record in any public office,
except such as may have been filed or recorded by the Borrower in favor of
the Lender pursuant to this Security Agreement or the Mortgage (except
with respect to Liens arising under the Security Agreement, dated as of
May 22, 1986, between Bayonne and CTNJI, relating to the property
purchased by CTNJI under the Purchase and Sale Agreement).
(c) Appropriate financing statements or other appropriate instruments
having been filed in the public offices listed on Schedule 5 to the Loan
Agreement, this Security Agreement constitutes a valid and (assuming
appropriate UCC continuation statements are timely filed) continuing lien
on and perfected security interest in the Collateral (to the extent
perfected by the filing of financing statements) in favor of the Lender,
prior to the rights of all other Persons (except with respect to Liens
arising under the Security Agreement, dated as of May 22, 1986, between
Bayonne and CTNJI, relating to the property purchased by CTNJI under the
Purchase and Sale Agreement) and subject to no Liens, except Permitted
Liens, and is enforceable as such against creditors of and purchasers from
the Borrower and against any owner or mortgagee of the real property where
any of the equipment is located and against any purchaser of such real
property and any present or future creditor obtaining a lien on such real
property. All action currently necessary to protect and perfect such lien
on and security interest in each item of the Collateral has been duly
taken.
(d) The Borrower's chief executive office and principal place of
business and the place where its records concerning the Collateral are
kept is at 1600
-5-
<PAGE>
Smith Street, Suite 5000, Houston, Texas 77002, and the Borrower will not
change such chief executive office and principal place of business or
remove such records without prior written notice to the Lender.
(e) The Assigned Agreements are in full force and effect and there is
no breach or default thereunder, and they have not been transferred or
assigned in whole or in part, save for the assignment herein contained and
no Lien arising by, through, or under the Borrower exists with respect to
any of them or any obligation payable or performable thereunder, except
Permitted Liens and Permitted Exceptions and except for a prior assignment
(which has been terminated and which Lien with respect thereto has been
lifted) under a Mortgage and Security Agreement, dated as of October 20,
1986, from the Borrower to General Electric Power Funding Corporation.
5. Covenants. The Borrower covenants and agrees with the Lender that
from and after the date of this Security Agreement and until the Obligations are
fully satisfied:
(a) Further Documentation; Pledge of Instruments. At any time and from
time to time, upon the written request of the Lender, and at the sole
expense of the Borrower, the Borrower promptly and duly shall execute and
deliver any and all such further instruments and documents and take such
further action as the Lender reasonably may deem desirable in order to
obtain the full benefits of this Security Agreement and of the rights and
powers herein granted, including, without limitation, the filing of any
financing or continuation statements under the Uniform Commercial Code in
effect in any jurisdiction with respect to the liens and security
interests granted hereby. The Borrower also hereby authorizes the Lender
to file any such financing or continuation statement without the
signature of the Borrower to the extent permitted by applicable law. If
any amount payable under or in connection with any of the Collateral shall
be or become evidenced by any promissory note or other instrument, such
note or instrument shall be immediately pledged to the Lender hereunder,
duly endorsed in a manner satisfactory to the Lender.
(b) Maintenance of Records. The Borrower will keep and maintain at
its own cost and expense satisfactory and complete records of the
Collateral including,
-6-
<PAGE>
without limitation, a record of all payments received and all credits
granted with respect to the Collateral and all other dealings with the
Collateral.
(c) Indemnification. In any suit, proceeding or action brought by the
Lender under any Assigned Agreement or for any sum owing thereunder, or to
enforce any provisions of such Assigned Agreement, the Borrower will save,
indemnify and keep the Lender harmless from and against all expense, loss
or damage suffered by reason of any defense, setoff, counterclaim,
recoupment or reduction of liability whatsoever of the other party under
such Assigned Agreement, arising out of a breach by the Borrower of any
obligation thereunder or arising out of any other agreement, indebtedness
or liability at any time owing to or in favor of such other party or its
successors from the Borrower, and all such obligations of the Borrower
shall be and remain enforceable against and only against the Borrower and
shall not be enforceable against the Lender.
(d) Further Identification of Collateral. The Borrower will furnish to
the Lender from time to time statements and schedules further identifying
and describing the Collateral and such other reports in connection with
the Collateral as the Lender reasonably may request, all in reasonable
detail.
(e) Equipment. All Equipment, other than vehicles and other Equipment
that is moved from time to time away from the Site in the ordinary course
of the Borrower's business (collectively, the "Moveable Equipment"), is
kept at the Site and, except for Equipment that is sold or otherwise
disposed of in accordance with the provisions of Section 9.9 of the Loan
Agreement, no Equipment (other than Moveable Equipment) shall be removed
from the Site without the express prior written consent of the Lender
except for off-site repair and maintenance performed in the ordinary
course of business.
(f) Continuous Perfection. The Borrower will not change its name or
identity in any manner unless the Borrower shall have given the Lender at
least 10 days' prior written notice thereof and shall have taken, at the
Borrower's expense, all action necessary or reasonably requested by the
Lender in order to continue the perfection and priority of the liens and
security
-7-
<PAGE>
interests in the Collateral intended to be created by this Security
Agreement.
6. Lender's Appointment as Attorney-in-Fact. (a) The Borrower hereby
irrevocably constitutes and appoints the Lender and any officer or agent
thereof, with full power of substitution, as its true and lawful attorney-in-
fact with full irrevocable power and authority in the place and stead of the
Borrower and in the name of the Borrower or in its own name, from time to time
in the Lender's discretion, for the purpose of carrying out the terms of this
Security Agreement, to take any and all appropriate action and to execute any
and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Security Agreement and, without limiting the
generality of the foregoing, hereby gives the Lender the power and right, on
behalf of the Borrower, without notice to or assent by the Borrower, to do the
following:
(i) upon the occurrence and continuance of an Event of Default, to
ask, demand, collect, receive and give acquittances and receipts for any
and all moneys due and to become due under any Collateral and, in the name
of the Borrower or its own name or otherwise, to take possession of and
endorse and collect any checks, drafts, notes, acceptances or other
instruments for the payment of moneys due under any Collateral and to file
any claim or to take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the Lender for the purpose of
collecting any and all such moneys due under any Collateral whenever
payable;
(ii) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral, to
effect any repairs or any insurance called for by the terms of this
Security Agreement or the Loan Agreement and to pay all or any part of the
premiums therefor and the costs thereof;
(iii) upon the occurrence and continuance of an Event of Default, (A)
to direct any party liable for any payment under any Collateral to make
payment of any and all moneys due and to become due thereunder directly to
the Lender or as the Lender shall direct; (B) to receive payment of and
receipt for any and all moneys, claims and other amounts due and to become
due at any time in respect of or arising out of any Collateral;
-8-
<PAGE>
(C) to sign and indorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with accounts and
other documents relating to the Collateral; (D) to commence and prosecute
any suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Collateral or any thereof and to
enforce any other right in respect of any Collateral; (E) to defend any
suit, action or proceeding brought against the Borrower with respect to
any Collateral; (F) to settle, compromise or adjust any suit, action or
proceeding described above and, in connection therewith, to give
discharges or releases; and (G) generally to sell, transfer, pledge, make
any agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though the Lender was the sole absolute owner
thereof for all purposes, and to do, at the Lender's option and the
Borrower's expense, at any time, or from time to time, all acts and things
which the Lender deems necessary to protect, preserve or realize upon the
Collateral and the Lender's security interest therein, in order to effect
the intent of this Security Agreement, all as fully and effectively as the
Borrower might do; and
(iv) upon the occurrence and continuance of an Event of Default, to
the extent permitted by law, to take possession of all or any part of the
Collateral, and to exclude the Borrower and all Persons claiming under the
Borrower wholly or partly therefrom, and thereafter to hold, store, use,
operate, manage and control the same, and upon any such taking of
possession, at the expense of the Borrower, to make all such repairs,
replacements, alterations, additions and improvements to and of the
Collateral as the Lender may deem proper, and to manage and control the
Collateral and to carry on the business of, and to exercise all rights and
powers of, the Borrower in respect thereto as the Lender shall deem best,
including the right to enter into any and all such agreements with respect
to the leasing and/or operation of the Collateral or any part thereof as
the Lender may see fit, and to collect and receive all rents, issues,
profits, fees, revenues and other income of the same and every part
thereof, with such rents, issues, profits, fees, revenues and other income
being applied to pay the expenses of holding and operating the Collateral,
of conducting the business thereof and of all maintenance, repairs,
-9-
<PAGE>
replacements, alterations, additions and improvements with respect
thereto, and to make all payments which the Lender may be required or may
elect to make, if any, for taxes, assessments, insurance and other charges
upon the Collateral or any part thereof, and all other payments which the
Lender may be required or authorized to make under any provision of this
Security Agreement (including legal costs and attorney's fees), with the
remainder of such rents, issues, profits, fees, revenues and other income
being available for the payment of the obligations.
The Borrower hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) The powers conferred on the Lender hereunder are solely to protect
its interests in the Collateral and shall not impose any duty upon it to
exercise any such powers. The Lender shall be accountable only for amounts that
it actually receives as a result of the exercise of such powers and neither it
nor any of its officers, directors, employees or agents shall be responsible to
the Borrower for any act or failure to act, except for their own gross
negligence or willful misconduct.
(c) The Borrower also authorizes the Lender (i) to communicate in its
own name with any party to any contract, agreement or instrument included in the
Collateral with regard to the assignment of such contract, agreement or
instrument and other matters relating thereto and (ii) to execute, in connection
with any sale provided for in Section 8(b) of this Security Agreement, any
indorsements, assignments, bills of sale or other instruments of conveyance or
transfer with respect to the Collateral.
7. Performance by Lender of Borrower's Obligations. If the Borrower
fails to perform or comply with any of its agreements contained herein and the
Lender, as provided for by the terms of this Security Agreement, shall
perform or comply, or otherwise cause performance or compliance, with such
agreement, the expenses of the Lender incurred in connection with such
performance or compliance, together with interest thereon at a rate per annum
equal to the Stipulated Interest Rate shall be payable by the Borrower to the
Lender on demand and shall constitute obligations secured hereby.
-10-
<PAGE>
8. Remedies, Rights Upon Default. (a) If an Event of Default shall
occur and be continuing:
(i) all payments received by the Borrower under or in connection with
any of the Collateral shall be held by the Borrower in trust for the
Lender, shall be segregated from other funds of the Borrower and shall,
forthwith upon receipt by the Borrower, be turned over to the Lender in
the same form as received by the Borrower (duly indorsed by Borrower to
the Lender, if required); and
(ii) any and all such payments so received by the Lender (whether from
the Borrower or otherwise) may, in the sole discretion of the Lender, be
held by the Lender as collateral security for, and/or then or at any time
thereafter be applied (subject only to the relevant provisions of the Loan
Agreement or of applicable law) in whole or in part by the Lender first to
pay any and all Obligations due and payable other than principal of or
premium, if any, or interest on the Term Notes, and second to pay
principal of and premium, if any, and interest on the Term Notes.
Any balance of such payments held by the Lender and remaining after
payment in full of all the Obligations shall be paid over to the Borrower or to
whomsoever may be lawfully entitled to receive the same.
(b) If any Event of Default shall occur and be continuing, the Lender
may exercise in addition to all other rights and remedies granted to it in this
Security Agreement and in any other Security Document or other instrument or
agreement securing, evidencing or relating to the Obligations, all rights and
remedies of a secured party under the Uniform Commercial Code. Without limiting
the generality of the foregoing, the Borrower expressly agrees that in any such
event the Lender, without demand of performance or other demand, advertisement
or notice of any kind (except the notice specified below of time and place of
public or private sale) to or upon the Borrower or any other person (all and
each of which demands, advertisements and/or notices are hereby expressly
waived), may forthwith collect, receive, appropriate and realize upon the
Collateral or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or sell or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do so), in one or more parcels at
public or private sale or sales, at any exchange, broker's board or at any of
-11-
<PAGE>
the Lender's offices or elsewhere at such prices as it may deem best, for cash
or on credit or for future delivery without assumption of any credit risk. The
Lender shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption in the Borrower, which right or equity of redemption is hereby
expressly waived and released. The Borrower further agrees, at the Lender's
request, to assemble the Collateral, make it available to the Lender at places
which the Lender reasonably shall select, whether at the Borrower's premises or
elsewhere. The Lender shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care, safekeeping or otherwise of any or all of the Collateral or in any way
relating to the rights of the Lender hereunder, including attorneys' fees and
legal expenses, to the payment in whole or in part of the Obligations, in such
order as the Lender may elect, and only after so applying such net proceeds and
after the payment by the Lender of any other amount required by any provision
of law, including Section 9-504 (1) (c) of the Code, shall the Lender be
required to account for the surplus, if any, to the Borrower. To the extent
permitted by applicable law, the Borrower waives all claims, damages and demands
against the Lender arising out of the repossession, retention or sale of the
Collateral. The Borrower agrees that the Lender need not give more than 10 days'
notice (which notification shall be deemed given three Business Days after
mailing when mailed by registered or certified mail, return receipt requested,
postage prepaid, addressed to the Borrower at its address set forth in Section
12.5 of the Loan Agreement) of the time and place of any public sale or of the
time after which a private sale may take place and that such notice is
reasonable notification of such matters.
(c) The Borrower also agrees to pay all reasonable costs of the
Lender, including attorneys' fees, incurred with respect to the collection of
any of the Obligations and the enforcement of any of its respective rights
hereunder.
(d) The Borrower hereby waives presentment, demand, protest or any
notice (to the extent permitted by applicable law) of any kind in connection
with this Security Agreement or any Collateral.
-12-
<PAGE>
9. Limitation on Lender's Duty in Respect of Collateral. Beyond the
safe custody thereof, the Lender shall not have any duty as to any Collateral in
its possession or control or in the possession or control of its nominee, or as
to the preservation of rights against prior parties or any other rights
pertaining thereto.
10. Future Advances. Upon request of the Borrower, the Lender may, at
its sole option, from time to time make further advances, in accordance with
Section 12.8 of the Loan Agreement, to the Borrower to finance further
improvements to the Premises (as defined in the Mortgage) , including the
expansion of the Facility to include a fourth turbine to the Facility. If
required by the Lender, the Borrower shall execute and deliver to the Lender,
one or more notes or other agreements evidencing each and every such further
advance which may be made, and such notes or other agreements shall contain such
terms and conditions as the Lender may require. The Borrower shall pay when due
all such further advances with interest and other charges thereon, as
applicable. Said further advances, each note and agreement evidencing the same,
the Loan Agreement and the Term Notes shall all be secured hereby. All
provisions of this Agreement shall apply to each further advance as well as to
all other indebtedness secured hereby, including, without limitation, all
indebtedness under the Loan Agreement and the Term Notes.
11. Notices. Except as otherwise required by the provisions of this
Security Agreement, any notice hereunder shall be given as provided in Section
12.5 of the Loan Agreement.
12. Release of Liens. Upon payment in full of the principal amount of
and interest on the Term Notes and all other obligations the Lender agrees, upon
the written request of the Borrower and at the Borrower's sole expense, to
execute, record and file such instruments and perform such acts as are necessary
to release the Collateral from the lien and security interest of this Security
Agreement or any assignment or other security document entered into pursuant
hereto.
13. Severability. Any provision of this Security Agreement 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 any such prohibition or
unenforceability in any jurisdiction shall
-13-
<PAGE>
not invalidate or render unenforceable such provision in any other jurisdiction.
14. No Waiver; Cumulative Remedies. (a) The Lender shall not by any
act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder and no waiver shall be valid unless in writing, signed by the
Lender, and then only to the extent therein set forth. None of the terms or
provisions of this Security Agreement may be waived, altered, modified or
amended except by an instrument in writing, duly executed by the Lender.
(b) A waiver by the Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the Lender
would otherwise have had on any future occasion. No failure to exercise nor any
delay in exercising on the part of the Lender any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or future
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies hereunder provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights and remedies
provided by law.
15. SUCCESSORS AND ASSIGNS; GOVERNING LAW. THIS SECURITY AGREEMENT
SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF THE BORROWER, THE LENDER AND
THEIR RESPECTIVE SUCCESSORS AND ASSIGNS. THIS SECURITY AGREEMENT SHALL BE
GOVERNED BY, AND BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
16. Further Indemnification. The Borrower agrees to pay, and to save
the Lender harmless from, any and all liabilities with respect to, or resulting
from any delay in paying, any and all excise, sales or other taxes which may be
payable or determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Security Agreement.
17. Non-Recourse Nature of Liability to Partners. Notwithstanding
anything to the contrary contained in this Security Agreement or in any of the
Project Documents, no recourse under or upon any obligation contained in this
Security Agreement (other than the indemnities contained in Section 16) 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
-14-
<PAGE>
assert liability under this Security Agreement (other than the indemnities
contained in Section 16), 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 17 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 Security Agreement and the other
Project Documents.
18. Conflicts. To the extent that any provision of this Security
Agreement shall be determined to conflict with any provision of the Loan
Agreement, such provision of the Loan Agreement shall govern.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Security Agreement and Assignment to be executed by their duly authorized
officers on the date first set forth above.
COGEN TECHNOLOGIES
NJ VENTURE
By Cogen Technologies NJ, Inc.,
Managing Venturer
By /s/ LAWRENCE THOMAS
------------------------------
Vice President
-15-
<PAGE>
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By PRUCAPITAL MANAGEMENT, INC.,
agent
By /s/ William Brad Winegar
------------------------------
Title: Vice President, Corporate
Finance
-16-
<PAGE>
STATE OF NEW YORK )
)ss.:
COUNTY OF NEW YORK )
On this 29th day of December, 1988 before me personally came Lawrence
Thomas, to me known, who, being by me duly sworn, did depose and say that he
resides at 3826 Olympia Houston, Tx 77019; that he is the Vice President of
Cogen Technologies, NJ, Inc. the corporation described in and which executed the
above instrument as a partner of COGEN TECHNOLOGIES NJ VENTURE; and that he
signed his name thereto by order of the Board of Directors of said corporation.
/s/ Leena I. Hilivirta
-----------------------------
Notary Public
LEENA I. HILIVIRTA
Notary Public, State of New York
No. 31-4913776
Qualified in New York County
Commission Expires Dec. 7, 1989
<PAGE>
STATE OF NEW YORK )
)ss.:
COUNTY OF NEW YORK )
On this 29th day of December, 1988 before me personally came William
Brad Winegar, to me known, who, being by me duly sworn, did depose and say that
he resides at 310 Greenwich St., Apt. 7H, NY, NY 10013; that he is the Vice
President Corporate Finance of PruCapital Management, Inc., the corporation
described in and which executed the above instrument and that he is the duly
authorized representative of said corporation.
/s/ Leena I. Hilivirta
-----------------------------
Notary Public
LEENA I. HILIVIRTA
Notary Public, State of New York
No. 31-4913776
Qualified in New York County
Commission Expires Dec. 7, 1989
<PAGE>
AMENDMENT TO SECURITY AGREEMENT AND ASSIGNMENT
AMENDMENT TO SECURITY AGREEMENT AND ASSIGNMENT, dated as of April
27, 1995 (this "Amendment"), made 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")
pursuant to the Term Loan Agreement dated as of November 1, 1987, as amended
(the "Loan Agreement"), between the Borrower and the Lender.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Loan Agreement, the Lender, upon the terms
and subject to the conditions set forth therein, made a loan to finance the
Project (as hereinafter defined); and
WHEREAS, pursuant to the terms of the Loan Agreement, the Borrower and
the Lender executed that certain Security Agreement and Assignment dated as of
December 15, 1988 (the "Security Agreement"), under the terms of which the
Borrower collaterally assigned, and granted a security interest in, the Basic
Contracts (as hereinafter defined) to the Lender; and
WHEREAS, the Borrower, as "Owner," and Stewart & Stevenson Operations,
Inc., a Delaware corporation ("S&S"), as "Operator," entered into that certain
Operation and Maintenance Agreement dated effective as of March 28, 1994 (the
"O&M Agreement"), providing for the operation and maintenance of the Project by
S&S; and
WHEREAS, the Borrower, as "Bailor," and IMTT-Bayonne, a Delaware
partnership ("IMTT"), as "Bailee," entered into that certain Agreement dated
May 5, 1994 (the "Kerosene Agreement"), providing for the storage, and delivery
to the Borrower, of the Borrower's kerosene by IMTT; and
WHEREAS, Section 8.9(a) of the Loan Agreement provides that upon
execution of Additional Contracts (as hereinafter defined) after the Closing
Date (as hereinafter defined), the Borrower shall collaterally assign such
Additional Contracts to the Lender;
WHEREAS, the Borrower desires to assign the O&M Agreement and the
Kerosene Agreement to the Lender subject to the terms hereof;
<PAGE>
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the Borrower and the Lender hereby
agree as follows:
1. Defined Terms. As used in this Amendment, terms defined in Annex A
to the Loan Agreement shall have their defined meanings when used herein, terms
defined in the Security Agreement shall have their defined meanings when used
herein, and terms defined in the foregoing paragraphs of this Amendment shall
have the meanings therein assigned, unless the context requires otherwise.
2. Basic Contracts. The Security Agreement is hereby amended by
amending the definition of the Basic Contracts as set forth therein to include,
for all purposes, the O&M Agreement and the Kerosene Agreement
3. Grant of Security Interest. As collateral security for the prompt
and complete payment and performance when due of all the Obligations, the
Borrower hereby assigns, conveys, mortgages, pledges, hypothecates and
transfers to the Lender, and hereby grants to the Lender a continuing security
interest in, all the Borrower's right, title and interest in, to and under the
O&M Agreement and the Kerosene Agreement upon the same terms and conditions as
contained in the Security Agreement All of the warranties, representations,
covenants and agreements of the Borrower contained in the Security Agreement in
favor of the Lender shall extend and apply to the O&M Agreement and the Kerosene
Agreement as fully as though such agreements had been originally included in the
Basic Contracts at the time of execution of the Security Agreement.
4. No Other Amendments. Except as expressly amended hereby, the
Security Agreement remains in full force and effect.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Amendment to be executed by their duly authorized officers on the date first set
forth above.
COGEN TECHNOLOGIES NJ VENTURE
By Cogen Technologies NJ, Inc.,
Managing Venturer
By /s/ R.A. Lydecker, Jr.
-----------------------------
Name: Richard A. Lydecker, Jr.
------------------------
Vice President & Chief
Financial Officer
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By /s/ Joseph J. Lemanowkz
----------------------------
Name: Joseph J. Lemanowkz
--------------------------
Title: Vice President
------------------------
STATE OF (S)
(S)
COUNTY OF HARRIS (S)
On this 8th day of September 1995, before me personally came Richard
A. Lydecker, to me known, who, being by me duly sworn, did depose and say that
he resides at Houston, Texas; that he is the Vice President of Cogen
Technologies NJ, Inc., the corporation described in and which executed the above
instrument as Managing Venturer of COGEN TECHNOLOGIES NJ VENTURE; and that he
signed his name thereto by order of the Board of Directors of said corporation.
[SEAL]
/s/ Glenda B. Morrison
--------------------------
Notary Public in and for
State of Texas
--------------------------
Glenda B. Morrison
--------------------------
Printed Name of Notary
My Commission Expires: 4/25/96
<PAGE>
STATE OF NEW JERSEY (S)
(S)
COUNTY OF ESSEX (S)
On this 22nd day of August, 1995, before me personally came Joseph J.
Lemanowicz, to me known, who, being by me duly sworn, did depose and say that he
resides at Oakhurst, New Jersey; that he is the Vice President of THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA; and that he signed his name thereto by order of
the Board of Directors of said corporation.
[SEAL]
/s/ Silvana Rago
-----------------------------
Notary Public in and for
Silvana Rago
------------------------------
Printed Name of Notary
My Commission Expires: 3/22/2000
<PAGE>
The Prudential Insurance Company of America
Four Gateway Center, Newark, NJ 07102-4069
[LOGO of ThePrudential appears here]
July 28, 1995
Cogen Technologies NJ Venture
Two Tower Center, 20th Floor
East Brunswick, New Jersey 08816
Attention: Mr. Brian 0. Peteler
Re: The Term Loan Agreement, dated as of November 1, 1987 (the "TERM LOAN
AGREEMENT"), between Cogen Technologies NJ Venture, a joint venture
organized under the laws of the state of New Jersey, as borrower ( the
"BORROWER") and the Prudential Insurance Company of America, as lender (the
"Lender"). Security Agreement and Assignment dated as of December 15, 1988
as amended by that certain Amendment to Security Agreement and Assignment
dated as of April 27, 1995 (THE "SECURITY AGREEMENT"), between the Borrower
and the Lender. The Kerosene Storage Agreement, dated as of May 17, 1994
(the "KEROSENE AGREEMENT"), between IMTT Bayonne, a Delaware Partnership,
and the Borrower.
Dear Sir or Madam:
Reference is made to the Term Loan Agreement. Section 8.9(a) of the Term Loan
Agreement requires the Borrower with respect to any additional contract executed
after the closing date, to execute and deliver to the Lender an assignment 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 IN THE FORM SPECIFIED IN EXHIBIT C THERETO. The borrower has
executed an Assignment in the form of the Security Agreement but has not
obtained such consent. This letter agreement is intended to waive compliance
with the resulting breach of such section.
"With respect to the Kerosene Agreement, the Lender hereby grants the following
waiver:
1. Waiver. Lender hereby waives compliance with Section 8.9(a) of the Term
Loan Agreement, solely with respect to the Kerosene Agreement, arising from
Borrowers failure to obtain a consent to assignment in the form of Exhibit C to
the Term Loan Agreement in connection with the execution and delivery of the
Kerosene Agreement.
<PAGE>
2. EFFECT UPON OTHER PROVISIONS OF THE AGREEMENTS. The execution, delivery
and effectiveness of this letter agreement shall not be deemed to, except as
expressly provided herein, (i) operate as a waiver of any right, power or remedy
of the Lender under the Term Loan Agreement, the Security Agreement, the
Kerosene Agreement or any other document, nor constitute a waiver of any
provision thereunder, (ii) prejudice any rights which the Lender now has or may
have in the future under or in connection with the Term Loan Agreement or
Security Agreement, the Kerosene Agreement or any other documents, and all other
terms and conditions of the Term Loan Agreement, the Security Agreement, the
Kerosene Agreement or any other document shall remain unchanged and in full
force and effect.
3. COUNTERPARTS. This Agreement and all acceptances hereof may be executed
by the parties hereto on any number of separate counterparts, and all said
counterparts taken together shall be deemed to constitute one and the same
instrument, notwithstanding that all of the parties have not signed the same
counterpart.
Very truly yours,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ Joseph J. Lemanowicz
---------------------------
Name: Joseph J. Lemanowicz
Title: Vice President
<PAGE>
EXHIBIT 10.77
================================================================================
DISBURSEMENT AND SECURITY AGREEMENT
among
COGEN TECHNOLOGIES NJ VENTURE,
Borrower,
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
Lender, and
MIDLANTIC NATIONAL BANK,
Disbursement Trustee
Dated as of December 15, 1988
Bayonne Cogeneration Project
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS..................................................... 1
ARTICLE II
APPOINTMENT OF DISBURSEMENT TRUSTEE;
CREATION OF ACCOUNTS
SECTION 2.01. Appointment of Disbursement
Trustee...................................... 1
SECTION 2.02. Creation of Revenue Account.................. 2
SECTION 2.03. Creation of Debt Service Reserve
Account...................................... 2
SECTION 2.04. Creation of Current Debt
Account...................................... 2
SECTION 2.05. Creation of Insurance Account................ 2
ARTICLE III
ASSIGNMENT, PLEDGE AND GRANT OF
SECURITY INTEREST
SECTION 3.01. Assignment .................................... 3
ARTICLE IV
DEPOSITS INTO ACCOUNTS
SECTION 4.01. (a) Deposit of Revenues, etc .................. 3
(b) Insurance Proceeds ........................ 3
SECTION 4.02. Information to Accompany Amounts
Delivered to Disbursement
Trustee; Deposits Irrevocable................ 4
SECTION 4.03. Books of Account; Statements .................. 4
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE V
TRANSFERS FROM ACCOUNTS
SECTION 5.01. Transfers From Accounts -
No Debt Service Reserve
Period....................................... 4
SECTION 5.02. Transfers From Accounts During
Debt Service Reserve Period.................. 5
SECTION 5.03. Delivery of Certificates; Timing
of Payments.................................. 6
SECTION 5.04. Defaults....................................... 7
ARTICLE VI
INVESTMENT...................................................... 7
ARTICLE VII
TRUSTEE......................................................... 8
ARTICLE VIII
DETERMINATIONS
SECTION 8.01. Value.......................................... 9
SECTION 8.02. Disputes....................................... 10
SECTION 8.03. Cash Available................................. 10
ARTICLE IX
REMEDIES
SECTION 9.01. Remedies....................................... 10
SECTION 9.02. Remedies Cumulative; Delay
Not Waiver................................... 11
SECTION 9.03. Superior Liens................................. 12
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Fees and Indemnification of
Disbursement Trustee......................... 12
SECTION 10.02. Replacement or Resignation of
Disbursement Trustee......................... 13
SECTION 10.03. Termination.................................... 14
SECTION 10.04. Severability................................... 14
SECTION 10.05. Counterparts................................... 14
SECTION 10.06. Amendments..................................... 14
SECTION 10.07. Applicable Law................................. 14
SECTION 10.08. Notices........................................ 15
SECTION 10.09. Benefit of Agreement........................... 15
SCHEDULE I Addresses for Payments and Notices
SCHEDULE II Disbursement Agreement Definitions
</TABLE>
(iii)
<PAGE>
DISBURSEMENT AND SECURITY AGREEMENT dated as of December 15, 1988
among COGEN TECHNOLOGIES NJ VENTURE, a general partnership organized under the
laws of the State of New Jersey (the "Borrower"), THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA (the "Lender") and MIDLANTIC NATIONAL BANK, a national
banking association (the "Disbursement Trustee").
The Borrower and the Lender are parties to a Term Loan Agreement dated
as of November 1, 1987 (the "Term Loan Agreement"). The Term Loan Agreement
contemplates that, on or prior to the Borrowing Date, the parties hereto shall
execute and deliver this Disbursement Agreement, which provides for, inter alia,
(1) the appointment of Midlantic National Bank, as disbursement trustee, (2) the
deposit, investment and disbursement of all Project Revenues during the term
hereof and (3) the funding, maintenance and investment of a debt service reserve
fund under certain terms and conditions. Pursuant to the terms of this
Agreement, the Borrower will pledge and collaterally assign all its rights to
such revenues to the Lender to secure the Term Loan Payments to be made by it
under the Term Loan Agreement. The Disbursement Trustee will hold the Project
Revenues in the Accounts established hereunder as security agent and in trust
for the Lender.
In consideration of the mutual agreements herein contained and other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used herein and not otherwise defined herein or in
the Term Loan Agreement shall have the meanings assigned to them in Schedule II
attached hereto.
ARTICLE II
APPOINTMENT OF DISBURSEMENT TRUSTEE;
CREATION OF ACCOUNTS
SECTION 2.01. Appointment of Disbursement Trustee. Midlantic National
Bank is hereby appointed by the
<PAGE>
Lender to act as disbursement trustee hereunder (the "Disbursement Trustee") and
hereby agrees to receive and deposit Project Revenues in the Accounts in
accordance with this Agreement. The Disbursement Trustee shall hold and
safeguard the Accounts (and the revenues, cash, payments, securities,
investments and other amounts on deposit therein) during the term of this
Disbursement Agreement as security agent and in trust for the Lender and shall
treat the Accounts as trust funds to be held in accordance with the terms hereof
and as security for the obligations of the Borrower to make the Term Loan
Payments.
SECTION 2.02. Creation of Revenue Account. There is hereby created and
established a special, segregated and irrevocable trust fund entitled the
"Bayonne Revenue Account" (the "Revenue Account") to be held in the custody of
the Disbursement Trustee as security agent and in trust for the Lender. No
payments shall be made out of the Revenue Account except for the purposes and on
the terms herein stated.
SECTION 2.03. Creation of Debt Service Reserve Account. There is
hereby created and established a special, segregated and irrevocable trust fund
entitled the "Bayonne Debt Service Reserve Account" (the "Debt Service Reserve
Account") to be held in the custody of the Disbursement Trustee as security
agent and in trust for the Lender. No payments shall be made out of such trust
fund except for the purposes and on the terms herein stated.
SECTION 2.04. Creation of Current Debt Account. There is hereby
created and established a special, segregated and irrevocable trust fund
entitled the "Bayonne Current Debt Account" (the "Current Debt Account") to be
held in the custody of the Disbursement Trustee as security agent and in trust
for the Lender. No payments shall be made out of such trust fund except for the
purposes and on the terms herein stated.
SECTION 2.05. Creation of Insurance Account. There is hereby created
and established a special, segregated and irrevocable trust fund entitled the
"Bayonne Insurance Account" (the "Insurance Account") to be held in the custody
of the Disbursement Trustee as security agent and in trust for the Lender. No
payments shall be made out of such trust fund except for the purposes and on the
terms herein stated.
-2-
<PAGE>
ARTICLE III
ASSIGNMENT, PLEDGE AND GRANT OF
SECURITY INTEREST
SECTION 3.01. Assignment. To secure the timely payment of all Term
Loan Payments due and owing by the Borrower, the Borrower does hereby assign,
transfer and pledge to, and subject to a security interest in favor of, the
Lender, all the estate, right, title and interest of the Borrower in and to (i)
all amounts payable under the Assigned Contracts, including without limitation,
the Power Purchase Agreements; (ii) all other Project Revenues and any other
moneys derived from the Project; (iii) each of the Accounts, including all
moneys and investment securities held in such Accounts and all other funds held
by the Disbursement Trustee as depositary under this Agreement; and (iv) the
proceeds of all the foregoing (all the collateral described above being herein
collectively called the "Collateral Security"). The Borrower hereby relinquishes
to the Disbursement Trustee as security agent for the Lender all right, title
and interest which the Borrower has in the Collateral Security, subject to the
terms and conditions of this Agreement. The Disbursement Trustee shall maintain
at all times a list of Permitted Investments, shall obtain receipts from all
transferors of Permitted Investments in the Accounts and shall take such other
action as may be requested by the Lender in order to comply with the provisions
of the UCC governing the perfection of security interests in property similar to
the Permitted Investments.
ARTICLE IV
DEPOSITS INTO ACCOUNTS
SECTION 4.01. (a) Deposit of Revenues, etc. As soon as practicable
after the Borrower receives any Project Revenue, the Borrower shall deliver (or
cause to be delivered) such to the Disbursement Trustee. The Borrower agrees to
request each Buyer to make all payments under its respective Power Purchase
Agreement directly to the Disbursement Trustee (such notice to be in form and
scope satisfactory to the Lender). The Disbursement Trustee shall deposit all
such Project Revenues received from the Borrower or a Buyer into the Revenue
Account.
(b) Insurance Proceeds. Any insurance proceeds received by the
Disbursement Trustee in connection with any
-3-
<PAGE>
Event of Loss or Partial Loss or Damage shall be deposited by the Disbursement
Trustee into the Insurance Account for application in accordance with the Term
Loan Agreement. The Disbursement Trustee shall transfer amounts in the Insurance
Account as directed by the Lender.
SECTION 4.02. Information to Accompany Amounts Delivered to
Disbursement Trustee; Deposits Irrevocable. (a) The Borrower agrees that as to
all amounts delivered to the Disbursement Trustee it shall, on the date of any
such delivery, provide the Disbursement Trustee with information in reasonable
detail specifying the source of the amounts and the Account or Accounts into
which such amounts are to be deposited.
(b) Any deposit made into any Account (except any deposit made through
clerical or other manifest error) shall be irrevocable and the amount of such
deposit and any security held in any Account and all interest and gains thereon
shall be held in trust by the Disbursement Trustee and applied, invested and
transferred solely as provided herein.
SECTION 4.03. Books of Account; Statements. (a) The Disbursement
Trustee shall maintain books of account on a cash basis and record therein all
deposits into and transfers to and from the Accounts and all investment
transactions effected by the Disbursement Trustee pursuant to Article VI. The
Disbursement Trustee shall make such books of account available during normal
business hours for inspection and audit by the Borrower and the Lender and their
respective representatives.
(b) Not later than 10 Business Days after each Monthly Distribution
Date, the Disbursement Trustee shall deliver to each of the parties hereto, a
statement setting forth the transactions into and out of each Account since the
previous Monthly Distribution Date and specifying the revenues, cash, payments,
securities, investments and other amounts held in each Account at the close of
business on such Monthly Distribution Date and the Value thereof at such time.
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ARTICLE V
TRANSFERS FROM ACCOUNTS
SECTION 5.01. Transfers From Accounts - No Debt Service Reserve
Period. Subject to Sections 5.02 and 5.04, the Disbursement Trustee shall
transfer, from the Revenue Account and from Surplus Funds in the Debt Service
Reserve Account, such amounts, for such purposes and at such times, as the
Borrower may request the Disbursement Trustee; provided, that the Borrower may
order the Disbursement Trustee to transfer funds only on a current basis and the
Borrower shall not have the right to order the Disbursement Trustee to transfer
funds effective as of some future date or dates.
SECTION 5.02. Transfers from Accounts During Debt Service Reserve
Period. The Lender or the Borrower shall notify the Disbursement Trustee in
writing of the commencement of any Debt Service Reserve Period. The Lender shall
notify the Disbursement Trustee in writing of the termination of any Debt
Service Reserve Period promptly upon receipt of notice from the Borrower
pursuant to Section 8.2(k) of the Term Loan Agreement that the Coverage Ratio is
at least 1.5. During any Debt Service Reserve Period, there shall be no
transfers pursuant to Section 5.01, and, subject to Section 5.04, the only
permitted transfers from the Accounts shall be as follows:
(a) On each Monthly Distribution Date occurring during each Debt
Service Reserve Period, the Disbursement Trustee shall transfer from the cash
available in the Revenue Account to the Borrower, an amount certified in an
Officer's Certificate of the Borrower to be equal to the excess of (i) the
amount estimated by the Borrower to be payable during the next monthly period in
respect of the costs referenced in clause (b) of the definition of Net Revenues
over (ii) the amount of any funds transferred to the Borrower on the immediately
preceding Monthly Distribution Date pursuant to this clause that remains
unspent; provided, that the Borrower shall specify in such officer's Certificate
by reference to line items in the then current Operating Budget the use to which
such cash is to be used; and further, provided, that in no single fiscal year
shall the Disbursement Trustee transfer to the Borrower with respect to costs
referenced to a particular line item in the Operating Budget an amount in the
aggregate in excess of the annual amount provided in the Operating Budget for
such line item unless the Borrower certifies that such excess is al-
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<PAGE>
lowable pursuant to Section 8.11(c) of the Term Loan Agreement. With respect to
any Debt Service Reserve Period which commences after the first calendar quarter
of the fiscal year of the Borrower, the Borrower shall provide the Disbursement
Trustee with a statement of expenditures made by the Borrower in the then
current fiscal year prior to the commencement of such Debt Service Reserve
Period for each line item in the then current Operating Budget.
(b) on each Monthly Distribution Date which is not an Interest Payment
Date and following the transfer described in Section 5.02(a) hereof, the
Disbursement Trustee shall transfer from the Revenue Account to the Current Debt
Account an amount equal to one-third of the Term Loan Payments scheduled to be
paid by the Borrower on the next Interest Payment Date.
(c) On each Interest Payment Date and following the transfer described
in Section 5.02(a) hereof, the Disbursement Trustee shall transfer to the
Lender an amount equal to the Term Loan Payments then due and owing the Lender,
first, from cash available in the Current Debt Account, second, from cash
available in the Revenue Account, and third, from cash available in the Debt
Service Reserve account.
(d) On each Monthly Distribution Date following the transfers, if any,
described in Section 5.02(a), 5.02(b) and 5.02(c) hereof, the Disbursement
Trustee shall transfer from the Revenue Account to the Debt Service Reserve
Account an amount such that after such transfer the balance of the Debt Service
Reserve Account is such that if such balance had been present in the Debt
Reserve Account as of the immediately preceding Quarterly Calculation Date, the
Debt Service Reserve Period would have terminated or would not have commenced,
as the case may be, as of such preceding Quarterly Calculation Date.
(e) On each Monthly Distribution Date and following the transfers
described in Sections 5.02(a),, 5.02(b), 5.02(c) and 5.02(d) hereof, the
Disbursement Trustee shall transfer to the Borrower the balance of the cash
remaining in the Revenue Account.
SECTION 5.03. Delivery of Certificates; Timing of Payments. (a) Each
of the officer's Certificates required to be delivered to the Disbursement
Trustee hereunder shall be delivered to the Disbursement Trustee not later than
five Business Days prior to the date of any transfer or distribu-
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<PAGE>
tion contemplated by such certificate unless otherwise specified herein. Any
Officer's Certificate delivered later than the time specified herein shall
nevertheless be considered valid and shall be honored by the Disbursement
Trustee on or as promptly after the date otherwise specified herein for payment
as is practicable, subject to the availability of cash in the applicable
Account.
(b) The Disbursement Trustee shall make any payment hereunder required
in immediately available funds, to the account of the payee set forth on
Schedule I hereto, prior to 1:30 p.m. (New York City Time) on the date specified
herein for such payment, or by such other means of payment, to such other
address or at such later time as shall be specified by such payee.
SECTION 5.04. Defaults. Notwithstanding any other provision contained
in this Disbursement Agreement, upon receipt by the Disbursement Trustee of
written notice from the Borrower or the Lender to the effect that an Event of
Default under the Term Loan Agreement shall have occurred and be continuing, the
Disbursement Trustee shall thereafter distribute the cash from the Accounts in
the amount and in the manner as directed by the Lender and only upon the express
written instructions of the Lender until notified in writing to the contrary by
the Lender, in which case the Disbursement Trustee shall thereafter make such
distributions or draws in accordance with the terms of this Disbursement
Agreement.
ARTICLE VI
INVESTMENT
Prior to the receipt by the Disbursement Trustee of written notice of
a default described in Section 5.04 of this Agreement, any cash held by the
Disbursement Trustee in the Accounts shall be invested by the Disbursement
Trustee from time to time in Permitted Investments as directed in writing by the
Borrower and if the Borrower fails so to direct, in United States Treasury
obligations having a maturity of no more than 30 days. Subsequent to the receipt
by the Disbursement trustee of written notice of a default described in Section
5.04 of this Agreement, any cash held by the Disbursement Trustee in the
Accounts shall be invested by the Disbursement Trustee as directed in writing by
the Lender until notified in writing to the contrary by the Lender.
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<PAGE>
Any income or gain realized as a result of any such investment shall
be held as part of the applicable Account and reinvested as provided herein. The
Disbursement Trustee shall have no liability for any loss resulting from any
such investment other than by reason of its wilful misconduct or gross
negligence. The Disbursement Trustee may sell any such investment (without
regard to maturity date) whenever the Disbursement Trustee in its sole
discretion deems it necessary to make any distribution required by this
Disbursement Agreement and the Disbursement Trustee shall not be liable to any
Person for any loss suffered because of any such sale.
ARTICLE VII
TRUSTEE
The acceptance by the Disbursement Trustee of its duties hereunder is
subject to the following terms and conditions which the parties to this
Disbursement Agreement hereby agree shall govern and control with respect to the
rights, duties, liabilities and immunities of the Disbursement Trustee:
(a) it shall not be responsible or liable in any manner whatever for
the sufficiency, correctness, genuineness or validity of any revenues, cash,
payments, securities, investments or other amounts deposited with or held by it;
(b) it shall be fully protected in acting on and relying upon any
written notice, certificate, instruction, direction, request or other paper or
document which the Disbursement Trustee in good faith believes to be genuine and
to have been signed or presented by the proper party or parties and may assume
that any Person purporting to give such written notice, certificate,
instruction, direction, request or other paper or document has been duly
authorized to do so and shall be fully protected in acting on and relying upon
any written notice, certificate, instruction, direction, request or other paper
or document as to the due execution thereof and the validity and effectiveness
of the provisions thereof and as to the truth of any information therein
contained, which the Disbursement Trustee in good faith believes to be genuine;
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<PAGE>
(c) it shall not be liable for any error of judgment or for any act
done or step taken or omitted except in the case of its negligence, willful
misconduct or bad faith;
(d) it may consult with and obtain advice from counsel and other
skilled Persons (at the expense of the Borrower) in the event of any dispute or
question as to the construction of any provision hereof and shall be fully
protected in taking or not taking any action in good faith in reliance on such
advice;
(e) it shall have no duties as the Disbursement Trustee except those
which are expressly set forth herein, and in any modification or amendment
hereof; provided, however, that no such modification or amendment hereof shall
affect its duties unless it shall have given its written consent thereto;
(f) it may execute or perform any duty hereunder either directly or
through agents or attorneys;
(g) it may engage or be interested in any financial or other
transaction with any party hereto and may act on, or as depositary, trustee or
agent for, any committee or body of holders of obligations of such persons as
freely as if it were not the Disbursement Trustee hereunder;
(h) it shall not be obligated to take any action which in its
reasonable judgment would involve it in expense or liability unless it has been
furnished with reasonable indemnity; and
(i) it shall not take instructions from any Person except those given
in accordance with this Agreement.
ARTICLE VIII
DETERMINATIONS
SECTION 8.01. Value. Cash and securities on deposit from time to time
in the Accounts shall be valued by the Disbursement Trustee as follows:
(a) cash shall be valued at the face amount thereof; and
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<PAGE>
(b) securities shall be valued at the liquidation value thereof (in
accordance with Section 8.03).
The term "Value" shall mean, with respect to any Account, the
aggregate value of the cash and securities then on deposit in such Account,
valued in accordance with the provisions of this Section 8.01.
SECTION 8.02. Disputes. Subject to Section 9.01, in the event of any
dispute as to any amount to be transferred or paid pursuant to this Disbursement
Agreement, the Disbursement Trustee is authorized and directed to retain in its
possession, without liability to anyone, the disputed amount until such dispute
shall have been settled by agreement of the other parties hereto or by legal
proceedings but the Disbursement Trustee shall be under no duty whatsoever to
institute or defend any such proceedings. The Disbursement Trustee shall be
entitled to hold the disputed amount in a special account, provided that such
monies are (a) subject to the same security interests and (b) handled with the
same degree of care as such monies would be absent such special account.
SECTION 8.03. Cash Available. In determining the amount of cash
available in, or balance of, any Account at any time, the Disbursement Trustee
shall treat as cash available the net amount that the Disbursement Trustee would
have received on such day if the Disbursement Trustee had liquidated all the
securities then on deposit in such Account (at then prevailing market prices and
assuming normal sales expenses). The Disbursement Trustee will use its best
efforts to sell securities in order that actual cash shall be available on each
date on which a transfer or payment is to be made pursuant to this Disbursement
Agreement.
ARTICLE IX
REMEDIES
SECTION 9.01. Remedies. If any Event of Default under the Term Loan
Agreement has occurred and is continuing, the Lender may (i) proceed to protect
and enforce the rights vested in it by this Disbursement Agreement, including
the right to cause all revenues hereby pledged to it as security and all other
moneys pledged to it hereunder to be paid directly to it, and to enforce its
rights hereunder to such payments and all other rights hereunder by such appro-
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<PAGE>
priate judicial proceedings as it shall deem most effective to protect and
enforce any of such rights, either at law or in equity or in bankruptcy or
otherwise, whether in aid of the exercise of any powers therein or herein
granted, or for any foreclosure hereunder and sale under a judgment or decree in
any judicial proceeding, or to enforce any other legal or equitable right vested
in it by this Disbursement Agreement or by law; or (ii) cause any action at law
or suit in equity or other proceeding to be instituted and prosecuted to collect
or enforce any obligations or rights included in the Collateral Security, or to
foreclose or enforce any other agreement or other instrument by or under or
pursuant to which such obligations are issued or secured, subject in each case
to the provisions and requirements thereof; or (iii) exercise any other or
additional rights or remedies granted to a secured party under law. If, pursuant
to applicable law, prior notice of any such action is required to be given to
the Borrower, the Borrower hereby agrees that the minimum time required by such
applicable law is a reasonable notice period, or if no minimum is specified,
five Business Days shall be deemed a reasonable notice period.
SECTION 9.02. Remedies Cumulative; Delay Not Waiver. No right, power
or remedy herein conferred upon or reserved to the Lender is intended to be
exclusive of any other right, power or remedy, and every such right, power and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right, power and remedy given hereunder or now or hereafter existing
at law or in equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
All costs and expenses (including reasonable attorney's fees and
expenses) incurred by the Lender in connection with any such suit or proceeding,
together with interest thereon (to the extent permitted by law) computed at the
Stipulated Interest Rate from the date on which such costs or expenses are
incurred to the date of payment thereof, shall constitute additional
indebtedness secured by this Disbursement Agreement.
No delay or omission of the Lender to exercise any right or power
accruing upon the occurrence and during the continuance of any Event of Default
under the Term Loan Agreement as aforesaid shall impair any such right or power
or shall be construed to be a waiver of any such Event of
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<PAGE>
Default or an acquiescence therein; and every power and remedy given by this
Disbursement Agreement may be exercised from time to time, and as often as shall
be deemed expedient, by the Lender.
SECTION 9.03. Superior Liens. The rights of the Lender to exercise
remedies hereunder, notwithstanding any other provisions hereof, shall be
consistent with any Liens granted by the Borrower in the Revenue Account, the
Current Debt Account and the Debt Service Reserve Account which secure the
Indebtedness described in Section 9.1(c) of the Term Loan Agreement (the "Senior
Indebtedness"), which Liens are Permitted Liens pursuant to Section 9.2 of the
Term Loan Agreement and which Liens are superior to the Lien of the Lender over
such Accounts. To the extent that upon the acceleration of the Term Notes
pursuant to the terms of the Term Loan Agreement, any Senior Indebtedness is
outstanding, then such Senior Indebtedness shall be repaid with the proceeds, if
any, in the Revenue Account, the Current Debt, Account and the Debt Service
Reserve Account prior to any payment of the Term Notes, unless the holder of the
Senior Indebtedness does not elect to accept such payment, or is unable to elect
to accept such payment, in which case such proceeds shall be used to repay the
Term Notes and any other obligation of the Borrower under the Term Loan
Agreement.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Fees and Indemnification of Disbursement Trustee. The
Borrower shall pay to the Disbursement Trustee reasonable compensation for its
services under this Disbursement Agreement as the Borrower and the Disbursement
Trustee may mutually agree. In addition, the Borrower hereby assumes liability
for, and agrees to indemnify, protect, save and keep harmless the Disbursement
Trustee and its respective successors, assigns, agents and servants, from and
against any and all claims, liabilities, losses and expenses (including legal
expenses) that may be imposed on, incurred by, or asserted against, at any time,
the Disbursement Trustee (whether or not also indemnified against by any other
Person under any contract or instrument) and in any way relating to or arising
out of the execution and delivery of this Disbursement Agreement, the
establishment of the Accounts, the acceptance of deposits, the purchase of
securities, the retention of money and securities or the proceeds thereof and
any payment, transfer or
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<PAGE>
other application of money or securities by the Disbursement Trustee in
accordance with the provisions of this Disbursement Agreement, or as may arise
by reason of any act, omission or error of the Disbursement Trustee made in good
faith in the conduct of its duties; except that the Borrower shall not be
required to indemnify, protect, save and keep harmless the Disbursement Trustee
against its own gross negligence, active or passive, or wilful misconduct. The
indemnities contained in this Section 10.01 shall survive the termination of
this Disbursement Agreement.
SECTION 10.02. Replacement or Resignation of Disbursement Trustee. (a)
The Disbursement Trustee may at any time resign by giving notice to each other
party to this Disbursement Agreement, such resignation to be effective upon the
appointment of a successor Disbursement Trustee as hereinafter provided. If a
successor Disbursement Trustee shall not have been appointed within 30 days
after the giving of written notice of such resignation, the Disbursement Trustee
may apply to any court of competent jurisdiction to appoint a successor
Disbursement Trustee to act until such time, if any, as a successor shall have
been appointed as herein provided.
(b) The Lender may remove the Disbursement Trustee at any time by
giving notice to each other party to this Disbursement Agreement, such removal
to be effective upon the appointment of a successor Disbursement Trustee as
hereinafter provided; provided, that the Lender shall give the Disbursement
Trustee at least 3 Business Days' prior written notice of such removal.
(c) In the event of any resignation or removal of the Disbursement
Trustee, a successor Disbursement Trustee, which shall be a bank or trust
company organized under the laws of the United States of America, the State of
New Jersey or the State of New York, having its principal corporate trust office
in the State of New Jersey or the State of New York and a capital and surplus of
not less than $100,000,000 shall be appointed by the Borrower, with the approval
of the Lender (such consent not to be unreasonably withheld). Any such successor
Disbursement Trustee shall deliver to each party to this Disbursement Agreement
a written instrument accepting such appointment hereunder and thereupon such
successor Disbursement Trustee shall succeed to all the rights and duties of the
Disbursement Trustee hereunder and shall be entitled to receive the Accounts
from the predecessor Disbursement Trustee.
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<PAGE>
(d) Any corporation into which the Disbursement Trustee may be merged
or converted or within which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Disbursement
Trustee shall be a party, or any corporation to which substantially all the
corporate trust business of the Disbursement Trustee may be transferred, shall,
subject to the terms of Section 10.02(c), be the Disbursement Trustee under this
Agreement without further act.
SECTION 10.03. Termination. This Disbursement Agreement shall
terminate on the earliest of (i) the date on which all Term Notes and all
obligations of the Borrower under the Term Loan Agreement have been satisfied in
full, (ii) twenty-one years less one day after the death of the last survivor of
the now living lineal descendants of the late Joseph P. Kennedy, father of the
late John F. Kennedy, President of the United States, living on the date hereof
and (iii) any other date agreed to by the parties hereto. The Lender shall
deliver written notice of such termination to the Disbursement Trustee. Upon
termination of this Disbursement Agreement, all cash, securities and
investments, together with all interest thereon, then held in any of the
Accounts shall be transferred as soon as practicable by the Disbursement Trustee
at the written direction of the Borrower (if a termination under clause (i)) or
of the Borrower and the Lender (if a termination under clause (ii) and (iii)).
SECTION 10.04. Severability. If any one or more of the covenants or
agreements provided in this Disbursement Agreement on the part of the parties
hereto to be performed should be determined by a court of competent jurisdiction
to be contrary to law, such covenant or agreement shall be deemed and construed
to be severable from the remaining covenants and agreements herein contained and
shall in no way affect the validity of the remaining provisions of this
Disbursement Agreement.
SECTION 10.05. Counterparts. This Disbursement 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.
SECTION 10.06. Amendments. This Disbursement Agreement may not be
modified or amended without the prior written consent of each of the parties
hereto.
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<PAGE>
SECTION 10.07. APPLICABLE LAW. THIS DISBURSEMENT AGREEMENT HAS BEEN
NEGOTIATED AND DELIVERED IN, AND SHALL IN ALL RESPECTS BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY IN THAT STATE INCLUDING MATTERS
OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
SECTION 10.08. Notices. All notices, requests, consents, demands and
other communications (collectively, "notices") required or permitted to be given
under this Disbursement Agreement to any Person shall be in writing and shall
become effective, if mailed, five Business Days after being deposited in the
United States mail, proper postage for first-class mail affixed thereto or, if
delivered by hand or courier service or in the form of a telex or telegram, when
received, and shall be directed to the address of such Person set forth in
Schedule I hereto.
SECTION 10.09. Benefit of Agreement. This Disbursement Agreement shall
be binding upon, and inure to the benefit of, the parties hereto and their
successors and assigns. No party hereto (other than the Lender) may assign its
rights and/or obligations hereunder. Nothing in this Disbursement Agreement,
whether expressed or implied, shall be construed to give any Person not a party
to this Agreement any legal or equitable right, remedy or claim under or in
respect of this Disbursement Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this
Disbursement Agreement to be executed by their duly authorized officers as of
the date first above written.
COGEN TECHNOLOGIES NJ VENTURE
By Cogen Technologies NJ, Inc.,
its Managing Venturer
By /s/ LAWRENCE THOMAS
---------------------------
Vice President
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
MIDLANTIC NATIONAL BANK
By /s/ GUY F. SQUILLAGE
---------------------------
Name: Guy F. Squillage
Title: VICE PRESIDENT
& TRUST OFFICER
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<PAGE>
SCHEDULE I
to
Disbursement Agreement
ADDRESSES FOR
PAYMENTS AND NOTICES
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA:
In the case of all Term Loan Payments:
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
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)
COGEN TECHNOLOGIES NJ VENTURE
In the case of all payments:
By bank wire transfer in
immediately available funds to:
Midlantic Newark/Trust
ABA No. 021200012
Account No.: 20-4-1263-1
Account of Cogen Technologies
NJ Venture
<PAGE>
In the case of all other communications:
c/o Cogen Technologies NJ, Inc.
1600 Smith Street
50th Floor
Houston,.Texas 77002
Attn: Robert C. McNair
MIDLANTIC NATIONAL BANK
In the case of all payments:
By bank wire transfer
in immediately available funds
to the Revenue Account:
Midlantic Newark/Trust
A.B.A. No. 021200012
Account No. 10107290
Attn: M. Davoren, Vice President
In the case of all other
communications:
Midlantic National Bank
Metropark Plaza
P.O. Box 600
Edison, N.J. 08818
Attn: M. Davoren, Vice President
<PAGE>
SCHEDULE II
to
Disbursement
Agreement
Disbursement Agreement
Definitions
"Account": shall mean any of the Revenue Account, the Insurance
Account, the Current Debt Account and the Debt Service Reserve Account.
"Current Debt Account": as defined in Section 2.04 of the Disbursement
Agreement.
"Debt Service Reserve Account": as defined in Section 2.03 of the
Disbursement Agreement.
"Debt Service Reserve Period": any period commencing with a Quarterly
Calculation Date as of which the Coverage Ratio is less than 1.5 and ending on
the next following Quarterly Calculation Date as of which the Coverage Ratio is
equal to or greater than 1.5.
"Insurance Account": as defined in Section 2.05 of the Disbursement
Agreement.
"Monthly Distribution Date": the first day of each month (or the next
succeeding Business Day thereafter if such date is not a Business Day).
"Officers' Certificate": a certificate signed by a general partner of
any partnership and by the President, Vice President, Treasurer or Secretary of
any corporation.
"Quarterly Calculation Date": the day following the day on which the
Borrower furnishes the Coverage Ratio pursuant to Section 8.2(k) of the Term
Loan Agreement.
"Permitted Investments": shall mean investments in (a) obligations of,
or guaranteed as to interest and principal by, the United States of America
maturing within one year after such investment; (b) widely traded commercial
paper of any corporation incorporated under the laws of the United States of
America or any state thereof which is rated "prime-1" or its equivalent by
Moody's Investor Services, Inc. or "A-1" or its equivalent by Standard & Poor's
Corporation maturing within one year after the date of such in-
<PAGE>
Schedule II
page 2
vestment; (c) certificates of deposit maturing within one year after such
investment and issued by commercial banks organized under the laws of the United
States of America or any state thereof (i) having a combined capital and surplus
in excess of $500,000,000 or (ii) which are domestic branches of a foreign bank,
the senior debt obligations of which are rated "AAA" (or "Aaa") or better by
Standard & Poor's Corporation (or Moody's Investor Services, Inc.) provided that
no more than $1,000,000 may be invested in such certificates of deposit at any
one such branch; (d) tax-exempt variable rate demand bonds backed by letters of
credit issued by banks described in clause (c) above; (e) Eurodollar time
deposits, provided that (i) no more than $5,000,000 may be invested in such
deposits at any one time, (ii) such deposits mature within 90 days or less after
the date of such investment, (iii) such deposits are issued by commercial banks
rated at least "AAA" (or "Aaa") by Standard & Poor's Corporation (or Moody's
Investor Services, Inc.), (iv) no more than $3,000,000 may be invested in such
deposits at any one bank at any one time and (v) such deposits must be purchased
in the United States; and (f) repurchase agreements respecting any of the
foregoing with banks incorporated under the laws of the United States or of any
state thereof whose commercial paper is rated "A-1" (or "prime-1") by Standard
& Poor's Corporation (or Moody's Investor Services, Inc.), provided, however,
that the collateral therefor is actually transferred or that custody of the
collateral therefor is maintained by a domestic commercial bank having total
assets of not less than $1,000,000,000 and confirmation is received from such
bank that such collateral is being held as security for such repurchase
obligation.
"Project Revenues": all revenues, cash and moneys payable to the
Borrower, including, without limitation, amounts payable pursuant to the Power
Purchase Agreements and insurance policies required pursuant to the Term Loan
Agreement.
"Revenue Account": as defined in section 2.02 of the Disbursement
Agreement.
"Surplus Funds in the Debt Service Reserve Account": funds in the Debt
Service Reserve Account following a Quarterly Calculation Date as of which the
Coverage Ratio was equal to at least 1.5 in excess of the amount required to
enable the Coverage Ratio to equal at least 1.5 as of such Quarterly Calculation
Date.
<PAGE>
Schedule II
page 3
"Term Loan Payments": all payments of principal, premium and interest
due under the Term Notes and all other payments payable by the Borrower under
the Term Loan Agreement.
"UCC": means the Uniform Commercial Code, as from time to time in
effect in the relevant state as the context may require.
<PAGE>
AMENDMENT NO. I
TO DISBURSEMENT AND SECURITY AGREEMENT
--------------------------------------
AMENDMENT NO. 1 TO DISBURSEMENT AND SECURITY AGREEMENT dated as of
February 9, 1989 (this "Amendment") to the Disbursement and Security Agreement
dated as of December 15, 1988 (the "Agreement") by and among Cogen Technologies
NJ Venture, The Prudential Insurance Company of America and Midlantic National
Bank.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the parties to the Agreement desire to amend certain
provisions of the Agreement; and
WHEREAS, pursuant to Section 10.06 of the Agreement the Agreement may
be amended by the written agreement of the parties thereto;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Agreement.
2. Amendments to the Agreement. The Agreement is hereby amended as
follows:
(a) Section 4.01 is hereby amended by adding the following as the
final two sentences thereof:
"Amounts deposited into the Revenue Account constituting a payment
from a Buyer pursuant to its respective Power Purchase Agreement
shall be held in a separate sub-account of the Revenue Account
(the "Power Purchase Agreements Sub-Account"). The Disbursement
Trustee agrees that all monies held in the Power Purchase
Agreements Sub-Account shall be subject to the same security
interests and handled with the same degree of care as such would
be absent being placed in the Power Purchase Agreements Sub-
Account."
<PAGE>
(b) Section 4.03 shall be amended to insert the following immediately
after each use of the words "Accounts" or "Account" therein:
"and the Power Purchase Agreements Sub-Account"
(c) There shall be added a new Section 5.05 as follows:
"SECTION 5.05. Transfers from Revenue Account. Whenever the
Disbursement Trustee shall make a transfer from the Revenue
Account pursuant to the terms of this Agreement, the Disbursement
Trustee shall transfer monies therefrom first from the Power
Purchase Agreements Sub-Account and second from the other monies
held in the Revenue Account."
3. Counterparts. This Amendment may be executed simultaneously in two
or more counterparts, each of which shall be deemed to be an original, and it
shall not be necessary in making proof of this Amendment to produce or account
for more than one such counterpart.
4. Agreement Not Otherwise Amended. Terms and provisions of the
Agreement not amended hereby shall continue to remain in full force and affect.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be executed an its behalf an of the date first above written.
COGEN TECHNOLOGIES NJ VENTURE
By COGEN TECHNOLOGIES NJ, INC.,
its Managinq Venturer
By /s/ LAWRENCE THOMAS
----------------------------
Vice President
THE PRDUENTIAL INSURANCE COMPANY
OF AMERICA
BY PRUCAPITAL MANAGEMENT, INC.,
Agent
By
------------------------------
Title:
MIDLANTIC NATIONAL BANK
By
------------------------------
Title:
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be executed on its behalf as of the date first above written.
COGEN TECHNOLOGIES NJ VENTURE
By COGEN TECHNOLOGIES NJ, INC.,
its Managing Venturer
By
-----------------------------
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By /s/ W. Brad Winegar
----------------------------
Title: Vice President
MIDLANTIC NATIONAL BANK
By
-----------------------------
Title:
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be executed an its behalf as of the date first above written.
COGEN TECHNOLOGIES NJ VENTURE
By COGEN TECHNOLOGIES NJ, INC.,
its Managing Venturer
By
-----------------------------
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By PRUCAPITAL MANAGEMENT, INC.,
Agent
By
-----------------------------
Title:
MIDLANTIC NATIONAL BANK
By /s/ GUY F. SQUILLAGE
------------------------------
Title: VICE PRESIDENT
<PAGE>
Page 1 of 7
Contract #: CTK-1 BAYONNE
- ----------------- -------
IMTT-BAYONNE
------------
AGREEMENT OF GENERAL CONDITIONS
-------------------------------
THIS AGREEMENT and the attached schedule(s) which are made part hereof, by
and between IMTT-BAYONNE, A DELAWARE PARTNERSHIP, (hereinafter called "Bailee")
and COGEN TECHNOLOGIES NJ VENTURE, a joint venture, organized and created under
the laws of the State of NEW JERSEY (hereinafter called "Bailor"). The parties
signing the within Agreement for and in behalf of Bailee and Bailor warrant that
each of them is fully authorized by their respective parties to execute and
deliver the within Agreement in accordance with the terms and conditions set
forth herein and in said attached schedule(s).
WITNESSETH THAT:
For and in consideration of the mutual covenants and agreements undertaken
herein, Bailee and Bailor agree as follows, to-wit:
1. Bailee hereby agrees during the term of this Agreement to store in its
public warehouse tank storage facilities in the City of Bayonne, New Jersey
and/or Jersey City all as more specifically set forth in the attached schedules.
Bailee shall retain exclusive control and administration of all tank(s),
including all throughput in or out thereof, and all premises, lines and
appurtenances appertaining thereto. TITLE TO PRODUCT WILL REMAIN WITH BAILOR AT
ALL TIMES. Unless otherwise specified Bailee shall provide AND MAINTAIN storage
tanks and lines constructed of plain, unlined steel having standard
construction, pumps, valves and accessories commonly used for the storage and
handling of bulk liquids. Bailee reserves the right to substitute tanks OF
COMPARABLE QUALITY/CAPACITY during the term of this agreement AT NO ADDITIONAL
COST TO BAILOR.
2. Bailor shall deliver to Bailee for storage materials as specified in
said attached schedule(s), provided however, that Bailor shall not tender to
Bailee any materials, corrosive or otherwise, which would in any way damage its
tank(s); nor shall Bailee be required to store any materials therein which
would render said tank(s) unfit, after cleaning, for the proper storage of
products. Bailor or its representative is granted the right at its expense to
inspect the tank(s) assigned to Bailor's products from time to time prior to
commencement of unloading of Bailor's materials into said tank(s). If, as a
result of such inspection by Bailor, any tank should fail to satisfy the
requirements of Bailor and the defect or deficiency is not susceptible of
reasonable remedy in the opinion of Bailee, then and in such event, each party
is granted the option forthwith to terminate those parts of this Agreement which
cannot be performed, provided that such termination shall be without liability
whatever on the part of Bailee to Bailor for any loss, damage or expense,
consequential or remote, sustained by Bailor as a result of the failure of such
tank(s) to meet
<PAGE>
Page 2 of 7
Bailor's requirements, and the within Agreement shall remain in full force and
effect as to the remaining storage. Once Bailor has authorized the unloading of
its materials into the lines and tank(s) of Bailee, it is stipulated that such
authorization constitutes an acceptance (with or without inspection, as the case
may be) by Bailor of Bailee tank(s) as being fit and suitable for the storage of
Bailor's materials.
3. Bailor is to furnish Bailee with a full written description of
materials to be handled, including all known physical and chemical properties,
prior to storage thereof. Materials are to be of such consistency and refinement
as to be free-flowing and pumpable at all times subject to proper application of
heat when required. In the event such materials require the application of heat
or steam by Bailee to maintain same in a liquid free-flowing or pumpable state,
Bailee will provide the required heat, if tanks are appropriately equipped, at
Bailor's cost as set forth in the attached schedule. Bailee reserves the right
to refuse to accept or store or continue to store the materials or any part
thereof if in its opinion the condition of the materials gives reasonable ground
for apprehension of loss or damage to other goods or to storage facilities or to
any person or persons whatsoever. In such event, Bailee shall be entitled to
give notice to Bailor to remove such materials within a reasonable time after
receiving such notice and if Bailor should fail to remove such materials, Bailee
shall be entitled to dispose of said materials in the same manner as provided in
paragraph 7 hereinbelow. Bailor warrants that any materials delivered for
storage under this Agreement will not be corrosive or otherwise injurious to
Bailee's tank(s), lines, appurtenances or personnel. BAILEE RECOGNIZES THAT
SPECIFICATION GRADES OF KEROSENE ARE NOT CORROSIVE. BAILEE TRAINS/EQUIPS ITS
EMPLOYEES TO SAFELY HANDLE ALL GRADES OF KEROSENE. In the event Bailor's
materials should require special handling to maintain quality and minimize
hazards, Bailor shall so advise Bailee in writing thereof in advance of
execution of this Agreement. Bailor shall be strictly liable for any loss,
damage, or expense, which results from breach of said warranty or failure to
advise of required special handling.
4. Bailee agrees to receive, deliver and/or transfer into and out of its
terminal such materials as may be stored therein under the terms hereof, to
provide such other services as may be specified in said schedule(s), and to
provide the facilities needed therefor. Bailor agrees to pay Bailee monthly in
advance, the agreed monthly charges specified in the attached schedule(s).
Bailor also agrees to pay Bailee any other charges accruing hereunder which may
be mutually agreed upon, from time to time, upon presentation of invoice
therefor. All payments hereunder shall be made to Bailee at its principal
office, Foot of E22nd Street, Bayonne, New Jersey 07002 or such other address as
may be designated by Bailee. Notwithstanding Bailee's charges for receiving
materials (throughput charge), the cost of all inpumping of materials from ship
or barge into the lines and tank(s) of Bailee shall be arranged by and at the
cost of Bailor.
<PAGE>
Page 3 of 7
5. The term "barrel" whenever used in this Agreement or attached
schedule(s) shall mean 42 U.S. gallons at 60 degree F; the term "materials"
whenever used in this Agreement or attached schedule(s) shall mean materials
which are stored for Bailor but which may be owned by Bailor or by others.
6. This Agreement shall remain in effect for the period of time specified
in the attached schedule(s). If additional tank(s) are required by Bailor
from time to time hereafter, such requirement may be evidenced by a Letter
Agreement, or otherwise, and become an addition to the attached schedule(s), and
the terms of this Agreement shall also apply to it.
7. Bailor agrees, promptly upon the expiration or termination of this
Agreement to remove all materials contained in Bailee's terminal and leave the
tanks used for Bailor's materials in the same condition as they were at the
beginning of this contract, ordinary wear and tear AND DAMAGE NOT CAUSED BY
BAILOR'S PRODUCT excepted. In the event Bailor's materials are not completely
out of the tank(s) at the end of the term of this Agreement, Bailor agrees to
pay Bailee an additional charge of one month's storage or, at the option of
Bailee, damages incurred by reason of Bailor's refusal or inability to remove
its materials from the tank(s). In the event of Bailor's refusal or inability to
so remove its materials Bailee is granted the additional right, over and above
its claim for damages, to remove and dispose of all materials remaining in said
tank(s) and to satisfy Bailor's obligations to Bailee out of the proceeds of
such disposition, if any, Bailee to hold any balance for the account of Bailor
or other party in interest.
8. Bailee shall not be liable for evaporation, shrinkage, line-loss,
clingage, discoloration, contamination, damage to or destruction of any
materials of Bailor, or for any delay or non-performance of services or failure
to provide facilities due hereunder when any of the foregoing is caused in whole
or in part by force majeure, unnatural act or the public enemy, or by labor
dispute or trouble, strike, riot, vandalism, sabotage, expropriation or
appropriation, flood, fire, war (whether declared or undeclared), accident when
not caused by Bailee, storm, explosion, breakdown of machinery, fuel shortage,
power shortage, railroad embargo or congestion, government regulation or action,
embargo or intervention, failure or delay of manufacturers or persons from whom
Bailee is obtaining machinery, equipment, materials, or supplies to deliver the
same, or other cause beyond its control, whether such other cause be of the
classes herein specifically provided for or not, and whether the cause is or is
not existing on the date of this Agreement. In any event, regardless of the
occurrence or nonoccurrence of any of the aforementioned events, Bailee shall
not be liable for loss of or damage to Bailor's materials except when caused by
Bailee's failure to use reasonable care in the safekeeping and handling of
Bailor's materials.
9. All movements and receipts or deliveries of Bailor's materials
<PAGE>
Page 4 of 7
hereunder, whether by tank, tank car, tank truck, barge, tanker or vessel, shall
be on a nonpreferential, first come/first served basis, and Bailee shall not be
responsible for any loss, damage, demurrage, or expense due to delay in
loading or unloading Bailor's materials. Bailor shall give Bailee at least seven
(7) days advance notice of the arrival of each tanker and at least twelve (12)
hours advance notice of the arrival of each barge making deliveries of Products
into the Storage Facilities, specifying the quantity and nature of Products into
the storage hereunder. Such tankers, barges or customer vessels will be
accommodated with every vessel using the Storage Facilities in the order of
arrival. Tankers, barges or customer vessels loading or discharging for Bailor's
account will be subject to Bailee's applicable dock rules as they may be in
effect from time to time and such tankers, barges, and customer vessels will
proceed to and from Bailee's dock facilities with promptness and dispatch.
BAILEE'S DOCK RULES SHALL NOT BE AMENDED IN A MANNER WHICH MATERIALLY AFFECTS
THE PERFORMANCE of THIS AGREEMENT. The tankers, barges and customer vessels will
load or unload, as the case may be, on a continuous basis.
10. Insurance on Bailor's materials shall be obtained and carried by
Bailor at its expense. Bailor agrees to reimburse and indemnify Bailee for any
and all REASONABLE expenses incurred by Bailee for the preservation or
protection of Bailor's materials. In the event of a casualty Bailor will obtain
a waiver of subrogation against Bailee for the covered portion of any loss
sustained by reason of storage of materials for Bailor hereunder. BAILEE WILL
PROVIDE BAILOR WITH AN INSURANCE CERTIFICATE ON A YEARLY BASIS EVIDENCING
VARIOUS COVERAGES WHICH BAILEE CARRIES FOR ITS OWN BENEFIT.
11. Should Bailor fail to pay any monies due or to become due hereunder or
should Bailor fail to comply with any of its other obligations under this
Agreement within THIRTY (30) days from the mailing by Bailee of notice of such
default, Bailee shall have the right, at its option (a) to terminate and cancel
the within Agreement in which event there shall be due to Bailee, as liquidated
damages, a sum equal to the amount of the storage charges hereunder for one (1)
month; (b) to accelerate all monies due for the unexpired remaining term of the
within Agreement and to declare same immediately due and payable; or (c) to sue
for the storage charges in intervals or as the same accrue. IN THE EVENT THAT
BAILOR DEFAULTS AND THIS AGREEMENT IS TERMINATED, BAILEE WILL PROMPTLY MAKE BEST
EFFORTS TO LEASE STORAGE SPECIFIED BY THIS AGREEMENT TO OTHER PARTIES APPLYING
STORAGE REVENUE RECEIVED AGAINST BAILOR'S LIABILITY AND IF POSSIBLE TERMINATE
BAILOR'S RESPONSIBILITY/LIABILITY TO BAILEE, IN WHOLE OR IN PART. The foregoing
provisions are without prejudice to any remedy which might otherwise be
available under the laws of New Jersey for non-payment of monies due, or to
become due hereunder, or for breach of any of the obligations of the within
Agreement, or to establish any lien or privilege.
If Bailor has commenced by reasonable means to cure any default not
curable in THIRTY (30) days, such additional time as is reasonably necessary to
cure such default shall be granted Bailor before Bailor will be
<PAGE>
Page 5 of 7
adjudged in default hereunder.
Bailee's failure to strictly and promptly enforce these conditions
shall not operate as a waiver of Bailee's rights hereunder, Bailee hereby
reserves the right to enforce prompt payment of storage charges or other
charges, or to cancel the within Agreement regardless of any indulgences, or
extensions previously granted to Bailor.
In the event Bailor defaults in the performance of any of the terms,
covenants, agreements or conditions provided herein and Bailee refers to its
attorney the enforcement of this Agreement, or any part hereof, for the
collection of any monies due or to become due hereunder, and said attorney files
suit thereon, then Bailor agrees to pay such reasonable attorney's fees as
incurred by Bailee.
SHOULD BAILEE FAIL TO COMPLY WITH ANY OF ITS MAJOR OBLIGATIONS UNDER THIS
AGREEMENT WITHIN THIRTY (30) DAYS FROM THE RECEIPT BY Bailee OF A NOTICE OF
DEFAULT, FROM BAILOR; BAILOR SHALL HAVE THE RIGHT TO TERMINATE AND CANCEL THIS
AGREEMENT WITHOUT FURTHER LIABILITY; HOWEVER, IF BAILEE HAS COMMENCED BY
REASONABLE MEANS TO CURE ANY DEFAULT NOT CURABLE IN THIRTY (30) DAYS, SUCH
ADDITIONAL TIME AS IS REASONABLY NECESSARY TO CURE SUCH DEFAULT SHALL BE GRANTED
BAILEE BEFORE BAILEE WILL BE ADJUDGED IN DEFAULT HEREUNDER. NON-PERFORMANCE BY
BAILEE TO DUE TO FORCE MAJEURE WILL NOT BE CONSIDERED DEFAULT.
12. If voluntary bankruptcy proceedings are instituted by EITHER PARTY or
if EITHER PARTY is adjudicated a bankrupt, or if EITHER PARTY makes an
assignment for the benefit of its creditors, or if execution is issued against
EITHER PARTY, or if the interest of EITHER PARTY hereunder passes by operation
of law to any person other than THAT PARTY then, in any of such events, THE
OTHER PARTY may, at its option, declare the within Agreement terminated by
notice thereof mailed by certified mail and addressed to THE OTHER at its last
known address, provided that Bailee shall retain its lien and privilege against
all Bailor's materials situated for any monies or payments due or to become due
Bailee.
13. Bailee reserves the right to reject any vessel, barge, tanker, rail
tank car or tank truck, or any material contained therein, which it reasonably
determines to be unsuitable for handling or in bad order, without liability
whatever on the part of Bailee to Bailor for any loss, damage, demurrage or
expense, consequential or remote, sustained by Bailor as a result of such
rejection.
14. It is stipulated that the charges specified herein or in the attached
schedule(s) are based upon Bailee's cost of operation and construction necessary
to comply with governmental laws, rules and regulations as presently enforced,
particularly with respect to environmental control and safety standards. If,
during the term of this Agreement, there should occur a change in policy
affecting enforcement of said laws, rules and regulations; or Bailee should
incur significant additional costs in continuing to comply with existing
regulations; or
<PAGE>
Page 6 of 7
should there be enacted or promulgated new or revised laws, rules or regulations
requiring additions to or modifications of Bailee's facilities or changes in its
methods of operation increasing the cost of services and providing facilities
hereunder, and Bailee determines that it can modify its facilities or change its
methods of operations, Bailee shall advise Bailor of any increase in costs
resulting therefrom, in which event the charges hereunder shall be adjusted to
compensate Bailee for such increased costs, provided however, Bailor is granted
thirty (30) days from the date of advice of cost increases to elect whether to
accept such charges or to terminate the within Agreement. In the event Bailor
elects to terminate the within Agreement, each party hereto shall thereupon be
discharged of any further liability hereunder.
15. EACH PARTY shall defend, indemnify and hold THE OTHER harmless for any
injury or damage caused by errors and omissions of surveyors, inspectors, or
other individuals designated by IT to act on ITS behalf on any phase of the
within agreement. EACH PARTY shall indemnify, defend and hold THE OTHER harmless
against any/all claims of injury or damages brought by ITS surveyors, inspectors
or other individuals/companies designated by IT to perform work on the property
of THE OTHER PARTY.
16. If this agreement is executed by more than one party as Bailor, said
parties shall be jointly, severally and in solido liable hereunder.
17. The laws of the State of New Jersey shall govern and apply to the
terms of this Agreement and its performance thereof. THIS AGREEMENT WILL BE
PERFORMED IN ACCORDANCE WITH ALL APPLICABLE LOCAL, STATE AND FEDERAL LAWS.
18. This Agreement shall be binding upon, and inure to the benefit of the
successors, transferees and assigns of each of the parties hereto; provided,
however, that Bailor shall not sublease storage covered by this Agreement or
transfer or assign this Agreement, in whole or in part, without the written
consent of Bailee, provided further, that in the event of assignment or sublease
Bailor shall remain liable hereunder.
COGEN MAY ASSIGN THIS AGREEMENT TO ITS LENDER (PRUDENTIAL) OR AN
AFFILIATE WITHOUT IMTT'S CONSENT PROVIDING THAT COGEN WILL REMAIN LIABLE
HEREUNDER. IF COGEN SELLS ITS POWER PLANT ON IMTT'S PROPERTY TO ANOTHER PARTY
AND IMTT CONSENTS TO THE ASSIGNMENT OF THIS STORAGE AGREEMENT THEN COGEN WILL NO
LONGER REMAIN LIABLE FOR PAYMENTS SPECIFIED BY THIS AGREEMENT.
19. EITHER PARTY'S FAILURE TO STRICTLY AND PROMPTLY ENFORCE THE CONDITIONS
OF THIS AGREEMENT SHALL NOT OPERATE AS A WAIVER OF THAT PARTY'S RIGHTS REGARDING
ANY PROVISION OF THE AGREEMENT REGARDLESS OF ANY INDULGENCES OR EXTENSIONS
PREVIOUSLY GRANTED.
20. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES
AND SETS FORTH ALL OF THE REPRESENTATIONS, COVENANTS AND WARRANTIES UPON WHICH
THE PARTIES RELY IN ENTERING THE AGREEMENT.
<PAGE>
Page 7 of 7
21. Every provision of this Agreement is intended to be severable such that
if any term or provision is found to be illegal such provision will be severed
from this Agreement and shall not effect the validity of the Agreement.
22. No amendment or modification hereof shall be valid or binding upon the
parties hereto unless evidenced in writing and signed by duly authorized
representatives of each party.
23. Bailor and Bailee will not be responsible to each other for
consequential damages resulting from the performance of this agreement.
Dated and signed by Bailee at Bayonne, New Jersey on the 17th day of May, 1994.
WITNESSES: IMTT-BAYONNE
/s/??????????????? By: /s/??????????????
- ------------------------ -----------------------
Title: Sales Manager
- ----------------------------
Dated and signed
by_________________________; at_______________________________________________
_________________________, on the 17th day of May, 1994.
WITNESSES: COGEN TECHNOLOGIES NJ VENTURE INC.
/s/ ?????????????????????? BY: /s/??????????????????
- ----------------------------- ------------------------------
TITLE: V.P. - Mid Atlantic Region
- ----------------------------- ---------------------------
TITLE:
<PAGE>
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
PRO FORMA HISTORICAL
-------------- ---------------------------------------------------
31-MAR 31-DEC 31-MAR 31-MAR 31-DEC 31-DEC 31-DEC 31-DEC 31-DEC
1998 1997 1998 1997 1997 1996 1995 1994 1993
------ ------ ------ ------ ------ ------ ------ ------ ------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income for Fixed Charge
Coverage
Income Before Tax...... $18.9 $ 72.2 $21.5 $15.2 $ 80.1 $ 71.9 $ 76.9 $55.6 $ 67.6
Distributions Received
Greater (Less) than
Equity in Earnings of
Affiliates............ (4.7) (1.1) (4.7) 1.8 (1.1) 16.1 18.4 (1.1) (2.3)
----- ------ ----- ----- ------ ------ ------ ----- ------
Income for Fixed
Charge Coverage....... $14.2 $ 71.1 $16.8 $17.0 $ 79.0 $ 88.0 $ 95.3 $54.5 $ 65.3
===== ====== ===== ===== ====== ====== ====== ===== ======
Fixed Charges
Group Interest
Expense............... $12.0 $ 50.0 $ 4.9 $ 5.7 $ 21.7 $ 23.2 $ 26.3 $25.8 $ 26.1
Group Share of
Interest Expense of
Affiliates
NJ Venture........... 1.7 7.0 1.7 1.8 7.0 7.3 7.6 7.8 7.9
Camden Cogen......... 1.4 7.0 1.4 1.8 7.0 7.7 8.2 8.6 9.0
Amortization of
Deferred Financing
Costs................. 0.1 0.2 0.1 0.1 0.2 0.2 0.2 0.3 1.3
Portion of Rent
Expense
Representative of
Interest Factor....... -- 0.1 -- -- 0.1 0.2 0.1 0.1 0.1
----- ------ ----- ----- ------ ------ ------ ----- ------
Total Fixed Charges.... $15.2 $ 64.3 $ 8.1 $ 9.4 $ 36.0 $ 38.6 $ 42.4 $42.6 $ 44.4
===== ====== ===== ===== ====== ====== ====== ===== ======
Income Plus Fixed
Charges................ $29.4 $135.4 $24.9 $26.4 $115.0 $126.6 $137.7 $97.1 $109.7
===== ====== ===== ===== ====== ====== ====== ===== ======
Fixed Charge Coverage... 1.9 2.1 3.1 2.8 3.2 3.3 3.2 2.3 2.5
===== ====== ===== ===== ====== ====== ====== ===== ======
</TABLE>
<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
August 13, 1998
