<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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EAST COAST POWER L.L.C.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4911 52-2143667
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
<TABLE>
<S> <C>
JOSEPH M. BOLLINGER
711 LOUISIANA STREET 711 LOUISIANA STREET
HOUSTON, TEXAS 77002 HOUSTON, TEXAS 77002
(713) 853-6161 (713) 345-9713
(Address, including zip code, and telephone (Name, address, including zip code, and
number, including telephone number
area code, of registrant's principal
executive offices) including area code, of agent for service)
</TABLE>
Copies to:
KEITH R. FULLENWEIDER
VINSON & ELKINS L.L.P.
1001 FANNIN, SUITE 2300
HOUSTON, TEXAS 77002-6760
(713) 758-2222
(713) 758-2346 (FAX)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable following the effectiveness of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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, check the following box and
list the Securities Act registration statement number of the earlier
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 registration statement for the same
offering. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6.737% Series B Senior Secured
Notes due 2008.................. $283,869,920 100% $283,869,920
7.066% Series B Senior Secured
Notes due 2012.................. $236,000,000 100% $236,000,000 $232,928
7.536% Series B Senior Secured
Notes due 2017.................. $318,000,000 100% $318,000,000
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE 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> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
COMPANY MAY NOT EXCHANGE THE NOTES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION
IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THE NEW NOTES AND IT IS
NOT SOLICITING AN OFFER TO BUY THE NEW NOTES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JUNE , 1999
$837,869,920
[EAST COAST POWER L.L.C.]
Offer to Exchange
6.737% Series B Senior Secured Notes due 2008
7.066% Series B Senior Secured Notes due 2012
7.536% Series B Senior Secured Notes due 2017
For All Outstanding
6.737% Series A Senior Secured Notes due 2008
7.066% Series A Senior Secured Notes due 2012
7.536% Series A Senior Secured Notes due 2017
---------------------
THE NEW NOTES:
- - Restrictions: The new notes will be freely tradeable and otherwise
substantially identical to the outstanding notes.
- - Maturity: The 6.737% Series B Senior Secured Notes will mature on March 31,
2008; the 7.066% Series B Senior Secured Notes will mature on March 31, 2012;
and the 7.536% Series B Senior Secured Notes will mature on June 30, 2017.
- - Payments: Payments on the new notes will be made quarterly on March 31, June
30, September 30 and December 31 of each year, beginning on September 30,
1999.
- - Interest Accrual: Interest on the new notes will accrue from the most recent
date to which interest has been paid on the outstanding notes.
- - Security: The new notes are secured by the pledge of our owners' equity
interests in our Company and certain equity interests in the intermediate
holding companies which indirectly own our interests in the power plants.
- - Ranking: The new notes rank senior to all of our existing and future
subordinated debt and equally with all of our unsubordinated debt. The new
notes are effectively subordinated to all debt and other liabilities of our
subsidiaries and to distributions to minority partners in our power plants. As
of March 31, 1999, our subsidiaries had approximately $353.0 million of
indebtedness outstanding.
- - Listing: The new notes will not be listed on any security exchange or on any
automated dealer quotation system.
THE EXCHANGE OFFER:
- - Expiration: 5:00 p.m. New York City time on , 1999, unless
otherwise extended.
- - Conditions: The exchange offer is not conditioned upon any minimum aggregate
principal amount of outstanding notes being tendered.
- - Tendered Notes: All outstanding notes that are validly tendered and not
validly withdrawn will be exchanged for an equal principal amount of new notes
of the same maturity date that are registered under the Securities Act of
1933.
- - Withdrawal: Tenders of outstanding notes may be withdrawn at any time prior to
the expiration of the exchange offer.
- - Tax Consequences: The exchange of outstanding notes for new notes will not be
a taxable event for U.S. federal income tax purposes.
------------------------
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 12 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NEW NOTES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this prospectus is , 1999.
<PAGE> 3
Each broker-dealer that receives new notes for its own account pursuant to
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such new notes. The letter of transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of new notes
received in exchange for outstanding notes where such outstanding notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. We have agreed that, starting on the expiration date of the
exchange offer and ending on the close of business 180 days after the expiration
date, we will make this prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution."
Each broker-dealer that receives new notes for its own account in exchange
for outstanding notes, where the outstanding notes were acquired by the
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of the new notes. See "Plan of Distribution."
This prospectus is part of a registration statement we filed with the
Securities and Exchange Commission. You should rely only on the information or
representations provided in this prospectus. We have not authorized any person
to provide information other than that provided in this prospectus. We have not
authorized anyone to provide you with different information. We are not making
an offer of these securities in any jurisdiction where the offer is not
permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of this document.
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events based upon our knowledge of facts as of the date of this
prospectus and our assumptions about future events. These forward-looking
statements are subject to various risks and uncertainties that may be outside of
our control, including, among other things:
- governmental, statutory, regulatory or administrative changes or
initiatives affecting our Company, our power plants, the contracts
relating to our power plants or the U.S. electricity industry generally;
- the cost and availability of fuel and fuel transportation services for
our power plants;
- the enforceability of the long-term power purchase and steam sales
agreements for our power plants;
- the creditworthiness of our electric power and steam customers;
- weather effects on sales and revenues; and
- competition from other power plants, including new plants that may be
developed in the future.
We use words like "anticipate," "estimate," "project," "plan," "expect" and
similar expressions to help identify forward-looking statements in this
prospectus.
For additional factors that could affect the validity of our
forward-looking statements, you should read "Risk Factors" beginning on page 12.
In light of these and other risks, uncertainties and assumptions, the actual
events or results may be very different from those expressed or implied in the
forward-looking statements in this prospectus or may not occur. We have no
obligation to publicly update or revise any forward-looking statement, whether
as a result of new information, future events or otherwise.
---------------------
The new notes may not be offered or sold in or into 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 purposes of
their businesses (or in other circumstances that do not constitute an offer to
the public in the United Kingdom for the purposes of the Public Offers of
Securities Regulations 1995), and this prospectus may only be issued or passed
on to persons in the United Kingdom if such persons are of a kind described in
i
<PAGE> 4
article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or if such persons are persons to whom this prospectus
may otherwise lawfully be issued or passed on.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES
WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY
REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A
FINDING BY THE DIRECTORS OF THE OFFICE OF SECURITIES REGULATION THAT ANY
DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY
SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE DIRECTORS OF THE OFFICE OF SECURITIES
REGULATION HAVE PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR
RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS
UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE INVESTOR, CUSTOMER OR
CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
ii
<PAGE> 5
PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus but does
not contain all of the information that is important to you. To understand all
of the terms of the exchange offer and to attain a more complete understanding
of our business and financial situation, you should read carefully this entire
prospectus. In this prospectus, the terms "Company," "we," "our," "ours," and
"us" refer to East Coast Power L.L.C. and its direct and indirect subsidiaries.
The term "Enron" refers to Enron Corp. and its subsidiaries. The term
"outstanding notes" refers to our Series A senior secured notes due 2008, 2012
and 2017 that we issued on April 20, 1999. The term "new notes" refers to the
Series B senior secured notes offered in the exchange offer. The term "notes"
refers to both the outstanding notes and the new notes. For an explanation of
certain technical terms used in this prospectus, see "Glossary of Technical
Terms."
OUR COMPANY
Our Company indirectly owns equity interests in three combined-cycle
natural gas cogeneration power plants. The power plants are located in Linden,
Camden and Bayonne, New Jersey. In this prospectus, we refer to these power
plants as "the Facilities," "our Facilities" or "our power plants," and we refer
to the acquisition of our interests in the Facilities as "the Acquisition." A
cogeneration power plant is one that uses a single energy source to produce two
or more forms of energy output. Our Facilities burn natural gas to produce both
electricity and steam.
Our Facilities have a total nameplate capacity of 1,037 megawatts of
electrical power production. In 1998, our power plants produced a total of
approximately 6.36 million megawatt hours of electricity and approximately 5.71
billion pounds of steam. Our power plants sell electricity to investor-owned
utilities in New York and New Jersey pursuant to long-term power purchase
agreements. We acquired our equity interests in the Facilities from the Cogen
Technologies group in February 1999. Our activities are limited to the
ownership, operation and potential expansion of our Facilities.
We are owned by Enron and the California Public Employees' Retirement
System ("CalPERS"), who hold a portion of their interests through Joint Energy
Development Investments II Limited Partnership ("JEDI II"). The general partner
of JEDI II is an indirect wholly owned subsidiary of Enron. The limited partners
of JEDI II are CalPERS and an indirect wholly owned subsidiary of Enron. As the
general partner of JEDI II, Enron is responsible for managing our business and
affairs. Our officers and employees, who include former officers and employees
of the Cogen Technologies group, manage the day-to-day operations of our
Company.
Our principal executive offices are located at 711 Louisiana Street,
Houston, Texas 77002. Our telephone number is (713) 853-6161.
OUR FACILITIES
Linden
Our Linden Facility is a 715 megawatt dispatchable cogeneration facility
located in Linden, New Jersey which began commercial operations in May 1992.
During the last five full calendar years, the Linden Facility had an average
availability factor of 93%. This Facility sells its electric capacity and energy
(up to 645 MW) to The Consolidated Edison Company of New York, Inc. ("Con Ed")
under a power purchase agreement which expires in 2017. Moody's Investors
Service rates Con Ed's long-term debt as A1, and Standard & Poor's Ratings
Services rates it as A+. The Linden Facility provides steam to Bayway Refining
Company, a subsidiary of Tosco Corporation, and to Infineum USA L.P., a joint
venture among Exxon Chemical Corporation, The Shell Petroleum Company Limited
and Shell Chemical Company, under agreements which expire in 2017. We have
operating and maintenance responsibility for the Linden Facility, but we have
contracted with General Electric Company to provide the day-to-day operation and
maintenance of the plant. We acquired our interest in our Linden Facility for
total consideration of $686.0 million.
In June 1999, we entered into a letter of intent with Tosco Refining
Company that contemplates an expansion of the Linden Facility with the addition
of a sixth turbine generator to provide electricity and steam
1
<PAGE> 6
service to Tosco's Bayway Refinery. Completion of the transactions contemplated
by the letter of intent are subject to, among other things, further
negotiations, completion of due diligence and receipt of necessary approvals.
Camden
Our Camden Facility is a 146 megawatt base load cogeneration facility
located in Camden, New Jersey which began commercial operations in March 1993.
During the last five full calendar years, the Camden Facility had an average
availability factor of 96%. This Facility sells its electric capacity and energy
(up to 143 MW) to Public Service Electric and Gas Company of New Jersey
("PSE&G") under a power purchase agreement which expires in 2013. Moody's
Investors Service rates PSE&G's long-term debt as A3, and Standard & Poor's
Ratings Services rates it as A-. The Camden Facility sells steam to Camden
Paperboard Company under an agreement which expires in 2013. We have operating
and maintenance responsibility for the Camden Facility, but we have contracted
with General Electric Company to provide the day-to-day operation and
maintenance of the plant. We acquired our interest in our Camden Facility for
total consideration of $140.0 million.
Bayonne
Our Bayonne Facility is a 176 megawatt base load cogeneration facility
located in Bayonne, New Jersey which began commercial operations in October
1988. During the last five full calendar years, the Bayonne Facility had an
average availability factor of 95%. This Facility sells approximately 76% of its
electric capacity and energy (up to 125 MW) to Jersey Central Power & Light
Company ("JCP&L") and approximately 24% (up to 40 MW) to PSE&G under separate
power purchase agreements which expire in 2008. Moody's Investors Service rates
JCP&L's long-term debt as Baa1, and Standard & Poor's Ratings Services rates it
as A+. The Bayonne Facility sells steam to IMTT-Bayonne and IMTT-BX under
separate year-to-year agreements. We have operating and maintenance
responsibility for the Bayonne Facility, but we have contracted with General
Electric Company to provide the day-to-day operation and maintenance of the
plant. We acquired our interest in our Bayonne Facility for total consideration
of $240.0 million.
INVESTMENT HIGHLIGHTS
We believe that the combination of our Facilities' long-term power purchase
agreements and their location in the key New York City and Pennsylvania-New
Jersey-Maryland power markets makes the Notes an attractive investment. Some of
the investment highlights are as follows:
- Power Purchase Agreements -- Each of our Facilities has committed its
generating capacity under long-term power purchase agreements with
investment-grade investor-owned utilities as follows:
- Linden -- 645 megawatts through 2017;
- Camden -- 143 megawatts through 2013; and
- Bayonne -- 165 megawatts through 2008.
We believe that our power purchase agreements will provide us with stable
cash flow for three reasons:
- our power purchase agreements are based on fixed-price components for
electricity and capacity, with fuel costs generally passed through to
our power purchasers;
- the current regulatory environment and legal precedent in New York and
New Jersey confirm the sanctity of contracts between independent power
producers and investor-owned utilities and the recovery by such
utilities of costs associated with these contracts; and
- prices under our power purchase agreements are consistently lower than
our power purchasers' cost of generation or do not significantly
impact their overall cost of power supply.
2
<PAGE> 7
- Location -- We believe that the location of our Facilities provides us
with the following substantial benefits:
- the New York City and Pennsylvania-New Jersey-Maryland power pools
suffer from a shortage of transmission capacity, limiting the amount
of power that can be imported into the region;
- local reliability rules in Con Ed's New York City service area require
that 80% of the load be supplied by "in-city" generation (plants
located or directly interconnected with Con Ed's New York City power
grid). The Linden Facility qualifies as an in-city generator and
therefore has a distinct competitive advantage given the nature of
power supply and constrained transmission access to New York City. We
believe that there are not likely to be significant in-city capacity
additions in the near future and, regardless of any possible capacity
additions, New York City will continue to have constraints on capacity
to meet peak-load demand in the near term; and
- our Bayonne and Camden facilities are located east of the
Pennsylvania-New Jersey-Maryland power pool transmission constraint
which limits the movement of power generated in the western portion of
the Pennsylvania-New Jersey-Maryland power pool into the New Jersey
and eastern Pennsylvania regions.
- Gas Transportation and Marketing Synergies -- A primary variable in the
financial performance of our Facilities will be the management of fuel
costs and transportation service. As the largest marketer of natural gas
in the United States, Enron is well positioned to help in optimizing the
fuel transportation and supply arrangements for our Facilities. Enron's
fuel management services will be provided on an arm's-length basis.
- Quality and Reliability of Service -- All of our Facilities burn natural
gas and operate with modern technology, which gives us a cost advantage
over much of the generation capacity in the region. During 1998, our
Facilities' weighted average heat rate, based on total electrical output,
was 9,354 Btu/KWh. In addition, our Facilities have strong operating
histories, with average availability factors of at least 93% over the
last five years.
3
<PAGE> 8
STRUCTURE AND OWNERSHIP
The following chart depicts the summary structure of our ownership
interests in the Facilities and our subsidiaries:
Organizational Chart
4
<PAGE> 9
JEDI II
JEDI II was formed in December 1997 to invest in projects related to
natural gas, crude oil, coal, electricity and other forms of energy. The general
partner of JEDI II is an indirect wholly owned subsidiary of Enron. The limited
partners of JEDI II are CalPERS and an indirect wholly owned subsidiary of
Enron.
Enron
Enron is an integrated natural gas and electricity company with
headquarters in Houston, Texas. Enron conducts its operations through its
subsidiaries and affiliates, which are principally engaged in:
- the exploration for, and production of, natural gas and crude oil in the
United States and internationally;
- the transportation of natural gas through pipelines to markets throughout
the United States;
- the generation and transmission of electricity to markets in the
northwestern United States;
- the marketing of natural gas, electricity and other commodities and
related risk management and finance services worldwide; and
- the development, construction and operation of power plants, pipelines
and other energy-related assets worldwide.
CalPERS
CalPERS is the largest public pension system in the United States and the
second largest in the world, with more than $150 billion in assets under
management. Headquartered in Sacramento, California, CalPERS provides retirement
and health benefits to more than one million California state and local public
employees, retirees, and their families. The board of administration of CalPERS
has investment authority and sole fiduciary responsibility for the management of
the retirement system's assets. The board of administration is guided by the
CalPERS Investment Committee, management, and the 80-member investment division
staff which carries out the daily activities of the investment program. CalPERS'
investments span a broad range of industries in both domestic and international
markets.
5
<PAGE> 10
SUMMARY OF THE EXCHANGE OFFER
On April 20, 1999, we completed the private offering of the outstanding
notes.
We entered into a registration rights agreement with the initial purchasers
in the private offering in which we agreed to deliver to you this prospectus and
to complete the exchange offer within 270 days after the date we issued the
outstanding notes. You are entitled to exchange in the exchange offer your
outstanding notes for new notes with substantially identical terms.
You should read the discussion under the headings "-- Summary of Terms of
the New Notes" beginning on page 8 and "Description of the New Notes" beginning
on page 81 for further information regarding the new notes.
We summarize the terms of the exchange offer below. You should read the
discussion under the heading "The Exchange Offer" beginning on page 71 for
further information regarding the exchange offer and resale of the new notes.
The Exchange Offer.....
We are offering to exchange up to $837,869,920 aggregate
principal amount of new notes for up to $837,869,920
aggregate principal amount of outstanding notes.
Outstanding notes may be exchanged only for new notes of
the same maturity date and only in integral multiples of
$1,000 (except for the 2008 notes, the exchange of which
will reflect a partial payment of principal on June 30,
1999).
Expiration Date........
The exchange offer will expire at 5:00 p.m., New York City
time, on , 1999, or such later date and time
to which we extend it.
Withdrawal of
Tenders................
You may withdraw your tender of outstanding notes at any
time prior to the expiration date. We will return to you,
without charge, promptly after the expiration or
termination of the exchange offer any outstanding notes
that you tendered but that were not accepted for exchange.
Conditions to the
Exchange Offer.........
We will not be required to accept outstanding notes for
exchange if the exchange offer would violate applicable
law or any legal action has been instituted or threatened
that would impair our ability to proceed with the exchange
offer. The exchange offer is not conditioned upon any
minimum aggregate principal amount of outstanding notes
being tendered. Please read the section "The Exchange
Offer -- Conditions to the Exchange Offer" on page 74 for
more information regarding the conditions to the exchange
offer.
Procedures for
Tendering Outstanding
Notes..................
If your outstanding notes are held through The Depository
Trust Company and you wish to participate in the exchange
offer, you may do so through the automated tender offer
program of The Depository Trust Company. If you tender
under this program, you will agree to be bound by the
letter of transmittal that we are providing with this
prospectus as though you had signed the letter of
transmittal. By signing or agreeing to be bound by the
letter of transmittal, you will represent to us that,
among other things:
- any new notes that you receive will be acquired in the
ordinary course of your business;
- you have no arrangement or understanding with any person
or entity to participate in the distribution of the new
notes;
- you are not engaged in and do not intend to engage in
the distribution of the new notes;
- if you are a broker-dealer that will receive new notes
for your own account in exchange for outstanding notes,
you acquired those notes as a result of market-
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<PAGE> 11
making activities or other trading activities and you will deliver a prospectus,
as required by law, in connection with any resale of such new notes; and
- you are not our "affiliate," as defined in Rule 405 of
the Securities Act.
Special Procedures for
Beneficial Owners......
If you own a beneficial interest in outstanding notes that
are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee, and you wish to
tender the outstanding notes in the exchange offer, you
should contact the registered holder promptly and instruct
the registered holder to tender on your behalf.
Guaranteed Delivery
Procedures.............
If you wish to tender your outstanding notes and cannot
comply, prior to the expiration date, with the applicable
procedures under the automated tender offer program of The
Depository Trust Company, you must tender your outstanding
notes according to the guaranteed delivery procedures
described in "The Exchange Offer -- Guaranteed Delivery
Procedures" beginning on page 78.
U.S. Federal Income Tax
Considerations.........
The exchange of outstanding notes for new notes in the
exchange offer will not be a taxable event for U.S.
federal income tax purposes. Please read "Certain United
States Income Tax Considerations" on page 106.
Use of Proceeds........
We will not receive any cash proceeds from the issuance of
new notes.
THE EXCHANGE AGENT
We have appointed The Bank of New York as exchange agent for the exchange
offer. You should direct questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for the notice of guaranteed delivery to the exchange agent addressed
as follows: The Bank of New York, Reorganization Section, 101 Barclay St., Floor
7E, New York, New York 10286. Eligible institutions may make requests by
facsimile at (212) 815-6339.
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<PAGE> 12
SUMMARY OF TERMS OF THE NEW NOTES
The new notes will be freely tradeable and otherwise substantially
identical to the outstanding notes. The new notes will not have registration
rights or provisions for additional interest. The new notes will evidence the
same debt as the outstanding notes, and the outstanding notes and the new notes
will be governed by the same indenture.
SECURITIES OFFERED... $283,869,920 aggregate principal amount of 6.737% Series B
Senior Secured Notes due 2008
$236,000,000 aggregate principal amount of 7.066% Series B
Senior Secured Notes due 2012
$318,000,000 aggregate principal amount of 7.536% Series B
Senior Secured Notes due 2017
MATURITY DATES....... 2008 new notes: March 31, 2008
2012 new notes: March 31, 2012
2017 new notes: June 30, 2017
PAYMENT DATES........ March 31, June 30, September 30, and December 31,
beginning September 30, 1999
AMORTIZATION......... Principal of the notes will be payable in quarterly
installments. Annual percentages of the original principal
amount payable on the notes are set forth below:
<TABLE>
<CAPTION>
YEAR 2008 NOTES 2012 NOTES 2017 NOTES
---- ---------- ---------- ----------
<S> <C> <C> <C>
1999 6.778% -- --
2000 4.322% -- --
2001 6.865% -- --
2002 11.765% -- --
2003 10.553% -- --
2004 9.106% -- --
2005 14.772% -- --
2006 15.382% -- --
2007 15.491% -- --
2008 4.966% 27.043% --
2009 -- 17.962% --
2010 -- 20.913% --
2011 -- 28.589% --
2012 -- 5.493% 18.235%
2013 -- -- 14.467%
2014 -- -- 14.934%
2015 -- -- 16.582%
2016 -- -- 23.994%
2017 -- 11.788%
------ ------ ------
Total 100% 100% 100%
</TABLE>
For the percentage of the original principal amount
payable on each quarterly payment date, see "Description
of the New Notes."
AVERAGE LIFE......... 2008 new notes: 5.4 years
2012 new notes: 11.0 years
2017 new notes: 15.8 years
RATINGS.............. "Baa3" by Moody's Investors Service, "BBB-" by Standard &
Poor's Ratings Services and "BBB-" by Duff & Phelps Credit
Rating Co.
8
<PAGE> 13
RANKING................
The new notes:
- are senior secured obligations;
- rank senior to all our existing and future subordinated
indebtedness;
- rank pari passu in right of payment with all our
existing and future senior secured indebtedness; and
- are structurally subordinated to all indebtedness and
other liabilities, including trade payables, of our
subsidiaries and are structurally subordinated to the
distribution rights of minority partners in our power
plants.
As of March 31, 1999, our subsidiaries had approximately
$353.0 million of indebtedness outstanding.
COLLATERAL.............
The new notes will be secured by:
- the pledge by our owners of all of their interests in
our Company;
- the pledge by us of our interests in certain of our
subsidiaries which indirectly own our interests in the
Facilities; and
- the pledge of a $289.6 million intercompany subordinated
note payable by Linden Ltd.
OPTIONAL REDEMPTION....
We may redeem any of the new notes at any time at a
redemption price equal to:
- 100% of the principal amount of the new notes redeemed,
plus
- accrued interest on the new notes redeemed, plus
- a make-whole premium based on rates of comparable
treasury securities, plus 50 basis points.
MANDATORY REDEMPTION...
In the event of a governmental taking or other event of
loss (as defined in "Description of the New Notes") at one
of our Facilities, we must use any proceeds actually
received by us in excess of $5.0 million that are not used
to repair or replace such Facility, to redeem as many new
notes as possible. In such event, the redemption price for
the new notes will be 100% of the principal amount of the
new notes redeemed plus accrued interest.
We must redeem all of the new notes without premium in the
event that a power contract buyout (as defined in
"Description of the New Notes") occurs, resulting in one
or more of the owners of our Facilities receiving net
buyout proceeds (as defined in "Description of the New
Notes") in excess of $25.0 million. In such an event, the
redemption price for the new notes will be 100% of the
principal amount of the new notes plus accrued interest.
We may not have sufficient funds available at the time of
any power contact buyout to purchase all of the new notes.
We will not be required to redeem any of the new notes
upon the occurrence of an event of loss or power contract
buyout to the extent that we receive confirmation of the
initial ratings of the notes. We may redeem a portion of
the new notes in order to obtain such confirmation.
CHANGE OF CONTROL......
If Enron, in combination with institutional investors,
ceases to beneficially own a majority of our voting
securities, then, unless we receive confirmation of the
initial ratings of the notes or the holders of 66 2/3% of
the new notes and any additional notes issued under the
indenture approve the change in ownership, we must offer
to purchase all of the new notes at a purchase price equal
to 101% of the principal amount of the new notes plus
accrued interest. We may not have sufficient funds
available at the time of any change of control to purchase
all of the new notes.
9
<PAGE> 14
DEBT SERVICE RESERVE
ACCOUNT..............
We will be required to maintain a debt service reserve
account funded with enough money to pay principal and
interest due on the new notes on the next two payment
dates. We do not have to fund this account if we provide
acceptable debt service credit support, which may be
either an Enron undertaking or an acceptable letter of
credit. The trustee will disburse funds from this account
or call upon the debt service credit support if we have
failed to provide sufficient funds to pay principal and
interest three business days prior to the payment date. If
the debt service reserve account has excess reserves, the
trustee may, upon our request, pay us the excess amount.
RESTRICTED PAYMENTS....
The terms of the new notes will restrict our ability to
pay dividends, make payments on subordinated debt or make
certain other restricted payments unless, among other
things, we have maintained, for any restricted payment
made through September 30, 2001, a debt service coverage
ratio (as defined in "Description of the New Notes") of at
least 1.20 to 1 for the four preceding fiscal quarters and
have a projected debt service coverage ratio of at least
1.20 to 1 for the next four fiscal quarters, and we have
maintained, for any restricted payment made after
September 30, 2001, a debt service coverage ratio of at
least 1.25 to 1 for the four preceding fiscal quarters and
have a projected debt service coverage ratio of at least
1.25 to 1 for the next four fiscal quarters.
ADDITIONAL
INDEBTEDNESS...........
The terms of the new notes will permit us to incur
additional indebtedness to:
- finance improvements to the Facilities to maintain
compliance with applicable law if an independent
engineer certifies that the proposed improvements are
reasonably expected to enable the Facility to comply
with applicable law and, after the financing, the debt
service coverage ratio over the remaining term of the
2017 new notes will not be less than 1.10 to 1; and
- finance other improvements to the Facilities, provided
that such incurrence does not result in a default, and
we receive confirmation of the initial ratings of the
notes.
In addition, we may incur subordinated debt and
indebtedness to refinance our permitted indebtedness.
ADDITIONAL INDEBTEDNESS
OF OUR
SUBSIDIARIES.........
The terms of the new notes will permit our subsidiaries to
incur additional indebtedness to:
- finance up to $225 million for certain improvements or
expansions related to our Facilities, provided that such
incurrence does not result in a default, and we receive
confirmation of the initial ratings of the notes;
- finance up to $25 million for working capital or the
costs of acquiring or constructing an asset; and
- refinance any indebtedness outstanding on the date we
issued the outstanding notes.
COVENANTS..............
The terms of the new notes will restrict our ability and
the ability of our subsidiaries to:
- incur liens on our property;
- consolidate or merge or sell assets;
- enter into certain transactions with affiliates; and
10
<PAGE> 15
- take or fail to take certain actions with respect to the
project documents relating to our Facilities.
These limitations are subject to a number of important
qualifications and exceptions which are described in
"Description of the New Notes."
RIGHTS UNDER
REGISTRATION RIGHTS
AGREEMENT............
If we fail to complete the exchange offer as required by
the registration rights agreement, we will be obligated to
pay additional interest to holders of the outstanding
notes.
Please read "The Exchange Offer" beginning on page 71 for
more information regarding your rights as a holder of
outstanding notes.
RISK FACTORS
You should carefully consider "Risk Factors" beginning on page 12 before
participating in the exchange offer.
11
<PAGE> 16
RISK FACTORS
An investment in the new notes involves a significant degree of risk,
including the risks described below. You should carefully consider the following
risk factors and other information in this prospectus before making an
investment decision.
WE ARE DEPENDENT ON OUR SUBSIDIARIES TO GENERATE CASH FLOW TO SERVICE OUR DEBT,
AND YOUR RIGHT TO RECEIVE PAYMENTS ON THE NEW NOTES IS JUNIOR TO THE PAYMENT
RIGHTS OF CREDITORS OF OUR SUBSIDIARIES AND DISTRIBUTION RIGHTS OF OUR MINORITY
PARTNERS IN CERTAIN OF OUR SUBSIDIARIES.
Our subsidiaries conduct all of our operations and own all of our assets.
As a result, our ability to make required payments on the new notes and our
other debt depends on the performance of the power plants in which our
subsidiaries own interests and our subsidiaries' ability to distribute funds to
us. Our subsidiaries will have no obligation to pay any amounts due on the new
notes, and none of our subsidiaries will guarantee the payment of the new notes.
No other entity besides us, including JEDI II, ECP Holding Company L.L.C., Enron
and CalPERS, will have any obligation to pay or guarantee payment of the new
notes.
The rights of holders of the new notes will be structurally subordinated to
the rights of our subsidiaries' lenders and our minority partners. A default by
a subsidiary under its debt obligations or the occurrence of a special event
under a partnership agreement (in the case of Linden or Camden) would result in
a block on distributions from the affected subsidiary to us.
The loan agreements entered into by our subsidiaries in connection with the
development, construction and operation of the Facilities restrict our
subsidiaries' ability to pay dividends, make distributions or otherwise transfer
funds to us. These loan agreements generally require that, before paying
dividends or making distributions or other transfers, our subsidiaries must pay
other obligations, such as operating expenses, taxes and debt service, and fund
reserve accounts relating to their debt. As of March 31, 1999, our subsidiaries
had $353.0 million of indebtedness outstanding. Our subsidiaries may incur up to
$250 million of additional debt. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Description of the New Notes -- Certain Covenants -- Limitation
on Indebtedness of the Company's Subsidiaries."
In addition, the minority partners in our subsidiaries that own the Linden
and Camden Facilities receive a portion of the distributable cash from those
power plants before we receive any distributable cash. Upon the occurrence of
certain special events, our minority partners in Linden and Camden may remove
our subsidiary as managing general partner, alter the allocation of cash
distributions and prohibit cash distributions to us. Either of these occurrences
would have a material adverse effect on our ability to pay the new notes and our
other debt. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources -- Linden Structure,
Indebtedness and Cash Distributions" and "-- Camden Structure, Indebtedness and
Cash Distributions."
OUR SUBSIDIARIES' DEBT AND PARTNERSHIP AGREEMENTS LIMIT THE TRUSTEE'S ABILITY TO
FORECLOSE ON THE COLLATERAL THAT SECURES THE NEW NOTES AND ON YOUR ABILITY TO
REALIZE VALUE FROM THE COLLATERAL.
We cannot assure you that if we default on the new notes, the exercise of
the legal remedies provided in the indenture, including foreclosure on the
pledged interests, will provide sufficient funds to repay amounts due on the new
notes and our other debt. In the event of the bankruptcy, insolvency,
liquidation or reorganization of any of our subsidiaries, any creditors of the
subsidiary (including trade creditors) will be entitled to payment in full from
the assets of the subsidiary before we would be entitled to receive any
distributions from the subsidiary. The ability of the trustee to realize value
upon a foreclosure of the collateral for the new notes is structurally
subordinated to our subsidiaries' creditors and minority partners. If any of our
subsidiaries defaults under its debt, its lenders could accelerate the repayment
of the debt and foreclose on any collateral that secures it.
12
<PAGE> 17
WE DEPEND ON A SMALL NUMBER OF CUSTOMERS AND CONTRACTS TO PROVIDE ALL OF OUR
REVENUES.
Our Facilities' revenues and, therefore, our cash distributions depend
primarily upon payments received from power purchasers and, to a lesser extent,
steam customers. During 1998, our power purchasers accounted for approximately
97% of the total revenues from our Facilities. Con Ed accounted for
approximately 57% of total revenues, and PSE&G and JCP&L each accounted for
approximately 20% of total revenues. The loss of any power purchase agreement or
the material failure of any customer to fulfill its obligations could adversely
affect the distributions we receive and, therefore, our ability to pay the new
notes and our other debt.
Any of our power purchasers might attempt to amend or terminate its power
purchase agreement with us if the rates it pays for power exceed market rates or
its actual avoided cost for the power purchased or if it is subject to
financial, regulatory or other pressures or if we default on our obligations
under such agreements. However, our power purchase agreements generally do not
permit amendments or early termination without the consent of our subsidiary
that owns the power plant. Our subsidiaries' existing indebtedness and the
applicable partnership agreements prohibit consents to amendment or early
termination without the consent of their lenders and other parties. In addition,
existing Federal Energy Regulatory Commission ("FERC") and appellate court
precedent protect qualifying facility power purchase agreements from unilateral
amendment or termination and from regulatory modification. Nevertheless, it is
possible that a court or regulatory authority could order an amendment to or
early termination of any of our power purchase agreements following a change in
the relevant legislation, case law or regulations. Such an amendment or
termination could materially and adversely affect the revenues of the particular
Facility and, consequently, our ability to pay the new notes.
THE OPERATION OF OUR FACILITIES INVOLVES RISKS.
The operation of power generation and steam production facilities involves
many operating risks, including:
- breakdown or failure of power generation equipment, transmission lines,
pipelines or other necessary equipment or processes;
- interruptions in fuel supply;
- performance below expected levels of output or efficiency; and
- operator error or catastrophic events such as fires, explosions,
earthquakes and floods, which could result in personal injury, loss of
life, severe damage or destruction of the power plant, pollution or
environmental damage and suspension of operations.
While our power plants have strong operating histories with average availability
factors of at least 93%, they have experienced occasional equipment breakdowns
or failures. We can not assure you that future occurrences of the events listed
above would not significantly decrease or eliminate the revenues from the
affected power plant or significantly increase the costs of operating the power
plant. Any of the events listed above could therefore reduce or eliminate the
funds available for the payment of indebtedness related to the affected power
plant and for distribution to us and payment of the new notes. An extended
unavailability of the capacity resulting from such events may entitle the
purchaser under existing power purchase or steam sales agreements for the
affected power plant to terminate its agreements. In addition, occurrence of
these events could lead to a default under the indebtedness related to the
affected power plant, which could result in us losing our interest in the
affected power plant.
Although we have insurance to protect against some of these risks, the
insurance proceeds may not be adequate to cover lost revenues, increased
expenses or other costs related to the occurrence of the events described above.
Further, we can not assure you that the insurance that we currently have will be
available in the future at commercially reasonable rates.
13
<PAGE> 18
WE AND OUR SUBSIDIARIES MAY INCUR ADDITIONAL DEBT WHICH COULD ADVERSELY AFFECT
YOU.
We may incur additional debt, including additional series of new notes, to
pay for certain capital improvements and expansions of our Facilities and to
refinance existing indebtedness. Certain types of this permitted indebtedness
may rank equally with the new notes and share ratably in the collateral which
secures the new notes. This would reduce the benefits of the collateral to you
and your ability to control certain actions taken with respect to the
collateral.
In addition, if certain conditions are met, our subsidiaries may incur up
to an additional $250 million of debt for project expansions, capital
improvements or working capital. This additional debt could result in the
dedication of more of our or our subsidiaries' cash flow to the payment of debt
obligations and exacerbate the other risks described. See "Description of the
New Notes -- Issuance of Additional Notes" and "-- Certain Covenants."
OUR BUSINESS IS SUBJECT TO SUBSTANTIAL REGULATIONS AND PERMITTING REQUIREMENTS
AND MAY BE ADVERSELY AFFECTED BY CHANGES IN SUCH REGULATIONS OR REQUIREMENTS.
Our business is subject to extensive energy, environmental and other laws
and regulations at the federal, state and local level affecting many aspects of
our operations. Such laws and regulations generally require the Facilities to
obtain and comply with a wide variety of licenses, permits and other approvals.
Our business is also subject to certain laws and regulations which private
individuals may seek to enforce. The U.S. Congress is considering proposals
relating to retail electricity competition and related matters which involve a
fundamental restructuring of the electric power industry. Some states have
already provided for retail competition and the unbundling of the generation,
transmission and distribution businesses within their states. Regulatory
initiatives are well under way in New York and New Jersey that could have
implications for our power purchasers and our relationships with them. We expect
the laws and regulations applicable to our business and the electric power
industry generally to be in a state of transition for the foreseeable future.
Accordingly, we cannot assure you that such laws or regulations will not be
changed or reinterpreted or that new laws or regulations will not be adopted
which could have a material adverse effect on our business and, therefore, our
ability to make payments on the new notes.
We cannot assure you that any of our power plants will comply at all times
with all conditions established by existing permits and approvals or that we
will be able to renew or maintain all permits and approvals required to operate
our power plants. Our failure to renew or maintain any required permits or
approvals or our inability to satisfy any requirement of any permits may result
in increased compliance costs, the need for additional capital expenditures or a
suspension of Facility operations. In addition, our Facilities are subject to
extensive environmental laws and regulations. It may be costly to comply with
changes or reinterpretations of these laws and regulations if they become more
stringent than they currently are. See "Regulation."
OUR REVENUES MAY BE ADVERSELY AFFECTED BY FUEL COST INCREASES AND UNAVAILABILITY
OF FUEL.
In order to minimize exposure to fuel price risk, we seek to match our fuel
costs with the fuel component included in our power purchase agreements. Because
our Facilities do not have long-term gas supply contracts, we can not assure you
that gas supplies will be available at all times during the terms of our
Facilities' power purchase agreements. We also can not assure you that our fuel
costs will not be higher than the fuel component provisions of our power
purchase agreements. If fuel is not available or if our fuel costs are higher
than the fuel component provisions of our power purchase agreements, there could
be a material adverse impact on a Facility's cash flow and ability to service
its debt and on distributions to us and our ability to make payments under the
new notes and our other debt. Our Linden Facility has incurred fuel costs in
excess of its fuel reimbursement component in its power purchase agreement in
four of the last six years. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Power Purchase Agreements."
14
<PAGE> 19
THERE ARE RISKS ASSOCIATED WITH THE YEAR 2000 COMPUTER PROBLEM.
Many existing computer systems use only two digits to identify a year in
the date field. These systems were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the year
2000. We believe that we will be able to achieve substantial year 2000 readiness
with respect to the mission critical systems that we control. However, we can
not assure you that all of our systems and any systems of third parties on whom
we rely will be adequately remediated so that they are year 2000 ready by
January 1, 2000. If there are mission-critical year 2000-related failures that
create substantial disruptions to our business, the adverse impact on our
business could be material. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Year 2000."
IF YOU FAIL TO EXCHANGE YOUR OUTSTANDING NOTES, THE EXISTING TRANSFER
RESTRICTIONS WILL REMAIN IN EFFECT AND THE MARKET PRICE OF YOUR OUTSTANDING
NOTES MAY BE ADVERSELY AFFECTED.
If you do not exchange your outstanding notes for new notes under the
exchange offer, then you will continue to be subject to the existing transfer
restrictions on the outstanding notes. In general, the outstanding notes may not
be offered or sold unless they are registered or exempt from registration under
the Securities Act of 1933 and applicable state securities laws. Except as
required by the registration rights agreement, we do not intend to register
resales of the outstanding notes. You should refer to "Prospectus
Summary -- Summary of the Exchange Offer" beginning on page 6 and "The Exchange
Offer" beginning on page 71 for information about how to tender your outstanding
notes.
The tender of outstanding notes under the exchange offer will reduce the
principal amount of the outstanding notes outstanding. This may have an adverse
effect upon, and increase the volatility of, the market price of any outstanding
notes that you continue to hold due to a reduction in liquidity.
THERE IS NO PUBLIC MARKET FOR THE NEW NOTES, AND WE DO NOT INTEND TO LIST THEM
ON ANY SECURITIES EXCHANGE OR AUTOMATED QUOTATION SYSTEM.
There is no existing market for the new notes. We cannot provide any
assurance about:
- the liquidity of any markets that may develop for the new notes;
- your ability to sell your new notes; or
- the prices at which you will be able to sell your new notes.
Future trading prices of the new notes will depend on many factors, including
prevailing interest rates, our operating results, the ratings of new notes, and
the market for similar securities. The initial purchasers of the outstanding
notes have advised us that they presently intend to make a market in the new
notes after completion of the exchange offer. However, those purchasers do not
have any obligation to do so and they may discontinue any market-making
activities at any time without any notice.
We do not intend to apply for listing of the new notes on any securities
exchange or for quotation of the new notes in any automated dealer quotation
system.
15
<PAGE> 20
OUR OWNERS
GENERAL
Our Company is a limited liability company organized in Delaware. We have
three members:
- JEDI II indirectly owns 100% of the Class A membership interests;
- Enron indirectly owns 50% of the Class B membership interests; and
- CalPERS owns 50% of the Class B membership interests.
Our members are not obligated to make any other contributions to us. All
distributions will be made to the Class A member until the Class A member has
received distributions equal to $80.0 million plus specified rates of return.
After the Class A member has received its preferential distributions, all
distributions will be made 90% to the Class A member and 10% to the Class B
members.
JEDI II
JEDI II was formed in December 1997 to invest in certain projects related
to natural gas, crude oil, coal, electricity and other forms of energy. The
general partner of JEDI II is an indirect wholly owned subsidiary of Enron. The
limited partners of JEDI II are CalPERS and an indirect wholly owned subsidiary
of Enron.
ENRON CORP.
Enron is an integrated natural gas and electricity company with
headquarters in Houston, Texas. Enron conducts its operations through its
subsidiaries and affiliates, which are principally engaged in:
- the exploration for, and production of, natural gas and crude oil in the
United States and internationally;
- the transportation of natural gas through pipelines to markets throughout
the United States;
- the generation and transmission of electricity to markets in the
northwestern United States;
- the marketing of natural gas, electricity and other commodities and
related risk management and finance services worldwide; and
- the development, construction and operation of power plants, pipelines
and other energy related assets worldwide.
Enron's natural gas and crude oil exploration and production operations are
conducted by Enron Oil & Gas Company ("EOG"). Enron currently owns a majority of
the outstanding common stock of EOG. Consistent with its goal of maximizing the
value of its investment in EOG for its shareholders, Enron currently intends to
actively explore the following alternative transactions for its EOG common
stock:
- the sale of all or a portion of its shares of EOG common stock pursuant
to one or more privately negotiated transactions;
- the sale of all or a portion of its shares of EOG common stock pursuant
to a secondary stock offering; and
- the monetization of all or a portion of its investment pursuant to a
leveraged recapitalization or similar transaction.
However, there can be no assurance that any such transaction will be pursued or,
if pursued, will be consummated.
16
<PAGE> 21
CALPERS
CalPERS is the largest public pension system in the United States and the
second largest in the world, with more than $150 billion in assets under
management. Headquartered in Sacramento, California, CalPERS provides retirement
and health benefits to more than one million California state and local public
employees, retirees, and their families. The board of administration of CalPERS
has investment authority and sole fiduciary responsibility for the management of
the retirement system's assets. The board of administration is guided by the
CalPERS Investment Committee, management, and the 80-member investment division
staff which carries out the daily activities of the investment program. CalPERS
investments span a broad range of industries in both domestic and international
markets.
17
<PAGE> 22
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the new notes.
In consideration for issuing the new notes, we will receive in exchange a like
principal amount of outstanding notes. The outstanding notes surrendered in
exchange for the new notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the new notes will not result in any change in our
capitalization.
18
<PAGE> 23
CAPITALIZATION
The following table sets forth our capitalization (a) as of March 31, 1999,
and (b) as adjusted to give effect to the sale of the outstanding notes and the
application of the net proceeds from that sale and the $80.0 million capital
contribution made by JEDI II at the time of the issuance of the outstanding
notes:
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
-------------------------
ACTUAL AS ADJUSTED(5)
-------- --------------
(IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents................................... $ 25.2 $ 25.1
======== ========
Notes(1).................................................... $ -- $ 850.0
Bridge loan(2).............................................. 831.0 --
Linden Ltd. term loan(3).................................... 206.6 206.6
Subordinated note........................................... 250.0 187.9
Member's equity(4).......................................... 76.4 75.0(6)
-------- --------
Total capitalization........................................ $1,364.0 $1,319.5
======== ========
</TABLE>
- ---------------
(1) Includes current portion of $23.2 million.
(2) Includes current portion of $23.2 million. CalPERS guaranteed $25.0 million
of the bridge loan as a contribution in respect of its membership interest
in the Company. In connection with the repayment of the bridge loan at the
time of the sale of the outstanding notes, $25.0 million of such repayment
was deemed to be a distribution to CalPERS as a result of the release of its
guaranty.
(3) Includes current portion of $14.3 million and $4.3 million premium
recognized in connection with the Acquisition.
(4) In connection with the Acquisition, Enron contributed $1.0 million in cash
and an indirect interest in one of the Facilities, which it purchased for
$24.0 million, to the Company in exchange for its membership interest. Enron
received $25.0 million of the proceeds of the sale of the outstanding notes
as a distribution in respect of its membership interest in the Company.
(5) Reflects (a) the issuance of $850.0 million in outstanding notes, (b) the
collection of an $80.0 million contribution receivable, (c) the use of the
proceeds from the issuance of the outstanding notes and the collection of
the contribution receivable to repay the bridge loan, ($831.0 million),
$62.1 million of the principal amount of the subordinated note, make a $12.0
million purchase price adjustment payment in connection with the Acquisition
and a $25.0 million distribution payable, and (d) the amortization of $1.4
million of deferred issue costs upon the repayment of the bridge loan.
(6) Reflects the amortization of $1.4 million in deferred issue costs upon the
repayment of the bridge loan.
19
<PAGE> 24
SELECTED FINANCIAL DATA
The following table sets forth summary historical financial data for the
Company and its predecessor the Cogen Tech Group (also referred to as the
"Acquired Group"), which consists of Cogen Technologies Linden, Ltd. ("Linden
Ltd."), Cogen Technologies Camden GP Limited Partnership ("Camden GP") and
McNair Energy Services Corporation ("MESC") and its wholly owned subsidiary
Cogen Technologies NJ, Inc. ("NJ Inc."). The summary historical balance sheet
data as of March 31, 1999 and the summary income statement data for the period
from February 4, 1999 to March 31, 1999 for the Company are derived from
consolidated financial statements which have been audited by Arthur Andersen LLP
and are included in this prospectus. The summary historical balance sheet data
as of December 31, 1998 and 1977 and the summary historical income statement
data for each of the three years in the period ended December 31, 1998 for the
Acquired 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 each of the years in the
three-year period ended December 31, 1996 and the summary historical income
statement data for each of the two years in the period ended December 31, 1995
for the Acquired Group 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 February 4, 1999 and March 31, 1998
and the summary income statement data for the period ended February 4, 1999 and
the three months ended March 31, 1998 for the Acquired Group are derived from
the unaudited combined financial statements of the Acquired Group.
Also set forth below are summary historical financial and operating data
for each of Cogen Technologies Linden Venture, L.P. ("Linden Venture"), the
owner and operator of the Linden Facility; Camden Cogen L.P. ("Camden Venture"),
the owner and operator of the Camden Facility; and Cogen Technologies NJ Venture
("Bayonne Venture"), the owner and operator of the Bayonne Facility. The summary
historical balance sheet data as of December 31, 1998 and 1997 and the summary
income statement data for each of the three years in the period ended December
31, 1998 for these entities are derived from the combined financial statements
of Cogen Technologies New Jersey Operating Partnerships which have been audited
by Arthur Andersen LLP and are included elsewhere in this prospectus. The
summary historical balance sheet data as of each of the years in the three-year
period ended December 31, 1996 and the summary historical income statement data
for each of the two years in the period ended December 31, 1995 are derived from
combined financial statements of Cogen Technologies New Jersey Operating
Partnerships 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,
1999 and 1998 and the summary income statement data for the three-month periods
then ended are derived from the combined unaudited financial statements of Cogen
Technologies New Jersey Operating Partnerships.
You should read the summary historical financial data in conjunction with
the historical and pro forma financial statements which are included elsewhere
in this prospectus. See also "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
THE COMPANY COGEN TECH GROUP (PREDECESSOR)
----------- -----------------------------------------------------------------------
2/4/99 1/1/99 THREE MONTHS YEAR ENDED DECEMBER 31,
TO TO ENDED ------------------------------------------
3/31/99 2/4/99 MARCH 31, 1998 1998 1997 1996 1995 1994
----------- --------- -------------- ------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Equity in earnings
(losses) of affiliates
Linden Venture........ 6$.4...... $(44.6) $ 17.4 $ 75.3 $ 73.8 $ 78.7 $ 59.0 $ 64.2
Camden Venture........ 1.9...... (11.9) 4.7 14.2 14.5 13.7 13.4 11.8
Bayonne Venture....... 6.4...... 5.0 15.1 47.6 17.5 18.1 28.3 17.4
-------- ------ ------ ------ ------ ------ ------ ------
14.7..... (51.5) 37.2 137.1 105.8 110.5 100.7 93.4
-------- ------ ------ ------ ------ ------ ------ ------
</TABLE>
20
<PAGE> 25
<TABLE>
<CAPTION>
THE COMPANY COGEN TECH GROUP (PREDECESSOR)
----------- -----------------------------------------------------------------------
2/4/99 1/1/99 THREE MONTHS YEAR ENDED DECEMBER 31,
TO TO ENDED ------------------------------------------
3/31/99 2/4/99 MARCH 31, 1998 1998 1997 1996 1995 1994
----------- --------- -------------- ------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Costs and expenses:
Operating overhead...... -- ...... 0.9 9.3 21.6 11.6 9.6 8.4 6.8
General and
administrative........ 1.4...... 1.7 4.9 20.2 19.9 10.9 10.4 12.2
-------- ------ ------ ------ ------ ------ ------ ------
1.4...... 2.6 14.2 41.8 31.5 20.5 18.8 19.0
-------- ------ ------ ------ ------ ------ ------ ------
Income (loss) from
operations.............. 13.3..... (54.1) 23.0 95.3 74.3 90.0 81.9 74.4
Other income (expense):
Interest and other
income................ 0.3...... 0.1 3.4 12.6 15.5 16.7 17.8 13.8
Interest expense........ (17.2) (2.0) (5.3) (19.3) (21.8) (23.3) (26.5) (25.9)
Allowance for long-term
receivable............ -- -- -- -- 10.3 (10.3) 6.5 (6.5)
-------- ------ ------ ------ ------ ------ ------ ------
Income (loss) before
income taxes............ (3.6) (56.0) 21.1 88.6 78.3 73.1 79.7 55.8
Income taxes............ -- (1.7) (4.7) (14.6) (4.2) (4.1) (7.5) (2.9)
-------- ------ ------ ------ ------ ------ ------ ------
Net income (loss)......... $ (3.6) $(57.7) $ 16.4 $ 74.0 $ 74.1 $ 69.0 $ 72.2 $ 52.9
======== ====== ====== ====== ====== ====== ====== ======
BALANCE SHEET DATA AT END
OF PERIOD:
Investment in
affiliates............ $1,283.8 $ 82.1 $ 74.2 $ 83.8 $ 75.7 $ 71.8 $ 71.8 $ 74.0
Total assets............ 1,421.9 259.3 249.4 247.2 250.8 250.5 280.1 282.2
Long-term debt
(including current
portion).............. 1,287.6 205.6 227.8 218.0 230.9 246.9 262.2 276.2
Owner's equity
(deficit)............. 76.4 41.7 5.3 16.7 (11.6) (27.4) (16.0) (36.2)
OTHER FINANCIAL DATA:
Distributions received
from affiliates....... $ 13.9 $ 20.3 $ 32.7 $128.5 $102.3 $116.7 $106.3 $ 92.2
Ratio of earnings to
fixed charges......... 0.8 5.9 2.4 3.5 3.1 3.1 3.0 2.3
</TABLE>
21
<PAGE> 26
LINDEN VENTURE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------- ------- ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Electricity................... $ 61.3 $ 66.3 $262.8 $283.5 $290.4 $246.9 $259.0
Steam......................... 1.4 3.3 11.3 15.5 15.1 8.7 10.1
------ ------ ------ ------ ------ ------ ------
62.7 69.6 274.1 299.0 305.5 255.6 269.1
------ ------ ------ ------ ------ ------ ------
Costs and expenses:
Fuel.......................... 32.3(1) 31.0 118.1 138.1 138.6 104.8 117.5
Operating and maintenance..... 5.0 4.9 19.9 22.1 22.6 28.1 26.3
Depreciation and
amortization................ 3.9 3.8 15.4 22.3 22.2 22.3 21.9
General and administrative.... 48.4(2) 2.8 10.1 11.4 10.7 9.1 9.7
Taxes other than income....... 0.5 0.5 1.6 0.6 1.7 2.1 1.8
------ ------ ------ ------ ------ ------ ------
90.1 43.0 165.1 194.5 195.8 166.4 177.2
------ ------ ------ ------ ------ ------ ------
Income (loss) from operations.... (27.4) 26.6 109.0 104.5 109.7 89.2 91.9
Interest expense.............. -- -- -- -- (0.1) (0.1) (0.1)
Other income.................. 0.9 0.2 0.8 1.1 0.6 0.8 3.5
------ ------ ------ ------ ------ ------ ------
Net income (loss)............. $(26.5) $ 26.8 $109.8 $105.6 $110.2 $ 89.9 $ 95.3
====== ====== ====== ====== ====== ====== ======
THE ACQUIRED GROUP'S SHARE OF:
Net income (loss)................ $(32.1)(3) $ 17.4 $ 75.3 $ 73.8 $ 78.7 $ 59.0 $ 64.2
Cash distributions............... 22.5 18.7 74.0 75.6 77.7 59.4 71.6
BALANCE SHEET DATA AT END OF
PERIOD:
Property and equipment, net...... $409.7 $424.4 $413.6 $428.2 $450.1 $470.6 $490.1
Total assets..................... 463.4 479.4 470.6 492.4 514.8 525.8 546.5
Long-term debt (including current
portion)...................... -- -- -- -- -- -- --
Partners' capital................ 438.3 453.5 444.5 458.4 480.4 499.5 520.3
SELECTED OPERATING INFORMATION:
Megawatt-hours generated
(thousands)................... 890 923 3,808 3,891 3,806 3,952 3,991
Average heat rate (without steam
credit)(4).................... 9,907 9,783 9,588 9,852 9,924 9,768 9,783
Average heat rate (with steam
credit)(4).................... 8,927 8,815 8,757 8,664 8,938 8,848 9,014
Average equivalent
availability.................. 96% 90% 96% 94% 89% 91% 94%
Steam produced (millions of
pounds)....................... 1,297 1,251 4,357 5,073 4,953 4,168 5,172
</TABLE>
- ---------------
(1) Includes a one-time payment of $6.0 million in connection with the
termination of a gas management agreement. See Note 2 to the Audited and
Unaudited Financial Statements of Cogen Technologies New Jersey Operating
Partnerships included in this prospectus.
(2) Includes a one-time payment of $46.4 million in connection with the
termination of a management services agreement. See Note 2 to the Audited
and Unaudited Financial Statements of Cogen Technologies New Jersey
Operating Partnerships included in this prospectus.
(3) The one-time payments in connection with the termination of the gas
management and management services agreement were allocated 100% to the
Acquired Group's share of net income.
(4) Btu/Kilowatt-hour.
22
<PAGE> 27
CAMDEN VENTURE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------- ------- ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Electricity................ $ 19.4 $ 19.9 $ 73.1 $ 80.2 $ 77.2 $ 67.5 $ 66.0
Steam...................... -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
19.4 19.9 73.1 80.2 77.2 67.5 66.0
------ ------ ------ ------ ------ ------ ------
Costs and expenses:
Fuel....................... 9.5(1) 8.9 33.3 39.2 38.4 28.9 30.2
Operating and
maintenance.............. 1.6 1.6 7.0 7.7 6.4 7.2 5.7
Depreciation and
amortization............. 0.9 0.9 3.7 6.9 6.8 6.8 6.7
General and
administrative........... 13.2(2) 0.6 2.2 2.6 2.6 2.3 2.1
Taxes other than income.... 0.1 -- 0.4 0.6 0.6 0.5 0.7
------ ------ ------ ------ ------ ------ ------
25.3 12.0 46.6 57.0 54.8 45.7 45.4
------ ------ ------ ------ ------ ------ ------
Income (loss) from
operations................. (5.9) 7.9 26.5 23.2 22.4 21.8 20.6
Interest expense........... (1.7) (1.9) (7.4) (7.7) (8.2) (8.4) (8.8)
Other income............... 0.1 0.1 0.4 0.4 0.4 0.4 0.2
------ ------ ------ ------ ------ ------ ------
Net income (loss).......... $ (7.5) $ 6.1 $ 19.5 $ 15.9 $ 14.6 $ 13.8 $ 12.0
====== ====== ====== ====== ====== ====== ======
THE ACQUIRED GROUP'S SHARE OF:
Net income (loss)............. $ (8.9)(3) $ 4.7 $ 14.2 $ 14.5 $ 13.7 $ 13.4 $ 11.8
Cash distributions............ 3.9 4.8 15.0 8.6 14.5 15.0 4.3
BALANCE SHEET DATA AT END OF
PERIOD:
Property and equipment, net... $102.2 $105.4 $103.1 $106.3 $108.9 $115.3 $121.8
Total assets.................. 122.4 124.6 121.4 125.3 128.4 133.5 140.7
Long-term debt (including
current portion)........... 83.2 88.9 84.6 90.2 95.2 99.8 104.0
Partners' capital............. 31.6 28.7 29.2 28.0 23.8 26.7 30.7
SELECTED OPERATING INFORMATION:
Megawatt-hours generated
(thousands)................ 310 305 1,153 1,208 1,190 1,169 1,127
Average heat rate (without
steam credit)(4)........... 8,723 8,754 8,791 8,764 8,740 8,662 8,709
Average heat rate (with steam
credit)(4)................. 8,534 8,573 8,601 8,431 8,422 8,347 8,404
Average equivalent
availability............... 99% 98% 96% 97% 98% 98% 94%
Steam produced (millions of
pounds).................... 81 77 300 301 310 302 281
</TABLE>
- ---------------
(1) Includes a one-time payment of $1.6 million in connection with the
termination of a gas management agreement. See Note 2 to the Audited and
Unaudited Financial Statements of Cogen Technologies New Jersey Operating
Partnerships included in this prospectus.
(2) Includes a one-time payment of $12.8 million in connection with the
termination of a management services agreement. See Note 2 to the Audited
and Unaudited Financial Statements of Cogen Technologies New Jersey
Operating Partnerships included in this prospectus.
(3) The one-time payments in connection with the termination of the gas
management and management services agreements were allocated 100% to the
Acquired Group's share of net income.
(4) Btu/Kilowatt-hour.
23
<PAGE> 28
BAYONNE VENTURE
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------- ------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Electricity................. $ 28.3 $ 32.3 $112.8 $ 92.8 $ 90.4 $ 93.2 $ 82.6
Steam....................... 1.1 1.2 3.8 3.7 4.9 3.3 3.8
------ ------ ------ ------ ------ ------ ------
29.4 33.5 116.6 96.5 95.3 96.5 86.4
------ ------ ------ ------ ------ ------ ------
Costs and expenses:
Fuel........................ 9.3 10.3 38.6 43.2 45.2 33.4 34.9
Operating and maintenance... 2.6 2.6 10.9 14.4 10.2 11.4 13.0
Depreciation and
amortization.............. 0.7 0.8 3.0 6.9 6.9 6.9 6.7
General and
administrative............ 0.8 0.9 3.1 2.9 2.8 2.6 2.1
Taxes other than income..... 0.1 0.1 0.5 0.5 0.5 0.5 0.4
------ ------ ------ ------ ------ ------ ------
13.5 14.7 56.1 67.9 65.6 54.8 57.1
------ ------ ------ ------ ------ ------ ------
Income from operations......... 15.9 18.8 60.5 28.6 29.7 41.7 29.3
Interest expense............ (1.9) (1.9) (7.7) (8.1) (8.5) (8.8) (9.0)
Other income................ -- 0.6 1.2 0.1 0.1 0.1 0.1
------ ------ ------ ------ ------ ------ ------
Net income.................. $ 14.0 $ 17.5 $ 54.0 $ 20.6 $ 21.3 $ 33.0 $ 20.4
====== ====== ====== ====== ====== ====== ======
THE ACQUIRED GROUP'S SHARE OF:
Net income..................... $ 12.8 $ 15.1 $ 47.6 $ 17.5 $ 18.1 $ 28.3 $ 17.4
Cash distributions............. 7.8 9.2 39.5 18.1 24.5 31.9 16.3
BALANCE SHEET DATA AT END OF
PERIOD:
Property and equipment, net.... $ 70.2 $ 73.1 $ 70.9 $ 73.8 $ 80.6 $ 87.2 $ 92.6
Total assets................... 101.1 99.9 98.4 99.0 99.8 107.3 111.4
Long-term debt (including
current portion)............ 67.5 71.0 68.4 71.8 74.9 77.7 80.1
Partners' capital.............. 27.0 19.2 21.5 12.2 12.5 19.6 23.4
SELECTED OPERATING INFORMATION:
Megawatt-hours generated
(thousands)................. 367 354 1,400 1,330 1,351 1,386 1,225
Average heat rate (without
steam credit)(1)............ 9,457 9,323 9,183 9,285 9,215 4,184 9,430
Average heat rate (with steam
credit)(1).................. 8,829 8,203 8,278 8,449 8,370 8,141 8,037
Average equivalent
availability................ 97% 97% 95% 94% 97% 98% 91%
Steam produced (millions of
pounds)..................... 355 332 1,056 927 952 975 1,025
</TABLE>
- ---------------
(1) Btu/Kilowatt-hour.
24
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with the historical
and pro forma consolidated financial statements of East Coast Power L.L.C. and
the related notes thereto and the historical combined financial statements of
the Cogen Tech Group and the Cogen Technologies New Jersey Operating
Partnerships and the related notes thereto appearing elsewhere in this
prospectus. Certain information contained in this section, including information
with respect to our plans and expectations for our business, are forward-looking
statements. You should consider carefully the factors set forth under the
captions "Forward-Looking Statements" and "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
Our Company was formed in December 1998, and on February 4, 1999, we
acquired equity interests in three power generation facilities located in
Linden, Bayonne and Camden, New Jersey. Our power plants have a total nameplate
capacity of 1,037 megawatts of generating capacity. In 1998, our power plants
produced a total of 6.36 million megawatt hours of electricity and 5.71 billion
pounds of steam. Our activities are limited to the ownership, operation and
possible expansions of the Facilities.
Certain historical financial information presented in this prospectus
represents the combined results of operation and financial position of the three
entities we acquired in the Acquisition (Linden Ltd., Camden GP and McNair
Energy Services Corporation). These entities were, directly or indirectly, the
general partners of the partnerships that owned the Facilities prior to the
closing of the Acquisition. We refer to these acquired entities as the "Acquired
Group" or the "Cogen Tech Group." We accounted for the Acquisition on the basis
of purchase accounting. Accordingly, our investment in the partnerships that own
the Facilities was increased by an amount equal to the excess of the purchase
price allocated to such partnerships over the historical basis in the
partnerships.
The following table reflects sources and uses of cash for the Acquired
Group for the three-year period ended December 31, 1998:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997 1996
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
ACQUIRED GROUP
Net cash provided (used) by operating activities
Cash distributions from affiliates........................ $128.5 $102.3 $116.7
General and administrative and operating overhead......... (41.8) (31.5) (20.5)
Net interest expense and current income taxes............. (19.7) (9.3) (10.0)
Changes in other operating assets and liabilities......... (7.6) 5.2 (7.9)
Net cash provided (used) by investing activities............ (0.7) 7.8 17.2
Principal payments on long-term borrowings.................. (12.9) (16.0) (15.3)
Total cash generated........................................ 45.8 58.5 80.2
</TABLE>
THE ACQUISITION
We acquired our interests in the Facilities in February 1999. For the
reasons discussed below, our results of operations for the first quarter of 1999
are not comparable to the results of operations for the Acquired Group for the
comparable period last year, and we expect our results of operations in future
periods to continue to differ materially from the historical results of the
Acquired Group.
Operating, General and Overhead Expenses
The Company expects its general and administrative expense to differ
materially from the operating overhead and general and administrative expense
reflected in the historical operations of the Acquired Group,
25
<PAGE> 30
and such difference is reflected in our first quarter results as described
below. The Company employs approximately 30 persons, compared with approximately
55 employees of the Acquired Group. The Company also expects to realize
significant savings compared to historical operations in travel and
entertainment, professional fees, management information systems, political and
charitable contributions and insurance.
The Company will also experience cost savings compared to the Acquired
Group as a result of transactions consummated at the time of the Acquisition. In
connection with the Acquisition, Linden Venture and Camden Venture made one-time
payments to terminate agreements with affiliates with respect to management and
gas management fees. The payments made to terminate these agreements were made
from capital contributions from the sellers. There are no charges relating to
these agreements in our financial statements for periods after the closing of
the Acquisition. During the year 1998, the first quarter of 1998 and the period
prior to the Acquisition in 1999, equity in earnings of affiliates for the
Acquired Group reflected costs attributable to the terminated agreements
(excluding the costs to buy out such agreements in the 1999 period) of $4.9
million, $0.8 million and $0.3 million, respectively, for Linden Venture and
$1.3 million, $0.3 million and $0.1 million, respectively, for Camden Venture.
The results of operations for the Acquired Group in the year 1998 and the first
quarter of 1998 also includes operating overhead of $16.3 million and $8.0
million, respectively, for development bonuses earned during the period
(including $14.5 million in the year 1998 of one-time payments to buy out such
development bonuses). The development bonuses were eliminated in connection with
the Acquisition and will not affect our results of operations for periods after
the Acquisition. Finally, the results of operations for the Acquired Group in
the year 1998 and the first quarter of 1998 include general and administrative
expense of $6.0 million and $1.7 million, respectively, relating to the use of a
private aircraft that is not available to the Company.
Linden Receivable
Interest and other income of the Acquired Group relates primarily to an
account receivable for amounts owed to Linden Ltd. by a former affiliate. In
connection with the Acquisition, the receivable was distributed to the sellers
in their capacity as partners of Linden Ltd. Since the receivable was
essentially an "intercompany" transaction within this group of sellers, amounts
related to the receivable are not relevant to our operations after the
Acquisition. Amounts under "Allowance for long-term receivable" relate entirely
to such receivable. The receivable appears on the balance sheet of the Acquired
Group at December 31, 1998 as a $149.0 million account receivable, affiliate.
Interest in Bayonne Venture
In July 1998, NJ Inc. acquired an additional 5.25% partnership interest in
Bayonne Venture from an unaffiliated party for $12.5 million in cash. On a pro
forma basis, assuming such transaction took place on January 1, 1998, the
Acquired Group's equity in the earnings of Bayonne Venture for the year 1998 and
three months ended March 31, 1998 would have increased by $1.5 million and $0.9
million, respectively, and net income would have increased by $1.0 million and
$0.5 million, respectively.
LINDEN DISTRIBUTABLE CASH
The Linden Venture partnership agreement divides cash distributions between
our subsidiary Linden Ltd. and our minority partner. Under the partnership
agreement, our minority partner receives 99% of distributable cash up to a
capped amount per month. The capped amount was approximately $4.3 million per
month through September 1998 but switched to $3.0 million in October 1998. The
reduction in the cap will permit us to receive additional distributions of
approximately $1.3 million per month from Linden Venture through September 2001.
After September 2001, the cap amount will increase to between $4.3 and $4.8
million per month. See "-- Liquidity and Capital Resources -- Linden Structure,
Indebtedness and Cash Distributions."
POWER PURCHASE AGREEMENTS
Our Facilities sell their electric output pursuant to long-term power
purchase agreements with investor-owned utilities. Each of our utility power
purchasers has an investment-grade senior debt rating. Our Facilities
26
<PAGE> 31
historically have provided consistent and substantial cash distributions,
reflecting in part the fixed payment components of the power purchase
agreements.
The power purchase agreements for our Facilities typically include a fixed
capacity payment, an escalating operations and maintenance payment tied to an
inflation index and a fuel expense component tied to the utility's weighted
average cost of gas ("WACOG") or another measure. The fuel components of the
Camden and Bayonne power purchase agreements historically have been well
correlated to our actual fuel costs. The fuel component in one of the Bayonne
agreements is based on the utility's prior year's WACOG resulting in a lag in
the linkage between reimbursement of fuel costs and actual costs. This provision
has not had a material impact on the Bayonne Facility over time although it does
create variations between fuel costs and fuel pricing in any given year.
The fuel component in the Linden power purchase agreement is based on a cap
indexed to Con Ed's weighted average cost of gas. Con Ed reimburses the project
for its actual fuel costs throughout the year. At the end of the contract year
(April 30), actual costs are compared to the cap. If Linden Venture's fuel costs
exceed the cap, Linden Venture reimburses Con Ed for the excess over the next 12
months. If fuel costs are below the cap, Linden Venture and Con Ed split the
difference on a 50/50 basis and Con Ed reimburses Linden Venture for its share
of the savings over the next 12 months. Linden Venture's fuel costs have
exceeded the cap established by Con Ed's WACOG in four of the past six years.
Con Ed purchases gas both for distribution to its local gas customers and as
fuel for its gas-fired generating plants. Con Ed's WACOG for distribution to its
gas customers historically has been higher than its WACOG for generation. This
difference reflects the fact that Con Ed's WACOG includes both the commodity
cost of its gas purchases and transportation charges, including reservation
charges for firm transportation. When Con Ed has had increased demand for gas to
run its power plants, the effect is to lower Con Ed's WACOG by lowering the per
unit cost of gas transportation. Linden Venture's results in 1997 and 1998 were
adversely affected by a nuclear plant outage which increased Con Ed's gas
purchases to run gas-fired power plants and therefore lowered Con Ed's WACOG. We
expect Con Ed's WACOG to increase (adjusted for commodity prices) after
completion of the pending sale of its gas-fired generation assets later this
year. However, the effect of the historical costs will continue to be felt
through the contract year which expires at the end of April 2000. Distributions
to us from Linden Venture will continue to be impacted by our ability to manage
our fuel costs against Con Ed's WACOG. See "Our Business -- The Linden
Facility -- Linden Power Purchase Agreement."
LINDEN STEAM AGREEMENTS
The Linden Facility sells steam to Infineum USA L.P. ("Infineum") and
Bayway Refining Company ("Bayway") under separate agreements. The Infineum steam
sale agreement provides that Linden Venture's maximum delivery obligation is
181,000 lbs/hr for the months of October through and including May and 109,000
lbs/hr for the months of June through and including September. Late in 1998,
Infineum began to increase its steam take under the contract from approximately
120,000 pounds per hour to approximately 181,000 pounds per hour. Infineum
increased its steam purchases after it obtained authorization from New Jersey
regulatory authorities to resell steam purchased from Linden Venture. As a
result of the pricing and credit provisions of the Infineum agreement, Infineum
does not pay Linden Venture for the additional steam take. Infineum is reselling
its increased steam take to Bayway, thereby reducing sales by Linden Venture to
Bayway by approximately 61,000 pounds per hour. The Company estimates that the
increased steam take by Infineum will reduce distributions to the Company from
Linden Venture by approximately $1.3 million per year.
RESULTS OF OPERATIONS
East Coast Power L.L.C. -- Three Months Ended March 31, 1999
The results of operations for East Coast Power for the first quarter of
1999 include the effect of the results of operations of the Acquired Group for
the period subsequent to the Acquisition (February 5 to March 31, 1999). Unless
otherwise indicated, discussions with respect to Linden Venture, Camden Venture
and Bayonne Venture reflect the full three-month periods in 1999 and 1998.
27
<PAGE> 32
Our equity in earnings of affiliates for the first quarter of 1999 totaled
$14.7 million, and we received $13.9 million in cash distributions during the
period after the Acquisition.
Linden Venture. Revenues decreased from $69.6 million in the first
quarter of 1998 to $62.7 million in the first quarter of 1999. Electricity
revenues decreased by $5.0 million due primarily to a lower fuel component.
Electricity revenues in the first quarter of 1999 reflected a $2.7 million
limitation in the Linden power purchase agreement on the pass-through of
fuel costs compared with a $1.9 million limitation in the prior period.
Steam revenues declined $1.9 million primarily due to lower fuel costs,
which are a component in the determination of the sales price of steam, and
the change in the amount of steam sold to Infineum and Bayway discussed
under "Linden Steam Agreements." Costs and expenses totaled $90.1 million
in the first quarter of 1999, including one-time charges of $46.4 million
to terminate a management services agreement and $6.0 million to terminate
a gas management agreement. Such amounts are included in general and
administrative and fuel costs, respectively. Excluding such charges, costs
and expenses decreased from $43.0 million in the first quarter of 1998 to
$37.7 million in the first quarter of 1999, primarily reflecting a $4.7
million decrease in fuel costs.
Linden Venture had a net loss of $26.5 million in the first quarter of
1999 (net income of $25.9 million excluding the one-time charges related to
the gas management and management services agreements) compared to earnings
of $26.8 million in the first quarter of 1998. Linden Venture made cash
distributions of $32.1 million in the first quarter of 1999 compared to
$31.7 million in the first quarter of 1998. The Acquired Group's share of
Linden Venture's net loss in 1999 was $31.5 million. Excluding the one-time
charges for the termination of the gas management and management services
agreements, which were allocated 100% to the Acquired Group, the Acquired
Group was allocated earnings of $20.9 million in the first quarter of 1999
compared to earnings of $17.3 million in the prior period. The Acquired
Group's share of Linden Venture cash distributions in the first quarter of
1999 was $22.5 million compared to $18.7 million in the prior period.
Subsequent to the Acquisition, Linden Venture reported earnings of
$16.1 million and made cash distributions of $12.5 million. The Company's
share of such earnings, $12.6 million, are included in the Company's
results of operations for the first quarter of 1999 and its share of such
cash distributions, $9.1 million, are included in cash flows for the first
quarter of 1999. The Company's equity in the earnings of Linden Venture is
reported net of $6.2 million of amortization of the excess of the Company's
investment in Linden Venture over its share of Linden Venture's equity.
Camden Venture. Revenues decreased from $19.9 million in the first
quarter of 1998 to $19.4 million in the first quarter of 1999 primarily
reflecting a lower fuel component. Costs and expenses totaled $25.3 million
in the first quarter of 1999 including one-time charges of $12.8 million to
terminate a management services agreement and $1.6 million to terminate a
gas management agreement. Such amounts are included in general and
administrative and fuel costs, respectively. Excluding such charges, costs
and expenses decreased from $12.0 million in the first quarter of 1998 to
$10.9 million in the first quarter of 1999, primarily reflecting a $1.0
million decrease in fuel costs.
Camden Venture had a net loss of $7.5 million in the first quarter of
1999 (net income of $6.9 million excluding the one-time charges related to
the gas management and management services agreements) compared to earnings
of $6.1 million in the first quarter of 1998. Camden Venture made cash
distributions of $7.8 million in the first quarter of 1999 compared to $5.4
million in the first quarter of 1998. The Acquired Group's share of Camden
Venture's net loss in the first quarter of 1999 was $8.9 million. Excluding
the one-time charges for the termination of the gas management and
management services agreements, which were allocated 100% to the Acquired
Group, the Acquired Group was allocated earnings of $5.5 million in the
first quarter of 1999 compared to earnings of $4.7 million in the prior
period. The Acquired Group's share of Camden Venture cash distributions in
the first quarter of 1999 was $3.9 million compared to $4.8 million in the
first quarter of 1998.
Subsequent to the Acquisition, Camden Venture reported earnings of
$3.8 million and made cash distributions of $5.4 million ($2.1 million
excluding a $3.3 million special distribution to the limited partner in
connection with the Acquisition). The Company's share of such earnings,
$3.0 million, is
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<PAGE> 33
included in the Company's results of operations for the first quarter of
1999, and its share of such cash distributions, $1.8 million, is included
in cash flows for the first quarter of 1999. The Company's equity in the
earnings of Camden Venture is reported net of $1.1 million of amortization
of the excess of the Company's investment in Camden Venture over its share
of Camden Venture's equity.
Bayonne Venture. Revenues decreased from $33.5 million in the first
quarter of 1998 to $29.4 million in the first quarter of 1999. Electricity
revenues for the first quarter of 1998 include a $6.4 million fuel
component adjustment related to 1997 and 1996 operations. Excluding the
adjustment, electricity revenues were $2.3 million higher in the first
quarter of 1999, primarily reflecting a higher fuel component with respect
to sales to one of the purchasers and an increase in capacity due to an
upgrade in the first quarter of 1998. Costs and expenses decreased from
$14.7 million in the first quarter of 1998 to $13.5 million in the first
quarter of 1999, primarily reflecting a $1.0 million decrease in fuel
costs. The other income included in the first quarter of 1998 represents
interest related to the previously mentioned fuel component adjustment.
Bayonne Venture had net income of $14.0 million in the first quarter
of 1999 compared to earnings of $17.5 million in the first quarter of 1998
and made cash distributions of $8.5 million in the first quarter of 1999
compared to $10.5 million in the first quarter of 1998. The Acquired
Group's share of Bayonne Venture's net income in the first quarter of 1999
was $12.8 million compared to $15.2 million in the first quarter of 1998
and the Acquired Group's share of Bayonne Venture cash distributions in the
first quarter of 1999 was $7.8 million compared to $9.2 million in the
first quarter of 1998.
Subsequent to the Acquisition, Bayonne Venture reported earnings of
$8.6 million and made cash distributions of $3.3 million. The Company's
share of such earnings, $7.9 million are included in the Company's results
of operations for the first quarter of 1999 and its share of such cash
distributions, $3.0 million, are included in cash flows for the first
quarter of 1999. The Company's equity in the earnings of Bayonne Venture is
reported net of $1.5 million of amortization of the excess of the Company's
investment in Bayonne Venture over its share of Bayonne Venture's equity.
General and administrative costs for the Company totaled $1.4 million for
the first quarter of 1999 (which represents the two-month period beginning
February 5) compared to the Acquired Group's costs of $2.6 million in the
one-month period in 1999 and $14.2 million in the first quarter of 1998. The
reasons for the lower costs reported by the Company are discussed in "-- The
Acquisition -- Operating, General and Overhead Expenses."
Interest expense for the Company for the first quarter of 1999 includes
$11.9 million in interest expense related to the bridge loan, a loss on an
interest swap with respect to $600.0 million of borrowings under the bridge loan
and the subordinated note to Enron and $2.8 million in amortization of deferred
costs related to the bridge loan. See "-- Liquidity and Capital
Resources -- Acquisition Financing."
Cogen Tech Group -- Period January 1, 1999 to February 4, 1999 Compared to Three
Months Ended March 31, 1998
The Acquired Group's equity in earnings of affiliates for the 1999 period
prior to the Acquisition totaled a loss of $51.5 million compared to earnings of
$37.2 million in the first quarter of 1998 and the Acquired Group received $20.3
million in cash distributions during the 1999 period prior to the Acquisition
compared to $32.5 million in the first quarter of 1998.
Linden Venture. During the period in 1999 prior to the Acquisition,
Linden Venture reported a net loss of $42.6 million (net income of $9.8
million excluding the one-time charges related to the gas management and
management services agreements) and made cash distributions of $19.7
million. The Acquired Group's share of such loss, $44.6 million (100% of
the one-time charges related to the gas management and management services
agreements were allocated to the Acquired Group's share of income), are
included in the results of operations for the 1999 period prior to the
Acquisition and its share of such cash distributions, $13.4 million, are
included in cash flows for the 1999 period prior to the Acquisition. The
Acquired Group's share of Linden Venture's earnings for the first quarter
of 1998
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<PAGE> 34
totaled $17.4 million and the Acquired Group received $18.7 million in cash
distributions in the first quarter of 1998.
Camden Venture. During the period in 1999 prior to the Acquisition,
Camden Venture reported a net loss of $11.3 million (net income of $3.1
million excluding the one-time charges related to the gas management and
management services agreements) and made cash distributions of $2.4
million. The Acquired Group's share of such net loss, $11.9 million (100%
of the one-time charges related to the gas management and management
services agreements were allocated to the Acquired Group's share of
income), are included in the results of operations for the 1999 period
prior to the Acquisition and its share of such cash distributions, $2.1
million, are included in cash flows for the 1999 period prior to the
Acquisition. The Acquired Group's share of Camden Venture's earnings for
the first quarter of 1998 totaled $4.7 million and the Acquired Group
received $4.8 million in cash distributions in the first quarter of 1998.
Bayonne Venture. During the period in 1999 prior to the Acquisition,
Bayonne Venture reported earnings of $5.4 million and made cash
distributions of $5.2 million. The Acquired Group's share of such earnings,
$5.0 million, are included in the results of operations for the 1999 period
prior to the Acquisition and its share of such cash distributions, $4.8
million, are included in cash flows for the 1999 period prior to the
Acquisition. The Acquired Group's share of Bayonne Venture's earnings for
the first quarter of 1998 totaled $15.1 million and the Acquired Group
received $9.2 million in cash distributions in the first quarter of 1998.
Operating overhead and general and administrative costs for the Acquired
Group totaled $2.6 million for the 1999 period prior to the Acquisition compared
to the Acquired Group's costs of $14.2 million in the first quarter of 1998.
Operating overhead for the one-month period in 1999 includes development bonuses
of $0.3 million compared to $8.0 million in the three-month period in 1998.
General and administrative costs for the one-month period in 1999 includes $0.4
million for the use of corporate aircraft compared to $1.7 million in the three
month period in 1998.
Interest income in the first quarter of 1998 primarily relates to an
account receivable for amounts owed to Linden Ltd. by an affiliate. Under the
terms of the agreement with respect to the Acquisition, no interest was earned
on such receivable subsequent to December 31, 1998. See "-- The
Acquisition -- Linden Receivable."
The difference in interest expense primarily reflects the difference in the
length of the periods, differences in the amount of debt outstanding and
fluctuations in interest rates.
Income taxes relate primarily to the Acquired Group's interest in Bayonne
Venture and the fluctuation in income tax expense relates primarily the
fluctuations to the Acquired Group's equity in the earnings of Bayonne Venture.
Cogen Tech Group -- Year Ended December 31, 1998 Compared to Year Ended December
31, 1997
Equity in the earnings of affiliates of the Acquired Group increased from
$105.8 million in 1997 to $137.1 million in 1998. Cash distributions to the
Acquired Group from its affiliates increased from $102.3 million to $128.5
million over the same period.
Linden Venture. Revenues decreased from $299.0 million in 1997 to
$274.1 million in 1998. Electricity revenues decreased by $20.7 million
from period to period due primarily to a lower fuel component. Electricity
revenues also reflected a $7.0 million limitation in the Linden power
purchase agreement on the pass-through of fuel costs in 1998 compared with
a $4.7 million limitation in 1997. Steam revenues declined by $4.2 million
from period to period due primarily to a lower fuel price component and
lower steam take. The decline in revenues was more than offset by a $29.4
million decrease in costs. This decrease in costs was primarily due to a
$20.0 million decrease in fuel costs, a $6.9 million decrease in
depreciation expense as a result of the change in estimated useful life of
the Facility and a $2.2 million decrease in operations and maintenance
costs, primarily reflecting a $1.9 million payment made in 1997 to
terminate an operations and maintenance agreement and lower
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<PAGE> 35
maintenance costs. As a result of the decline in expenses, net income
increased from $105.6 million in 1997 to $109.8 million in 1998. The
Acquired Group's share of net income increased from $73.8 million in 1997
to $75.3 million in 1998. However, cash distributions to the Acquired Group
decreased from $75.6 million to $74.0 million over the same period,
primarily reflecting changes in working capital.
Camden Venture. Revenues decreased from $80.2 million in 1997 to $73.1
million in 1998 due primarily to a lower fuel component. The decrease in
revenues from period to period was more than offset by a $10.4 million
decrease in costs during the period. This decrease in costs was primarily
due to a $5.9 million decrease in fuel costs, a $3.2 million decrease in
depreciation expense due to the change in the estimated life of the
Facility and a $0.7 million decline in operations and maintenance costs,
primarily reflecting a $1.4 million payment made in 1997 to terminate an
operations and maintenance agreement. Net income increased from $15.9
million in 1997 to $19.5 million in 1998. The Acquired Group's share of net
income decreased from $14.5 million in 1997 to $14.2 million in 1998.
Income before depreciation increased $0.4 million (all depreciation is
allocated to the limited partner until its capital account equals zero);
however, an increase in debt principal payments, which are a factor in the
amount of net income allocated to the limited partner, resulted in a
decrease in the Acquired Group's share of net income. Cash distributions to
the Acquired Group increased from $8.6 million to $15.0 million from period
to period, primarily reflecting lower capital expenditures for the year.
Bayonne Venture. Revenues increased from $96.5 million in 1997 to
$116.6 million in 1998. Electricity revenues increased by $20.0 million
from period to period due primarily to a $6.4 million fuel component
adjustment related to 1997 and 1996 operations and a higher fuel component.
The fuel component adjustment reflects an adjustment agreed to by one of
the power purchasers in the first quarter of 1998 based upon an audit of
the power purchaser's calculation of the weighted average cost of gas for
prior periods. The fuel component in one of the Bayonne power purchase
agreements is tied to the utility's weighted average cost of gas for the
prior year, resulting in a time lag in the pass-through of fuel costs under
the contract. For example, while the fuel component was higher in 1998 than
1997, the cost of fuel decreased by $4.6 million from 1997 to 1998 due to a
decline in fuel prices. Operations and maintenance costs declined $3.5
million, primarily reflecting a $2.7 million charge in 1997 for an
unplanned overhaul of a gas turbine at the project and a $1.2 million
payment in 1997 to terminate an operations and maintenance agreement.
Depreciation expense decreased $3.9 million from period to period
reflecting the change in the estimated useful life of the Facility.
Interest expense declined by $0.4 million from period to period, reflecting
lower debt outstanding, and interest income increased $1.1 million,
reflecting interest on the previously discussed fuel component adjustment.
Net income increased from $20.6 million in 1997 to $54.0 million in 1998.
The Acquired Group's share of net income increased from $17.5 million in
1997 to $47.6 million in 1998, and cash distributions to the Acquired Group
increased from $18.1 million to $39.5 million over the same period.
Operating overhead of the Acquired Group increased from $11.6 million in
1997 to $21.6 million in 1998. Operating overhead in 1998 includes $14.5 million
to "buy out" development bonuses which certain employees were eligible to
receive in subsequent periods and $1.8 million for development bonuses earned
during the year. General and administrative expenses of the Acquired Group
increased from $19.9 million in 1997 to $20.2 million in 1998.
Cogen Tech Group -- Year Ended December 31, 1997 Compared to Year Ended December
31, 1996
Equity in the earnings of affiliates of the Acquired Group decreased from
$110.5 million in 1996 to $105.8 million in 1997. Cash distributions to the
Acquired Group from its affiliates decreased from $116.7 million in 1996 to
$102.3 million in 1997.
Linden Venture. Revenues declined from $305.5 million in 1996 to
$299.0 million in 1997, primarily reflecting the effect of a $4.7 million
limitation in the Linden power purchase agreement on the pass-through of
fuel costs in 1997 compared to a $2.3 million benefit in 1996. Fuel and
operations and maintenance costs each decreased by $0.5 million from 1996
to 1997. Linden Venture incurred a $1.9 million payment in 1997 in
connection with the termination of an operations and maintenance
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<PAGE> 36
agreement. General and administrative expenses increased by $0.7 million
from 1996 to 1997, primarily reflecting higher insurance costs. From 1996
to 1997, other income increased from $0.6 million to $1.1 million,
reflecting increased cash balances. Net income decreased from $110.2
million in 1996 to $105.6 million in 1997. The Acquired Group's share of
net income decreased from $78.7 million in 1996 to $73.8 million in 1997,
and cash distributions to the Acquired Group decreased from $77.7 million
in 1996 to $75.6 million in 1997, reflecting the lower earnings.
Camden Venture. Revenues increased from $77.2 million in 1996 to $80.2
million in 1997, primarily due to a higher capacity factor under the Camden
power purchase agreement. From 1996 to 1997, fuel costs increased by $0.8
million, and operations and maintenance costs increased by $1.3 million,
primarily due to a $1.4 million payment in connection with the termination
of an operations and maintenance agreement. Interest expense decreased by
$0.5 million from 1996 to 1997. Net income increased from $14.6 million in
1996 to $15.9 million in 1997. The Acquired Group's share of net income
increased from $13.7 million in 1996 to $14.5 million in 1997. However,
cash distributions to the Acquired Group decreased from $14.5 million in
1996 to $8.6 million in 1997, primarily due to a $4.0 million increase in
capital expenditures primarily due to the investment in a new air inlet
chiller at the Camden Facility in 1997.
Bayonne Venture. Revenues increased from $95.3 million in 1996 to
$96.5 million in 1997, reflecting a $2.4 million increase in electricity
revenues primarily due to the pass-through of a higher fuel cost factor and
a $1.2 million decrease in steam revenues primarily due to a lower fuel
price component and lower steam take. Fuel costs decreased by $2.0 million
from period to period, reflecting the use of alternative fuels in 1996 and
lower fuel prices in 1997. This cost decline was more than offset by a $4.2
million increase in operations and maintenance costs due primarily to a
$2.7 million charge in 1997 for an unplanned overhaul of a gas turbine at
the project. Estimated costs associated with planned outages for major
maintenance that benefit more than one period are accrued in advance on a
straight-line basis. Bayonne Venture also incurred a $1.2 million payment
in 1997 in connection with the termination of an operations and maintenance
agreement. Interest expense declined from $8.5 million in 1996 to $8.1
million in 1997, reflecting lower debt outstanding. Net income decreased
from $21.3 million in 1996 to $20.6 million in 1997. The Acquired Group's
share of net income decreased from $18.1 million in 1996 to $17.5 million
in 1997, and cash distributions to the Acquired Group decreased from $24.5
million in 1996 to $18.1 million in 1997, primarily reflecting changes in
working capital.
Corporate overhead allocated to the Acquired Group by its affiliates
increased from $9.6 million in 1996 to $11.6 million in 1997, reflecting an
increase in management time relating to the operations and strategic
alternatives with respect to the Acquired Group. General and administrative
costs of the Acquired Group also increased from $10.9 million in 1996 to $19.9
million in 1997, principally reflecting an increase of $7.2 million in charges
for the use of corporate aircraft from 1996 to 1997.
Interest expense declined from $23.3 million in 1996 to $21.8 million in
1997, primarily reflecting lower outstanding long-term debt and fluctuations in
interest rates.
LIQUIDITY AND CAPITAL RESOURCES
Acquisition Financing
We financed the Acquisition in part with an $831 million bridge loan and a
$250 million subordinated note issued by us to Enron. We repaid all amounts
outstanding under the bridge loan and a portion of the amount outstanding under
the subordinated note with the proceeds of the offering of the outstanding notes
and an equity contribution by JEDI II. The subordinated note bears interest at
9% per annum and matures on November 4, 2017.
On April 20,1999 we sold $850.0 million of outstanding notes in three
tranches as follows: $296.0 million of 6.737% notes due 2008 (the "2008 notes"),
$236.0 million of 7.066% notes due 2012 (the "2012 notes") and $318.0 million of
7.536% notes due 2017 (the "2017 notes"). The 2008 notes bear interest at 6.737%
per annum and are repayable in 36 quarterly installments of varying amounts
beginning on June 30, 1999, with the
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<PAGE> 37
final payment due March 31, 2008. The June 30, 1999 payment of $12,130,080
reduced the original principal amount of the 2008 notes to $283,869,920. The
2012 notes bear interest at 7.066% per annum and are repayable in 17 quarterly
installments of varying amounts beginning on March 31, 2008, with the final
payment due March 31, 2012. The 2017 notes bear interest at 7.536% per annum and
are repayable in 22 quarterly installments of varying amounts beginning on March
31, 2012, with the final payment due June 30, 2017. Interest on the outstanding
notes is payable quarterly with the first interest payment due June 30, 1999.
The outstanding notes are senior secured obligations which rank senior in
right of payment to all existing and future subordinated indebtedness and pari
passu in right of payment with all existing and future senior secured
indebtedness. In addition, the outstanding notes are structurally subordinated
to all indebtedness and other liabilities, including trade payables, of the
Company's subsidiaries and to the distribution rights of minority partners in
the ventures. The outstanding notes are secured by the pledge by our owners of
their interest in the Company, the pledge by the Company of its ownership
interests in certain of the subsidiaries that own indirect interests in the
Facilities and the pledge of Linden Ltd.'s $289.6 million intercompany
subordinated note payable to the Company.
The terms of the outstanding notes limit our ability to pay dividends,
incur additional indebtedness, make payments on subordinated debt and make
certain other restricted payments. The terms of the outstanding notes also
require the Company to fund a debt service reserve account unless it provides
acceptable debt service credit support in the form of an Enron undertaking or an
acceptable letter of credit. Enron has provided the required undertaking, and,
therefore, we are not currently funding the debt service reserve account.
Also on April 20, 1999, in accordance with the terms of the limited
liability company agreement, JEDI II made an $80.0 million capital contribution
to the Company. Such amount is reflected in the Company's March 31, 1999 balance
sheet as Contributions Receivable.
The proceeds from the sale of the outstanding notes and the capital
contribution by JEDI II were used to repay the bridge loan, make a $25.0 million
cash distribution to ECT (which is reflected in the Company's March 31, 1999
balance sheet as Distributions Payable), repay $62.1 million of the principal
amount of the Enron subordinated note and make a $12.0 million purchase price
adjustment payment in connection with the Acquisition. The repayment of the
bridge loan resulted in the release of the $25.0 million guaranty on the loan by
CalPERS. The release was deemed to be a distribution to CalPERS.
Capital Expenditures
Each of the capital expenditures projects described below is subject to
certain lender, partner and regulatory or third party consents which may delay
or prevent the projects. We are currently planning to finance the projects with
cash flow from operations at the project level.
Linden. Linden Venture has planned capital expenditures of approximately
$5.6 million and $6.3 million in 1999 and 2000, respectively. Included in the
Linden Venture capital expenditure budget is approximately $5.0 million and $5.8
million in 1999 and 2000, respectively, for the Linden "gray water" project.
Currently, the Linden Facility uses city water as the source for make-up water.
The gray water project is a reverse osmosis treatment plant which will allow the
Linden Facility to satisfy its make-up water needs with recycled wastewater.
In June 1999, we entered into a letter of intent with Tosco Refining
Company that contemplates an expansion of the Linden Facility with the addition
of a sixth turbine generator to provide electricity and steam service to Tosco's
Bayway Refinery. Completion of the transactions contemplated by the letter of
intent are subject to, among other things, further negotiations, completion of
due diligence and receipt of necessary approvals.
Camden. Camden Venture has planned capital expenditures of approximately
$0.2 million and $1.1 million in 1999 and 2000, respectively. The primary
planned capital project at Camden is the river water project. Currently, the
Camden Facility uses a mechanical draft-cooling tower to produce cooling water
for use in its steam turbine condenser and other systems. Camden Venture plans
to install a new piping system and
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<PAGE> 38
pumping station which will allow the facility to use water from the Delaware
River as cooling water. By using river water as cooling water, the facility
expects to reduce its overall use of make-up water and increase the efficiency
of the plant by improving steam generator performance. The total estimated cost
of this project is $9.5 million, most of which will be spent in 2001. Camden
Venture is currently in the process of obtaining the required permits and
negotiating the easements.
Bayonne. Bayonne Venture has planned capital expenditures of approximately
$1.4 million and $14.6 million in 1999 and 2000, respectively. Included in the
Bayonne Venture capital expenditure budget is approximately $1.3 million and
$14.5 million in 1999 and 2000, respectively, for the gas bypass project. Under
the current Bayonne fuel supply contract, PSE&G is responsible for the transport
and sale of natural gas to the Bayonne Facility. The gas bypass project involves
the installation of a pipeline that connects the Bayonne Facility directly to
the facility's gas suppliers' pipeline thereby eliminating the need to use
PSE&G's gas line and services.
Existing Project and Subsidiary Debt
The following table summarizes the outstanding long-term indebtedness of
our subsidiaries and affiliates at March 31, 1999:
<TABLE>
<CAPTION>
CURRENT LONG-TERM TOTAL MATURITY
------- --------- ------ --------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Linden Ltd.(1)
Fixed rate............................................ $ 6.9 $ 85.2 $ 92.1 2007
Floating rate......................................... 7.4 92.8 100.2 2007
Working capital....................................... -- 10.0 10.0 2007
----- ------ ------
14.3 188.0 202.3
----- ------ ------
Camden Venture
Term loan -- Tranche A loan........................... 5.2 55.1 60.3 2007
Term loan -- Tranche B loan........................... 1.1 21.8 22.9 2009
----- ------ ------
6.3 76.9 83.2
----- ------ ------
Bayonne Venture
Term loan............................................. 4.0 63.1 67.1 2008
Equipment loan........................................ 0.4 -- 0.4 1999
----- ------ ------
4.4 63.1 67.5
----- ------ ------
Total......................................... $25.0 $328.0 $353.0
===== ====== ======
</TABLE>
- ---------------
(1) Does not include $4.3 million unamortized premium recorded in connection
with the Acquisition.
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Linden Structure, Indebtedness and Cash Distributions
Linden Structure. The following chart shows the Linden ownership structure:
[LINDEN STRUCTURE CHART]
The development of the Linden Facility was financed through equity
contributions to Linden Venture of $25.0 million from Linden Ltd. and $500.0
million from an owner trust (the "Owner Trust") created for the benefit of GECC
and Dana Capital Corporation, its co-investor. The Owner Trust receives
distributions from Linden Venture on a preferential basis. In addition, 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.
Linden Indebtedness. At March 31, 1999, Linden Ltd. had outstanding
indebtedness of $202.3 million under the term loan agreement (the "Linden Ltd.
Term Loan") with State Street Bank and Trust Company, as trustee. The Linden
Ltd. Term Loan is secured by the pledge by Linden Ltd. of its general
partnership interest in Linden Venture and certain segregated deposit accounts.
The Linden Ltd. Term Loan is comprised of a fixed rate portion, a floating rate
portion and a working capital portion, all of which mature September 1, 2007. At
March 31, 1999, $92.1 million was outstanding under the fixed rate portion,
$100.2 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 September 1, 1999 being $1.7
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 September 1, 1999 being $1.8 million. The working capital portion
bears interest at a one month financial commercial paper rate plus 0.55%, with
interest payable quarterly.
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The Linden Ltd. Term Loan 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.
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 Linden Ltd. and
the Owner Trust, in accordance with the allocations described below. Portions of
distributions of Linden Venture Distributable Cash to Linden Ltd. are deposited
in an escrow account held by Linden Ltd. for the benefit of the Owner Trust to
pay monthly (a) debt service requirements under the Linden Ltd. Term Loan 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 paid to Linden Ltd. under
Linden Tranche 1 (as defined below), together with debt service payments of
Linden Ltd. on the Linden Ltd. Term Loan, for the same period. No Linden Venture
Distributable Cash may be paid to Linden Ltd. if there exists any default under
the Linden Ltd. Term Loan. The Required Payment Ratios are calculated quarterly
and are required to be at least 1.2 to 1.0.
Linden Venture Distributable Cash is paid to the Owner Trust and Linden
Ltd. monthly based on three tranches of payments under the Linden Venture
partnership agreement. Linden Ltd. receives 1% and the Owner Trust, as the
limited partner in Linden Venture, receives 99% of Linden Venture Distributable
Cash up to a capped amount equal to approximately $4.3 million per month through
September 1998, $3.0 million per month through September 2001 and between $4.3
million and $4.8 million per month after September 2001 ("Linden Tranche 1").
Linden Tranche 1 distributions are set at a level such that, over a period of
22.5 years, the Owner Trust will be repaid an amount equal to its initial equity
investment plus an 8.4% return (including the allocation of venture tax
benefits).
The second tranche ("Linden Tranche 2") is the Linden Venture Distributable
Cash remaining after the Linden Tranche 1 payment, up to an amount equal to
twice the amount of Linden Tranche 1. Linden Tranche 2 distributions are
allocated 99% to Linden Ltd. and 1% to the Owner Trust. The third tranche
("Linden 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. 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 March
17, 2015 or the date upon which the Owner Trust has achieved an 8.338% return on
its initial equity investment. On the Flip Date, distribution of cash according
to the above mechanism ends, and all Linden Venture Distributable Cash will then
be distributed initially 30% to the Owner Trust and 70% to Linden Ltd. until the
Owner Trust has achieved a 6.338% after-tax rate of return, at which time the
Owner Trust's distributable percentage will be reduced to 20%. The Owner Trust's
distributable percentage will be further reduced to 10% and finally to 1% when
the Owner Trust has achieved after-tax rates of return of 7.338% and 8.338%,
respectively.
If there is a positive balance in the Arrears Account (as defined) at any
time prior to the Flip Date, distributions of Linden Venture Distributable Cash
that are normally distributed pursuant to Linden Tranche 2 and Linden Tranche 3
are instead distributed 99% to the Owner Trust and 1% to Linden Ltd. until the
36
<PAGE> 41
balance in the Arrears Account equals zero, at which time the normal
distributions of Linden Tranche 2 and Linden Tranche 3 resume. If a Tax
Indemnity Event (as defined) occurs at any time, all amounts of Linden Venture
Distributable Cash that are normally distributed to Linden Ltd. are instead
distributed to the Owner Trust until either the balance in the Tax Indemnity
Account (as defined) equals zero or the Owner Trust is made whole from a tax
standpoint.
Upon the occurrence of a special event under the Linden Venture partnership
agreement, normal distributions are interrupted and Linden Venture Distributable
Cash is instead allocated 99% to the Owner Trust and 1% to Linden Ltd. Normal
distributions of Linden Venture Distributable Cash resume when the Owner Trust
receives a specified rate of return on its equity or the Special Event has
ceased to exist, whichever occurs earlier, provided that the Arrears Account
does not have a positive balance. In addition, so long as a Special Event is
ongoing, the Owner Trust may exercise certain powers with respect to the
management of Linden Venture.
Among other things, the following occurrences with respect to Linden Ltd.
and/or Linden Venture, as applicable, constitute special events which interrupt
normal distributions of Linden Venture Distributable Cash:
- false or misleading representations or warranties or the failure to
perform covenants with respect to certain documents;
- certain defaults in the repayment of certain indebtedness;
- certain failures of counterparties to perform under certain project
documents;
- voluntary or involuntary bankruptcy, receivership or similar proceedings;
- judgments in excess of $1,000,000;
- in certain circumstances, the levying upon, attachment or seizure of
property;
- certain dissolutions and liquidations; and
- the failure to maintain insurance and certain failures to comply with the
terms thereof.
Historical annual distributions from Linden Venture are set forth in the
table below:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Linden Venture Distributable Cash
Distributions to Owner Trust:
Linden Tranche 1.............................. $ 48.7 $ 51.1 $ 50.8
Linden Tranche 2.............................. 0.7 0.8 0.8
Linden Tranche 3.............................. 0.3 0.1 --
--------- --------- ---------
49.7 52.0 51.6
--------- --------- ---------
Linden Venture Distributable Cash
Distributions to Linden Ltd.:
Linden Tranche 1.............................. 0.5 0.5 0.5
Linden Tranche 2.............................. 70.7 74.1 77.2
Linden Tranche 3.............................. 2.8 1.0 --
--------- --------- ---------
74.0(1) 75.6(1) 77.7(1)
--------- --------- ---------
Total distributions........................... $ 123.7 $ 127.6 $ 129.3
========= ========= =========
</TABLE>
- ---------------
(1) Includes amounts escrowed for payment of the Linden Ltd. Term Loan of $29.4
million, $28.9 million and $28.3 million for 1998, 1997 and 1996,
respectively.
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<PAGE> 42
Camden Structure, Indebtedness and Cash Distributions
Camden Structure. The following chart sets forth the ownership structure of
Camden Venture:
CAMDEN STRUCTURE CHART
Camden Indebtedness. Camden Venture is a party to a term loan agreement
with GECC (the "Camden Venture Term Loan"). GECC assigned Tranche A of the
Camden Venture Term Loan to a group of banks and retained Tranche B. The Camden
Venture Term Loan is secured by a lien on the Camden Facility, Camden Venture's
revenues and other assets and a pledge of the general partnership interest of
Camden GP in Camden Venture. At March 31, 1999, the aggregate outstanding
principal balance of Tranche A, which matures May 1, 2007, was $60.3 million. At
March 31, 1999, the outstanding principal balance of Tranche B, which matures
May 1, 2009, was $22.9 million.
Tranche A accrues interest at the per annum rate of either (a) 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 (b) if such loan is in default, a prime
rate plus an increasing margin of 2.375% to 3.0% or the fed funds rate plus
2.5%, whichever is higher, with principal and interest payable quarterly.
Principal payments with respect to Tranche A increase each quarter by varying
amounts ranging from approximately 1.6% to approximately 4.8% of the prior
quarter's payment with the principal payment due August 1, 1999 being $1.3
million. Camden Venture has entered into an interest rate swap agreement with
GECC to fix the LIBOR portion of the interest rate with respect to Tranche A at
5.945%. The swap agreement has a notional amount equal at all times to the
outstanding principal balance of Tranche A. Tranche B accrues interest at the
annual rate of 11.4%, with interest and principal payable quarterly. Principal
payments with respect to Tranche B increase each quarter by varying amounts
ranging from approximately 1.6% to approximately 4.8% of the prior quarter's
payment, through May 1, 2007, with the principal payment due August 1, 1999
being $0.3 million, and the final eight
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<PAGE> 43
principal payments averaging approximately $1.3 million each. Optional
prepayments on Tranche B are subject to a yield maintenance premium.
The Camden Venture Term Loan contains certain restrictions that
significantly limit or prohibit, among other things, the ability of Camden
Venture or its general partner, Camden GP, 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 Venture Term Loan requires Camden Venture to establish and
maintain security deposit accounts into which its revenues are deposited and
from which reserve accounts are funded and maintained for various obligations,
including the repayment of the Camden Venture Term Loan.
Camden Cash Distributions. Camden Venture Distributable Cash is the cash
remaining after the payment of:
- project expenses;
- fees and expenses owed to lenders, interest rate swap counterparties and
letter of credit issuers under the Camden Venture Term Loan;
- principal and interest on the Camden Venture Term Loan;
- reimbursement obligations owed on letters of credit issued under the
Camden Venture Term Loan; and
- reserve amounts required if the fixed charge coverage ratio of the Camden
Venture Term Loan is less than 1.2 to 1.0.
Absent the existence of a default under the Camden Venture Term Loan, Camden
Venture Distributable Cash is distributed monthly by Camden Venture to Camden GP
and GECC in accordance with the allocations described below.
Camden Venture Distributable Cash is paid to GECC and Camden GP based on
two tranches of payments under the terms of Camden Venture's partnership
agreement. Under the first tranche ("Camden Tranche 1"), Camden Venture pays to
GECC and the other lenders all amounts due for debt service expenses and other
obligations pursuant to the Camden Venture Term Loan. Also under Camden Tranche
1, GECC receives 99% and Camden GP 1% of Camden Venture Distributable Cash up to
a capped amount equal to approximately $0.3 million to $0.4 million per month
through May 2007 and varying amounts thereafter. Camden Tranche 1 distributions
are set at a level such that GECC will be repaid an amount equal to its initial
equity investment plus a 6.8% return thereon (including the allocation of all
venture tax benefits).
The balance of the Camden Venture Distributable Cash following satisfaction
of the Camden Tranche 1 obligations is distributed 99% to Camden GP and 1% to
GECC ("Camden Tranche 2"). The distributions of cash according to the above
mechanism ends April 1, 2010. Thereafter, Camden Venture Distributable Cash will
be distributed 10% to GECC and 90% to Camden GP.
If there is a positive balance in the monthly arrears account,
distributions of Camden Venture Distributable Cash that are normally distributed
pursuant to Camden Tranche 2 are instead distributed 99% to GECC and 1% to
Camden GP until GECC receives a distribution equal to the then current balance
of the monthly arrears account, which is decreased by the amount of such
distribution, at which time normal distributions of Camden Tranche 2 resume. If
there is a positive balance in the quarterly arrears account, distributions of
Camden Venture Distributable Cash that are normally distributed pursuant to
Camden Tranche 2, or which are otherwise distributable as a result of a positive
monthly arrears account balance as previously discussed, are instead distributed
99% to GECC and 1% to Camden GP until GECC receives a distribution equal to the
then current balance of the quarterly arrears account, which is decreased by the
amount of such distribution, at which time distributions as a result of a
positive monthly arrears account balance are made, if applicable. Otherwise,
normal distributions of Camden Tranche 2 resume. If a tax indemnity event occurs
at any time, all amounts of Camden Venture Distributable Cash that are normally
distributed to Camden GP are instead distributed to GECC until either the
balance in the tax indemnity account equals zero or GECC is made whole from a
tax standpoint.
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<PAGE> 44
Upon the occurrence of a special event under the Camden Venture partnership
agreement, normal distributions are interrupted and Camden Venture Distributable
Cash is instead allocated 99% to GECC and 1% to Camden GP. Normal distributions
of Camden Venture Distributable Cash resume when GECC receives a specified rate
of return on its equity or the Special Event has ceased to exist, whichever
occurs earlier, provided that the arrears account does not have a positive
balance. In addition, so long as a Special Event is ongoing, GECC may exercise
certain powers with respect to the management of Camden Venture.
Among other things, the following occurrences with respect to Camden GP
and/or Camden Venture, as applicable, constitute special events which interrupt
normal distributions of Camden Venture Distributable Cash:
- false or misleading representations or warranties or the failure to
perform covenants with respect to certain documents;
- certain defaults in the repayment of certain indebtedness;
- certain failures of counterparties to perform under certain project
documents;
- voluntary or involuntary bankruptcy, receivership or similar proceedings;
- judgments in excess of $1,000,000;
- in certain circumstances, the levying upon, attachment or seizure of
property;
- certain dissolutions and liquidations; and
- the failure to maintain insurance and certain failures to comply with the
terms thereof.
Historical annual distributions from Camden Venture are set out in the
table below:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Payments to GECC and lenders:
Camden Tranche 1.......................................... $16.3 $16.0 $15.7
Camden Tranche 2.......................................... 0.1 0.1 0.1
----- ----- -----
16.4 16.1 15.8
----- ----- -----
Camden Venture Distributable Cash Distributions to Camden
GP:
Camden Tranche 1.......................................... 0.1 0.2 0.2
Camden Tranche 2.......................................... 14.9 8.4 14.3
----- ----- -----
15.0 8.6 14.5
----- ----- -----
Total Distributions............................... $31.4 $24.7 $30.3
===== ===== =====
</TABLE>
40
<PAGE> 45
Bayonne Structure, Indebtedness and Cash Distributions
Bayonne Structure. The following chart sets forth the ownership structure
of Bayonne Venture:
[BAYONNE STRUCTURE CHART]
The original development and construction of the Bayonne Facility was
financed through a term loan agreement (the "Bayonne Term Loan") with Prudential
Insurance Company of America and approximately $30.0 million in equity
contributed by the partners of Bayonne Venture.
Bayonne Indebtedness. As of March 31, 1999, Bayonne Venture had $67.1
million of outstanding indebtedness under the Bayonne Term Loan. The Bayonne
Term Loan is generally non-recourse to the partners of Bayonne Venture and is
secured by the Bayonne Facility and other Bayonne Venture assets and all the
revenues of Bayonne 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 Bayonne Term Loan is non-callable through September 2002,
and thereafter may, at the option of Bayonne Venture, be prepaid at a premium on
the prepaid portion thereof calculated at a decreasing percentage which
commences at 10.85%.
The Bayonne Term Loan contains certain restrictions that significantly
limit or prohibit, among other things, the ability of Bayonne 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 Bayonne Term Loan requires Bayonne Venture to create a debt service reserve
fund from net cash flow if Bayonne Venture's annual debt service coverage ratio,
calculated each quarter using the previous twelve months' financial information,
falls below 1.50x. Bayonne 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 Bayonne Venture's net cash flow cause Bayonne Venture's coverage
ratio to exceed 1.50x. Bayonne Venture
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<PAGE> 46
has not been required to fund the debt service reserve. At March 31, 1999,
Bayonne Venture's debt service coverage ratio as calculated under the Bayonne
Term Loan was 4.5x.
Bayonne Venture Cash Distributions. The cash remaining after payment of
operating expenses, debt service and maintenance of required reserve funds
("Bayonne Venture Distributable Cash") is distributed monthly by Bayonne Venture
to each of the partners of Bayonne Venture according to each partner's
respective ownership percentages in Bayonne Venture. Under the Bayonne Term
Loan, Bayonne Venture is prohibited from making distributions to its partners
except in accordance with an approved operating budget. No distributions of
Bayonne Venture Distributable Cash may be made if there is a default under the
Bayonne Term Loan.
Historical annual distributions from Bayonne Venture are set forth in the
table below.
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Bayonne Venture Distributable Cash Distributions:(1)
NJ Inc. (former managing general partner of Bayonne
Venture)............................................... $39.5 $18.1 $24.5
Minority general partners................................. 5.2 2.8 3.8
----- ----- -----
Total Distributions............................... $44.7 $20.9 $28.3
===== ===== =====
</TABLE>
- ---------------
(1) Historical annual distributions from Bayonne Venture to its general partners
do not correlate with the current ownership percentages of such partners due
to the purchase by NJ Inc. of an additional 5.25% interest in Bayonne
Venture in July 1998.
YEAR 2000
Many existing computer systems use only two digits to define a year. These
systems were designed and developed without considering the impact of the
upcoming change in century. When computer systems must process dates both before
and after January 1, 2000, two-digit year "fields" may create processing
ambiguities that can cause errors and system failures, resulting in potentially
serious operational problems. For example, computer programs that have
date-sensitive features may recognize a date represented by "00" as the year
1900, instead of 2000. These errors or failures may have limited effects, or the
effects may be widespread, depending on the computer chip, system or software,
and its location and function. For instance, there are embedded chips contained
within electric and steam generation equipment, and electric transmission and
distribution equipment that may be date-sensitive. In these circumstances where
an embedded chip fails to recognize the correct date, electric and steam
generation operations could be adversely affected.
The effects of the Year 2000 problem are exacerbated because of the
interdependence of computer and telecommunications systems in the United States
and throughout the world. This interdependence exists in virtually all
industries, and is certainly true for the Company and the Company's suppliers
and customers.
The Company uses computer hardware and software to control and monitor many
of the major components of its electric and steam generation operations.
Embedded chips also occur in some aspects of generation, transmission and
distribution. The Company has implemented a program to address these issues to
make its computer systems and, where necessary, its embedded chips capable of
processing dates later greater than 1999 in an effort to mitigate any adverse
operational or financial impacts.
State Of Readiness
In early 1998, the Company started its Year 2000 Program (the "Plan"),
covering all three of the Facilities. General Electric is contracted to operate
and maintain the plants, and is playing an integral role in preparing the plants
for Year 2000. Generally, the approach used at each plant is based on a Year
2000 program developed by General Electric. The plan embodies the following
elements: awareness, inventory, assessment, remediation, testing and contingency
planning. The Company plant managers each are responsible for the Year 2000
program work at their respective plants, and the Director of Operations has
overall responsibility for all aspects of the Plan. The Company is scheduled to
complete all work by June 1999.
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<PAGE> 47
As directed by the Plan, a comprehensive inventory of the three facilities
has been completed, documented and assessed with regard to operational
criticality and Year 2000 readiness. The most significant components include
distributed control systems, turbine control systems, continuous emissions
monitoring systems, digital relays, transmitters, communications equipment,
switchgear and fire protection systems. Component suppliers have been contacted
and component readiness information has been documented. Where necessary,
components were replaced or upgraded to be Year 2000 ready.
The Company has also evaluated its exposure to Year 2000 problems of
mission-critical third parties with whom the Company conducts business, i.e.,
suppliers providing materials and services and markets receiving electric and
steam products. Failures of third party computer systems and embedded chips
could have a material impact on the Company's ability to conduct its business.
Third parties that are considered mission critical have provided their Year 2000
status to the Company, and are expected to be ready by late 1999 or before. The
Company's management has a high level of confidence that suppliers and customers
have recognized the potential for problems and are taking prudent action to
mitigate risks.
As part of the Plan, the Company is developing contingency plans that deal
with two aspects of the Year 2000 problem: (1) that the Company, despite its
good-faith, reasonable efforts, may not have satisfactorily remediated all of
its internal mission-critical systems; and (2) that outside systems may not be
Year 2000 ready, despite the Company's good-faith, reasonable efforts to work
with outside entities. The Company's contingency plans are being designed to
minimize the disruptions or other adverse effects resulting from Year 2000
incompatibilities regarding these mission-critical functions or systems, and to
facilitate the early identification and remediation of mission-critical Year
2000 problems that first manifest themselves after January 1, 2000. Alternate
fuel capabilities at all three Facilities and flexible electric/steam generation
configurations at two of the Facilities add to the Company's capability to work
around some potential problems.
The Company's contingency plans will contemplate an assessment of all its
mission-critical internal operational systems that use computer-based controls.
The procedure of implementing a contingency plan will be triggered by the first
occurrence of a Year 2000-related failure, and continue for as long as
circumstances require. It is important to note that a system can fail to
correctly process a new century date well before the actual roll over to
1/1/2000. Further, the Company will, in that time frame, assess any
mission-critical disruptions due to Year 2000-related failures that are external
to the Company. The assessment process will cover, for example, loss of fuel
supply, water supply, or telecommunications services from carriers.
Worst Case Scenario
The Commission requires that public companies forecast the most reasonably
likely worst case Year 2000 scenario. In doing so, the Company is assuming that
the company's Year 2000 plan will not be effective. Analysis of the most
reasonably likely worst case Year 2000 scenarios the Company may face leads to
contemplation of the following possibilities which, though unlikely in some or
many cases, must be included in any consideration of worst cases: widespread
failure of electrical, gas, water and similar supplies by utilities serving the
Company; widespread disruption of the services of communications common
carriers; similar disruption to means and modes of transportation for the
Company and its employees, contractors, suppliers, and customers; significant
disruption to the Company's ability to gain access to, and remain working in,
office buildings and other facilities; and/or the failure of substantial numbers
of the Company's mission-critical computer hardware and software systems,
including both internal business systems and systems (such as those with
embedded chips) controlling operational facilities such as electrical
generation, transmission, and distribution. Among other things, the Company
could face substantial claims by customers or loss of revenues due to service
interruptions, inability to fulfill contractual obligations, inability to
account for certain revenues or obligations or to bill customers accurately and
on a timely basis, and increased expenses associated with litigation,
stabilization of operations following mission-critical failures, and the
execution of contingency plans. The Company could also experience an inability
by customers and others to pay, on a timely basis or at all, obligations owed to
the Company. Under these circumstances, the adverse effect on the Company, and
the diminution of the Company's revenues, would be material, although not
quantifiable at this time. Further in this scenario, the cumulative effect of
these failures could have a substantial adverse effect on the economy,
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<PAGE> 48
domestically and internationally. The adverse effect on the Company, and the
diminution of the Company's revenues, from a domestic or global recession or
depression also is likely to be material, although not quantifiable at this
time.
The Company will continue to monitor business conditions with the aim of
assessing and quantifying material adverse effects, if any, that result or may
result from the Year 2000 problem.
Summary
We believe that we will be able to achieve substantial Year 2000 readiness
with respect to the mission critical systems that we control. However, from a
forward-looking perspective, the extent and magnitude of the Year 2000 problem
as it will affect the Company, both before and for some period after January 1,
2000, are difficult to predict or quantify. Accordingly, there can be no
assurance that all of our systems and all outside systems will be adequately
remediated so that they are Year 2000 ready by January 1, 2000, or by some
earlier date, so as not to create a material disruption to the our business. If,
despite our reasonable efforts under the Plan, there are mission- critical Year
2000-related failures that create substantial disruptions to our business, the
adverse impact on our business could be material. Additionally, Year 2000 costs
are difficult to estimate accurately because of unanticipated vendor delays,
technical difficulties, the impact of tests of outside systems and similar
events. Moreover, the estimated costs of implementing the Plan do not take into
account the costs, if any, that might be incurred as a result of Year
2000-related failures that occur despite our implementation of the Plan.
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<PAGE> 49
OUR BUSINESS
The Company's sole business is the ownership, operation and potential
expansion of the Facilities, which are located in Linden, Camden and Bayonne,
New Jersey. The following information summarizes certain important information
with respect to our Facilities:
<TABLE>
<CAPTION>
LINDEN VENTURE CAMDEN VENTURE BAYONNE VENTURE
--------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
Location................... Linden, NJ Camden, NJ Bayonne, NJ
Equipment Type............. 5 GE Frame 7EA gas turbines 1 GE Frame 7EA gas turbine 3 GE Frame 6B gas turbines
3 GE condensing steam 1 GE condensing steam 1 GE SAEC steam turbine
turbines turbine
Nameplate Electric 715 MW 146 MW 176 MW
Capacity.................
Power Purchase
Agreement/Expiration..... Con Ed/2017 PSE&G/2013 JCP&L (75.8%)/2008
PSE&G (24.2%)/2008
Commercial Operations...... May 1992 March 1993 October 1988
Average Heat Rate
(1998)(1)................ 9,588 Btu/KWh 8,791 Btu/KWh 9,183 Btu/KWh
Historical Average
Availability
(1993-1998).............. 93% 96% 95%
Facility Dispatch.......... Dispatchable (restricted) Base load Base load
Facility Design Maximum
Steam Output Capacity.... 1,250,000 lbs/hr 92,000 lbs/hr 225,000 lbs/hr
Facility Design Steam Sales
Capacity................. 1,000,000 lbs/hr 60,000 lbs/hr 125,000 lbs/hr
Steam Sales/Expiration..... Bayway Refining Camden Paperboard/2013 IMTT-Bayonne/Year-to-Year
Company/2017 IMTT-BX/Year-to-Year
Infineum USA L.P./2017
Facility 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 30,000 MMBtu 36,000 MMBtu
Fuel Supply................ Spot(2) Spot(2) PSE&G -- CIG Tariff
Gas Transportation/
Expiration............... PSE&G and Elizabethtown/ PSE&G/2013 PSE&G -- CIG Tariff/5 days'
2017 termination
</TABLE>
- ---------------
(1) Without credit for steam production.
(2) The fuel supply for the Linden and Camden Facilities is provided under
short-term firm gas supply contracts. The contract price is based on spot
gas prices plus a reservation charge.
THE LINDEN FACILITY
Linden Facility Description. The Linden Facility is a 715 MW gas-fired,
combined-cycle cogeneration dispatchable facility located in Linden, New Jersey,
on the site of Bayway Refining Company, adjacent to a chemical plant complex and
technology center owned by Infineum USA L.P.
The Linden Facility is comprised of 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 to produce high pressure
steam for the steam turbine generators. The steam turbine generators produce
additional electricity and process steam which is sold to Bayway Refining
Company and Infineum USA L.P. 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 approximately 66%. Condensate from process steam sold to Bayway
Refining Company and Infineum USA L.P. is not returned to the cycle. All raw
makeup water is purchased from Elizabethtown Water Company.
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<PAGE> 50
The Linden Facility has been designed to operate 24 hours per day, 365 days
per year, for a total of 8,760 hours per year, at 93% availability, with design
net delivered capacity of 645 MW and export steam generation volume of 1,000,000
pounds per hour.
The 13.8 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. The Linden Facility's qualification as an
"in-city facility" is significant because, under current regulations, 80% of the
power used in New York City must be generated by "in-city" generators. This
electric interconnection terminates with Con Ed's Goethals Station on Staten
Island, New York. The total interconnection distance to Con Ed is approximately
1.6 miles. Each cable has potential transmission capacity of 650 MW.
The Linden Facility has been designed, and is being maintained and
operated, to meet the strict environmental standards of the State of New Jersey.
The Linden Facility uses best available control technology 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 by
selective catalytic reduction in the heat recovery steam generators. Carbon
monoxide ("CO") emissions are controlled by the design of the combustion
turbines.
Linden Power Purchase Agreement. Linden Venture sells all the electricity
up to the power production capacity produced by the Linden Facility, net of
auxiliary plant loads and deliveries of electricity to steam customers, to Con
Ed pursuant to a power purchase agreement (the "Linden PPA"). Certain provisions
of the Linden PPA are summarized below.
Term: Base term of 25 years from May 1, 1992, the date of initial
commercial operations.
Regulatory Approval: Approval by the Public Service Commission of New York
(the "NYPSC") allowing Con Ed full recovery of all payments for the purchase of
electricity under the Linden PPA through its fuel adjustment clause was received
in 1991.
Pricing: Base term pricing is determined by the following components:
Capacity: Con Ed is required to pay a fixed capacity rate of 1.8553c per
KWh delivered or available, subject to a cap of 85% of the Linden
Facility's dependable maximum net capability. The dependable maximum net
capability is determined by an annual capability test but may not exceed
an agreed maximum of 645MW. Kilowatt-hours delivered or available in
excess of the 85% cap during the 12 months preceding any off-peak months
can be credited to an off-peak month to the extent the total payments
for that month do not exceed the 85% cap. Linden Venture receives a
credit of 240,000 KWh in any month that Con Ed curtails deliveries, but
curtailment requests occurring in a peak period cannot be credited to an
off-peak period.
Fuel: Con Ed is required to pay actual fuel costs, including steam
commodity, transportation and storage costs attributable to electricity
actually delivered, subject to an annual cap of 2.634c per KWh
delivered, adjusted for changes in Con Ed's annual weighted average cost
of gas since 1989 (2.8597c for March 1999). Linden Venture is entitled
to keep 50% of the amount by which actual fuel costs are less than the
annual cap. Actual fuel costs above the annual cap are absorbed 100% by
Linden Venture. In addition, Con Ed is required to pay the full costs
attributable to steam generated by an outside source and delivered to
the Linden Facility.
Operating and Maintenance: Con Ed is required to pay an escalating
operations and maintenance ("O&M") rate equal to 0.9c per KWh as of the
inception of the Linden PPA, increasing by a local CPI inflation factor
on a monthly basis (1.250c per KWh for March 1999). The O&M component is
equal to this rate multiplied by KWhs delivered or available subject to
a cap equal to 90% of the Linden Facility's dependable maximum net
capability. Kilowatt-hours delivered or available in excess of the 90%
cap during the 12 months preceding any off-peak months can be credited
to such month up to the 90% cap.
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Pricing during any renewal periods and during curtailment is determined
by alternate mechanisms as set forth in the Linden PPA.
Curtailment: Con Ed is permitted to reduce the dispatch of the plant by
various amounts in certain periods. At any time during the term of the
Linden PPA, upon four hours' notice, Con Ed may reduce actual deliveries to
82% of the dependable maximum net capability. Upon 12 hours' notice, Con Ed
may reduce actual deliveries to 82% of the dependable maximum net
capability less 150 MW for an eight hour period on weekday nights a maximum
of 100 times a year. During the first 15 years of the Linden PPA, upon 24
hours' notice, Con Ed may reduce actual deliveries to 47% of the dependable
maximum net capability on weekends and certain holidays. In the last 10
years of the Linden PPA, Con Ed has the right, upon 24 hours' notice, to
reduce the dispatch of the plant to 47% of the dependable maximum net
capability 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.
Voltage Support: The Linden Facility must supply voltage support within a
specified range, as requested by Con Ed, at the point of interconnection,
to be measured at Con Ed's Goethals Station on Staten Island, New York.
Qualifying Facility Status: During any period in which the Linden Facility
ceases, temporarily or permanently, to be a QF, the Linden PPA provides
that Con Ed's rates will be reduced 10%. The FERC may, however, require a
lower rate to be charged during such period. In addition, certain
additional obligations, as set forth in the Linden PPA, are imposed on
Linden Venture in the event of a loss of QF status.
Breach of Contract: Among other events, failure by the Linden Facility to
use good faith efforts to resume deliveries after an outage of 120 days
constitutes a breach. Failure to perform for reasons of force majeure is
not deemed a breach.
Force Majeure: Either party to the Linden PPA may suspend performance
thereunder (except for any obligation to make payments) due to the
occurrence of force majeure, provided that 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 Sale Agreements. Steam produced by the Linden Facility is sold
to Infineum USA L.P. and Bayway Refining Company ("Bayway") under two separate
agreements. Infineum USA L.P. ("Infineum") is a joint venture among Exxon
Chemical Corporation, The Shell Petroleum Company Limited and Shell Chemical
Company. Exxon Chemical Corporation is a division of Exxon Corporation, which
has long term debt credit ratings from Moody's Investors Service ("Moody's") and
Standard & Poor's Ratings Services ("S&P") of Aaa and AAA, respectively. The
Shell Petroleum Company Limited and Shell Chemical Company are members of the
Royal Dutch/Shell Group, which has a long term debt credit rating from S&P of
AAA. Bayway is owned by Tosco Corporation, which has long term debt credit
ratings from Moody's and S&P of Baa2 and BBB, respectively. The base term of
both steam sale agreements expires in April 2017.
Steam Sales from Infineum to Bayway. Historically, under the Linden
contractual steam arrangements, Bayway has purchased all steam in excess of
Infineum's takes. The Infineum steam sale agreement provides that Linden
Venture's maximum delivery obligation is 181,000 lbs/hr for the months of
October through and including May ("peak period") and 109,000 lbs/hr for
the months of June through and including September ("off-peak period"). On
a historical basis, Infineum has taken approximately 120,000 lbs/hr during
the peak period, which it receives at no cost. However, Infineum recently
began taking quantities of steam up to its maximum contract quantity of
181,000 lbs/hr. As a result of the increased takes by Infineum, steam
purchased by Bayway has decreased by 61,000 lbs/hr.
Assuming that Infineum will continue to take steam up to the maximum
contract quantity during the peak and off-peak periods throughout the
contract term, it is estimated that Linden Venture will experience a
decrease in revenues from steam sales to Bayway of approximately $1.3
million per year over
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the life of the contract. It is possible that the revenue loss could
increase if Infineum seeks to take quantities of steam in excess of the
maximum contract quantity. The Infineum steam sale agreement requires
Linden Venture to deliver quantities above the maximum contract quantities
to the extent Linden Venture is able to do so, provided that Linden Venture
is not materially adversely affected under the Linden PPA or Linden
Venture's other agreements to sell steam to other steam users. Linden
Venture believes that deliveries above the maximum contract quantity that
would cause a reduction in sales to Bayway would have a materially adverse
affect on the Bayway steam sale agreement.
Operating Standards for Qualifying Facilities. In order to be a
qualifying cogeneration facility under the Public Utility Regulatory
Policies Act of 1978, the Linden Facility must satisfy an operating
standard and an efficiency standard relating to the production of thermal
energy by the Linden Facility. The operating standard requires that at
least 5% of a facility's total energy output must be useful thermal energy
used in an industrial or commercial process. If a facility achieves an
operating standard of 15% or more, then in order to satisfy the efficiency
standard, the useful power output of the facility plus one-half the useful
thermal energy output must be no less than 42.5% of the total energy input
of natural gas to the facility. If a facility achieves an operating
standard that is below 15% (but above 5%), the facility must achieve an
efficiency standard of at least 45%. The operating and efficiency standards
are calculated for the first 12 months of a facility's operations and for
each calendar year subsequent to the year in which the facility first
produces electricity. The facility commenced operations in 1992. From 1993
through 1998, the Linden Facility achieved an operating standard no lower
than 28.6% and an efficiency standard no lower than 46.0% in any calendar
year.
In order to maintain its status as a qualifying facility, Linden
Venture relies on the fact that the demand for steam by Bayway and Infineum
is significantly above the level required to achieve the minimum operating
and efficiency standards. The Linden steam sale agreements do not have
minimum steam purchase requirements that are tied to the Linden Facility
maintaining qualifying facility status.
Linden Gas Service Agreement. Linden Venture is a party to a gas service
agreement (the "Linden GSA") with PSE&G and Elizabethtown Gas Company (the
"Suppliers"), providing for transportation and partial supply to be furnished
jointly by PSE&G and Elizabethtown Gas Company. Certain provisions of the Linden
GSA are summarized below.
Term: Base term of 25 years. Sales service terminates after 15 years,
unless extended by the Suppliers at the end of the 13th year, in which case
such sales service continues for an additional 10 years. If no such
election is made, the transportation resale service increases to the
maximum quantity during the final 10 years of the base term to replace the
terminated sales service.
Quantities: The base amount of gas provided pursuant to resale service is
85,000 MMBtu/day. The resale amount may be increased or decreased, subject
to a minimum quantity of gas of 73,000 MMBtu/day and a maximum quantity of
143,500 MMBtu/day, over the life of the Linden GSA. Gas delivered pursuant
to sales service is subject to nomination by Linden Venture and can range
from zero to 58,500 MMBtu/day. Sales service is fully interruptible, but
resale service may be curtailed only to the minimum quantity. Delivery of
butane may be used to satisfy the minimum quantity in periods of reduced
resale service quantity. Butane storage and deliverability are sized to
supply the minimum fuel requirements during gas supply interruption. During
such interruptions, the plant can be operated on butane at an output level
of only 300 MW due to butane deliverability restrictions. After the
fifteenth year, the parties may negotiate to adjust the quantities of gas
and butane to reflect changes in electricity purchases by Con Ed.
Obligations: Resale service under the Linden GSA creates an obligation on
Linden Venture to procure a sufficient supply of natural gas to deliver to
the designated interstate pipeline receipt points. Linden Venture must
contract for a year-round supply of natural gas of 85,000 MMBtu/day plus
line loss and compressor fuel. Such supply must be firm from December
through March and must be contractually committed for by the preceding June
1. The Linden Facility must purchase and make available to the Suppliers
certain quantities of butane storage and butane product, which may be
substituted by the
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Suppliers during curtailment on peak days during the period November
through March. The Suppliers must obtain firm transportation capacity for a
period of at least 15 years and obtain interruptible transportation as
necessary.
Services: Under resale service, Linden Venture purchases gas in the U.S.
Gulf Coast production areas from which the Suppliers have pipeline
transportation capacity. Linden Venture delivers to the pipeline receipt
points of the Suppliers in the production area the base amount of 85,000
MMBtu/ day, plus line loss and compressor fuel, and sells such amount to
the Suppliers at those locations. Suppliers then resell these amounts, less
line loss and compressor fuel, to Linden Venture at the Linden Facility's
interconnections with the Suppliers' facilities. Resale service volumes are
at least the minimum quantity, plus line loss and compressor fuel. FERC
Order 636, issued April 1992, prohibits new contracts for such resale
transportation services. The Linden GSA is allowed under the grandfather
provision of FERC Order 636, but it cannot be extended or renewed. Subject
to nominations by Linden Venture, the Suppliers sell additional gas to
Linden Venture from their system supply in an amount that can range from
zero to 58,500 MMBtu/day. Butane also is purchased by Linden Venture from
Bayway for use as back-up fuel if the suppliers fail to deliver natural
gas.
Pricing: Resale service pricing is based on the sum of three components:
- a component based on the price paid by the Suppliers for natural gas
sold to the Suppliers at their receipt points;
- a component based on transportation costs; and
- 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 pricing is based on the sum of three components:
- a component equal to the Suppliers' cost of gas;
- a component based on a specified service fee which can escalate with
the Suppliers' base rates; and
- a component equal to 1.5% of the Suppliers' cost of gas.
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 Linden GSA may be terminated by the Suppliers for
lack of performance by Linden Venture due to the occurrence of force
majeure if the inability to perform extends for 18 months. This period
of time can be extended if certain fees are paid to the Suppliers by
Linden Venture. The Linden GSA may be terminated by Linden Venture if
the Suppliers experience a force majeure event that extends for six
months.
Linden Operation and Maintenance Agreement. General Electric operates and
maintains the Linden Facility pursuant to an operations and maintenance
agreement with a 12 year term which began in 1997. Linden Venture has the right
to terminate the agreement upon 180 days' notice and the payment of specified
amounts at the end of each of the fourth and seventh years and upon 180 days'
notice at the end of the tenth year.
Linden Site Lease. Linden Venture leases the site for the Linden Facility
from Bayway. The term of the Linden site lease is 25 years from the date of
initial commercial operations of the Linden Facility of May 1992. Bayway is
entitled to terminate the Linden site lease in the event Linden Venture defaults
under the Bayway steam sale agreement (subject to various protections in favor
of Linden Venture). The Linden site lease provides Linden Venture with both a
leasehold estate in the Linden site and non-exclusive easements over other
portions of Bayway's property for various interconnections to the Linden
Facility.
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THE CAMDEN FACILITY
Camden Facility Description. The Camden Facility is a 146 MW gas-fired,
combined-cycle cogeneration facility located in Camden, New Jersey.
The Camden Facility is comprised of 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
heat recovery steam generator 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 Company ("Camden Paperboard"). See
"-- Camden Steam Sale Agreement." The steam turbine exhausts into a water cooled
surface condenser to return condensate to the Camden Facility'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 Camden Facility design has
been optimized based on thermal cycle power output of 143 MW net and average
export steam generation volume of approximately 35,000 lbs/hour.
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 PSE&G 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 Facility has been designed, and is being maintained and
operated, to meet the strict environmental standards of the State of New Jersey.
The Camden Facility uses best available control technology to reduce gas turbine
emissions to the level required and permitted by federal and state regulators.
NOx and CO emissions levels are controlled through steam injection into the
turbine combustion chamber and by the design of the combustion turbine. The
Camden Facility incorporates a selective catalytic reduction system to further
reduce CO and NOx emissions.
Camden Power Purchase Agreement. Camden Venture sells the electrical
capacity of the Camden Facility to PSE&G pursuant to a power purchase agreement
(the "Camden PPA") which also provides for the interconnection of the Camden
Facility with PSE&G's transmission system. Certain provisions of the Camden PPA
are summarized below.
Term: Base term through March 2013.
Regulatory Approval: NJBPU authorization was received in June 1989.
Pricing: Pricing is comprised of a capacity payment and an energy charge,
which has three components, each as described below:
Capacity: PSE&G is required to pay a monthly seasonal capacity payment
for power delivered to PSE&G's receipt point. The payment is escalated
at 5% per annum. The rate as of March 31, 1999 was $14.6576/KW/month.
Payments during the summer peak months will not exceed the Camden
Facility's current nominated capacity of 148.5 MW, and payments during
the winter peak months will not exceed the Camden Facility's current
nominated capacity of 151.5 MW. Camden Venture has the right to adjust
these seasonal capacity levels every three years, with a cumulative
maximum of 10% of the initial nominated capacity of 135 MW during summer
months and 145 MW during winter months. Adjustments to date have
resulted in the cumulative summer maximum being achieved. In the event
that any capacity in excess of the nominated capacity has been delivered
in either the summer or winter peak months, PSE&G is entitled to a
refund of a portion of the capacity charges to the extent it has paid
for such excess capacity.
Energy Fixed: PSE&G is required to pay a fixed energy component of
2.0c/KWh for power delivered to PSE&G's receipt point. The fixed energy
component remains unchanged for 20 years.
Energy Fuel: PSE&G is required to pay a fuel charge for power delivered
to PSE&G's receipt point which escalates monthly based upon PSE&G's
average cost of gas in the CIG tariff. The average
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cost of gas 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.
For March 1999, the adjustable component was 1.605c/KWh.
Energy Inflation: PSE&G is required to pay an inflation component for
power delivered to PSE&G's receipt point which escalates annually based
on a GNP index. This component closely tracks a portion of the Camden
Facility's pipeline charges and variable O&M costs, which tend to
increase with inflation. For March 1999, the inflation component was
1.254c/KWh.
Security: The tracking account under the Camden PPA tracks the difference
between payments PSE&G has made to Camden Venture and projected payments
based on PJM capacity and energy rates. These projections are fixed and set
out in the Camden PPA. The tracking account reached a maximum of $54
million during 1997 and will decline to zero by 2001. If a breach by PSE&G
were to result in a termination of the Camden PPA, Camden Venture would be
required to pay to PSE&G the amount, if any, by which the balance in the
tracking account exceeds the damages found to be due to Camden Venture as a
result of such breach. PSE&G has been granted a second lien on the Camden
Facility to secure its rights with respect to the security provisions of
the Camden PPA.
Curtailment: PSE&G is obligated to accept all of the Camden Facility's net
electrical output, except in the following circumstances:
- the Camden Facility fails to comply with certain interconnection,
protection and safety requirements and standards for customer-owned
generating facilities;
- such acceptance would jeopardize the integrity or transmission
facilities of the PSE&G or PJM systems;
- during system emergencies or planned maintenance of the transmission
or interconnection facilities; or
- 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 never curtailed deliveries pursuant to these provisions other
than for minimum general system emergencies and other than during "light load"
periods, which have occurred every year.
Qualifying Facility Status: If sections 201 and 210 of the Public Utility
Regulatory Policies Act of 1978 ("PURPA") are no longer in effect or the
Camden Facility 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 the following
conditions are met:
- the NJBPU does not bar PSE&G from passing the rates through to its
customers;
- federal, state or local laws are not violated; and
- Camden Venture or its owners are not subject to unreasonably
burdensome regulation under the Public Utility Holding Company Act of
1935 ("PUHCA").
However, in such circumstances, Camden Venture must file the Camden PPA
with the FERC, and the FERC might impose a lower rate. See
"Regulation -- Federal Energy Regulation." If one of the above events does
occur, Camden Venture and PSE&G must negotiate in good faith for an arrangement
with substantially similar economic benefits to each party as are provided under
the Camden PPA. If one of the above PURPA events occurs, and the NJBPU denies
rate pass-through of PSE&G's obligations under the Camden PPA, Camden 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. Any such agreement would be subject to approval
by the FERC. If the parties cannot reach such an agreement, either party may
exercise any other right afforded it under the Camden PPA.
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Breach of Contract: Among other events, the failure by Camden Venture to
perform its obligations under the Camden PPA constitutes a breach unless,
within 30 days after notice from PSE&G, Camden Venture 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.
Force Majeure: Either party to the Camden PPA may suspend performance
thereunder (except for any obligation to make payments for expenses already
incurred) due to the occurrence of force majeure, provided that 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 Sale Agreement. Camden Venture sells steam to Camden
Paperboard, a subsidiary of Caraustar Industries, Inc., which has long term debt
credit ratings from Moody's and S&P of Baa1 and BBB, respectively. The agreement
provides for a base period expiring in March 2013. Under the Camden steam sale
agreement, Camden Venture must sell and deliver steam up to a maximum quantity
of 50,000 lbs/hour. However, Camden Venture has agreed to take all reasonable
steps to provide up to 60,000 lbs/hour if requested by Camden Paperboard. Camden
Paperboard has agreed to accept and utilize a minimum quantity of steam
sufficient to preserve the Camden Facility's QF status under PURPA. Camden
Paperboard's obligation is deemed satisfied if it purchases an amount averaging
23,000 lbs/hour from Camden Venture. Camden Paperboard's obligation to take the
minimum steam required for the Camden Facility to maintain QF status will be
excused for a maximum of twelve months in the aggregate due to any of the
following:
- an event of force majeure;
- a major plant overhaul;
- retooling or equipment failure; or
- 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. Camden Paperboard is required to return
steam condensate in specified quantities and qualities. Steam is priced in two
increments. Camden Paperboard receives the first 35,000 lbs/hour at no cost;
thereafter, it pays one-half the avoided boiler fuel cost per 1,000 lbs/hour in
excess of 35,000 lbs/hour on a monthly basis. The Camden steam sale agreement
may not be assigned or transferred by either party without the prior written
consent of the other party, provided that either party may assign it to an
affiliate or a lender.
Camden Gas Service Agreement. Camden Venture is party to a gas service
agreement with PSE&G (the "Camden GSA"), certain provisions of which are
summarized below.
Term: Base term extends through May 2011.
Quantities: PSE&G must provide the Camden Facility with firm gas
transportation (to burner tip) for up to 30,000 MMBtu/day and must
provide interruptible gas transportation service to Camden during peak
period curtailments if interstate pipeline capacity is available. Every
three annual periods following the date of commercial operations, Camden
Venture may adjust the daily quantity plus or minus 2,750 MMBtu/day from
the original contract quantity of 27,500 MMBtu/day to reflect
anticipated changes in the fuel requirements of the Camden Facility.
Obligations: PSE&G must provide firm transportation for 30,000 MMBtu/day
(plus shrinkage) on a continuous, year-round basis, subject to a maximum
of 25 days of interruption per year on any day the U.S. Weather Bureau
forecasts certain average temperatures at Newark International Airport
in Newark, New Jersey. During such interruptions, the Camden Facility
can burn kerosene, Jet-A or L.S. Diesel, although interruptible gas
service may be available via extended service or through other
arrangements that Camden Venture may make for incremental gas supplies.
PSE&G is required to
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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 Venture is obligated to deliver and sell the contract quantity of
gas to PSE&G at the receipt points and to purchase such gas at the
Camden Facility upon delivery by PSE&G. Upon curtailment, the Camden
Facility may substitute alternative fuels and also may use up to 22,000
barrels of alternative fuels in lieu of the resale service for up to 25
days per year.
Services: Gas purchased by Camden Venture is sold to PSE&G, with certain
exceptions, at a price equal to Camden Venture's cost and is then
delivered by PSE&G to the Camden Facility and resold to Camden Venture.
FERC Order 636, issued April 1992, prohibits new contracts for such
resale transportation services. The Camden GSA is allowed under the
grandfather provision of FERC Order 636, but it cannot be extended or
renewed.
Pricing: Resale service pricing is based on three components:
- the price per MMBtu at the receipt point;
- PSE&G's average cost of interstate transportation per MMBtu; and
- a service charge provided to PSE&G.
Force Majeure: The Camden GSA may be terminated in certain circumstances
by PSE&G for lack of performance by Camden Venture due to the occurrence
of force majeure if the inability to perform extends for a period of 18
months. Camden Venture may terminate the Camden GSA if PSE&G experiences
a force majeure event for a period of six months.
Camden Operation and Maintenance Agreement. General Electric operates and
maintains the Camden Facility pursuant to an operations and maintenance
agreement with a 12 year term which began in 1997. Camden Venture has the right
to terminate the agreement upon 180 days' notice and the payment of specified
amounts at the end of each of the fourth and seventh project years and upon 180
days' notice at the end of the tenth project year.
Camden Site Arrangements. Camden Venture acquired the Camden site, which
consists of two adjacent parcels, in January 1992 prior to the commencement of
construction of the Camden Facility.
THE BAYONNE FACILITY
Bayonne Facility Description. The Bayonne Facility is a 176 MW gas-fired,
combined-cycle cogeneration facility located on the site of the IMTT facility in
Bayonne, New Jersey. FERC has certified the Bayonne Facility as a QF under
PURPA.
The Bayonne Facility is comprised of three GE Frame 6B gas turbine
generators and one GE Single Admission/Extraction Condensing 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 heat recovery steam
generators 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
Facility's water cycle. All raw makeup water is purchased from the City of
Bayonne.
The 13.8 KV electrical power produced by the generators is stepped up to
138 KV and delivered by SF6 switchgear to an underground cable which provides
the outgoing power connection to PSE&G. This cable interconnects with PSE&G's
Bayonne Substation in Bayonne, New Jersey, over an interconnection distance of
approximately three miles.
The Bayonne Facility has been designed, and is being maintained and
operated, to meet the strict environmental standards of the State of New Jersey.
The Bayonne Facility uses best available control technology to reduce gas
turbine, water and noise emissions to the levels required and permitted by
federal and
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state regulators. NOx emissions levels are controlled through water injection
into the turbine combustion chambers and by selective catalytic reduction in the
heat recovery steam generators. CO emissions are controlled by the design of the
combustion turbines.
The Bayonne Facility has been designed based on a thermal cycle power
output of 165 MW net and average export steam generation volume of 125,000
pounds per hour. Recent upgrades to the three gas turbine generators, which were
completed in early 1998, increased the Bayonne Facility's output by 6.7 MW.
Transmission Interconnections. Bayonne Venture is party to a transmission
service and interconnection agreement with PSE&G pursuant to which PSE&G agreed
to design, construct, own and operate a 138 KV underground transmission cable
circuit and associated terminal facilities to connect the Bayonne Facility 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. The initial term of the
agreement expires in 2008. A determination by the FERC that the Bayonne Facility
is no longer a qualifying facility is an event of termination under the
transmission and interconnection agreement.
Bayonne Power Purchase Agreements. Bayonne Venture sells 75.8% of the
Bayonne Facility's net electrical output (up to an average annual maximum of 125
MW) to JCP&L pursuant to a power purchase agreement (the "JCP&L PPA"). The
remaining 24.2% of electrical output of the Bayonne Facility (up to 40 MW) is
sold to PSE&G pursuant to a power purchase agreement (the "PSE&G PPA"). Certain
provisions of the JCP&L PPA and the PSE&G and PPA are summarized below.
JCP&L PPA.
Term: Base term expires in October 2008.
Regulatory Approval: Approval by the New Jersey Board of Public Utilities
(the "NJBPU") was received in December 1985. The first amendment to the
JCP&L PPA was not submitted to the NJBPU for approval because the changes
were non-substantive. NJBPU approval of the second amendment to the JCP&L
PPA was received in December 1988.
Pricing: Pricing is determined by the sum of the fixed, gas, gross national
product ("GNP") and retail rate components (as explained below) and is
adjusted annually (the "Applicable Rate"). 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 all electricity
delivered during off-peak periods. The peak period is 8:00 am to 8:00 pm,
Monday through Friday, 52 weeks per year. The components are set forth
below:
Fixed: The fixed component is 2.80c/KWh for electricity delivered to
receipt points, up to a maximum aggregate of 125 MW/hour on an average
annual basis.
Gas: The gas component is indexed against changes in JCP&L's weighted
average cost of gas for the prior year. For March 1999, the gas
component was 3.027c/KWh for power delivered to receipt points, up to a
maximum aggregate of 125 MW/hour on an average annual basis.
GNP Deflator: The general price change component reflects inflation
adjustments. For March 1999, this component was approximately 0.965c/KWh
for power delivered to receipt points, up to a maximum aggregate of 125
MW/hour on an average annual basis.
Retail Rate: The local price change component reflects changes in
JCP&L's retail rates. For March 1999, this component was approximately
0.84c/KWh, for power delivered to receipt points, up to a maximum
aggregate of 125 MW/hour on an average annual basis.
Qualifying Facility Status: The JCP&L PPA does not require the Bayonne
Facility to remain a qualifying facility. However, should the Bayonne
Facility lose its qualifying facility status, Bayonne Venture would be
required to file the JCP&L PPA with the FERC, and the FERC might impose a
lower rate.
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Curtailment: JCP&L may curtail purchases only in the event of force majeure
and other excusable conditions, including emergencies involving the
wheeling system and interruptions, curtailments and reductions required by
prudent electrical practices. The Company does not anticipate that these
limited curtailment provisions will have a material effect on Bayonne
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 Facility to
deliver electricity for 365 consecutive days, for reasons other than force
majeure, constitutes a breach.
Force Majeure: Either party to the JCP&L PPA may suspend performance
thereunder (except for any obligation to make payments) due to the
occurrence of force majeure, provided that 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.
PSE&G PPA.
Term: Base term expires in November 2008.
Regulatory Approval: NJBPU authorization was received in June 1989.
Pricing: Pricing under the PSE&G PPA is comprised of a capacity payment and
an energy charge which has three components, each as described below:
Capacity: PSE&G is required to pay a monthly seasonal capacity payment
for power delivered to PSE&G's receipt point. The payment is escalated
at 4.9% per annum. As of March 31, 1999, the rate was $14.13/Kw/month.
Payments during the summer peak months will not exceed PSE&G's
proportion of the Bayonne Facility's nominated capacity of 150 MW (i.e.,
36 MW), and payments during the winter peak months will not exceed
PSE&G's proportion of the Bayonne Facility's nominated capacity of 179
MW (i.e., 43 MW). Bayonne Venture has the right to adjust these seasonal
capacity levels every year, within a range of plus or minus 10% of the
initial or renominated values.
Energy Fixed: PSE&G is required to pay a fixed energy component of
2.0c/KWh for power delivered to PSE&G's receipt point. The fixed energy
component remains unchanged for twenty years.
Energy Fuel: PSE&G is required to pay a fuel energy component for power
delivered to PSE&G's receipt point which escalates monthly in accordance
with 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 includes an additional component representing transportation through
the local distribution system. For March 1999, the fuel energy component
rate was 1.825c/KWh.
Energy Inflation: PSE&G is required to pay an inflation component for
power delivered to PSE&G's receipt point which escalates annually based
on a GNP index. This component closely tracks a portion of the Bayonne
Facility pipeline charges and variable O&M costs, which tend to increase
with inflation. For March 1999, the inflation component was 0.938c/KWh.
Security: The tracking account under the PSE&G PPA tracks the difference
between payments PSE&G has made to Bayonne Venture and estimated future
capacity and energy rates of the PJM. These estimates are fixed and set out
in the PSE&G PPA. The tracking account reached a maximum of $46 million
during 1997 and will decline to zero by 2005. If a breach by PSE&G were to
result in a termination of the PSE&G PPA, Bayonne Venture would be required
to pay to PSE&G the amount, if any, by which the balance in the tracking
account exceeds the damages found to be due to Bayonne Venture as a result
of such breach. Bayonne Venture has provided a letter of credit to PSE&G
for 10% of the tracking account ($4.6 million at March 31, 1999) to secure
its contingent obligation with respect to the security provisions of the
PSE&G PPA. If the tracking account has not been closed by the end of the
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base term, Bayonne Venture may either (i) pay any credit balance due to
PSE&G or (ii) continue sales to PSE&G under terms that will reduce the
balance to zero over a maximum period of five years.
Curtailment: PSE&G may curtail purchases in the following circumstances:
- the Bayonne Facility fails to comply with certain interconnection,
protection and safety requirements and standards for customer-owned
generating facilities;
- such acceptance would jeopardize the integrity or transmission
facilities of the PSE&G or PJM systems;
- during system emergencies or planned maintenance of the transmission
or interconnection facilities; or
- 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 curtailed the Bayonne Facility
only pursuant to the "light load" provisions.
Qualifying Facility Status: If sections 201 and 210 of PURPA are no longer
in effect or the Bayonne Facility 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 the
following conditions are met:
- the NJBPU does not bar PSE&G from passing the rates through to its
customers;
- federal, state or local laws are not violated; and
- Bayonne Venture or its owners are not subject to unreasonably
burdensome regulation under PUHCA.
However, in such circumstances, Bayonne Venture must file the PSE&G PPA with the
FERC, and the FERC might impose a lower rate. See "Regulation -- Federal Energy
Regulation." If one of the above events does occur, Bayonne Venture and PSE&G
must negotiate in good faith for an arrangement with substantially similar
economic benefits to each party as are provided under the PSE&G PPA. 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, Bayonne 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. Any such agreement would be subject to approval by the FERC. If the
parties cannot reach such an agreement, either party may exercise any other
right afforded it under the PSE&G PPA.
Breach of Contract: Failure by Bayonne Venture to perform its obligations,
including a failure by Bayonne Venture to deliver electric power to PSE&G
for 240 out of 365 consecutive days for any reason other than force majeure
or curtailment, constitutes a breach unless, within 30 days after notice of
breach from PSE&G, Bayonne Venture cures the breach or commences and
diligently pursues a cure.
Force Majeure: Either party to the PSE&G PPA may suspend performance
thereunder (except for any obligation to make payments for expenses already
incurred) due to the occurrence of force majeure, provided that 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 Steam Sale Agreements. Steam produced by the Bayonne Facility is
sold to IMTT-Bayonne and IMTT-BX under two separate agreements. IMTT-Bayonne and
IMTT-BX are subsidiaries of Van Ommeren. The IMTT-Bayonne and IMTT-BX steam sale
agreements are described below.
IMTT-Bayonne. Pursuant to the IMTT-Bayonne steam sale agreement,
IMTT-Bayonne agrees to purchase from Bayonne 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
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based on IMTT-Bayonne's avoided cost of steam. The IMTT-Bayonne steam
sale agreement also provides for the sale of electricity to IMTT-Bayonne
at Bayonne Venture's option. Bayonne Venture has no current plans to
offer IMTT-Bayonne electricity. The IMTT-Bayonne steam sale agreement
provides for a base term of 10 years, which has expired, and for
automatic renewals thereafter for each subsequent year, unless either
party elects to terminate the agreement at the end of a renewal year
upon 60 days' notice. The IMTT-Bayonne steam sale agreement is currently
in full force and effect.
IMTT-BX. Under the terms of the IMTT-BX steam sale agreement, IMTT-BX
agrees to purchase from Bayonne Venture an average of 50,000 lbs/hour of
steam on an annualized basis, at all times that Bayonne Venture has a
minimum of 65,000 lbs/hour of deliverable steam. The pricing formula is
based on IMTT-BX's avoided cost of steam. IMTT-BX has the right to
reduce its required take of 50,000 lbs/hour to the extent that there are
changes in its operations which result in lower annual steam
requirements. The IMTT-BX steam sale agreement provides for an initial
term of five years, which has expired, and for automatic renewals for
each subsequent year, unless either party provides one year's written
notice of its intent to terminate the agreement. The IMTT-BX steam sale
agreement would then terminate one year after such notice or at an
earlier date upon which the parties mutually agree.
Bayonne Gas Supply Arrangement. Bayonne Venture is party to an agreement
for gas service with PSE&G, which provides that PSE&G will supply gas to Bayonne
Venture pursuant to the terms of the PSE&G CIG, as modified by the Bayonne gas
service agreement. The Bayonne Facility requires an average of approximately
36,000 MMBtu/day. Certain provisions of the agreement are summarized below.
Term: Subject to termination upon five days' notice.
Quantities: Bayonne Venture may purchase up to a maximum of 3,000 Mcf/hour
and up to a maximum of 17,600,000 MMBtu/year.
Obligations: The Bayonne Facility must maintain QF status.
Service: Interruptible service is provided by PSE&G under certain
conditions that include PSE&G's continuing ability to provide the service
and the Bayonne Facility's continuing status as a QF. The Bayonne
Facility's supply is subject to 100% interruption during very low
temperature days on eight hours' notice.
In the event that PSE&G interrupts gas service, the Bayonne Facility can
utilize kerosene, which is stored at the site in a day tank with a capacity of
250,000 gallons. In addition, the Bayonne Facility 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 Facility's day tank. Additional fuel is
stored routinely by fuel suppliers at the IMTT -- Bayonne terminal facility.
Over the preceding four winters, the Bayonne Facility's gas supply has been
interrupted a total of ten days. During those periods of interruption, the plant
continued to operate on kerosene.
Pricing: Bayonne 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 at the sources of the
gas;
- PSE&G's estimated interstate pipeline commodity charges;
- 50% of PSE&G's estimated interstate pipeline demand charges; and
- PSE&G's local distribution charge.
The average price of gas under the PSE&G CIG in 1998 was $2.978 per MMBtu.
Bayonne Operation and Maintenance Agreement. General Electric operates and
maintains the Bayonne Facility pursuant to an operations and maintenance
agreement with a twelve year term that began in 1997.
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Bayonne Venture has a right to terminate the Bayonne agreement upon 180 days'
notice and the payment of specified amounts at the end of each of the fourth and
seventh project years and upon 180 days' notice at the end of the tenth project
year.
Bayonne Site Lease Agreement. Bayonne Venture leases the site for the
Bayonne Facility from IMTT-Bayonne and Bayonne Industries, Inc. The initial term
of the Bayonne site lease is 20 years from May 22, 1986. After the expiration of
the initial term, the Bayonne site lease will automatically renew for two
succeeding terms, the first for two years and the second for 10 years, unless
Bayonne Venture elects to terminate the lease upon nine months' notice. Base
rent for the Bayonne Facility is pre-paid for 20 years. The Bayonne site lease
provides Bayonne 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 Facility.
COMPETITION
The Company's Facilities sell power pursuant to long-term agreements with
investor-owned utilities in New York and New Jersey. Because of the terms of the
power purchase agreements for the Facilities, the Company's revenues are not
significantly impacted by competition from other sources of generation. The
power generation industry is rapidly evolving, however, and regulatory
initiatives have been adopted at the federal level and in both New York and New
Jersey aimed at increasing competition in the power generation business. As a
result, it is likely that when the power purchase agreements expire over the
period of 2008-2017, the Facilities will be required to compete in a
significantly different market in which operating efficiency and other economic
factors will determine success. The Company is likely to face intense
competition from generation companies throughout the region as well as from the
wholesale power markets. See "Regulation -- Federal Energy Regulation" and
"-- State Energy Regulation."
EMPLOYEES
The Company has two officers who are responsible for the day-to-day
management of its affairs. The Company has approximately 30 employees in total.
Upon the request of the Company's management, Enron may provide tax, human
resource, legal, office space, cash management, information technology, payroll
and employee benefit related services pursuant to a corporate services agreement
between Enron and the Company. See "Our Management -- Corporate Services
Agreement." Under the Linden, Camden and Bayonne O&M agreements, General
Electric operates and maintains the Facilities and manages all aspects of their
operations.
INSURANCE
The Company has a comprehensive insurance program underwritten by
recognized insurance companies licensed to do business in the State of New
Jersey, which has been reviewed by an independent insurance consultant. The
insurance program includes:
- commercial general public liability, automobile liability and excess
liability insurance;
- property insurance, including "all risks" property damage (including
boiler and machinery); and
- 12 month business interruption insurance.
Limits and deductibles in respect of these insurance policies are comparable to
those carried by other electric generating facilities of similar size.
LITIGATION
In August 1996, Linden Venture brought an arbitration proceeding at the
American Arbitration Association against Ebasco Constructors, Inc. and ENSERCH
Corporation (the "Respondents") for alleged design deficiencies and warranty
claims with respect to the construction of the Linden Facility. The Respondents
brought a counterclaim against Linden Venture seeking the recovery of extra
costs and delay
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damages related to the performance of the construction contract. The arbitration
panel subsequently reduced Linden Venture's claim against the Respondents to
$9.0 million and reduced the Respondents' initial counterclaim to $3.9 million.
In July 1998, the Respondents filed a revised counterclaim against Linden
Venture in the amount of $16.0 million. In April 1999, the proceeding was
settled and Linden Venture received a cash payment of $1.2 million.
The Company's subsidiaries are also involved in or threatened with other
various legal proceedings from time to time arising in the ordinary course of
business. The Company does not believe that any liability arising from any such
current proceedings will have a material adverse effect on its consolidated
operation or financial position.
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REGULATION
Our Company is subject to complex energy, environmental and other laws and
regulations at the federal, state and local levels in connection with the
ownership and operation of the 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. 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.
FEDERAL ENERGY REGULATION
Public Utility Regulatory Policies Act of 1978 and implementing regulations
An 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 all qualifying cogeneration facilities from PUHCA
regulation based on the ownership and operation of a QF, and exempts most
categories of QFs from most provisions of the Federal Power Act (the "FPA") and,
except under certain limited circumstances, state laws concerning rate or
financial regulation. We believe that each of the Facilities currently meets the
requirements under PURPA for QF status.
PURPA provides two primary benefits to owners of QFs. First, QFs generally
are relieved of compliance with extensive federal, state and local regulations
that control the organizational and financial structure of an entity that owns
or operates an electric generating plant and the prices and terms on which
electricity may be sold by the plant to a wholesale purchaser. 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 that differ from the
utility's avoided cost. Due to the decrease in energy prices in comparison to
energy prices in the 1980s, when many PURPA avoided cost contracts were
established, many existing QF contracts provide for avoided costs that are
considerably higher than the cost of power available from other sources.
The FERC and the federal appellate courts have rejected utility efforts to
reduce the prices in QF contracts unilaterally, without the consent of the QF
owner. In Freehold Cogeneration Associates, L.P. v. Board of Regulatory
Commissioners of the State of New Jersey et. al., 44 F.3d 1179 (3d Cir. 1995),
cert. denied, 516 U.S. 815 (1995), a ruling which the U.S. Supreme Court
declined to review, the U.S. Court of Appeals for the Third Circuit held that a
state regulatory commission is preempted by PURPA from lowering the rates for
purchases from a QF in a contract that the state commission had previously
approved. Similarly, in New York State Electric & Gas Corp., 71 FERC para.
61,027 (1995), order denying reconsideration, 72 FERC para. 61,067 (1995),
dismissed, 117 F.3d 1473 (1997), the FERC rejected a request by a utility that
the FERC hold that above-current market rates established in contracts between
QFs and a utility violate PURPA. The FERC held that its regulations do not
prohibit rates based on projected avoided costs where the rates subsequently
differ from actual avoided costs at the time of delivery and stated that it
would not disturb QF contracts if the contracts were not challenged as exceeding
avoided costs at the time they were signed.
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. A QF also 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. In the case of
partnerships, joint ventures and limited liability companies, the FERC has
defined "ownership" to mean that a utility may not
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receive more than 50% of the stream of economic benefits from the operation of
the QF or possess more than 50% control of the QF. The FERC has interpreted
"control" to mean the ability unilaterally to alter the "stream of benefits" or
enter into QF-related contracts with affiliates. Under the FERC's PURPA
regulations, a holding company that is exempt from PUHCA regulation pursuant to
Section 3(a)(1) of PUHCA is considered a "utility" for purposes of the FERC's
PURPA restrictions on utility ownership. Upon Enron's 1997 acquisition of
Portland General Corp. and its subsidiary Portland General Electric Co., Enron
became a holding company exempt under Section 3(a)(1) of PUHCA and a "utility"
for purposes of the FERC's PURPA ownership regulations. Consequently, the
aggregate of Enron's and any other utilities' ownership interest in a QF cannot
exceed 50%.
Certain factors necessary to maintain QF status are subject to risks
outside our 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, we would seek to replace the thermal energy
customer or find another use for the thermal energy which meets PURPA's
requirements, but we cannot assure you that this would be possible.
If one of the plants in which we have 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 under PURPA. Loss of such exemptions could:
- trigger certain rights of termination under power purchase agreements;
- subject the plant owner to rate and financial regulation as a public
utility under the FPA and state law; and
- if the plant owner were not an exempt wholesale generator ("EWG"), result
in our Company inadvertently becoming a public utility holding company by
virtue of our owning more than 10% of the voting securities of, or
controlling, a facility that would no longer be exempt from PUHCA.
Loss of QF status might also trigger defaults under covenants to maintain QF
status in financing agreements and under the indenture. If a plant in which we
have an interest should lose its status as a QF and the FERC were not to waive
its QF regulations, FERC would require our venture that owns the plant to refund
to the utility power purchaser, an amount equal to the difference between the
contract rate and the utility's hourly marginal variable cost, plus interest,
for the period in which QF status was not retained and power sales were made at
the contract rate. If a power purchase agreement expressly provides for a rate
to apply in circumstances in which the Facility is no longer a QF, as do some of
the power purchase agreements for the Facilities, the FERC would permit that
rate to be charged, if it is shown that the contract "is the product of market
forces." If such a showing cannot be made, FERC precedent indicates that the
FERC would establish a rate based on the facility's cost-of-service, capped at
the contract rate. See "Our Business -- The Linden Facility -- Linden Power
Purchase Agreement," "-- The Camden Facility -- Camden Power Purchase Agreement"
and "-- The Bayonne Facility -- Bayonne Power Purchase Agreements."
Under current FERC policy, the FERC will continue to make available the
exemptions from PUHCA, the FPA, and state utility regulation available to a QF
that fails to satisfy the applicable standards unless the non-compliance was
marked by long duration or frequent occurrence. In addition, under the Energy
Policy Act of 1992, if the entity that owns a plant can be qualified as an EWG,
the entity 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 is to
qualify the plant as an EWG. Each of the Facilities has been qualified as an
EWG. EWG status, however, may not address the potential default issues relating
to maintenance of QF status under power and steam purchase agreements and
financing instruments. EWGs must also apply to the FERC for rate approval for
wholesale transactions and are not permitted to make retail sales of electricity
(such as to the thermal energy customer) unless the facility is also a QF.
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Public Utility Holding Company Act of 1935
Under PUHCA, any corporation, partnership or other legal entity which owns
or controls 10% or more of the outstanding voting securities of a "public
utility company" or a company which is a "holding company" for a public utility
company is subject to registration with the Commission and regulation under
PUHCA, unless eligible for an exemption from regulation under PUHCA. A holding
company of a public utility company that is subject to registration is required
by PUHCA to limit its utility operations to a single integrated utility system
and to divest any other operations not functionally related to the operation of
that utility system. Approval by the SEC 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 generation facilities without subjecting the owner or operator to
registration or regulation under PUHCA.
Federal Natural Gas Transportation Regulation
Each of our three power plants is fueled with natural gas. 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. Importantly, virtually all of the pending
proposals to repeal PURPA would do so prospectively. That is, they would
"grandfather" or not impair or invalidate existing QF contracts.
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.
Many state legislatures and state utility commissions have already
implemented, and others are currently studying, a number of proposals to
restructure the electric retail industry in the United States. Such
restructuring could permit "customer choice" for retail customers. Retail
customers would be given the opportunity to choose their electricity supplier,
thus creating a more competitive energy market. In April 1996, the FERC issued
Order No. 888, 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. Order No. 888 has been
the subject of rehearing and now is undergoing judicial review. Order No. 888
endorses the recovery of legitimate and verifiable "stranded costs" (fixed costs
that will be "stranded" by the ability of wholesale customers to choose new
electric power suppliers). 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
ends. In addition,
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future electric rates may be deregulated in a restructured United States
electric industry, and increased competition may result in lower rates and less
profit for sellers of electricity in the United States. The effect of any such
restructuring cannot be fully predicted.
The Clinton administration recently announced a proposal to expand retail
competition in 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 be
required to open their markets to retail competition by January 1, 2003.
However, a state could "opt out" of retail competition, thus not allowing retail
customers a choice of supplier if it believes its consumers would be better off
under the status quo or an alternate state-crafted plan. 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 (including contracts with QFs) 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 supplement an Environmental Protection Agency ("EPA") proposal to limit
power plant emissions of nitrogen oxide (NOx) by giving EPA authority to
establish a NOx trading program. EPA 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 our business.
Over the last four years, Congress has considered various pieces of
legislation to restructure the electricity industry, including those described
above, that would require customer choice, repeal PURPA, repeal PUHCA, and the
like. The debate is likely to continue, and perhaps intensify, during the new
Congress. The effect of enacting any such legislation cannot be predicted with
any degree of certainty. It seems likely that the existing PURPA contracts would
be given favorable treatment in any successful legislative proposal. The
effects, of any possible PUHCA amendments are more difficult to predict. They
could conceivably have a material adverse effect on our Company. But it seems
more likely that Congress would want to encourage increased competition in
generation, rather than discourage it. Thus, it can be expected to deal in a
positive way with any likely transitional issues stemming from PUHCA repeal in
an effort to encourage new generating capacity, and new generation owners,
rather than to discourage new competitors.
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, it is generally inclined to "pass through"
the expense associated with an independent power contract to the utility's
retail customers. In addition, retail sales of 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 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 location 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
On April 30, 1997, NJBPU issued an order adopting its Final Report in the
Energy Master Plan process entitled "Restructuring the Electric Power Industry
in New Jersey: Findings and Recommendations." The
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principal goal of NJBPU according to its Final Report was 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 a restructuring plan, an unbundled rate filing, and a stranded
costs filing with NJBPU pursuant to the requirements of the NJBPU's Final
Report. On September 14, 1998, legislation was introduced in the New Jersey
Assembly to authorize the NJBPU to permit competition in the New Jersey energy
market. That legislation, which was adopted by the New Jersey legislature on
January 28, 1999 and signed by the governor on February 7, 1999, provides that
August 1, 1999 will be the starting date for full retail choice, with full
implementation no earlier than June 1 but no later than August 1.
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.
NJ Stranded Costs. The New Jersey legislation includes provisions for the
determination and recovery of stranded costs of electric utilities. Stranded
costs are defined by the legislation in Section 13(c) 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 and the costs of buydowns or buyouts of power
purchase contracts." 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." Stranded costs arising from the power purchase agreements
pertaining to the facilities discussed herein would appear to qualify for
coverage in the latter category.
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
December 2, 1997. On May 19, 1999, the NJBPU approved a settlement which
provides for the recovery by JCP&L of $525 million of stranded costs associated
with above-market non-utility generator ("NUG") contracts. The PSE&G hearing
commenced on July 23, 1997. A partial settlement among Enron, PSE&G, the
independent power producer group, certain commercial consumers, a labor union
and certain other parties was approved by the NJBPU with minor modifications in
late April 1999. The settlement provides for the full and timely recovery of the
outer market costs with regard to the NUG contracts.
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 NUGs'
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."
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NJBPU based its determination that it lacks jurisdiction to order
modification of NUGs' contracts on the decision of the Third Circuit Court of
Appeals in Freehold, 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 NUGs' 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 to explore all
reasonable means to mitigate independent power producer's 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 and PSE&G have reported to NJBPU that
they intend to pursue efforts to mitigate their above-market costs for NUG power
purchase agreements on a voluntary basis.
In conclusion, while New Jersey regulators have provided for recovery of
the "above market" or stranded costs associated with the power purchase
agreements, there will continue to be public scrutiny of those costs and
pressure to renegotiate the power purchase agreements, using all reasonably
available measures.
New York
Retail Electricity. The NYPSC has been conducting a generic "competitive
opportunities" proceeding to determine how to introduce competition into retail
electricity markets in New York. On May 20, 1996, the NYPSC issued a policy
statement in connection with that proceeding in which it endorsed a fundamental
restructuring of the electric industry in New York State. The NYPSC's goals, as
stated in its policy statement, are lower prices for consumers from competition,
increased choice of suppliers and services for customers, information
dissemination to allow educated consumer 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. Pursuant to this policy, the NYPSC directed all New York utilities,
including Con Ed, to file proposed transition plans that address market
structure issues, the restructuring of their corporate organization, operational
constraints, a schedule allowing retail customers to choose an alternative
supplier of electricity, a rate plan for the duration of the transition period
and for recovering stranded costs.
Con Ed made such a filing on October 1, 1996. On March 13, 1997, Con Ed and
the NYPSC staff entered into a Settlement Agreement. Certain aspects of the
Settlement Agreement, which was approved by the NYPSC by order issued on
September 23, 1997, are summarized below. The summary of the Settlement
Agreement is qualified by reference to the actual terms thereof, copies of which
are publicly available as an attachment to the order.
The Settlement Agreement provides for a transition to a competitive
electric market by instituting "retail access" over a five-year period, a
five-year rate plan for the transition, a reasonable opportunity to recover
stranded costs, the divestiture by Con Ed of at least 50% of its New York City
fossil-fueled generating capacity (Con Ed subsequently agreed to divest 100% of
this capacity), and, subject to shareholder and other approvals that were
subsequently obtained, a corporate reorganization into a holding company
structure.
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With respect to contracts to purchase electricity from a NUG, like Linden
Venture, the Settlement Agreement provides an incentive for Con Ed to mitigate
NUG costs during the transition period. Con Ed will be permitted to retain the
full reductions in fixed NUG costs during the five-year period and 30% of
reductions in variable NUG costs for a period of 18 months resulting from
renegotiation, buyout or buydown of NUG contracts exclusive of financing related
savings from securitization. Con Ed will be permitted a reasonable opportunity
to recover the amount by which actual costs of its purchases from NUGs exceed
the market value after the transition period. Any potential disallowance after
the transition period will be limited to the lower of 10% of the above-market
costs or $300 million. The potential disallowance will be offset by NUG contract
mitigation achieved by Con Ed after the beginning of the transition period and
10% of the gross proceeds from generating unit sales to third parties. Con Ed
will be permitted a reasonable opportunity to recover any costs subject to
disallowance that are not offset by these two factors if it makes good faith
efforts in implementing provisions of the Settlement Agreement leading to the
development of a competitive electric market in its service territory. The
Company believes that Con Ed is likely to successfully offset all or a very
substantial portion of its potential $300 million disallowance based upon
recently completed NUG restructurings and expected proceeds from recently
completed divestiture auctions. While stranded cost recovery relating to the
Linden PPA is not guaranteed, the Settlement Agreement and Con Ed's actions and
announcements to date appear consistent with the Company's expectations that Con
Ed will achieve full recovery of such costs.
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. Approval for the contract and contract amendments was
supported by affirmative recommendations from the NYPSC staff. The approval was
based on estimates that electricity purchased pursuant to the contract would be
less costly than estimates of Con Ed's long-run avoided cost. The NYPSC
authorized Con Ed to recover "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. Nevertheless, there are ongoing investigations into certain
aspects of NYPSC regulation of NUG's in New York. The NYPSC has granted
utilities permission to closely monitor the QF status of plants having contracts
with New York utilities. This policy was challenged at the FERC, which affirmed
it with certain modifications. There is also still pending before the NYPSC a
request by the utilities for a clarification of their right to suspend purchases
from QFs due to operational circumstances (i.e., light load), when purchases
from QFs will result in costs greater than those which the utility would incur
if it did not make such purchases because of the inability to curtail other
"must-run" units. However, Con Ed specifically waived this right in the second
amendment to the Linden PPA.
Retail Natural Gas. In November 1998, the NYPSC issued a policy statement
pursuant to which it will encourage local distribution companies to exit the
business of selling natural gas to end users and instead become
transportation-only companies over the next three to seven years, subject to a
New York statutory provision that all end users have access to a "provider of
last resort." As noted in the discussion of the Linden PPA, Con Ed is required
to pay the actual fuel costs attributable to electricity actually delivered from
the Linden Facility. Con Ed's fuel cost payment is adjusted for changes in Con
Ed's annual weighted average cost of gas since 1989, with Linden Venture either
absorbing excess costs or receiving an incentive payment for cost savings. If,
pursuant to the NYPSC policy, Con Ed ceases selling gas or reduces its sales
significantly, Con Ed's annual weighted average cost of gas may be altered
significantly and in a manner that is difficult to predict. In such a
circumstance, Con Ed may seek to negotiate a new method for determining Con Ed's
responsibility for fuel costs under the Linden PPA.
ENVIRONMENTAL REGULATION
Our operations are subject to numerous federal, state, and local laws and
regulations governing the discharge of materials into the environment or
otherwise relating to environmental protection and restriction upon land use.
These laws and regulations primarily involve:
- the generation, handling, storage, transport, and disposal of hazardous
substances;
- the emission or discharge of air and water pollutants;
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- the emission of noise from the facilities; and
- the implementation of safety and health standards with respect to our
facilities or the public or environment in general.
In addition, these laws and regulations in many cases require the Company to
secure permits and other regulatory approvals with respect to its ongoing or
planned projects, which often triggers the need to comply with lengthy and
complex permitting or approval procedures, as well as impose ongoing reporting
and compliance obligations. Modified or renewed permits and authorizations may
be required for any physical or operational changes to our facilities. Failure
to comply with these applicable laws and regulations, including any permits or
authorizations required thereunder, may result in the assessment of
administrative, civil, and criminal penalties, imposition of cleanup costs and
liens, and, to a lesser extent, issuance of injunctions to limit or cease
operations. As discussed below, while we believe we are in substantial
compliance with applicable laws and regulations, there can be no assurance that
we will be able to obtain all necessary permits and approvals for proposed
projects or that compliance with new or changed environmental laws and
regulations would not have a material adverse effect on our results of
operations, financial condition, or competitive position.
Federal Clean Air Act (the "CAA")
Our operations are subject to the CAA and comparable state and local
requirements. As originally enacted, the CAA set guidelines for emission
standards for major pollutants (e.g., sulfur dioxide and oxides of nitrogen)
from newly built sources. Amendments to the CAA were adopted in 1990 which
contain provisions that attempt to reduce emissions from existing sources,
particularly previously exempted older power plants, and thus may result in
gradual imposition of certain pollution control requirements with respect to air
emissions from the operations of our Facilities. We believe that all of our
plants are in compliance in all material respects with the applicable federal
and state performance standards under the CAA, the 1990 amendments, and
comparable state laws. In addition, the 1990 amendments to the CAA 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 1994 Memorandum of Understanding between
the member states of the NEOTR, New Jersey has proposed regulations to implement
a region-wide plan for nitrogen oxide emissions. While our plants are expected
to be subject to this rule (once finalized), and therefore subject to additional
operating requirements, we believe that the new rules will not have a material
impact on our ability to maintain our present level of operations.
Federal Clean Water Act (the "CWA")
Our operations are also subject to the CWA and analogous state laws
relating to the discharge of pollutants to surface and groundwaters. The CWA and
state laws also establish requirements for municipally-owned sewage treatment
plants, including pretreatment requirements for industrial users of those
plants. Local sewerage authorities also have established regulations governing
connections to and discharges into their sewer systems and treatment plants.
Pursuant to these laws and regulations, we are required to obtain permits for
the discharge of our wastewater and stormwater runoff and to develop and
implement spill prevention, control and countermeasure plans with respect to its
handling and storage of oil. We believe that we are in substantial compliance
with the requirements of the CWA and analogous state laws and that any
non-compliance would not have a material adverse effect on our Company.
Resource Conservation and Recovery Act ("RCRA")
Our Company generates wastes, including hazardous wastes, that are subject
to RCRA and comparable state statutes. RCRA regulates the generation, treatment,
storage, handling, transportation, and disposal of hazardous and non-hazardous
wastes. Moreover, the EPA and various state agencies have limited the approved
methods of disposal for certain hazardous and non-hazardous wastes. We believe
that we are in
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substantial compliance with RCRA and comparable state statutes, and we do not
expect the cost of disposal of the regulated wastes to be material.
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"
or "Superfund")
CERCLA and similar state laws impose liability, without regard to fault or
the legality of the original conduct, on certain classes of persons that are
considered to have contributed to the release of a "hazardous substance" into
the environment. These persons include the owner or operator of the disposal
site or sites where the release occurred and companies that transported,
disposed or arranged for the transport or disposal of the hazardous substances
found at the site. Persons who are or were responsible for releases of hazardous
substances under CERCLA may be subject to joint and several liability for the
costs of cleaning up the hazardous substances that have been released into the
environment and for damages to natural resources, and it is not uncommon for
neighboring landowners and other third parties to file claims for personal
injury and property damage allegedly caused by the hazardous substances released
into the environment. The New Jersey 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. As of the present time, we believe that we are not
subject to liability for any Superfund or New Jersey Spill Act matters. We
generate wastes, including hazardous wastes, that are transported offsite for
disposal at third party waste disposal sites, however, and thus we cannot assure
you that we will not incur liability under CERCLA or the New Jersey Spill Act in
the future.
We currently own or lease properties that for many years in the past have
been used for oil refining and/or storage activities or other industrial
purposes. Although we believe that we are currently utilizing operating and
disposal practices that are in substantial compliance with applicable
environmental laws and regulations, historical operating and disposal practices
on the properties by third parties not under our control may have resulted in
the disposal or release of hydrocarbons or other wastes upon the properties or
on or under other locations where such wastes have been taken for disposal.
These properties and the wastes disposed thereon may be subject to CERCLA, RCRA,
and analogous state laws including the New Jersey Spill Act. Under such laws, we
could be required to remove or remediate previously disposed wastes (including
wastes disposed of or released by prior owners or operators) or property
contamination (including groundwater contamination by prior owners or operators)
to prevent future contamination.
New Jersey Industrial Site Recovery Act ("ISRA")
Our acquisition of our interests in the Facilities resulted in the
triggering of ISRA, obligating the sellers (as the parties who transferred their
legal interests in entities indirectly owning or operating properties qualifying
as "industrial establishments") to comply with requirements under ISRA. In
general, ISRA requires entities who transfer such legal interests to notify the
New Jersey Department of Environmental Protection ("NJDEP") of the triggering of
ISRA and to obtain NJDEP approval prior to the closing of any such transfer of
legal interests. In order to obtain NJDEP approval for a triggering event, the
responsible party must conduct a satisfactory investigation of the environmental
conditions of the industrial establishments and, if necessary, commit to
undertake appropriate remedial measures to address any contamination present at
the industrial establishments. The sellers obtained NJDEP approval for the
transfer of their legal interests in each of the Facilities. Based on the
foregoing, we believe that we will not incur any material cost with respect to
ISRA as a result of the acquisition of our interests in the Facilities.
Nevertheless, we cannot assure you that any imposition upon our Company of ISRA
cleanup requirements due to future events that trigger ISRA would not have a
material adverse effect on our Company.
New Jersey Toxic Catastrophe Prevention Act ("TCPA")
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. Our Bayonne Facility is subject to these requirements due to
its use of anhydrous ammonia in its air pollution control systems. We believe
that we are in material compliance with the TCPA requirements.
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OUR MANAGEMENT
We are a member managed limited liability company, which means that our
members are responsible for managing our affairs. Our members have designated
East Coast Power Holding Company L.L.C., a wholly owned subsidiary of JEDI II
("ECP Holding Company"), as the managing member of our Company. ECP Holding
Company has full authority to manage our business and affairs. ECP Holding
Company cannot be removed as managing member unless it agrees to be removed. Our
executive officers and employees, who include former officers and employees of
the entities we acquired in the Acquisition, are responsible for the day-to-day
activities of our Company.
Our other members do not have any authority to manage our Company. However,
ECP Holding Company must have the consent of the other members (or their
successors) to:
- change our business purpose;
- change or create obligations of the other members under our debt
agreements; or
- cause us to merge or consolidate with another company.
JEDI II is a Delaware limited partnership. The general partner of JEDI II
is an indirect wholly owned subsidiary of Enron. The limited partners of JEDI II
are CalPERS and an indirect wholly owned subsidiary of Enron. The general
partner of JEDI II is responsible for the management of JEDI II's investment in
our Company.
EXECUTIVE OFFICERS
We currently have two officers who are appointed by ECP Holding Company and
may be removed by ECP Holding Company at any time. Our officers are responsible
for the day-to-day management of our affairs, including our general
administrative affairs and the operation and maintenance of the Facilities in
accordance with annual budgets approved by ECP Holding Company.
Ross D. Ain, 52, has served as President, Business Development of the
Company since February 1999. From November 1994 to January 1999, he served as an
executive officer of various companies affiliated with the Cogen Tech Group,
most recently as Vice Chairman of Cogen Technologies Generating Company. Prior
to November 1994, Mr. Ain 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.
Joseph M. Bollinger, 52, has served as President, Generating of the Company
since February 1999. From June 1986 to January 1999, he served as an executive
officer of various companies affiliated with the Cogen Tech Group, most recently
as President of Cogen Technologies Generating Company. Prior to June 1986, Mr.
Bollinger held positions in engineering and project management with GE.
CORPORATE SERVICES AGREEMENT
At our request, Enron may provide certain corporate, administrative and
support services to the Company and its subsidiaries under a corporate services
agreement. Fees paid under the agreement will be provided on a cost-plus basis,
which we believe will approximate the fair market value of the service actually
provided.
Either party may reduce the level of any of the services provided or
terminate the agreement upon 30 days' prior written notice.
RELATED PARTY TRANSACTIONS
The Company and its subsidiaries may from time to time enter into contracts
or other business relationships with one or more of its members or their
affiliates. For example, we expect that Enron will assist us in purchasing
natural gas for our power plants and in arranging for gas transportation
service. Enron may provide backup fuel management, power marketing or other
services to us and our subsidiaries. In addition,
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Enron has provided credit support in the form of an undertaking which eliminates
our obligation to fund a debt service reserve account (as described in
"Description of the New Notes"). We pay Enron a fee for providing this
undertaking. Enron has also entered into several letters of credit for our
benefit for which we also pay Enron a fee. Our limited liability company
agreement provides that the terms of such transactions be comparable or at least
as favorable to us as the terms of arms' length transactions among unaffiliated
parties and that the terms of the transaction be approved by CalPERS or another
person that is not affiliated with Enron, is not an electric utility as defined
in federal regulations and is an equity holder in the entity which is a party to
the contract with Enron. In addition, the indenture provides that we may not,
and may not permit any subsidiary to, enter into any material transaction or
arrangement with any affiliate, whether or not in the ordinary course, that is
not on terms and conditions at least as favorable as would be obtained in a
comparable arm's length transaction with a person or entity other than an
affiliate, as determined in good faith by our managing member.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the issuance of the outstanding notes, we entered into a
registration rights agreement. Under the registration rights agreement, we
agreed to:
- use our reasonable best efforts to file a registration statement with the
SEC for an exchange of the new notes for the outstanding notes under the
Securities Act and to keep such registration statement effective until
the closing of such exchange offer;
- use our reasonable best efforts to cause the exchange offer to be
consummated within 270 days following the original issuance of the
outstanding notes;
- keep the exchange offer open for acceptance for a period of not less than
30 calendar days after the date notice thereof is mailed to holders of
the outstanding notes, or longer if required by applicable law; and
- accept for exchange all outstanding notes duly tendered and not validly
withdrawn in the exchange offer in accordance with the terms of the
exchange offer registration statement and letter of transmittal.
As soon as practicable after the exchange offer registration statement
becomes effective, we will offer the holders of outstanding notes who are not
prohibited by any law or policy of the SEC from participating in this exchange
offer the opportunity to exchange their outstanding notes for new notes
registered under the Securities Act that are substantially identical to the
outstanding notes, except that the new notes will not contain terms with respect
to transfer restrictions, registration rights and additional interest.
Under limited circumstances, we will use our reasonable best efforts to
cause the Securities and Exchange Commission to declare effective a shelf
registration statement with respect to the resale of the outstanding notes and
keep the statement effective for up to two years after the effective date of the
shelf registration statement. These circumstances include:
- if any changes in law or their interpretations by the staff of the SEC do
not permit us to effect the exchange offer as contemplated by the
registration rights agreement;
- if the exchange offer if not consummated within 270 days after April 20,
1999 (unless the exchange offer has commenced, in which case if the
exchange offer is not consummated within 90 days after the date on which
the exchange offer commenced);
- if any initial purchaser of the outstanding notes so requests with
respect to outstanding notes held by it within 150 days following
consummation of the exchange offer;
- if any holder of the outstanding notes (other than an initial purchaser)
notifies us that it is not permitted to participate in the exchange offer
or has participated in the exchange offer and has received new notes that
are not freely tradeable; and
- if the initial purchasers do not receive freely tradeable new notes in
exchange for outstanding notes constituting any portion of an unsold
allotment.
Additional interest will accrue on the notes at a rate of 0.5% per annum in
the following circumstances:
- the exchange offer registration statement is not filed with the SEC on or
prior to the 90th calendar day following April 20, 1999;
- the exchange offer registration statement is not declared effective on or
prior to the 240th calendar day following April 20, 1999 or the exchange
offer is not consummated on or prior to the 270th calendar day following
April 20, 1999; or
- a shelf registration statement is not declared effective when required.
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Upon the filing of the exchange offer registration statement, the effectiveness
of the exchange offer registration statement, the consummation of the exchange
offer or the effectiveness of a shelf registration statement, as the case may
be, the interest rate borne by the notes from the date of such filing,
effectiveness or consummation, as the case may be, will be reduced to the
original interest rate; provided, however, that, if after any such reduction in
interest rate, a different event specified in the three clauses above occurs,
the interest rate may again be increased pursuant to the foregoing provisions.
To exchange your outstanding notes for transferable new notes in the
exchange offer, you will be required to make the following representations:
- any new notes will be acquired in the ordinary course of your business;
- you have no arrangement or understanding with any person or entity to
participate in the distribution of the new notes;
- you are not engaged in and do not intend to engage in the distribution of
the new notes;
- if you are a broker-dealer that will receive new notes for your own
account in exchange for outstanding notes, you acquired those notes as a
result of market-making activities or other trading activities and you
will deliver a prospectus, as required by law, in connection with any
resale of such new notes; and
- you are not our "affiliate," as defined in Rule 405 of the Securities
Act.
In addition, we may require you to deliver information to be used in
connection with the shelf registration statement in order to have your notes
included in the shelf registration statement and benefit from the provisions
regarding additional interest described in the preceding paragraphs. A holder
who sells outstanding notes under the shelf registration statement generally
will be required to be named as a selling securityholder in the related
prospectus and to deliver a prospectus to purchasers. Such a holder will also be
subject to the civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the registration rights
agreement that are applicable to such a holder, including indemnification
obligations.
The description of the registration rights agreement contained in this
section is a summary only. For more information, you may review the provisions
of the registration rights agreement that we filed with the SEC as an exhibit to
the registration statement of which this prospectus is a part.
RESALE OF NEW NOTES
Based on interpretations of the SEC staff in no action letters issued to
third parties, we believe that new notes issued under the exchange offer may be
offered for resale, resold and otherwise transferred by you without compliance
with the registration and prospectus delivery provisions of the Securities Act,
if:
- you are not our "affiliate" within the meaning of Rule 405 under the
Securities Act;
- such new notes are acquired in the ordinary course of your business; and
- you do not intend to participate in the distribution of such new notes.
If you tender in the exchange offer with the intention of participating in
any manner in a distribution of the new notes, you
- cannot rely on such interpretations by the SEC staff; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.
Unless an exemption from registration is otherwise available, any security
holder intending to distribute new notes should be covered by an effective
registration statement under the Securities Act containing the selling security
holder's information required by Item 507 of Regulation S-K under the Securities
Act. This
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prospectus may be used for an offer to resell, resale or other retransfer of new
notes only as specifically described in this prospectus. Only broker-dealers
that acquired the outstanding notes as a result of market-making activities or
other trading activities may participate in the exchange offer. Each
broker-dealer that receives new notes for its own account in exchange for
outstanding notes, where such outstanding notes were acquired by such
broker-dealer as a result market-making activities or other trading activities,
must acknowledge that it will deliver a prospectus in connection with any resale
of the new notes. Please read the section captioned "Plan of Distribution" for
more details regarding the transfer of new notes.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions described in this prospectus
and in the letter of transmittal, we will accept for exchange any outstanding
notes properly tendered and not withdrawn prior to the expiration date. We will
issue new notes in principal amount equal to the principal amount of outstanding
notes surrendered under the exchange offer. Outstanding notes may be tendered
only for new notes of the same maturity date and only in integral multiples of
$1,000 (except for the 2008 notes, the exchange of which will reflect a partial
payment of principal on June 30, 1999).
The exchange offer is not conditioned upon any minimum aggregate principal
amount of outstanding notes being tendered for exchange.
As of the date of this prospectus, $837,869,920 aggregate principal amount
of the outstanding notes are outstanding, reflecting the June 30, 1999 payment
of principal on the 2008 notes in the amount of $12,130,080, or 4.098% of the
original principal amount outstanding. This prospectus and the letter of
transmittal are being sent to all registered holders of outstanding notes. There
will be no fixed record date for determining registered holders of outstanding
notes entitled to participate in the exchange offer.
We intend to conduct the exchange offer in accordance with the provisions
of the registration rights agreement, the applicable requirements of the
Securities Act and the Securities Exchange Act and the rules and regulations of
the SEC. Outstanding notes that are not tendered for exchange in the exchange
offer will remain outstanding and continue to accrue interest and will be
entitled to the rights and benefits such holders have under the indenture
relating to the notes and the registration rights agreement.
We will be deemed to have accepted for exchange properly tendered
outstanding notes when we have given oral or written notice of the acceptance to
the exchange agent and complied with the applicable provisions of the
registration rights agreement. The exchange agent will act as agent for the
tendering holders for the purposes of receiving the new notes from us.
If you tender outstanding notes in the exchange offer, you will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
outstanding notes. We will pay all charges and expenses, other than certain
applicable taxes described below, in connecting with the exchange offer. It is
important that you read the section labeled "-- Fees and Expenses" for more
details regarding fees and expenses incurred in the exchange offer.
We will return any outstanding notes that we do not accept for exchange for
any reason without expense to their tendering holder as promptly as practicable
after the expiration or termination of the exchange offer.
EXPIRATION DATE
The exchange offer will expire at 5:00 p.m., New York City time on
, 1999, unless, in our sole discretion, we extend it.
EXTENSIONS, DELAYS IN ACCEPTANCE, TERMINATION OR AMENDMENT
We expressly reserve the right, at any time or various times, to extend the
period of time during which the exchange offer is open. We may delay acceptance
of any outstanding notes by giving oral or written notice of such extension to
their holders. During any such extensions, all outstanding notes previously
tendered will remain subject to the exchange offer, and we may accept them for
exchange.
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In order to extend the exchange offer, we will notify the exchange agent
orally or in writing of any extension. We will notify the registered holders of
outstanding notes of the extension no later than 9:00 a.m., New York City time,
on the business day after the previously scheduled expiration date.
If any of the conditions described below under "-- Conditions to the
Exchange Offer" have not been satisfied, we reserve the right, in our sole
discretion
- to delay accepting for exchange any outstanding notes,
- to extend the exchange offer, or
- to terminate the exchange offer,
by giving oral or written notice of such delay, extension or termination to the
exchange agent. Subject to the terms of the registration rights agreement, we
also reserve the right to amend the terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders of outstanding notes. If we amend the exchange offer in a
manner that we determine to constitute a material change, we will promptly
disclose such amendment by means of a prospectus supplement. The supplement will
be distributed to the registered holders of the outstanding notes. Depending
upon the significance of the amendment and the manner of disclosure to the
registered holders, we will extend the exchange offer if the exchange offer
would otherwise expire during such period.
CONDITIONS TO THE EXCHANGE OFFER
Despite any other term of the exchange offer, we will not be required to
accept for exchange, or exchange any new notes for, any outstanding notes, and
we may terminate the exchange offer as provided in this prospectus before
accepting any outstanding notes for exchange, if in our reasonable judgment:
- the exchange offer, or the making of any exchange by a holder of
outstanding notes, would violate applicable law or any applicable
interpretation of the staff of the SEC; or
- any action or proceeding has been instituted or threatened in any court
or by or before any governmental agency with respect to the exchange
offer that, in our judgment, would reasonably be expected to impair our
ability to proceed with the exchange offer.
In addition, we will not be obligated to accept for exchange the
outstanding notes of any holder that has not made to us the representations
described under "-- Purpose and Effect of the Exchange Offer," "-- Procedures
for Tendering" and "Plan of Distribution" and such other representations as may
be reasonably necessary under applicable SEC rules, regulations or
interpretations to make available to us an appropriate form for registration of
the new notes under the Securities Act.
We expressly reserve the right to amend or terminate the exchange offer,
and to reject for exchange any outstanding notes not previously accepted for
exchange, upon the occurrence of any of the conditions to the exchange offer
specified above. We will give oral or written notice of any extension,
amendment, non-acceptance or termination to the holders of the outstanding notes
as promptly as practicable.
These conditions are for our sole benefit, and we may assert them or waive
them in whole or in part at any time or at various times in our sole discretion.
If we fail at any time to exercise any of these rights, this failure will not
mean that we have waived our rights. Each such right will be deemed an ongoing
right that we may assert at any time or at various times.
In addition, we will not accept for exchange any outstanding notes
tendered, and will not issue new notes in exchange for any such outstanding
notes, if at such time any stop order has been threatened or is in effect with
respect to the registration statement of which this prospectus constitutes a
part or the qualification of the indenture relating to the notes under the Trust
Indenture Act of 1939.
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<PAGE> 79
PROCEDURES FOR TENDERING
How to Tender Generally
Only a holder of outstanding notes may tender such outstanding notes in the
exchange offer. To tender in the exchange offer, a holder must:
- complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal;
- have the signature on the letter of transmittal guaranteed if the letter
of transmittal so requires; and
- mail or deliver such letter of transmittal or facsimile to the exchange
agent prior to the expiration date; or
- comply with the automated tender offer program procedures of The
Depository Trust Company, or DTC, described below.
In addition, either:
- the exchange agent must receive outstanding notes along with the letter
of transmittal;
- the exchange agent must receive, prior to the expiration date, a timely
confirmation of book-entry transfer of such outstanding notes into the
exchange agent's account at DTC according to the procedure for book-entry
transfer described below or a properly transmitted agent's message; or
- the holder must comply with the guaranteed delivery procedures described
below.
To be tendered effectively, the exchange agent must receive any physical
delivery of the letter of transmittal and other required documents at its
address provided above under "Prospectus Summary -- The Exchange Agent" prior to
the expiration date.
The tender by a holder that is not withdrawn prior to the expiration date
will constitute an agreement between the holder and us in accordance with the
terms and subject to the conditions described in this prospectus and in the
letter of transmittal.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND RISK.
RATHER THAN MAIL THESE ITEMS, WE RECOMMEND THAT YOU USE AN OVERNIGHT OR HAND
DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ASSURE
DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. YOU SHOULD NOT SEND
THE LETTER OF TRANSMITTAL OR OUTSTANDING NOTES TO US. YOU MAY REQUEST YOUR
BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR OTHER NOMINEES TO EFFECT
THE ABOVE TRANSACTIONS FOR YOU.
How to Tender if You Are a Beneficial Owner
If you beneficially own outstanding notes that are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee and you
wish to tender those notes, you should contact the registered holder promptly
and instruct it to tender on your behalf. If you are a beneficial owner and wish
to tender on your own behalf, you must, prior to completing and executing the
letter of transmittal and delivering your outstanding notes, either:
- make appropriate arrangements to register ownership of the outstanding
notes in your name; or
- obtain a properly completed bond power from the registered holder of
outstanding notes.
The transfer of registered ownership may take considerable time and may not
be completed prior to the expiration date.
Signatures and Signature Guarantees
You must have signatures on a letter of transmittal or a notice of
withdrawal (as described below) guaranteed by a member firm of a registered
national securities exchange or of the National Association of
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<PAGE> 80
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States, or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934,
that is a member of one of the recognized signature guarantee programs
identified in the letter of transmittal, unless the outstanding notes are
tendered:
- by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter
of transmittal; or
- for the account of a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondence in
the United States, or an eligible guarantor institution.
When You Need Endorsements or Bond Powers
If the letter of transmittal is signed by a person other than the
registered holder of any outstanding notes, the outstanding notes must be
endorsed or accompanied by a properly completed bond power. The bond power must
be signed by the registered holder as the registered holder's name appears on
the outstanding notes and a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States, or an eligible guarantor institution must guarantee the signature on the
bond power.
If the letter of transmittal or any outstanding notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, those persons should so indicate when signing. Unless waived by us,
they should also submit evidence satisfactory to us of their authority to
deliver the letter of transmittal.
Tendering Through DTC's Automated Tender Offer Program
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's automated tender offer
program to tender. Participants in the program may, instead of physically
completing and signing the letter of transmittal and delivering it to the
exchange agent, transmit their acceptance of the exchange offer electronically.
They may do so by causing DTC to transfer the outstanding notes to the exchange
agent in accordance with its procedures for transfer. DTC will then send an
agent's message to the exchange agent.
The term "agent's message" means a message transmitted by DTC, received by
the exchange agent and forming part of the book-entry confirmation, to the
effect that:
- DTC has received an express acknowledgment from a participant in its
automated tender offer program that is tendering outstanding notes that
are the subject of such book-entry confirmation;
- such participant has received and agrees to be bound by the terms of the
letter of transmittal or, in the case of an agent's message relating to
guaranteed delivery, that such participant has received and agrees to be
bound by the applicable notice of guaranteed delivery; and
- the agreement may be enforced against such participant.
Determinations Under the Exchange Offer
We will determine in our sole discretion all questions as to the validity,
form, eligibility, time of receipt, acceptance of tendered outstanding notes and
withdrawal of tendered outstanding notes. Our determination will be final and
binding. We reserve the absolute right to reject any outstanding notes not
properly tendered or any outstanding notes our acceptance of which would, in the
opinion of our counsel, be unlawful. We also reserve the right to waive any
defect, irregularities or conditions of tender as to particular outstanding
notes. Our interpretation of the terms and conditions of the exchange offer,
including the instructions in the letter of transmittal, will be final and
binding on all parties. Unless waived, all defects or irregularities in
connection with tenders of outstanding notes must be cured within such time as
we shall determine. Although we intend to notify holders of defects or
irregularities with respect to tenders of outstanding notes, neither we, the
exchange agent nor any other person will incur any liability for failure to give
such notification. Tenders of
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<PAGE> 81
outstanding notes will not be deemed made until such defects or irregularities
have been cured or waived. Any outstanding notes received by the exchange agent
that are not properly tendered and as to which the defects or irregularities
have not been cured or waived will be returned to the tendering holder, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
When We Will Issue New notes
In all cases, we will issue new notes for outstanding notes that we have
accepted for exchange under the exchange offer only after the exchange agent
timely receives:
- outstanding notes or a timely book-entry confirmation of such outstanding
notes into the exchange agent's account at DTC; and
- a property completed and duly executed letter of transmittal and all
other required documents or a properly transmitted agent's message.
Return of Outstanding Notes Not Accepted or Excepted
If we do not accept any tendered outstanding notes for exchange for any
reason described in the terms and conditions of the exchange offer or if
outstanding notes are submitted for a greater principal amount than the holder
desires to exchange, the unaccepted or non-exchanged outstanding notes will be
returned without expense to their tendering holder. In the case of outstanding
notes tendered by book-entry transfer into the exchange agent's account at DTC
according to the procedures described below, such non-exchanged outstanding
notes will be credited to an account maintained with DTC. These actions will
occur as promptly as practicable after the expiration or termination of the
exchange offer.
Your Representations to Us
By signing or agreeing to be bound by the letter of transmittal, you will
represent to us that, among other things:
- any new notes that you receive will be acquired in the ordinary course of
your business;
- you have no arrangement or understanding with any person or entity to
participate in the distribution of the new notes;
- you are not engaged in and do not intend to engage in the distribution of
the new notes;
- if you are a broker-dealer that will receive new notes for your own
account in exchange for outstanding notes, you acquired those notes as a
result of market-making activities or other trading activities and you
will deliver a prospectus, as required by law, in connection with any
resale of such new notes; and
- you are not our "affiliate," as defined in Rule 405 of the Securities
Act.
BOOK-ENTRY TRANSFER
The exchange agent will establish an account with respect to the
outstanding notes at DTC for purposes of the exchange offer promptly after the
date of this prospectus. Any financial institution participating in DTC's system
may make book-entry delivery of outstanding notes by causing DTC to transfer
such outstanding notes into the exchange agent's account at DTC in accordance
with DTC's procedures for transfer. Holders of outstanding notes who are unable
to deliver confirmation of the book-entry tender of their outstanding notes into
the exchange agent's account at DTC or all other documents required by the
letter of transmittal to the exchange agent on or prior to the expiration date
must tender their outstanding notes according to the guaranteed delivery
procedures described below.
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GUARANTEED DELIVERY PROCEDURES
If you wish to tender your outstanding notes but your outstanding notes are
not immediately available or you cannot deliver your outstanding notes, the
letter of transmittal or any other required documents to the exchange agent or
comply with the applicable procedures under DTC's automated tender offer program
prior to the expiration date, you may tender if:
- the tender is made through a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or
correspondent in the United States, or an eligible guarantor institution;
- prior to the expiration date, the exchange agent receives from such
member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., commercial bank or
trust company having an office or correspondent in the United States, or
eligible guarantor institution either a properly completed and duly
executed notice of guaranteed delivery by facsimile transmission, mail or
hand delivery or a properly transmitted agent's message and notice of
guaranteed delivery:
- setting forth your name and address, the registered number(s) of your
outstanding notes and the principal amount of outstanding notes
tendered;
- stating that the tender is being made thereby; and
- guaranteeing that, within three (3) New York Stock Exchange trading
days after the expiration date, the letter of transmittal or facsimile
thereof, together with the outstanding notes or a book-entry
confirmation, and any other documents required by the letter of
transmittal will be deposited by the eligible guarantor institution
with the exchange agent; and
- the exchange agent receives such properly completed and executed letter
of transmittal or facsimile thereof, as well as all tendered outstanding
notes in proper form for transfer or a book-entry confirmation, and all
other documents required by the letter of transmittal, within three (3)
New York Stock Exchange trading days after the expiration date.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent you if you wish to tender your outstanding notes according to the
guaranteed delivery procedures described above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, you may withdraw your
tender at any time prior to the expiration date.
For a withdrawal to be effective:
- the exchange agent must receive a written notice of withdrawal at one of
the addressees listed above under "Prospectus Summary -- The Exchange
Agent" or
- you must comply with the appropriate procedures of DTC's automated tender
offer program system.
Any notice of withdrawal must:
- specify the name of the person who tendered the outstanding notes to be
withdrawn and
- identify the outstanding notes to be withdrawn, including the principal
amount of such outstanding notes.
If outstanding notes have been tendered under the procedure for book-entry
transfer described above, any notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawn outstanding notes
and otherwise comply with the procedures of DTC.
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We will determine all questions as to the validity, form, eligibility and
time of receipt of notice of withdrawal, and our determination shall be final
and binding on all parties. We will deem any outstanding notes so withdrawn not
to have been validly tendered for exchange for purposes of the exchange offer.
Any outstanding notes that have been tendered for exchange but that are not
exchanged for any reason will be returned to their holder without cost to the
holder or, in the case of outstanding notes tendered by book-entry transfer into
the exchange agent's account at DTC according to the procedures described above,
such outstanding notes will be credited to an account maintained with DTC for
the outstanding notes. This return or crediting will take place as soon as
practicable after withdrawal, rejection of tender or termination of the exchange
offer. You may retender properly withdrawn outstanding notes by following one of
the procedures described under "-- Procedures for Tendering" above at any time
on or prior to the expiration date.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, we may make additional solicitation by
telegraph, telephone or in person by our officers and regular employees and
those of our affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or other soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its related
reasonable out-of-pocket expenses.
We will pay the cash expenses to be incurred in connection with the
exchange offer. They include:
- SEC registration fees;
- fees and expenses of the exchange agent and trustee;
- accounting and legal fees and printing costs; and
- related fees and expenses.
TRANSFER TAXES
We will pay all transfer taxes, if any, applicable to the exchange of
outstanding notes under the exchange offer. The tendering holder, however, will
be required to pay any transfer taxes, whether imposed on the registered holder
or any other person, if:
- certificates representing outstanding notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of
outstanding notes tendered;
- tendered outstanding notes are registered in the name of any person other
than the person signing the letter of transmittal; or
- a transfer tax is imposed for any reason other than the exchange of
outstanding notes under the exchange offer.
If satisfactory evidence of payment of any transfer taxes payable by a note
holder is not submitted with the letter of transmittal, the amount of such
transfer taxes will be billed directly to that tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
If you do not exchange your outstanding notes for new notes under the
exchange offer, you will remain subject to the existing restrictions on transfer
of the outstanding notes. In general, you may not offer or sell the outstanding
notes unless they are registered under the Securities Act, or if the offer or
sale is exempt from
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registration under the Securities Act and applicable state securities laws.
Except as required by the registration rights agreement, we do not intend to
register resales of the outstanding notes under the Securities Act.
ACCOUNTING TREATMENT
We will record the new notes in our accounting records at the same carrying
value as the outstanding notes, which is the aggregate principal amount of the
outstanding notes, as reflected in our accounting records on the date of
exchange. Accordingly, we will not recognize any gain or loss for accounting
purposes in connection with the exchange offer. The expenses of the exchange
offer have been accrued and are reflected in the March 31, 1999 balance sheet as
Other Assets (deferred financing costs).
OTHER
Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. You are urged to consult your financial and tax
advisors in making your own decision on what action to take.
We may in the future seek to acquire untendered outstanding notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. We have no present plans to acquire any outstanding notes that are
not tendered in the exchange offer or to file a registration statement to permit
resales of any untendered outstanding notes.
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DESCRIPTION OF THE NEW NOTES
GENERAL
We will issue the new notes under the indenture between the Company and The
Bank of New York, as trustee, dated as of April 20, 1999. You can find the
definitions of certain terms used in this section under "-- Certain
Definitions." The following description is a summary of the material provisions
of the indenture. It does not restate the indenture in its entirety. We urge you
to read the indenture because it and not this description defines your rights as
holders of the new notes. You may obtain a copy of the indenture from the
Company. As used in this section only, references to "we," "us" and "the
Company" exclude our Subsidiaries.
Each series of the outstanding notes and the new notes will constitute a
single class of debt securities under the indenture. If the exchange offer is
consummated, holders of outstanding notes who do not exchange their outstanding
notes for new notes of the same series will vote together with holders of the
new notes for all relevant purposes under the indenture. Accordingly, in
determining whether the required holders have given any notice, consent or
waiver or taken any other action permitted under the indenture, any outstanding
notes that remain outstanding after the exchange offer will be aggregated with
the new notes of the same series, and the holders of the outstanding notes and
the new notes will vote together as a single class. As used in this section, the
term "notes" refers to both the outstanding notes and the new notes. All
references in this prospectus to specified percentages in aggregate principal
amount of the outstanding notes means, at any time after the exchange offer is
consummated, the percentages in aggregate principal amount of the outstanding
notes and the new notes collectively then outstanding.
You may transfer and exchange notes at the office of the registrar and any
co-registrar. The Bank of New York, the trustee under the indenture, is the
initial paying agent and registrar for the notes. We will issue the new notes
only in fully registered form, without coupons, in denominations of $1,000 and
any integral multiple thereof (except for the 2008 notes, the exchange of which
will reflect a partial payment of principal on June 30, 1999). We may require
holders to pay any transfer tax or other similar governmental charge applicable
to transfers and exchanges.
PRINCIPAL, MATURITY AND INTEREST
We will issue the new notes in three series limited to the following
respective total principal amounts: $283,869,920 6.737% Series B Senior Secured
Notes due 2008; $236,000,000 7.066% Series B Senior Secured Notes due 2012; and
$318,000,000 7.536% Series B Senior Secured Notes due 2017. The 2008 new notes
will mature on March 31, 2008; the 2012 new notes will mature on March 31, 2012;
and the 2017 new notes will mature on June 30, 2017.
We will pay interest on the new notes quarterly on each March 31, June 30,
September 30 and December 31, commencing September 30, 1999 (the "Payment
Dates"). Interest on the new notes will accrue from the most recent date to
which interest has been paid on the old notes or, if no interest has been paid,
from April 20, 1999 (the "Issue Date"). Interest will be computed on the basis
of a 360-day year comprising twelve 30-day months.
Principal payments on the notes will also be made on the Payment Dates in
accordance with the amortization schedule listed below. The percentages of the
original principal amount payable on each Payment Date are:
<TABLE>
<CAPTION>
2008 2012 2017
PAYMENT DATE NOTES NOTES NOTES
- ------------ ------- ------- -------
<S> <C> <C> <C>
June 30, 1999............................................... 4.098% -- --
September 30, 1999.......................................... 1.328% -- --
December 31, 1999........................................... 1.352% -- --
March 31, 2000.............................................. 1.051% -- --
June 30, 2000............................................... 1.071% -- --
</TABLE>
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<TABLE>
<CAPTION>
2008 2012 2017
PAYMENT DATE NOTES NOTES NOTES
- ------------ ------- ------- -------
<S> <C> <C> <C>
September 30, 2000.......................................... 1.090% -- --
December 31, 2000........................................... 1.110% -- --
March 31, 2001.............................................. 1.670% -- --
June 30, 2001............................................... 1.700% -- --
September 30, 2001.......................................... 1.732% -- --
December 31, 2001........................................... 1.763% -- --
March 31, 2002.............................................. 2.862% -- --
June 30, 2002............................................... 2.914% -- --
September 30, 2002.......................................... 2.968% -- --
December 31, 2002........................................... 3.021% -- --
March 31, 2003.............................................. 2.567% -- --
June 30, 2003............................................... 2.614% -- --
September 30, 2003.......................................... 2.662% -- --
December 31, 2003........................................... 2.710% -- --
March 31, 2004.............................................. 2.215% -- --
June 30, 2004............................................... 2.256% -- --
September 30, 2004.......................................... 2.297% -- --
December 31, 2004........................................... 2.338% -- --
March 31, 2005.............................................. 3.594% -- --
June 30, 2005............................................... 3.659% -- --
September 30, 2005.......................................... 3.726% -- --
December 31, 2005........................................... 3.793% -- --
March 31, 2006.............................................. 3.742% -- --
June 30, 2006............................................... 3.811% -- --
September 30, 2006.......................................... 3.879% -- --
December 31, 2006........................................... 3.950% -- --
March 31, 2007.............................................. 3.769% -- --
June 30, 2007............................................... 3.837% -- --
September 30, 2007.......................................... 3.907% -- --
December 31, 2007........................................... 3.978% -- --
March 31, 2008.............................................. 4.966% 1.861% --
June 30, 2008............................................... -- 8.237% --
September 30, 2008.......................................... -- 8.393% --
December 31, 2008........................................... -- 8.552% --
March 31, 2009.............................................. -- 4.365% --
June 30, 2009............................................... -- 4.448% --
September 30, 2009.......................................... -- 4.532% --
December 31, 2009........................................... -- 4.617% --
March 31, 2010.............................................. -- 5.082% --
June 30, 2010............................................... -- 5.178% --
September 30, 2010.......................................... -- 5.277% --
December 31, 2010........................................... -- 5.376% --
March 31, 2011.............................................. -- 6.947% --
June 30, 2011............................................... -- 7.079% --
September 30, 2011.......................................... -- 7.213% --
December 31, 2011........................................... -- 7.350% --
March 31, 2012.............................................. -- 5.493% 1.339%
June 30, 2012............................................... -- -- 5.521%
September 30, 2012.......................................... -- -- 5.631%
December 31, 2012........................................... -- -- 5.744%
March 31, 2013.............................................. -- -- 3.510%
</TABLE>
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<TABLE>
<CAPTION>
2008 2012 2017
PAYMENT DATE NOTES NOTES NOTES
- ------------ ------- ------- -------
<S> <C> <C> <C>
June 30, 2013............................................... -- -- 3.580%
September 30, 2013.......................................... -- -- 3.652%
December 31, 2013........................................... -- -- 3.725%
March 31, 2014.............................................. -- -- 3.623%
June 30, 2014............................................... -- -- 3.696%
September 30, 2014.......................................... -- -- 3.770%
December 31, 2014........................................... -- -- 3.845%
March 31, 2015.............................................. -- -- 4.023%
June 30, 2015............................................... -- -- 4.103%
September 30, 2015.......................................... -- -- 4.186%
December 31, 2015........................................... -- -- 4.270%
March 31, 2016.............................................. -- -- 5.821%
June 30, 2016............................................... -- -- 5.938%
September 30, 2016.......................................... -- -- 6.057%
December 31, 2016........................................... -- -- 6.178%
March 31, 2017.............................................. -- -- 7.047%
June 30, 2017............................................... -- -- 4.741%
------- ------- -------
Total....................................................... 100.00% 100.00% 100.00%
</TABLE>
The principal of, premium, if any, and interest on the notes will be
payable (and the notes will be exchangeable and transferable) at the office or
agency of the Company in the Borough of Manhattan, The City of New York
maintained for such purposes (which initially will be the office of the trustee
located at 101 Barclay Street, Floor 21 West, New York, NY 10286, attention:
Corporate Trust Administration) to the Person in whose name such note is
registered on the March 15, June 15, September 15 or December 15 immediately
preceding the applicable Payment Date or, at the option of the Company in the
case of any certificated notes, payment may be paid by check mailed to the
address of the person entitled thereto as such address appears in the security
register. The notes will not be entitled to the benefit of any sinking fund.
ISSUANCE OF ADDITIONAL NOTES
The indenture provides for the issuance of additional notes (the
"additional notes"), subject to compliance with the covenants contained in the
indenture. Any additional notes will be part of the same issue as the notes
offered hereby, will rank pari passu in right of payment with the notes and will
vote on all matters with the notes of the same series. For purposes of this
"Description of the New Notes," reference to the notes does not include
additional notes unless otherwise indicated. No offering of any such additional
notes is being or shall in any manner be deemed to be made by this prospectus.
For a description of the conditions under which we may issue additional notes,
see "-- Certain Covenants -- Limitation on Indebtedness of the Company."
SECURITY
The notes will be secured by:
- the pledge by ECP Holding Company, CalPERS and ECT Merchant Investments
Corp. ("ECT Merchant") of their interests in the Company;
- the Company's pledge of its interests in its wholly owned subsidiaries
that own Camden GP (JEDI Camden LP, L.L.C. and JEDI Camden GP, L.L.C.),
its wholly owned subsidiary that indirectly owns Linden Ltd. (JEDI Linden
NB, L.L.C.) and its wholly owned subsidiary that is the managing general
partner in Bayonne Venture (JEDI Bayonne GP, L.L.C. ("Bayonne GP"));
- the pledge by JEDI Linden NB, L.L.C. of its interests in its wholly owned
subsidiaries (JEDI Linden LP, L.L.C. and JEDI Linden, Inc.) and its 99%
owned subsidiary (JEDI Linden GP, L.L.C.) which together, directly or
indirectly, own Linden Ltd.;
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- the pledge by JEDI Linden LP, L.L.C. of its limited partnership interests
in Linden Ltd.;
- the pledge by JEDI Camden LP, L.L.C. of its limited partnership interests
in Camden GP;
- the pledge of our interest in the Linden subordinated note; and
- the pledge of our interest in the Debt Service Reserve Account
(collectively, the "Pledged Interests").
Camden GP and Linden Ltd. are the general partners of the partnerships
which own the Camden Facility and the Linden Facility, respectively. Bayonne
Venture owns the Bayonne Facility.
Any additional notes issued will share equally and ratably in the Pledged
Interests with the notes. The Security Documents restrict the issuance of
additional equity interests in the Company and the other entities in which
equity interests have been pledged unless such additional equity interests are
also pledged to secure the notes.
RANKING
The notes:
- will be senior secured obligations of the Company;
- will rank pari passu in right of payment with all other senior secured
obligations of the Company and senior in right of payment to all existing
and future subordinated debt of the Company;
- will be structurally subordinated to all indebtedness and other
liabilities, including trade payables, of our Subsidiaries; and
- will be structurally subordinated to the rights of the minority partners
in Linden Venture and Camden Venture.
OPTIONAL REDEMPTION
Each series of the notes will be redeemable, at the Company's option, at
any time in whole or from time to time in part, on not less than 30 nor more
than 60 days' prior notice to the holders of such series of notes, on any date
prior to its maturity (a "Redemption Date"), at a redemption price (the
"Optional Redemption Price") equal to:
- 100% of the outstanding principal amount thereof; plus
- accrued and unpaid interest thereon to the Redemption Date; plus
- a Make Whole Premium.
In no event will the Optional Redemption Price ever be less than 100% of the
principal amount of the notes (or portion thereof) being redeemed plus accrued
and unpaid interest thereon to the Redemption Date.
The amount of the Make Whole Premium with respect to any series of notes
(or portion thereof) to be redeemed will be equal to the excess, if any, of:
- 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 quarterly basis (assuming a 360-day year
consisting of twelve 30-day months) at a discount rate equal to the
Treasury Rate plus 50 basis points with respect to the series of notes
being redeemed; over
- the outstanding principal amount of the series of notes (or portion
thereof) being redeemed.
The applicable "Treasury Rate" is a yield based on the yields on U.S.
treasury securities with comparable maturities and principal amounts to that of
the notes being redeemed. We will calculate the applicable
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Treasury Rate by taking the arithmetic mean of the yields on U.S. treasury
securities published under the heading "Week Ending" under the caption "Treasury
Constant Maturities" in statistical release H.15(519), published weekly by the
Federal Reserve System, with maturities corresponding to the remaining life to
maturity of the notes. If statistical release H.15(519) or a successor
publication of the Federal Reserve Board is not available, we will designate a
reasonably comparable index for this calculation.
If statistical release H.15(519), or any successor or alternative index,
does not have any U.S. treasury securities with maturities corresponding exactly
to the notes to be redeemed, we will use the yields on the two U.S. treasury
securities with maturities most closely corresponding to the remaining life to
maturity of the notes. We will then interpolate or extrapolate, on a straight
line basis, the applicable Treasury Rate based on these two published yields.
The applicable Treasury Rate is to be determined on the third business day
preceding any redemption date and the maturity of U.S. treasury securities will
be rounded to the nearest month to determine those with maturities most closely
corresponding to the notes. The Optional Redemption Price is calculated assuming
a 360-day year consisting of twelve 30-day months.
If less than all of any series of notes are to be redeemed, the particular
notes of such series to be redeemed will be selected not more than 45 days prior
to the redemption date by the trustee either by lot, pro rata or by such method
as the trustee deems fair and appropriate; provided that no notes of $1,000 in
principal amount or less shall be redeemed in part. Notice of redemption will be
mailed to each holder of the series of notes being redeemed at such holder's
address of record. Interest will cease to accrue on any series of notes on and
after the Redemption Date.
MANDATORY REDEMPTION AT PAR
Events of Loss
Upon the occurrence of an Event of Loss, the Company will be obligated to
use the Remaining Net Loss Proceeds received by the Company to redeem the notes
and additional notes, if any, without any premium at a redemption price (the
"Mandatory Redemption Price") equal to 100% of the principal amount of the notes
or additional notes to be redeemed plus accrued and unpaid interest thereon to
the Redemption Date. Remaining Net Loss Proceeds is defined as Net Loss Proceeds
with respect to one or more Events of Loss minus the aggregate amount of all of
such proceeds used toward the restoration, repair, reconstruction or replacement
of the affected Facility.
The Company will not be obligated to redeem any notes or additional notes
upon the occurrence of an Event of Loss if:
- the aggregate amount of Remaining Net Loss Proceeds from such Event of
Loss does not exceed $5 million; or
- the then current rating of the notes is at least as high as the rating of
the notes on the Issue Date and, after giving effect to such Event of
Loss and the use or contemplated use of the proceeds therefrom as
announced by the Company, the Rating Agencies confirm that a Rating
Downgrade will not result.
Under the terms of the indebtedness of certain of the Company's
Subsidiaries, and the terms of the preferred equity interests of certain
Subsidiaries, the lenders to such Subsidiaries and the holders of such preferred
equity interests have prior rights to certain proceeds arising from an Event of
Loss. The existence of these rights substantially reduces the likelihood that
proceeds relating to an Event of Loss would be distributed to the Company rather
than used to repay or redeem the obligations to such lenders or preferred equity
holders or being "trapped" at a Subsidiary level for an extended period.
Therefore, there can be no assurance that the Company will be required to redeem
any notes or additional notes upon the occurrence of an Event of Loss.
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Power Contract Buyouts
All of the notes will be subject to mandatory redemption without premium at
the Mandatory Redemption Price if an Operating Partnership receives at any time
an aggregate amount of Net Buyout Proceeds in excess of $25 million from one or
more Power Contract Buyouts related to its Facility, unless the then current
rating of the notes is at least as high as the rating of the outstanding notes
on the Issue Date and, after giving effect to such buyout and the use or
contemplated use of the proceeds therefrom as announced by the Company, the
Rating Agencies confirm that a Rating Downgrade will not result; provided,
however, that in lieu of the foregoing the Company may redeem a portion of the
notes at the Mandatory Redemption Price if the then current rating of the notes
is at least as high as the rating of the outstanding notes on the Issue Date
and, after giving effect to the buyout, the partial redemption and the use or
contemplated use of the proceeds therefrom as announced by the Company, the
Rating Agencies confirm that a Rating Downgrade will not result.
If a Power Contract Buyout occurs, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
notes and additional notes that it is required to purchase pursuant to the
foregoing covenant. Due to its position in the organizational structure, the
Company may not receive any of the Net Buyout Proceeds received by the Operating
Partnership. The failure of the Company to redeem the notes or additional notes
required to be redeemed upon a Power Contract Buyout or to pay the applicable
Mandatory Redemption Price when due would result in an Event of Default and
would give the trustee and the holders of notes and additional notes the rights
described under "-- Events of Default."
Terms of Mandatory Redemption
If the notes are redeemed pursuant to any of the foregoing provisions, the
notes will be redeemed:
- pari passu with any other senior secured debt of the Company which
requires redemption or repayment; and
- pro rata among each of the series of the notes and additional notes.
Notice of redemption will be mailed to each holder of the series of notes
or additional notes being redeemed at such holder's address of record. Interest
will cease to accrue on any series of notes or additional notes on and after the
Redemption Date.
PURCHASE AT THE OPTION OF HOLDERS -- CHANGE OF CONTROL
If a Change of Control occurs, then each holder of notes and additional
notes will have the right to require that the Company purchase all, but not less
than all, of such holder's notes or additional notes, as the case may be, at a
purchase price in cash equal to 101% of the outstanding principal amount of such
notes or additional notes, plus accrued and unpaid interest, if any, to the date
of purchase, pursuant to the offer described below (the "Change of Control
Offer") and the other procedures set forth in the indenture.
Within 30 days following any Change of Control, the Company will notify the
trustee thereof and give written notice of such Change of Control to each holder
of notes and additional notes by first-class mail, postage prepaid, at its
address appearing in the security register, stating, among other things:
- that a Change of Control has occurred;
- the purchase price and the expiration date of the Change of Control
Offer, which will be a Business Day no earlier than 30 days nor later
than 60 days from the date such notice is mailed or such later date as is
necessary to comply with any applicable requirements under the Exchange
Act of 1934;
- the purchase date, which will be not more than five Business Days
following the expiration date;
- the places where the notes and additional notes to be purchased are to be
surrendered;
- that any note or additional note not tendered will continue to accrue
interest;
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<PAGE> 91
- that, unless the Company defaults in the payment of the purchase price,
any notes or additional notes accepted for payment pursuant to the Change
of Control Offer will cease to accrue interest after the Change of
Control purchase date; and
- certain other procedures that holders of notes and additional notes must
follow to accept a Change of Control Offer or to withdraw such
acceptance, including procedures of The Depository Trust Company.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the notes and additional notes that might be tendered by holders of notes and
additional notes seeking to accept the Change of Control Offer. The failure of
the Company to make or consummate the Change of Control Offer or to pay the
applicable Change of Control purchase price when due would result in an Event of
Default and would give the trustee and the holders of notes and additional notes
the rights described under "-- Events of Default."
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the indenture applicable to a Change of Control Offer made by the Company and
purchases all the notes and additional notes validly tendered and not withdrawn
under such Change of Control Offer.
The Company will comply with the applicable tender offer rules, including
Rule-14e under the Exchange Act, and any other applicable securities laws and
regulations in connection with a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Change of
Control" provisions of the indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
indenture by virtue thereof.
CERTAIN COVENANTS
The indenture contains various covenants, including the following:
Limitation on Indebtedness of the Company
The Company will not create, incur or suffer to exist any Indebtedness,
other than:
- the notes;
- Indebtedness incurred to finance the making of capital improvements to
the Facilities required to maintain compliance with applicable law or
anticipated changes therein; provided that no such Indebtedness may be
incurred unless, at the time of such incurrence, the Independent Engineer
confirms as reasonable (a) a certification by the Company that the
proposed capital improvements are reasonably expected to enable such
Facility to comply with applicable law or anticipated changes therein and
(b) the calculations of the Company that demonstrate, after giving effect
to the incurrence of such Indebtedness, the minimum Forward Debt Service
Coverage Ratio, (1) for the next four consecutive fiscal quarters, taken
as one annual period, commencing with the quarter in which such
Indebtedness is incurred and (2) for each subsequent fiscal year through
the maturity date of the notes, will not be less than 1.1 to 1;
- Indebtedness incurred to finance the making of capital improvements to
the Facilities so long as after giving effect to the incurrence of such
Indebtedness (a) no Default or Event of Default has occurred and is
continuing and (b) the then current rating of the notes is at least as
high as the rating of the outstanding notes on the Issue Date and the
Rating Agencies confirm that the incurrence of such Indebtedness will not
result in a Rating Downgrade;
- Interest Rate Agreements;
- Subordinated Indebtedness; and
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<PAGE> 92
- Indebtedness incurred to refinance, renew, replace, defease or refund, in
whole or part, any Indebtedness specified in the five clauses set forth
above and any Indebtedness incurred pursuant to this clause (plus accrued
interest and fees and expenses related to such financing, renewal,
replacement, defeasance or refunding); provided that any such refinancing
must be on terms no less favorable in the aggregate to the Company than
the outstanding Indebtedness refinanced (as determined by the Managing
Member of the Company in good faith).
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 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 Indebtedness of the Company's Subsidiaries
No Subsidiary of the Company will create, incur or suffer to exist any
Indebtedness other than:
- Indebtedness outstanding on the date the outstanding notes were issued
and any Indebtedness incurred to refinance, renew, replace, defease or
refund, in whole or part, any such Indebtedness (plus accrued interest
and fees and expenses related to such financing, renewal, replacement,
defeasance or refunding); provided that any such refinancing must be on
terms no less favorable in the aggregate to the Company and its
Subsidiaries than the outstanding Indebtedness refinanced (as determined
by the Managing Member of the Company in good faith);
- up to $225 million of Indebtedness incurred to finance capital
improvements to the Facilities, so long as after giving effect to the
incurrence of such Indebtedness (a) no Default or Event of Default has
occurred and is continuing and (b) the then current rating of the notes
is at least as high as the rating of the outstanding notes on the Issue
Date and the Rating Agencies confirm that the incurrence of such
Indebtedness will not result in a Rating Downgrade; and
- up to $25 million of Indebtedness incurred or assumed solely for the
purpose of financing the cost of acquiring or constructing an asset or
for working capital purposes. This "Limitation on Indebtedness of the
Company's Subsidiaries" covenant does not prohibit intercompany loans
between the Company and any of its Subsidiaries or between two
Subsidiaries of the Company.
Limitation on Restricted Payments
The Company may declare and pay dividends or pay or make any other
distributions on account of its Capital Stock or Subordinated Indebtedness on a
quarterly basis; provided that (a) no Default or Event of Default has occurred
and is continuing, (b) the amount of such dividends or other distributions paid
or made, as applicable, do not exceed 100% of Net Cash Flow after the Issue Date
and (c)(1) for restricted payments made through September 30, 2001, the Company
(A) has maintained a Debt Service Coverage Ratio of at least 1.20 to 1 over the
four preceding fiscal quarters, taken as one annual period, and (B) has
projected a Debt Service Coverage Ratio (as certified by the Company to the
trustee) for the next four fiscal quarters, taken as one annual period, of at
least 1.20 to 1, and (2) for restricted payments made after September 30, 2001,
the Company (A) has maintained a Debt Service Coverage Ratio of at least 1.25 to
1 over the four preceding fiscal quarters, taken as one annual period, and (B)
has projected a Debt Service Coverage Ratio (as certified by the Company to the
trustee) for the next four fiscal quarters, taken as one annual period, of at
least 1.25 to 1. In the event the Company is prevented from paying dividends or
paying or making other distributions on its Capital Stock or Subordinated
Indebtedness pursuant to the provisions of clause (c) in the preceding sentence,
it may not pay dividends or pay or make distributions in respect of its Capital
Stock or Subordinated Indebtedness until the requirements described in clause
(c) above have been met for two consecutive fiscal quarters (a "restricted
payment suspension"); provided, however, that if the Company meets for any
fiscal quarter during a restricted payment suspension the required Debt Service
Coverage Ratio
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<PAGE> 93
over the four preceding fiscal quarters, taken as one annual period, and the
projected Debt Service Coverage Ratio for the next four fiscal quarters, taken
as one annual period, as well as the other requirements set forth above, then it
may pay a dividend or pay or make a distribution in respect of its Capital Stock
or Subordinated Indebtedness in an amount not to exceed Net Cash Flow for such
quarter. The fair market value of distributions of assets, other than cash, in
excess of $10 million shall be determined by an Independent Investment Banker,
or if less than $10 million, shall be determined in good faith by the Managing
Member of the Company.
Limitation on Asset Sales
Except for a sale of substantially all of the Company's assets as permitted
by the "Limitation on Consolidation, Merger and Sale or Disposition of Assets"
covenant, the Company may not sell, transfer, assign or otherwise dispose of any
Operating Partnership, Managing General Partner or other Subsidiary of the
Company that holds an interest, directly or indirectly, in any Operating
Partnership or Managing General Partner, or any interest in any of the
foregoing, and no Operating Partnership or other Subsidiary of the Company may
sell, transfer, assign or otherwise dispose of assets owned by such Operating
Partnership or other Subsidiary, as the case may be, except Excluded
Dispositions unless the then current rating of the notes is at least as high as
the rating of the original notes on the Issue Date and, after giving effect to
such sale, transfer, assignment or other disposition, the Rating Agencies
confirm that a Rating Downgrade will not result.
Maintenance of QF Status
The Company must maintain and cause each of its Subsidiaries to maintain
all the Facilities in conformity with the requirements under PURPA necessary to
retain QF Status, unless the loss of such status would not have a Material
Adverse Effect.
Limitation on Liens
So long as any notes are outstanding, the Company may not, and may not
permit any Subsidiary to, create, incur, assume, or suffer to exist any
Indebtedness of the Company or any of its Subsidiaries 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 notes (together with, if the
Company shall so determine, any other Indebtedness of the Company ranking
equally with the notes) equally and ratably with such Indebtedness (but only so
long as such Indebtedness is so secured).
The foregoing restriction will not apply to:
- the Pledged Interests;
- 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;
- Liens to secure Indebtedness incurred pursuant to the second or third
clauses of the "Limitation on Indebtedness of the Company's Subsidiaries"
covenant;
- any Lien on any asset existing thereon at the time of acquisition of such
asset and not created in connection with or in contemplation of such
acquisition; provided that the incurrence of such Indebtedness is
permitted under the "Limitation on Indebtedness of the Company" covenant
or the "Limitation on Indebtedness of the Company's Subsidiaries"
covenant;
- any Lien arising solely by operation of law;
- any Lien in the form of a tax or other statutory lien; provided that any
such Lien shall be discharged within 60 days after the date it is created
or arises (unless contested in good faith by the Company or such
Subsidiary, in which case it shall be discharged within 60 days after
final adjudication);
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- any Lien securing Indebtedness of the Company or any of its Subsidiaries,
all or a portion of the net proceeds of which are used, substantially
concurrently 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 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 notes), including the
amount of all accrued interest thereon and reasonable fees and expenses
and premium, if any, incurred by the Company or any such Subsidiaries in
connection therewith; and
- 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 the second
through the seventh clauses set forth above; provided, however, that the
principal amount of Indebtedness secured thereby and not otherwise
authorized by such second through seventh clauses, 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.
Limitation on Consolidation, Merger and Sale or Disposition of Assets
The Company 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:
- 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;
- 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 notes and the performance of every covenant of the indenture
to be performed or observed by the Company;
- immediately after giving effect to such transaction, no Event of Default
or Default shall have occurred and be continuing; and
- the Company 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 the Company as, or substantially as, an entirety, the successor
Person formed by such consolidation or with whom or into which the Company 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,
the Company under the indenture with the same effect as if such successor Person
had been named as the Company therein, and the Company will be released from all
obligations under the indenture and the notes.
Limitation on Transactions with Affiliates
The Company shall not, and shall not permit any Subsidiary to, enter into
any material transaction or arrangement, whether or not in the ordinary course
of business, with any Affiliate that is not on terms and conditions at least as
favorable as would be obtained in a comparable arm's-length transaction with a
Person other than an Affiliate as determined in good faith by the Managing
Member of the Company.
Maintenance of Existence
Subject to the covenant above under "-- Limitation on Consolidation, Merger
and Sale or Disposition of Assets," the Company shall do or cause to be done all
things necessary (a) to preserve and keep in full force and effect its
existence, and (b) to preserve all material rights and franchises of the Company
and, so long as it has a controlling equity interest in an Operating
Partnership, each Operating Partnership; provided, however, that the Company
shall not be required to preserve any such right or franchise of any such
Operating
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Partnership if either (a) the preservation 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 Operating Partnership are owned directly or
indirectly by the Company) or (b) the Managing Member of the Company shall
determine that (1) the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Subsidiaries taken as a whole and
(2) the loss thereof would not have a Material Adverse Effect.
Project Documents
The Company will, and will cause its Subsidiaries to:
- perform and observe in all material respects the covenants and agreements
contained in each of the Project Documents;
- enforce, defend and protect all of its material rights contained in any
of the Project Documents;
- take all reasonable and necessary actions to prevent the termination or
cancellation of any of the Project Documents,
unless the Managing Member of the Company determines in good faith that such
failure to perform, observe, enforce, defend, protect or act is in the best
interest of the Company.
In addition, the Company will not, and will cause its Subsidiaries not to:
- breach any obligation under any Project Document to which it is a party
and fail to cure such breach within the applicable cure period provided
for in such Project Document (or, if no cure period is specified in such
Project Document, within 30 days of such breach);
- (a) amend, vary or waive, or consent to any amendment, variation or
waiver of, any terms of any of the Project Documents to which it is a
party, (b) release, surrender, cancel or terminate any rights or
obligations under, or discharge any obligations (other than by
performance) of, the Project Documents to which it is a party or (c)
affirmatively consent to the assignment by any party to certain Project
Documents of such party's right or obligations under such Project
Documents without the consent of holders holding at least 66 2/3% in
aggregate principal amount of the outstanding Note; or
- assign, transfer or otherwise dispose of any of its rights in any of the
Project Documents to which it is a party unless, in each case, such
action would not have a Material Adverse Effect.
Nature of the Business
The Company and its Subsidiaries may not engage in any business other than
the Line of Business.
Certain Other Covenants
The indenture contains certain additional covenants, including but not
limited to:
- an operation and maintenance covenant;
- a maintenance of insurance covenant;
- a taxes and claims covenant;
- a compliance with law covenant; and
- a maintenance of licenses and approvals covenant.
DEBT SERVICE RESERVE ACCOUNT
The Company will establish and fund an account with the trustee (the "Debt
Service Reserve Account") in an amount equal at all times to the aggregate
principal and interest payments on the notes scheduled to be paid on the next
two Payment Dates (the "Debt Service Reserve Requirement"). The trustee will
disburse
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funds from the Debt Service Reserve Account to pay principal, premium, if any,
and interest on the notes if the Company has failed to provide sufficient funds
to the Paying Agent to pay such principal, premium and interest on the notes on
the third Business Day prior to the Payment Date. The Company may elect not to
fund the Debt Service Reserve Account, in whole or in part, or may withdraw all
or any portion of the amount in the Debt Service Reserve Account, to the extent
that cash on deposit in the Debt Service Reserve Account, together with any Debt
Service Credit Support, exceeds the Debt Service Reserve Requirement.
If at any time the balance of the Debt Service Reserve Account exceeds the
Debt Service Reserve Requirement and no Default or Event of Default has occurred
and is continuing, the trustee, on written request of the Company, shall pay
over to the Company or its designees any such excess cash or cancel any excess
amount of Debt Service Credit Support, or both, as requested by the Company, to
the extent of such excess.
At any time when the balance of the Debt Service Reserve Account (including
available amounts under Debt Service Credit Support) does not meet the Debt
Service Reserve Requirement, the Company may not pay dividends or make
distributions in respect of its Capital Stock or Subordinated Indebtedness.
EVENTS OF DEFAULT
Each of the following constitutes an "Event of Default" under the
indenture:
- default in the payment of principal of and premium, if any, on any note
or additional note when due and payable or the failure to redeem any note
or additional note on any mandatory redemption date;
- default in the payment of interest on any note or additional note when
due which continues for 30 days;
- default in the performance or breach of any other covenant or agreement
of the Company in the notes or additional notes or in the indenture or
any Security Document and the continuation thereof for 60 days after
receipt by the Company of notice from the trustee or from the holders of
at least 25% of the outstanding notes;
- bankruptcy, insolvency, reorganization, assignment or receivership of any
Facility Owner;
- acceleration of (a) any Indebtedness of the Company that ranks pari passu
with the notes or (b) any unsecured and/or unsubordinated Indebtedness of
the Company in an aggregate amount in excess of $25 million;
- any final judgment or decree for the payment of money (which is
non-appealable or which remains 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 $10 million, excluding amounts covered by
in-force insurance for which the insurer has admitted liability, shall be
entered against the Company; and
- (a) on or after the Issue Date, other than in accordance with the
provisions of the indenture or the Security Documents, if for any reason,
other than the satisfaction in full and discharge of the obligations
secured thereby, any Security Document ceases to be or is not in full
force and effect or the trustee ceases to have first priority security
interests in the Collateral and, in each case, such cessation continues
for 30 days or (b) on or after the Issue Date, other than in accordance
with the provisions of the indenture or the Security Documents, any of
the grantors under the Security Documents asserts in writing that any
Security Document has ceased to be or is not in full force and effect.
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 the first two clauses set forth above) or 51% (for any other Event
of Default) in aggregate principal amount of the notes and additional notes, may
accelerate the notes and additional notes 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 the Company
described in the fourth clause set forth above, the entire outstanding principal
amount of, the accrued interest on, and any other amounts payable with respect
to, such notes or additional notes shall automatically become due and
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payable without direction from any holders of the notes or additional notes. At
any time after an acceleration of the notes or additional notes has been
declared but before a judgment or decree for the payment of the principal amount
of the notes or additional notes has been obtained, if the Company 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 notes or additional notes.
The indenture provides 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 holders unless such holders have offered to
the trustee reasonable security or indemnity. Subject to such provisions for
indemnity and certain other limitations contained in the indenture, the holders
of a majority in principal amount of the outstanding notes and additional 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 notes and additional notes generally will have the
right to waive any past Default or Event of Default (other than a payment
default) on behalf of all holders. The indenture provides that no holder may
institute any action against the Company under the indenture unless such holder
previously has 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 notes and additional notes then outstanding affected by
such Event of Default shall have requested the trustee to institute such action
and shall have offered the trustee security or reasonable indemnity, and the
trustee shall not have instituted such action within 60 days of such request.
Furthermore, no holder will be entitled to institute any such action if and to
the extent that such action would disturb or prejudice the rights of other
holders. Notwithstanding that the right of a holder to institute a proceeding
with respect to the indenture is subject to certain conditions precedent, each
holder has the right, which is absolute and unconditional, to receive payment of
the principal of, premium, if any, and interest on such note or additional 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 holder. The indenture
provides that the trustee, within 90 days after the occurrence of a Default with
respect to the notes or additional notes, is required to give the holders 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, premium, if any, or interest
on any notes or additional 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.
The Company 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, the Company is in compliance with the conditions and
covenants under the indenture (including its Debt Service Reserve Requirement).
AMENDMENT, SUPPLEMENT AND WAIVER
Modifications and amendments of the indenture may be made by the Company
and the trustee with the consent of the holders of a majority in aggregate
outstanding principal amount of the notes; provided, however, that no such
modification or amendment may, without the consent of the holder of each
outstanding note affected thereby:
- change the stated maturity of the principal of, or any installment of
interest on, any note, reduce the principal amount thereof or the rate of
interest thereon or any premium payable upon the redemption thereof,
change the currency in which any note or any premium or the interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment after the stated maturity thereof (or, in
the case of redemption, on or after the redemption date);
- amend, change or modify the obligation of the Company to make and
consummate a Change of Control Offer in the event of a Change of Control
in accordance with the section entitled "Purchase at the Option of
Holders -- Change of Control," including amending, changing or modifying
any definition relating thereto;
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- reduce the percentage in principal amount of outstanding notes, the
consent of whose holders is required for any waiver of compliance with
certain provisions of, or certain defaults and their consequences
provided for under, the indenture;
- waive a default in the payment of principal of, premium, if any, or
interest on the notes;
- modify the ranking or priority of the notes;
- permit the release or termination of all or substantially all of the
security afforded by the Liens under the indenture and the Security
Documents, except in accordance with the terms thereof; or
- agree to create any Lien on the Collateral or any part thereof or release
or terminate any of the Liens of the trustee, except in accordance with
the terms of the Security Documents.
The holders of a majority in aggregate principal amount of the notes outstanding
may waive compliance with certain restrictive covenants and provisions of the
indenture.
Without the consent of any holders, the Company and the trustee, at any
time and from time to time, may enter into one or more indentures supplemental
to the indenture for any of the following purposes:
- to evidence the succession of another Person to the Company and the
assumption by any such successor of the covenants of the Company in the
indenture and the notes;
- to add to the covenants of the Company for the benefit of the holders or
to surrender any right or power herein conferred upon the Company;
- to add additional Events of Defaults;
- to provide for uncertificated notes in addition to or in place of the
certificated Notes;
- to evidence and provide for the acceptance of appointment under the
indenture by a successor trustee;
- to cure any ambiguity, to correct or supplement any provision in the
indenture that may be defective or inconsistent with any other provision
in the indenture, or to make any other provisions with respect to matters
or questions arising under the indenture; provided that such actions
pursuant to this clause do not adversely affect the interests of the
holders in any material respect;
- to mortgage, pledge, hypothecate or grant a security interest in favor of
the trustee for the benefit of the holders as additional security for the
payment and performance of the Company's obligations under the indenture;
or
- to comply with any requirement of the Trust Indenture Act or the
Commission in order to effect and maintain the qualification of the
indenture under such act.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, terminate the obligations
of the Company with respect to the outstanding notes ("legal defeasance"). Such
legal defeasance means that the Company will be deemed to have paid and
discharged the entire Indebtedness represented by the outstanding notes and
satisfied all of its obligations under the notes and the indenture, except for:
- the rights of holders to receive payments in respect of the principal of,
premium, if any, and interest on such notes when such payments are due;
- the Company's obligations to issue temporary notes, register the transfer
or exchange of any notes, replace mutilated, destroyed, lost or stolen
notes, maintain an office or agency for payments in respect of the notes
and segregate and hold such payments in trust;
- the rights, powers, trusts, duties and immunities of the trustee; and
- the legal defeasance provisions of the indenture.
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In addition, the Company may, at its option and at any time, elect to terminate
the obligations of the Company with respect to certain covenants set forth in
the indenture and described under "-- Certain Covenants" above, and any omission
to comply with such obligations would not constitute a Default or an Event of
Default with respect to the notes ("covenant defeasance").
In order to exercise either legal defeasance or covenant defeasance:
- the Company must irrevocably deposit or cause to be deposited with the
trustee, as trust funds in trust, specifically pledged as security for,
and dedicated solely to, the benefit of the holders, money in an amount,
or U.S. Government Obligations that through the scheduled payment of
principal and interest thereon will provide money in an amount, or a
combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay and discharge
the principal of, premium, if any, and interest on the outstanding notes
at maturity (or upon redemption, if applicable) of such principal or
installment of interest;
- no Default or Event of Default may have occurred and be continuing on the
date of such deposit or, insofar as an event of bankruptcy under the
fourth clause of "-- Events of Default" above is concerned, at any time
during the period ending on the 91st day after the date of such deposit;
- such legal defeasance or covenant defeasance may not result in a breach
or violation of, or constitute a default under, the indenture or any
other material agreement or instrument to which the Company is a party or
by which it is bound;
- in the case of legal defeasance, the Company must deliver to the trustee
an opinion of counsel stating that the Company has received from, or
there has been published by, the Internal Revenue Service a ruling, or
since the date hereof, there has been a change in applicable federal
income tax law, to the effect, and based thereon such opinion must
confirm that, the holders will not recognize income, gain or loss for
federal income tax purposes as a result of such legal defeasance and will
be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such legal
defeasance had not occurred;
- in the case of covenant defeasance, the Company must have delivered to
the trustee an opinion of counsel to the effect that the holders will not
recognize income, gain or loss for federal income tax purposes as a
result of such covenant defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as
would have been the case if such covenant defeasance had not occurred;
and
- the Company must have delivered to the trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent to
either the legal defeasance or the covenant defeasance, as the case may
be, have been complied with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange notes in accordance with the indenture.
Transfer restrictions will continue to apply to any outstanding notes not
exchanged for new notes in the exchange offer. Please read "The Exchange
Offer -- Consequences of Failure to Exchange." The registrar and the trustee may
require a holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a holder to pay any taxes and
fees required by law or permitted by the indenture. No holder will incur any
service charges, however, for any registration of transfer or exchange of the
notes. The Company is not required to transfer or exchange any note for a period
of 15 days before a selection of notes to be redeemed.
The registered holder of a note will be treated as the owner of it for all
purposes.
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RESIGNATION OR REMOVAL OF TRUSTEE
The trustee may resign at any time upon written notice to the Company
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 notes and additional notes of all series. In addition, so long as no
Event of Default or Default has occurred and is continuing, the Company may
remove the trustee upon notice to all holders and the trustee and appointment of
a successor trustee.
CONCERNING THE TRUSTEE
The indenture provides that, except during the continuance of an Event of
Default, the trustee will perform only such duties as are specifically set forth
in the indenture. Under the indenture, the holders of a majority in outstanding
principal amount of the notes and additional notes, if any, will have the right
to direct the time, method and place of conducting any proceeding for exercising
any remedy available to the trustee, subject to certain exceptions. If an Event
of Default has occurred and is continuing, the trustee will exercise such rights
and powers vested in it under the indenture and use the same degree of care and
skill in its exercise as a prudent Person would exercise under the circumstances
in the conduct of such Person's own affairs.
The indenture contains limitations on the rights of the trustee thereunder,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claims, as security or otherwise. The trustee is permitted to engage in
other transactions; provided, however, that, if it acquires any conflicting
interest (as defined in the Trust Indenture Act), it must eliminate such
conflict upon the occurrence of an Event of Default or else resign.
BOOK-ENTRY, DELIVERY AND FORM
Each series of the new notes will initially be represented by one or more
permanent global notes in definitive, fully registered book-entry form that will
be registered in the name of Cede & Co., the global note holder, as nominee of
DTC. The global notes will be deposited on behalf of the acquirors of the new
notes represented thereby with a custodian for DTC for credit to the respective
accounts of the acquirors or to such other accounts as they may direct at DTC.
See "The Exchange Offer -- Book-Entry Transfer."
The Global Notes
We expect that under procedures established by DTC:
- upon deposit of the global notes with DTC or its custodian, DTC will
credit on its internal system portions of the global notes that shall be
comprised of the corresponding respective amounts of the global notes to
the respective accounts of persons who have accounts with such
depositary; and
- ownership of the notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC or its
nominee, with respect to interests of persons who have accounts with DTC
("participants"), and the records of participants, with respect to
interests of persons other than participants.
So long as DTC or its nominee is the registered owner or holder of any of
the notes, DTC or such nominee will be considered the sole owner or holder of
such notes represented by the global notes for all purposes under the indenture
and under the notes represented thereby. No beneficial owner of an interest in
the global notes will be able to transfer such interest except in accordance
with the applicable procedures of DTC in addition to those provided for under
the indenture.
Payments on the notes represented by the global notes will be made to DTC
or its nominee, as the case may be, as the registered owner thereof. None of the
Company, the trustee or any paying agent under the
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indenture will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the global notes or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interest.
We expect that DTC or its nominee, upon receipt of any payment on the notes
represented by the global notes, will credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the global notes as shown in the records of DTC or its nominee. We also expect
that payments by participants to owners of beneficial interests in the global
notes held through such participants will be governed by standing instructions
and customary practice as is now the case with securities held for the accounts
of customers registered in the names of nominees for such customers. Such
payment will be the responsibility of such participants.
Transfers between participants in DTC will be effected in accordance with
DTC rules and will be settled in immediately available funds. If a holder
requires physical delivery of a certificated security for any reason, including
to see notes to persons in states that require physical delivery of such
security or to pledge such securities, such holder must transfer its interest in
the global notes in accordance with the normal procedures of DTC and the
procedures in the indenture.
DTC has advised us that DTC will take any action permitted to be taken by a
holder of notes, including the presentation of notes for exchange as described
below, only at the direction of one or more participants to whose account the
DTC interests in the global notes are credited and only in respect of the
aggregate principal amount as to which such participant or participants has or
have given such direction. However, if there is an event of default under the
indenture, DTC will exchange the global notes for certificated securities that
it will distribute to its participants.
DTC has advised us as follows:
- DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code
and a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered under the provisions
of Section 17A of the Securities Exchange Act of 1934;
- DTC holds securities that its participants deposit with DTC and
facilitates the settlement among participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in participants' accounts, thereby
eliminating the need for physical movement of securities certificates;
- Direct participants include securities brokers and dealers, banks, trust
companies, clearing corporations and other organizations;
- DTC is owned by a number of its participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc.;
- Access to the DTC system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a direct participant, either
directly or indirectly; and
- The rules applicable to DTC and its participants are on file with the
SEC.
Although DTC is expected to follow these procedures in order to facilitate
transfers of interests in the global notes among participants of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the trustee will have any
responsibility for the performance by DTC or its direct or indirect participants
of their respective obligations under the rules and procedures governing their
operations.
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Certificated Securities
Interests in the global notes will be exchanged for certificated securities
if:
- DTC or any successor depositary (the "Depositary") notifies us that it is
unwilling or unable to continue as depositary for the global notes, or
DTC ceases to be a "clearing agency" registered under the Securities
Exchange Act of 1934, and a successor depositary is not appointed by us
within 90 days;
- an event of default has occurred and is continuing with respect to the
notes and the registrar has received a request from the Depositary to
issue certificated securities in lieu of all or a portion of the global
notes, in which case we will deliver certificated securities within 30
days of such request; or
- we determine not to have the notes represented by global notes.
Upon the occurrence of any of the events described in the preceding sentence, we
will cause the appropriate certificated securities to be delivered.
Neither the Company nor the trustee will be liable for any delay by the
Depositary or its nominee in identifying the beneficial owners of the related
notes. Each such person may conclusively rely on, and will be protected in
relying on, instructions from such Depositary or nominee for all purposes,
including the registration and delivery, and the respective principal amounts,
of the notes to be issued.
Same-Day Settlement and Payment
The indenture requires that payments in respect of the notes represented by
the global notes (including principal, premium, if any, and interest) be made by
wire transfer of immediately available funds to the accounts specified by the
global note holder. With respect to certificated notes, the Company will make
all payments of principal, premium, if any, and interest by wire transfer of
immediately available funds to the accounts specified by the holders thereof or,
if no such account is specified, by mailing a check to each such holder's
registered address. Secondary trading in long-term notes and debentures of
corporate issues is generally settled in clearinghouse or next-day funds. In
contrast, notes represented by the global notes are expected to be eligible to
trade in the PORTAL market and to trade in DTC's Same-day Funds Settlement
System, and any permitted secondary market trading activity in such notes will,
therefore, be required by DTC to be settled in immediately available funds. The
Company expects that secondary trading in the certificated notes will also be
settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear
System or Cedel Bank participant purchasing an interest in a global note from a
participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Cedel participant, during the securities settlement
processing day (which must be a business day for Euroclear or Cedel) immediately
following the settlement date of DTC. DTC has advised the Company that cash
received in Euroclear or Cedel as a result of sales of interests in a global
note by or through a Euroclear or Cedel participant to a participant in DTC will
be received with value on the settlement date of DTC but will be available in
the relevant Euroclear or Cedel cash account only as of the business day for
Euroclear or Cedel following DTC's settlement date.
GOVERNING LAW
The indenture and the notes will be governed by and construed in accordance
with New York law.
CERTAIN DEFINITIONS
"Acceptable Credit Provider" means a bank or trust company authorized to
engage in the banking business having a combined capital and surplus of at least
$500,000,000 or the equivalent thereof whose long-term unsecured debt is rated
"A-" or higher by S&P or "A3" or higher by Moody's or, if both of such rating
agencies are no longer in business or no longer rating unsecured debt of banks
or trust companies, a comparable rating of another internationally recognized
rating agency selected by the Company and reasonably acceptable to the trustee.
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"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.
"Base Case Financial Model" means the model so titled in the Independent
Engineer's report prepared in connection with the sale of the outstanding notes,
as amended from time to time and certified by the Independent Engineer for
purposes of calculating the Forward Debt Service Coverage Ratio.
"Bridge Loan" means the $831,000,000 loan to the Company entered into in
connection with the acquisition of the Company's interests in the Facilities.
"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.
"CalPERS Security Agreement" means the security agreement dated the Issue
Date between CalPERS and the trustee.
"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 or interests, but excluding any debt securities convertible into such
equity.
"Cash Distribution" means all cash distributions received by the Company
which are made in respect and attributable to, and based upon the Company's
direct or indirect equity interests or ownership in the Operating Partnerships,
other power projects and other investments.
"Cashflow" means during any period the sum of:
- all amounts received by the Company pursuant to distributions from the
Operating Partnerships (other than damages or penalties received by the
Company pursuant to the Project Documents);
- all proceeds received by the Company from business interruption
insurance;
- all interest income or hedging receipts (net of costs) received by the
Company;
- all other amounts received by the Company in respect of the Facilities
and Operating Partnerships; and
- any amounts released to the Company after the Issue Date from the expense
account established in connection with the bridge loan.
"Change of Control" means a combination of (a) Enron and (b) CalPERS and/or
other third party institutional investors ceases to be the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of at
least a majority of the voting power of all classes of Voting Stock of the
Company; provided, however, that a Change of Control shall not be deemed to
occur if (1) the holders of 66 2/3% of the aggregate principal amount of the
outstanding notes (and additional notes) consent to the transaction that results
in such combination of (a) Enron and (b) CalPERS and/or other third party
institutional investors ceasing to be the beneficial owner of at least a
majority of voting power of all classes of Voting Stock of the Company or (2)
after giving effect to the transaction that results in such combination of (a)
Enron and (b) CalPERS and/or other third party institutional investors ceasing
to be the beneficial owner of at least a majority of the voting power of all
classes of Voting Stock of the Company, the then current rating of the Notes is
at least as high as the rating of the Notes on the Issue Date, and the Rating
Agencies confirm that a Rating Downgrade will not result.
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"Common Security Agreement" means the common security agreement dated the
Issue Date among the Company, certain of its Subsidiaries and the trustee.
"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 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
notes to be redeemed.
"Comparable Treasury Price" means (a) 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 (b) if such release (or any
successor release) is not published or does not contain such prices on such
business day, (1) 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 (2) if the Company
obtains fewer than four such Reference Treasury Dealer Quotations, the average
of all such Quotations.
"Debt Service Coverage Ratio" means for any period, without duplication, a
ratio the numerator of which is Net Cashflow for that period, and the
denominator of which is principal, interest and commitment fees, underwriting
fees and other similar fees owed by the Company due for such period on the notes
and other Indebtedness which ranks pari passu with the notes (without giving
effect to any amounts paid from the expense account established in connection
with the bridge loan). For purposes of calculating the Debt Service Coverage
Ratio for the first four quarters ending after the Issue Date in connection with
the "Limitation on Restricted Payments" covenant, historical numbers shall be
used for completed quarters (the first quarter being deemed to be the period
from February 4, 1999 to June 30, 1999) and projected numbers shall be used or
relied upon for the remaining quarters.
"Debt Service Credit Support" means (a) an undertaking to advance money to
the trustee for the benefit of the holders by (1) Enron, if and so long as
Enron's senior long-term unsecured debt has an Investment Grade Rating or (2)
any successor to Enron resulting from a Change of Control, merger, consolidation
or similar transaction resulting in a change in the beneficial ownership of the
Company, if and so long as such Person's senior long-term unsecured debt has an
Investment Grade Rating or (b) a letter or letters of credit from an Acceptable
Credit Provider.
"Default" means an event or condition that, with giving of notice, lapse of
time or both would become an Event of Default.
"ECP Holding Company Security Agreement" means the security agreement dated
the Issue Date between ECP Holding Company and the trustee.
"ECT Merchant Security Agreement" means the security agreement dated the
Issue Date between ECT Merchant and the trustee.
"Event of Loss" means any compulsory transfer or taking, or taking or
transfer under threat of compulsory transfer or taking, of all or substantially
all of any Facility by any Governmental Authority, or any event which causes all
or substantially all of any Facility 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:
- assets that in a single transaction or a series of related transactions
do not have a fair market value in excess of $10 million in any calendar
year;
- assets resulting from, included in, covered by, or related to an Event of
Loss or a Power Contract Buyout;
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- any sale, exchange of assets or lease by the Company or any of its
Subsidiaries (as lessor) made in the ordinary course of business
(excluding any forward sale, sale of receivables or similar
transactions);
- an issuance or sale of equity interests by a Subsidiary of the Company to
the Company or to another Subsidiary of the Company;
- a sale, transfer, assignment or other disposition by the Company or a
Subsidiary of the Company to the Company or another Subsidiary of the
Company;
- a dividend or other distribution permitted under the caption "Certain
Covenants of the Company and the Operating Partnerships Restricted
Payments";
- the sale, exchange, lease by the Company or any of its Subsidiaries (as
lessor) or other disposition of obsolete assets not integral to any Line
of Business;
- the abandonment or relinquishment of assets in the ordinary course of
business; and
- creations of liens, grants of security interests or pledges or
assignments to secure Indebtedness that are not prohibited under the
"Limitation on Liens" covenant.
"Facility" means any of the Bayonne Facility, the Camden Facility and the
Linden Facility and any Facility Expansion, as the context may require.
"Facility Expansion" means:
- an expansion in the electric power generating capacity of up to 300 MW at
or adjacent to the Linden Facility;
- an expansion in the electric power generating capacity of up to 500 MW at
or adjacent to the Bayonne Facility; and
- the expansion of transmission, infrastructure, or fuel storage or
transportation facilities at any Facility, together with related power
supply, thermal energy and fuel contracts and ancillary facilities,
services or goods.
"Facility Owner" means, collectively, the Company and each of its
Subsidiaries, including the Operating Partnerships and the Managing General
Partners.
"Forward Debt Service Coverage Ratio" means the projected Debt Service
Coverage Ratio over the life of the Notes with the longest maturity using as the
basis for the calculation of the Debt Service Coverage Ratio the amounts so
shown on the Base Case Financial Model, as amended, from time for time and
certified by the Independent Engineer.
"GAAP" means generally accepted accounting principles in the United States
of America, 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 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,
including opinions and pronouncements in staff accounting bulletins and similar
written statements from the accounting staff of the 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.
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"Indebtedness" with respect to any Person means, at any time, without
duplication:
- its liabilities for borrowed money and its redemption obligations in
respect of mandatorily redeemable preferred stock;
- 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 and other
current liabilities arising in the ordinary course of business);
- all liabilities appearing on its balance sheet in accordance with GAAP in
respect of capital leases;
- 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);
- 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); and
- any guaranty of such Person with respect to liabilities of a type
described in any of the clauses set forth above in this definition.
"Independent Engineer" means Burns and Roe Enterprises, Inc. or another
widely recognized independent engineering firm, engineer and/or industry
consultant who is widely recognized as an expert in electric power or thermal
energy generation or cogeneration retained as independent engineer or consultant
by the Company.
"Independent Investment Banker" means NationsBanc Montgomery Securities LLC
or its successor or, if such firm is unwilling or unable to select the
Comparable Treasury Issue, an independent investment banking institution of
national standing appointed by the Company; 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 Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement, in each case, entered into for non-speculative
purposes.
"Investment Grade Rating" means, with respect to any Indebtedness, a rating
of "BBB-" or higher by S&P or "Baa3" or higher by Moody's, or, if any of such
rating agencies is no longer in business or no longer rating such entity's
Indebtedness, a comparable rating of another internationally recognized rating
agency selected by the Company and reasonably acceptable to the trustee.
"Issue Date" means April 20, 1999, the date on which the outstanding notes
were originally issued under the indenture.
"Linden subordinated note" means the subordinated promissory note of Linden
Ltd. dated February 5, 1999 payable to the Company in the original principal
amount of $289,581,328.
"Line of Business" means, with respect to the Company and its Subsidiaries:
- the business of construction, development, acquisition, servicing,
ownership, improvement, operation and management of the Facilities,
- the business of consulting, insurance or advisory activities related to
any business referred to in this definition; and
- any activity or business that is reasonably related thereto.
"Managing General Partners" means Linden Ltd., Camden GP and Bayonne GP.
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"Managing Member" means, with respect to the Company, ECP Holding Company
or any other Person designated by the members of the Company to be the Company's
managing member.
"Material Adverse Effect" means a material adverse effect on:
- the financial position or results of operation of the Company and its
Subsidiaries, taken as a whole;
- the ability of the Company to perform its obligations under the notes; or
- the ability of a Facility Owner to perform any obligation under a Project
Document that is material to the Company and its Subsidiaries taken as a
whole.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Buyout Proceeds" means all cash proceeds and the fair market value of
all non-cash proceeds received by the Company or any of its Subsidiaries
(including the Operating Partnership and the Managing General Partners) (without
duplication) from a Power Contract Buyout, 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 Cashflow" during any period means the amount determined in accordance
with the definition of Cashflow for that period minus the sum of (a) all amounts
paid by or on behalf of the Company in respect of administration and overhead
other than any subordinated payments and (b) all taxes paid by the Company
(other than tax reimbursements paid by the Company), without duplication;
provided, however, that net cashflow for the quarter ended June 30, 1999 will be
deemed to also include all amounts received by the Company after February 4,
1999 through the Issue Date minus (a) interest paid on the bridge loan and (b)
all amounts paid by or on behalf of the Company in respect of administration and
overhead between February 4, 1999 and the Issue Date.
"Net Loss Proceeds" means all cash proceeds of insurance received by the
Company on account of an Event of Loss, 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 resulting from an Event of Loss, in each
case, net of all expenses, costs and other amounts expended or incurred by or on
behalf of the recipients 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 to the remediation or the reimbursement for the
cost of remediation of the environmental damage giving rise to such insurance
claim) or similar types of policies.
"Notes" means, collectively, the 2008 notes, the 2012 notes and the 2017
notes.
"Officers' Certificate" means a certificate signed by an officer or
manager, as the case may be, of the Company or any of its Subsidiaries, or any
authorized partner or member of any of them, as the case may be.
"Operating Partnerships" or "Operating Partnership" means collectively or
individually, as the case may be, Linden Venture, Camden Venture and Bayonne
Venture.
"Operating Property" means (a) any interest in real property owned by the
Company or its Subsidiaries and (b) any asset owned by the Company or its
Subsidiaries that is depreciable in accordance with GAAP, excluding, in either
case, (1) any interest of the Company 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 (2) 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, the Company, any of its Subsidiaries or the trustee or any of their
Affiliates.
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"Payment Dates" mean March 31, June 30, September 30 and December 31,
commencing June 30, 1999.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, limited liability company, trust,
unincorporated organization or Governmental Authority.
"Power Contract Buyout" means the termination of, or the negotiated
reduction of capacity or electricity to be sold under, a Power Purchase
Agreement other than pursuant to such agreement's terms and the payment by the
purchaser made in connection therewith.
"Power Purchase Agreement" means any agreement for the sale of electrical
generating capacity or electricity by a Facility other than any such agreement
that has a term of one year or less or that may be canceled or terminated by
either the power purchaser or seller thereunder on less than one year's notice
without substantial economic detriment.
"Principal Operating Property" means any Operating Property that consists
of any of the following: (a) a real estate site on which any Facility is located
and (b) any Facility or any turbine located at any Facility, excluding, however,
from each of clauses (a) and (b), 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 Purchase Agreements, steam
contracts, operating and maintenance agreements, administrative services
contracts, construction contracts (other than purchase orders), transmission
agreements, fuel supply contracts and partnership agreements that relate to a
Facility, other than any such agreement that has a term of one year or less or
that may be canceled or terminated by a party thereto on less than one year's
notice without substantial economic detriment.
"Rating" means the rating of (a) the notes by the Rating Agencies on the
Issue Date and (b) the additional notes on their date of issuance, provided that
if any of the Rating Agencies that initially rated such notes or additional
notes is no longer in business or no longer rating the notes or additional
notes, a comparable rating of another internationally recognized rating
institutions selected in good faith by the Managing Member of the Company.
"Rating Agencies" means Moody's and S&P to the extent that at each relevant
time of determination, each of them has an active and current rating in effect
on the 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 notes; provided that if none of them
has a current rating on the notes at any relevant time of determination, at
least 2 other internationally recognized rating institutions selected in good
faith by the Managing Member of the Company.
"Rating Downgrade" means a lowering by one or more of the Rating Agencies
of the Ratings.
"Reference Treasury Dealer" means (a) NationsBanc Montgomery Securities LLC
or its successor; provided, however, that if it shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), the
Company shall substitute therefore another Primary Treasury Dealer, and (b) any
other Primary Treasury Dealer selected by the Company.
"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 Company and to the trustee by such Reference Treasury Dealer at
5:00 p.m. on the third business day preceding such Redemption Date.
"S&P" means Standard & Poor's Rating Services and its successors.
"Security Documents" means the ECT Merchant Security Agreement, the CalPERS
Security Agreement, the ECP Holding Company Security Agreement and the Common
Security Agreement.
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"Subordinated Indebtedness" means any Indebtedness of the Company (whether
outstanding on the date hereof or thereafter incurred) which is subordinate or
junior in right of payment to the notes and the additional notes, if any,
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:
- such Person;
- such Person and one or more Subsidiaries of such Person; or
- one or more Subsidiaries of such Person.
"Treasury Rate" means, a rate of interest per annum equal to (a) 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 (b) 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 quarterly 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.
"Voting Stock" means any class or classes of Capital Stock of a Person
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the board of directors,
managers or trustees, or to elect or designate those generally responsible for
managing the business and affairs under ordinary circumstances, of any Person
(irrespective of whether or not, at the time, securities of any other class or
classes has, or might have, voting power by reason of the happening of any
contingency).
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CERTAIN UNITED STATES INCOME TAX CONSIDERATIONS
The discussion below is intended to be a general description of the United
States federal income tax considerations material to an investment in the notes.
It does not take into account the individual circumstances of any particular
investor and does not purport to discuss all of the possible tax consequences of
the purchase, ownership or disposition of the notes and is not intended as tax
advice. Therefore, prospective investors are urged to consult their own tax
advisors with respect to the income tax consequences of an investment in the
notes, including application of state, provincial, local, foreign and other tax
laws.
U.S. HOLDERS
The following is a general summary of certain United States federal income
tax consequences associated with the exchange and the acquisition, ownership,
and disposition of the notes. The following summary does not discuss all of the
aspects of federal income taxation that may be relevant to a prospective holder
of the notes in light of his or her particular circumstances, or to certain
types of holders which are subject to special treatment under the federal income
tax laws (including persons who hold the notes as part of a conversion, straddle
or hedge, dealers in securities, insurance companies, tax-exempt organizations,
financial institutions, broker-dealers and S corporations). Further, this
summary pertains only to U.S. Holders that will hold the notes as capital assets
within the meaning of section 1221 of the Internal Revenue Code of 1986, as
amended (the "Code"). A "U.S. Holder" is a beneficial owner of notes that is:
- an individual who is a citizen or resident of the United States;
- a corporation or partnership created or organized in the United States or
under the laws of the United States or of any State thereof (including
the District of Columbia);
- an estate the income of which is subject to U.S. federal income tax
regardless of its source; or
- a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States persons who
have the authority to control all substantial decisions of the trust. In
addition, this summary does not describe any tax consequences under
state, local, or foreign tax laws.
This summary is based upon the provisions of the Code, Treasury Regulations
(the "Regulations"), rulings and pronouncements issued by the Internal Revenue
Service ("IRS") and judicial decisions now in effect, all of which are subject
to change at any time by legislative, judicial or administrative action. Any
such changes may be applied retroactively in a manner that could adversely
affect the U.S. Holders of the notes. We have not sought and will not seek any
rulings from the IRS or opinions from counsel with respect to the matters
discussed below. We cannot assure you that the IRS will not take positions
concerning the tax consequences of the purchase, ownership or disposition of the
Notes which are different from those discussed herein.
The Exchange Offer
The exchange of outstanding notes for new notes will not produce, for
federal income tax purposes, recognizable gain or loss to either our Company or
a U.S. Holder of a new note because the new notes will be identical in all
material respects to the outstanding notes. The U.S. Holder will have an initial
adjusted tax basis and a holding period in the new note equal to his or her
adjusted tax basis and holding period in the outstanding note.
Payments of Interest
Stated interest paid on each note held by a U.S. Holder will generally be
taxable in accordance with the U.S. Holder's method of accounting for federal
income tax purposes. Special rules governing the treatment of market discount
and amortizable premium are described below. The notes will not be issued with
"original issue discount" for United States federal income tax purposes.
Market Discount
If a U.S. Holder purchases a note for less than the stated redemption price
of the note at maturity, the difference is considered market discount, unless
such difference is de minimis, i.e., less than one-fourth of one
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percent of the stated redemption price of the note at maturity multiplied by the
number of complete years remaining to maturity. Under the market discount rules,
any gain realized by the U.S. Holder on a taxable disposition of a note having
market discount, as well as any partial principal payment made with respect to
such a note, will be treated as ordinary income to the extent of the then
accrued market discount of the note.
Any market discount will accrue ratably from the date of acquisition to the
maturity date of the note, unless the U.S. Holder elects, irrevocably, to accrue
market discount on a constant interest rate method under which marginally less
market discount would accrue in early years and marginally greater amounts would
accrue in later years. The election to accrue market discount on a constant
interest rate method is irrevocable but may be made separately as to each note
held by the holder.
Accrual of market discount will not cause the accrued amounts to be
included currently in a U.S. Holder's taxable income, in the absence of a
disposition of, or principal payment on, the note. A U.S. Holder of such a note
is generally required to defer the deduction of all or a portion of the interest
expense on any indebtedness incurred or continued to purchase or carry the note
until the deferred income is realized. A U.S. Holder may elect to currently
include market discount in income as it accrues on either a ratable or constant
interest rate method. In such event, interest expense relating to the
acquisition of a note which would otherwise be deferred would be currently
deductible to the extent otherwise permitted by the Code. The election to
include market discount in income currently, once made, applies to all market
discount obligations acquired by such U.S. Holder on or after the first day of
the first taxable year to which the election applies and all subsequent years
unless revoked with the consent of the IRS.
Amortizable Premium
If a U.S. Holder acquires a note for an amount which is greater than its
principal amount, such U.S. Holder will be considered to have purchased such
note with amortizable bond premium equal to the amount of such excess. The U.S.
Holder may elect to amortize the premium using a constant yield method over the
period from the acquisition date to the maturity date of the note. Amortized
amounts may be offset only against interest paid with respect to the note. Once
made, an election to amortize and offset interest on the note may be revoked
only with the consent of the IRS and will apply to all notes held by the
subsequent U.S. Holder on the first day of the taxable year to which the
election relates and to subsequent taxable years and to all notes subsequently
acquired by such U.S. Holder.
Sale, Redemption or Other Taxable Disposition of Notes
The sale, redemption or certain other taxable dispositions of a note will
result in the recognition of gain or loss to the U.S. Holder in an amount equal
to the difference, if any, between (a) the amount realized upon the disposition
or redemption and (b) the U.S. Holder's adjusted tax basis in such note. A U.S.
Holder's tax basis for determining gain or loss on the disposition or redemption
of a note generally will be the cost of such note to such U.S. Holder, increased
by the amount of any market discount includible in such U.S. Holder's gross
income with respect to such note, and decreased by the amount of any payments
under the note that are part of its stated redemption price at maturity and by
the portion of any premium applied to reduce interest payments as described
above. Such gain or loss will be capital gain or loss (except to the extent the
gain represents market discount on the note not previously included in gross
income, to which extent such gain would be treated as ordinary income). In the
case of an individual U.S. Holder, such capital gain generally will be subject
to a maximum federal tax rate of 20% if the individual has held the note for
more than one year and otherwise will be short-term capital gain or loss. The
deductibility of capital losses is subject to certain limitations. Prospective
investors should consult their own tax advisors in this regard. Payments on such
disposition for accrued stated interest not previously included in income will
be treated as ordinary interest income.
Purchase or Redemption of Notes
Purchase at the Option of the Holders -- Change of Control. Upon a Change
of Control, we are required to offer to purchase all outstanding notes for a
price equal to 101% of the principal amount thereof plus accrued and unpaid
interest. Under the Regulations, such a Change of Control purchase offer will
not affect the yield or maturity date of the notes unless, based on all the
facts and circumstances as of the issue date, it is
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significantly more likely than not that a Change of Control giving rise to the
offer will occur. We will not treat the Change of Control provisions of the
notes as affecting the calculation of the yield to maturity of any note.
Optional Redemption. At our option, we may redeem part or all of the notes
at any time at a redemption price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest thereon to the date of redemption, plus a make
whole premium. For purposes of determining whether the notes are issued with any
original issue discount, the Regulations generally provide that an issuer will
be treated as exercising any such option if its exercise would lower the yield
of the debt instrument. A redemption of the notes at the optional redemption
prices, however, would increase rather than decrease the effective yield of the
debt instrument as calculated from the issue date and accordingly, the optional
redemption provisions of the Notes will not affect the calculation of yield to
maturity of any note.
Should we exercise an option and redeem a note, or upon the mandatory
redemption of a note, the U.S. Holder of the note would be required to treat any
amount paid by us (other than amounts paid as accrued and unpaid interest
thereon) as an amount realized upon the redemption of the note.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to interest
payments on the notes made to U.S. Holders other than certain exempt recipients
(such as corporations) and to proceeds realized by such holders on dispositions
of the notes. A 31% backup withholding tax will apply to such amounts only if
the U.S. Holder:
- fails to furnish its social security or other taxpayer identification
number ("TIN") within a reasonable time after request therefor;
- furnishes an incorrect TIN;
- fails to report properly interest or dividend income; or
- fails under certain circumstances to provide a certified statement,
signed under penalty of perjury, that the TIN provided is its correct
number and that it is not subject to backup withholding.
Any amount withheld from a payment to a U.S. Holder under the backup withholding
rules is allowable as a refund or as a credit against such holder's federal
income tax liability, provided that the required information is furnished to the
IRS. Furthermore, certain penalties may be imposed by the IRS on a U.S. Holder
who is required to supply information but who does not do so in the proper
manner. U.S. Holders of the notes should consult their tax advisors as to their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption.
NON-U.S. HOLDERS
The following is a general discussion of certain U.S. federal tax
consequences of the ownership and disposition of notes applicable to beneficial
owners that are Non-U.S. Holders ("Non-U.S. Holders") of the notes. A "Non-U.S.
Holder" is any person other than:
- an individual who is a citizen or resident of the United States;
- a corporation or partnership created or organized in the United States or
under the laws of the United States or of any State thereof (including
the District of Columbia);
- an estate the income of which is subject to U.S. federal income tax
regardless of its source; or
- a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States persons who
have the authority to control all substantial decisions of the trust.
This discussion is for general information only and does not deal with all
aspects of U.S. federal income and estate taxation that may be relevant to
Non-U.S. Holders in view of their particular circumstances, nor does it
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address the effect of any applicable state and local or foreign tax law.
Furthermore, this summary is based upon provisions of the Code, Regulations,
rulings and pronouncements issued by the IRS and judicial decisions now in
effect, all of which are subject to change at any time by legislative, judicial
or administrative action. Any such changes may be applied retroactively in a
manner that could adversely affect the Non-U.S. Holders of the notes. We have
not sought and will not seek any rulings from the IRS or opinions from counsel
with respect to the matters discussed below. There can be no assurance that the
IRS will not take positions concerning the tax consequences of the purchase,
ownership or disposition of the notes which are different from those discussed
herein. PROSPECTIVE FOREIGN INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS
REGARDING THE FEDERAL, STATE AND LOCAL, AND FOREIGN INCOME AND OTHER TAX
CONSEQUENCES OF OWNING AND DISPOSING OF THE NOTES.
Payments of Interest from U.S. Sources
Interest paid from U.S. sources on the notes to a Non-U.S. Holder should
qualify as "portfolio interest" on which no withholding of U.S. income tax is
imposed, provided (a) the Non-U.S. Holder:
- does not own, actually or constructively 10% or more of the total
combined voting power of all classes of stock of our Company;
- is not a controlled foreign corporation within the meaning of section
957(a) of the Code that is related directly or indirectly to our Company;
- is not a bank which acquired the notes in consideration for an extension
of credit made pursuant to a loan agreement entered into in the ordinary
course of its business; and
- such amounts are not considered payments of "contingent interest"
described in Section 871(h)(4) of the Code (relating primarily to
interest based on or determined by reference to income, profits, cash
flow, sales, dividends or other comparable attributes of the Company or a
party related to the Company), and
(b) we receive a statement that the beneficial owner of the notes is a Non-U.S.
Holder. Such statement is made on an IRS Form W-8, or a successor form, which is
signed by the beneficial owner under penalties of perjury, certifies that the
beneficial owner of the notes is a Non-U.S. person and provides the name and
address of the beneficial owner. Otherwise, interest paid from U.S. sources to a
Non-U.S. Holder of notes will be subject to the withholding of U.S. income tax
at the rate of 30% of the gross amount of interest paid or a lower rate under an
applicable income tax treaty.
Interest paid from U.S. sources to a Non-U.S. Holder may also be exempt
from U.S. federal withholding taxes provided such Non-U.S. Holder delivers (a)
IRS Form 1001, or a successor form, signed by the Non-U.S. Holder of the Note or
such Non-U.S. Holder's agent claiming exemption from or reduction of withholding
under an applicable tax treaty, or (b) IRS Form 4224, or a successor form,
signed by the Non-U.S. Holder of the Note or such Non-U.S. Holder's agent
claiming exemption from withholding tax on income effectively connected with the
conduct of a trade or business within the United States; provided that, in any
such case (x) the applicable form is delivered pursuant to applicable procedures
and is properly transmitted to the person otherwise required to withhold tax and
(y) none of the persons receiving the form has actual knowledge that the
Non-U.S. Holder is not a Non-U.S. Holder or that any certification on the form
is false. Non-U.S. Holders that are classified as partnerships for U.S. federal
income tax purposes but classified as corporations for non-United States tax
purposes may, however, not be entitled to the benefits of an otherwise
applicable tax treaty. Interest that is effectively connected with the conduct
by a Non-U.S. Holder of a trade or business within the United States generally
will be subject to United States federal income tax on a net basis in the manner
described above for U.S. Holders. In addition, a Non-U.S. Holder that is a
corporation may be subject to a branch profits tax in respect of such
effectively connected income equal to 30% or such lower rate as may be specified
in an applicable tax treaty.
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<PAGE> 114
Sale, Redemption or Other Taxable Disposition of the Notes
Generally, a Non-U.S. Holder of a note will not be subject to U.S. federal
income tax on any gain realized on the sale, redemption or other disposition of
a note unless:
- such gain or income is effectively connected with a trade or business in
the United States of the Non-U.S. Holder or, under an applicable tax
treaty, is attributable to a United States permanent establishment
maintained by the Non-U.S. Holder;
- in the case of a Non-U.S. Holder who is an individual, the Non-U.S.
Holder is present in the United States for 183 days or more in the
taxable year of such sale and certain other requirements are met; or
- the Non-U.S. Holder is subject to tax pursuant to the provisions of the
Code applicable to certain former citizens and residents of the United
States.
Information Reporting and Backup Withholding
U.S. information reporting and backup withholding tax (which is a
withholding tax imposed at the rate of 31% on certain payments to persons who
fail to furnish the information required under U.S. information reporting
requirements) generally will not apply to interest paid on the notes to a
Non-U.S. Holder who has provided us (or our agent) with a Form W-8, or a
successor form, provided the payor does not have actual knowledge that the payee
is not a Non-U.S. person.
Payment of the proceeds from a sale of the notes to or through a U.S.
office of a broker will be subject to information reporting and backup
withholding unless the owner certifies as to its status as a Non-U.S. Holder
under penalties of perjury or otherwise establishes an exemption. Payment of the
proceeds from a sale of notes to or through a non-U.S. office of a broker
generally will not be subject to information reporting or backup withholding;
however, if such broker is:
- a United States person;
- a "controlled foreign corporation"; or
- a foreign person that derives 50% or more of its gross income from the
conduct of a trade or business in the United States,
such payment will be subject to information reporting (but currently not backup
withholding, although the issue of whether backup withholding should apply is
under consideration by the IRS) unless such broker has documentary evidence in
its records that the owner is a Non-U.S. Holder and certain other conditions are
met or the owner otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be credited
against the Non-U.S. Holder's federal income tax liability, if any, or refunded,
provided the required information is furnished to the IRS.
THE FEDERAL TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE TAX
IMPLICATIONS OF HOLDING AND DISPOSING OF THE NOTES UNDER APPLICABLE STATE OR
LOCAL LAWS. FOREIGN INVESTORS SHOULD ALSO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES UNIQUE TO INVESTORS WHO ARE NOT U.S. PERSONS.
110
<PAGE> 115
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the SEC in no action letters
issued to third parties, we believe that you may transfer new notes issued under
the exchange offer in exchange for the outstanding notes if:
- you acquire the new notes in the ordinary course of your business; and
- you are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a
distribution of such new notes.
You may not participate in the exchange offer if you are:
- our "affiliates" within the meaning of Rule 405 under the Securities Act;
or
- a broker-dealer that acquired outstanding notes directly from us.
Broker-dealers receiving new notes in the exchange offer will be subject to
a prospectus delivery requirement with respect to resales of the new notes.
To date, the staff of the SEC has taken the position that broker-dealers
may fulfill their prospectus delivery requirements with respect to transactions
involving an exchange of securities such as this exchange offer, other than a
resale of an unsold allotment from the original sale of the outstanding notes,
with the prospectus contained in the exchange offer registration statement. Each
broker-dealer that receives new notes for its own account pursuant to the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of such new notes. This prospectus, and any amendment or
supplement to this prospectus, may be used by a broker-dealer in connection with
resales of new notes received in exchange for outstanding notes where such
outstanding notes were acquired as a result of market-making activities or other
trading activities. We have agreed that, starting on the expiration date and
ending on the close of business 180 days after the expiration date, we will make
this prospectus, and any amendment or supplement to this prospectus, available
to any broker-dealer for use in connection with any such resale. In addition,
until such date all dealers effecting transactions in the new notes may be
required to deliver a prospectus.
If you wish to exchange your outstanding notes for new notes in the
exchange offer, you will be required to make representations to us as described
in "The Exchange Offer -- Purpose and Effect of the Exchange Offer" and
"-- Procedures for Tendering -- Your Representations to Us" in this prospectus
and in the letter of transmittal. In addition, if you are a broker-dealer who
receives new notes for your own account in exchange for outstanding notes that
were acquired by you as a result of market-making activities or other trading
activities, you will be required to acknowledge that you will deliver a
prospectus in connection with any resale by you of such new notes.
We will not receive any proceeds from any sale of new notes by
broker-dealers. Broker-dealers who receive new notes for their own account in
the exchange offer may sell them from time to time in one or more transactions
in the over-the-counter market:
- in negotiated transactions;
- through the writing of options on the new notes or a combination of such
methods of resale;
- at market prices prevailing at the time of resale; and
- at prices related to such prevailing market prices or negotiated prices.
Any resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any broker-dealer or the purchasers of any new notes. Any broker-dealer
that resells new notes it received for its own account in the exchange offer and
any broker or dealer that participates in a distribution of such new notes may
be deemed to be an "underwriter" within the meaning of the Securities Act. Any
profit on any resale of new notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The letter of transmittal states that by acknowledging that it
will deliver and by delivering a
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<PAGE> 116
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
LEGAL MATTERS
The validity of the new notes will be passed upon for the Company by Vinson
& Elkins L.L.P., Houston, Texas.
INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements and schedules included in this prospectus and
elsewhere in the registration statement, to the extent and for the periods
indicated in their reports, have been audited by Arthur Andersen LLP,
independent public accountants, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
AVAILABLE INFORMATION
Upon consummation of the exchange offer, the Company will be subject to the
informational requirements of the Exchange Act and, in accordance therewith,
will file reports and other information with the Commission. Reports and other
information filed by the Company with the Commission can be inspected without
charge and copied, upon payment of prescribed rates, at the public reference
facilities maintained by the Commission located at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York 10048 and the
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material and any part thereof will also be available
by mail from the Public Reference Section of the Commission, located at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates, and via the
Commission's address on the World Wide Web at http://www.sec.gov.
112
<PAGE> 117
GLOSSARY OF TECHNICAL TERMS
The following terms used in this prospectus have the following meanings:
"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.
"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 another
service.
"Base load" plant or facility 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.
"Btu" means British thermal units, a unit of energy.
"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.
"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" in accordance with the Public
Utility Holding Company Act of 1935.
"Gas-fired, combined-cycle cogeneration 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.
"Kilovolt" or "KV" means one thousand volts.
"Kilowatt" or "KW" means one thousand watts.
"Kilowatt-hour" 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.
"Mcf" means one thousand cubic feet.
"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.
"MMBtu" means one million Btu.
"QF" or "qualifying facility" means a "qualifying cogeneration facility" in
accordance with PURPA.
"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
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<PAGE> 118
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.
"ventures" means the ventures or entities in which the Company's
subsidiaries have equity interests and which in turn directly own the Company's
independent power plants.
114
<PAGE> 119
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF
EAST COAST POWER L.L.C.
Pro Forma Consolidated Statement of Income of East Coast
Power L.L.C. for the three months ended March 31,
1999................................................... F-4
Pro Forma Consolidated Statement of Income of East Coast
Power L.L.C. for the year ended December 31, 1998...... F-6
Pro Forma Consolidated Balance Sheet of East Coast Power
L.L.C. as of March 31, 1999............................ F-8
AUDITED FINANCIAL STATEMENTS OF EAST COAST POWER L.L.C.
Report of Independent Public Accountants.................. F-9
Consolidated Statement of Income of East Coast Power
L.L.C. for the period February 4, 1999 to March 31,
1999................................................... F-10
Consolidated Balance Sheet of East Coast Power L.L.C. as
of March 31, 1999...................................... F-11
Consolidated Statement of Cash Flows of East Coast Power
for the period February 4, 1999 to March 31, 1999...... F-12
Consolidated Statement of Members' Equity of East Coast
Power L.L.C. for the period February 4, 1999 to March
31, 1999............................................... F-13
Notes to Consolidated Financial Statements of East Coast
Power L.L.C. .......................................... F-14
UNAUDITED FINANCIAL STATEMENTS OF COGEN TECH GROUP
Combined Statements of Income of Cogen Tech Group for the
period January 1, 1999 to February 4, 1999............. F-24
Combined Statement of Cash Flows of Cogen Tech Group for
the period January 1, 1999 to February 4, 1999......... F-25
Combined Statement of Owners' Equity of Cogen Tech Group
for the period January 1, 1999 to February 4, 1999..... F-26
Notes to Combined Financial Statements of Cogen Tech
Group.................................................. F-27
AUDITED FINANCIAL STATEMENTS OF COGEN TECH GROUP
Report of Independent Public Accountants.................. F-30
Combined Statements of Income of Cogen Tech Group for the
years ended December 31, 1998, 1997 and 1996........... F-31
Combined Balance Sheets of Cogen Tech Group as of December
31, 1998 and 1997...................................... F-32
Combined Statements of Cash Flows of Cogen Tech Group for
the years ended December 31, 1998, 1997 and 1996....... F-33
Combined Statements of Owners' Equity of Cogen Tech Group
for the years ended December 31, 1998, 1997 and 1996... F-34
Notes to Combined Financial Statements of Cogen Tech
Group.................................................. F-35
UNAUDITED FINANCIAL STATEMENTS OF COGEN TECHNOLOGIES NEW
JERSEY OPERATING PARTNERSHIPS
Combined Statements of Income of Cogen Technologies New
Jersey Operating Partnerships for the period from
February 5, 1999 to March 31, 1999, the period from
January 1, 1999 to February 4, 1999 and the three
months ended March 31, 1998............................ F-45
Combined Balance Sheets of Cogen Technologies New Jersey
Operating Partnerships as of March 31, 1999 and
December 31, 1998...................................... F-46
Combined Statements of Cash Flows of Cogen Technologies
New Jersey Operating Partnerships for the period from
February 5, 1999 to March 31, 1999, the period from
January 1, 1999 to February 4, 1999 and the three
months ended March 31, 1998............................ F-47
Combined Statements of Partners' Capital of Cogen
Technologies New Jersey Operating Partnerships for the
period from February 5, 1999 to March 31, 1999, the
period from January 1, 1999 to February 4, 1999 and the
three months ended March 31, 1998...................... F-48
Notes to Combined Financial Statements of Cogen
Technologies New Jersey Operating Partnerships......... F-49
</TABLE>
F-1
<PAGE> 120
<TABLE>
<S> <C>
AUDITED FINANCIAL STATEMENTS OF COGEN TECHNOLOGIES NEW
JERSEY OPERATING PARTNERSHIPS
Report of Independent Public Accountants.................. F-52
Combined Statements of Income of Cogen Technologies New
Jersey Operating Partnerships for the years ended
December 31, 1998, 1997 and 1996....................... F-53
Combined Balance Sheets of Cogen Technologies New Jersey
Operating Partnerships as of December 31, 1998 and
1997................................................... F-54
Combined Statements of Cash Flows of Cogen Technologies
New Jersey Operating Partnerships for the years ended
December 31, 1998, 1997 and 1996....................... F-55
Combined Statements of Partners' Capital of Cogen
Technologies New Jersey Operating Partnerships for the
years ended December 31, 1998, 1997 and 1996........... F-56
Notes to Combined Financial Statements of Cogen
Technologies New Jersey Operating Partnerships......... F-57
</TABLE>
F-2
<PAGE> 121
EAST COAST POWER L.L.C.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
East Coast Power L.L.C. (the "Company") was formed in December 1998 in
connection with the Acquisition of the Acquired Group. The following unaudited
pro forma consolidated financial statements give effect to (i) the Acquisition
of Cogen Tech Group (the "Acquired Group") by the Company in February 1999 and
certain related transactions, (ii) the acquisition by an entity acquired by the
Company in the Acquisition of an additional indirect 5.25% partnership interest
in Cogen Technologies NJ Venture ("Bayonne Venture") in July 1998 and (iii) the
issuance of $850.0 million of outstanding notes in April 1999, based on the
historical combined financial statements of the Acquired Group and the
historical consolidated financial statements of the Company, under the
assumptions and adjustments set forth in the notes hereto. The amounts shown in
the column entitled Acquired Group reflect the combined financial statements of
Cogen Technologies Linden, Ltd. ("Linden Ltd."), Cogen Technologies Camden GP
Limited Partnership ("Camden GP") and McNair Energy Services Corporation
("MESC") and its wholly owned subsidiary Cogen Technologies NJ, Inc. ("NJ
Inc."). As a result of the Acquisition, the Company acquired all of the equity
interests in Linden Ltd., Camden GP and MESC. No pro forma adjustments relating
to the organization of the Company are shown because the amounts are de minimis.
The unaudited pro forma consolidated statements of income for the year
ended December 31, 1998 and the three months ended March 31, 1999 assume such
transactions were consummated at the beginning of the period presented. The
unaudited pro forma consolidated balance sheet at March 31, 1999 assumes the
transactions with respect to the outstanding notes were consummated on March 31,
1999. The unaudited pro forma consolidated 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 consolidated financial statements should be read together
with the historical combined financial statements of the Cogen Tech Group and
the related notes thereto, the historical consolidated financial statements of
the Company and the related notes thereto and Management's Discussion and
Analysis of Financial Condition and Results of Operations, included elsewhere in
this prospectus.
The adjustments contained in the unaudited pro forma consolidated
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.
F-3
<PAGE> 122
EAST COAST POWER L.L.C.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
HISTORICAL
-------------------------
ACQUIRED COMPANY
GROUP FEBRUARY 4
JANUARY 1 TO TO COMPANY
FEBRUARY 4, MARCH 31, PRO FORMA PRO
1999(1) 1999 ADJUSTMENTS FORMA(1)
------------ ---------- ----------- --------
(IN MILLIONS OF DOLLARS EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C>
Revenues
Equity in earnings (loss) of
Linden Venture............................ $(44.6) $ 6.4 $ (3.0)(2) $(41.2)
Camden Venture............................ (11.9) 1.9 (0.6)(2) (10.6)
Bayonne Venture........................... 5.0 6.4 (0.8)(2) 10.6
------ ------ ------ ------
(51.5) 14.7 (4.4) (41.2)
Costs and Expenses
Operating overhead........................... 0.9 -- -- 0.9
General and administrative................... 1.7 1.4 -- 3.1
------ ------ ------ ------
2.6 1.4 -- 4.0
------ ------ ------ ------
Income (Loss) from Operations.................. (54.1) 13.3 (4.4) (45.2)
Other Income (Expense)
Interest and other income.................... 0.1 0.3 -- 0.4
9.4(3)
(15.2)(4)
(1.6)(5)
(0.4)(6)
(1.4)(7)
Interest expense............................. (2.0) (17.2) 0.2(8) (28.2)
------ ------ ------ ------
Income (Loss) Before Income Taxes.............. (56.0) (3.6) (13.4) (73.0)
Income taxes................................. (1.7) -- 1.7(9) --
------ ------ ------ ------
Net Income (Loss).............................. $(57.7) $ (3.6) $(11.7) $(73.0)
====== ====== ====== ======
Ratio of Earnings to Fixed Charges............. 1.1
======
</TABLE>
- ---------------
(1) The pro forma results for the Company have not been adjusted for the
following items:
In connection with the Acquisition, Cogen Technologies Linden Venture,
L.P. ("Linden Venture") and Camden Cogen L.P. ("Camden Venture") made
one-time payments totaling $66.8 million to terminate certain agreements
with affiliates with respect to the payment of management and gas
management fees. Such management and gas management fees were paid based on
a percentage of gross revenues and gas purchases, respectively. The
termination fees for such agreements were paid from contributions by the
sellers. Costs included in the Acquired Group historical and the Company
pro forma amounts for equity in earnings of affiliates associated with the
agreements which were terminated are $52.4 million for Linden Venture and
$14.4 million for Camden Venture, which represents the termination payments
plus the current period expenses with respect to such agreements.
The Acquired Group's operating overhead includes $0.3 million of
development bonuses which were previously granted to employees and were
being charged to expense as earned. Since all such bonuses were bought out
prior to the Acquisition, the Company will not incur charges relating to
the development bonuses in future periods.
Prior to the Acquisition, the Acquired Group used a corporate aircraft
owned by an affiliate and was charged for such use based on the affiliate's
cost to own and operate the aircraft and the Acquired
F-4
<PAGE> 123
Group's proportionate usage. Such aircraft was not acquired by the Company
and is not available for use by the Company. The Acquired Group's general
and administrative expense includes $0.4 million with respect to the use of
such aircraft. The Company does not anticipate incurring similar charges in
the future.
(2) In connection with the Acquisition, the Company has allocated a portion of
the purchase price to its equity investment in each of Linden Venture,
Camden Venture and Bayonne Venture. Under generally accepted accounting
principles, the difference between the purchase price allocated to each
venture and the historical equity in each venture will be amortized over the
remaining lives of the Facilities, which range from 20 to 24 years. The
adjustments reflect amortization with respect to the period prior to the
Acquisition.
(3) Reflects the reversal of historical interest expense with respect to: (i)
the bridge loan and the related interest rate swap ($8.4 million); (ii)
$62.1 million principal amount of the subordinated note ($0.9 million); and
(iii) the Camden GP term loan ($0.1 million). The bridge loan was repaid
with proceeds from the issuance of the outstanding notes and the related
interest rate swap was canceled, $62.1 million of the principal amount of
the subordinated note was repaid with proceeds from the issuance of the
outstanding notes and the Camden GP term loan was repaid prior to the
Acquisition.
(4) Reflects interest expense associated with the outstanding notes for the
period January 1 to March 31 assuming interest rates as follows: $296
million at 6.737%, $236 million at 7.066% and $318 million at 7.536%.
(5) Reflects interest expense associated with $187.9 million principal amount of
the subordinated note for the period January 1 to February 4 at 9%.
(6) Reflects the amortization of $20.9 million of deferred debt issuance costs
related to the issuance of the notes. Such costs are being deferred and
amortized pro rata over the life of the notes, $7.3 million over 9 years,
$5.9 million over 13 years and $7.7 million over 18 years.
(7) Reflects the amortization of debt issuance fees associated with the bridge
loan because these pro forma financial statements reflect the repayment of
the bridge loan.
(8) Reflects the amortization of the $4.3 million premium with respect to Linden
Ltd.'s long-term debt assumed in the Acquisition.
(9) Reflects the effect of reversing historical taxes for MESC. The Company will
be taxed as a partnership.
F-5
<PAGE> 124
EAST COAST POWER L.L.C.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-------------------------------------------
ACQUIRED COMPANY
GROUP PRO FORMA PRO
HISTORICAL(1) ADJUSTMENTS FORMA(1)
-------------- ------------ ---------
(IN MILLIONS OF DOLLARS EXCEPT FOR RATIOS)
<S> <C> <C> <C>
Revenues
Equity in earnings of affiliates:
Linden Venture...................................... $ 75.3 $ (37.1)(2) $ 38.2
Camden Venture...................................... 14.2 (6.8)(2) 7.4
(9.1)(2)
Bayonne Venture..................................... 47.6 2.0(3) 40.5
------ ------- ------
137.1 (51.0) 86.1
------ ------- ------
Cost and Expenses
Operating overhead..................................... 21.6 -- 21.6
General and administrative............................. 20.2 -- 20.2
------ ------- ------
41.8 -- 41.8
------ ------- ------
Income (Loss) from Operations............................ 95.3 (51.0) 44.3
Other Income (Expense):
Interest and other income.............................. 12.6 (11.8)(4) 0.8
(59.8)(5)
(16.9)(6)
(1.7)(7)
(4.1)(8)
1.3(9)
Interest expense....................................... (19.3) 0.8(10) (99.7)
------ ------- ------
Income (Loss) Before Income Taxes........................ 88.6 (143.2) (54.6)
Income taxes........................................... (14.6) 14.6(11) --
------ ------- ------
Net Income (Loss)........................................ $ 74.0 $(128.6) $(54.6)
====== ======= ======
Ratio of Earnings to Fixed Charges....................... 0.9
======
</TABLE>
- ---------------
(1) The pro forma results for the Company have not been adjusted for the
following matters:
In connection with the Acquisition, Cogen Technologies Linden Venture,
L.P. ("Linden Venture") and Camden Cogen L.P. ("Camden Venture") made
one-time payments totaling $66.8 million to terminate certain agreements
with affiliates with respect to the payment of management and gas
management fees. Such management and gas management fees were paid based on
a percentage of gross revenues and gas purchases, respectively. The
termination fees for such agreements were paid from contributions by the
sellers. Costs included in the historical and pro forma amounts for equity
in earnings of affiliates associated with the agreements which were
terminated are $4.9 million for Linden Venture and $1.3 million for Camden
Venture for the year ended December 31, 1998.
The Acquired Group's operating overhead includes $14.5 million of
one-time payments to "buy out" development bonuses which were previously
granted to employees and were being charged to expense as earned. Since all
such bonuses were bought out prior to the Acquisition, the Company will not
incur charges relating to the development bonuses in future periods. The
Acquired Group's operating overhead also includes $1.8 million for the year
ended December 31, 1998, with respect to development bonuses earned during
the period.
F-6
<PAGE> 125
Prior to the Acquisition, the Acquired Group used a corporate aircraft
owned by an affiliate and was charged for such use based on the affiliate's
cost to own and operate the aircraft and the Acquired Group's proportionate
usage. Such aircraft was not acquired by the Company and is not available
for use by the Company. The Acquired Group's general and administrative
expense includes $6.0 million for the year ended December 31, 1998, with
respect to the use of such aircraft.
The Company does not anticipate incurring similar charges in the
future.
(2) In connection with the Acquisition, the Company has allocated a portion of
the purchase price to its equity investment in each of Linden Venture,
Camden Venture and Bayonne Venture. Under generally accepted accounting
principles, the difference between the purchase price allocated to each
venture and the historical equity in each venture will be amortized over
the remaining lives of the Facilities, which range from 20 to 24 years. The
adjustments reflect one year of amortization.
(3) Reflects the equity in the earnings of Bayonne Venture attributable to a
5.25% partnership interest in Bayonne Venture which was acquired from an
unaffiliated entity in July 1998. Historical amounts include equity
earnings with respect to such interest for the period August 1998 through
December 1998. The pro forma adjustment represents equity earnings with
respect to such interest for the period January 1998 through July 1998.
(4) Reflects the elimination of interest income related to a receivable owed to
Linden Ltd. from Cogen Technologies Financial Services, L.P., which was
distributed to the sellers in connection with the Acquisition. The Company
did not acquire Cogen Technologies Financial Services, L.P.
(5) Reflects interest expense associated with the outstanding notes assuming
interest rates as follows: $296 million at 6.737%, $236 million at 7.066%
and $318 million at 7.536%.
(6) Reflects interest expense associated with $187.9 million principal amount
of the subordinated note at 9%.
(7) Reflects the amortization of deferred debt issuance costs related to the
issuance of the Notes. Such costs are being deferred and amortized pro rata
over the life of the Notes, $7.3 million over 9 years, $5.9 million over 13
years and $7.7 million over 18 years. The adjustment reflects one year of
amortization.
(8) Reflects the amortization of debt issuance fees associated with the bridge
loan because these pro forma financial statements reflect the repayment of
the bridge loan.
(9) Reflects the reversal of historical interest expense associated with the
Camden GP term loan. The Camden GP term loan was paid in full prior to the
closing of the Acquisition.
(10) Reflects the amortization of the $4.3 million premium with respect to
Linden Ltd.'s long-term debt assumed in the Acquisition.
(11) Reflects the effect of reversing historical taxes for MESC. The Company
will be taxed as a partnership.
F-7
<PAGE> 126
EAST COAST POWER L.L.C.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Current Assets
$ 850.0(1)
80.0(2)
Cash and cash equivalents................................ $ 25.2 (930.1)(3) $ 25.1
Contributions receivable................................. 80.0 (80.0)(2) --
Other current assets..................................... 8.9 -- 8.9
-------- ------- --------
114.1 (80.1) 34.0
-------- ------- --------
Investments in Affiliates
Cogen Technologies Linden Venture, L.P. (Linden
Venture).............................................. 915.9 -- 915.9
Camden Cogen L.P. (Camden Venture)....................... 179.1 -- 179.1
Cogen Technologies NJ Venture (Bayonne Venture).......... 188.8 -- 188.8
-------- ------- --------
1,283.8 -- 1,283.8
-------- ------- --------
Other Assets............................................... 24.0 (1.4)(4) 22.6
-------- ------- --------
$1,421.9 $ (81.5) $1,340.4
======== ======= ========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities
23.2(1)
Current maturities on long-term debt..................... $ 37.5 $ (23.2)(3) $ 37.5
Interest payable......................................... 8.7 -- 8.7
Distributions payable.................................... 25.0 (25.0)(3) --
Other current liabilities................................ 24.2 (12.0)(3) 12.2
-------- ------- --------
95.4 (37.0) 58.4
Long-Term Debt
Outstanding notes........................................ -- 826.8(1) 826.8
Bridge loan.............................................. 807.8 (807.8)(3) --
Subordinated note........................................ 250.0 (62.1)(3) 187.9
Linden Ltd. term loan.................................... 192.3 -- 192.3
Members' Equity............................................ 76.4 (1.4)(4) 75.0
-------- ------- --------
$1,421.9 $ (81.5) $1,340.4
======== ======= ========
</TABLE>
- ---------------
(1) Reflects the issuance of $850.0 million in outstanding notes.
(2) Reflects the collection of $80.0 million contribution receivable.
(3) Reflects the use of the proceeds from the issuance of the outstanding notes
and the collection of the contribution receivable to repay the bridge loan,
make a $25.0 million distribution to ECT, repay $62.1 million of the
principal amount of the subordinated note and make a $12.0 million purchase
price adjustment payment in connection with the Acquisition.
(4) Reflects the amortization of $1.4 million of deferred debt issuance costs
associated with the bridge loan.
F-8
<PAGE> 127
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To East Coast Power L.L.C.:
We have audited the accompanying consolidated balance sheet of East Cost
Power L.L.C. (a Delaware limited liability company) as of March 31, 1999, and
the related consolidated statements of income, members' equity and cash flows
for the period from February 4, 1999 to March 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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 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 audit provides 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 East Coast Power L.L.C. as
of March 31, 1999, and the results of their operations and their cash flows for
the period from February 4, 1999 to March 31, 1999 in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
June 25, 1999
F-9
<PAGE> 128
EAST COAST POWER L.L.C.
CONSOLIDATED STATEMENT OF INCOME
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FEBRUARY 4, 1999
TO MARCH 31, 1999
-------------------
<S> <C>
Revenues
Equity in earnings of
Cogen Technologies Linden Venture, L.P. (Linden
Venture).............................................. $ 6.4
Camden Cogen L.P. (Camden Venture)..................... 1.9
Cogen Technologies NJ Venture (Bayonne Venture)........ 6.4
------
14.7
Cost and Expenses
General and administrative................................ 1.4
------
Income from Operations...................................... 13.3
Other Income (Expense)
Interest and other income................................. 0.3
Interest expense.......................................... (17.2)
------
Net Income (Loss)........................................... $ (3.6)
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE> 129
EAST COAST POWER L.L.C.
CONSOLIDATED BALANCE SHEET
(IN MILLIONS OF DOLLARS)
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
1999
---------
<S> <C>
Current Assets
Cash and cash equivalents................................. $ 25.2
Accounts receivable....................................... 8.6
Contributions receivable.................................. 80.0
Other current assets...................................... 0.3
--------
114.1
--------
Investments in Affiliates
Cogen Technologies Linden Venture, L.P. (Linden
Venture)............................................... 915.9
Camden Cogen L.P. (Camden Venture)........................ 179.1
Cogen Technologies NJ Venture (Bayonne Venture)........... 188.8
--------
1,283.8
--------
Other Assets................................................ 24.0
--------
$1,421.9
========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities
Accounts payable.......................................... $ 0.2
Accounts payable, affiliate............................... 2.5
Current maturities on long-term debt...................... 37.5
Interest payable.......................................... 8.7
Distributions payable..................................... 25.0
Other current liabilities................................. 21.5
--------
95.4
Long-Term Debt.............................................. 1,250.1
Commitments and Contingencies (Note 8)
Members' Equity............................................. 76.4
--------
$1,421.9
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE> 130
EAST COAST POWER L.L.C.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
FEBRUARY 4,
1999 TO
MARCH 31,
1999
--------------
<S> <C>
Operating Activities
Net income (loss)......................................... $ (3.6)
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in earnings of affiliates
Cogen Technologies Linden Venture, L.P. (Linden
Venture)............................................ (6.4)
Camden Cogen L.P. (Camden Venture)................... (1.9)
Cogen Technologies NJ Venture (Bayonne Venture)...... (6.4)
Distributions received from affiliates
Cogen Technologies Linden Venture, L.P. (Linden
Venture)............................................ 9.1
Camden Cogen L.P. (Camden Venture)................... 1.8
Cogen Technologies NJ Venture (Bayonne Venture)...... 3.0
Amortization of deferred financing costs............... 2.8
Changes in operating assets and liabilities
Increase in other current assets....................... (0.3)
Increase in accounts payable........................... 0.2
Increase in accounts payable, affiliate................ 0.9
Increase in interest payable........................... 5.7
Increase in other current liabilities.................. 1.0
Net change in other assets and liabilities............. (0.3)
---------
Net Cash Provided by Operating Activities................... 5.6
---------
Investing Activities
Acquisition of Cogen Tech Group (net of cash acquired of
$17.7)................................................. (808.0)
Purchase of Enron Corp. common stock...................... (250.0)
---------
Net Cash Used in Investing Activities....................... (1,058.0)
---------
Financing Activities
Issuance of long-term debt................................ 1,081.0
Principal payments on long-term debt...................... (3.3)
Financing costs........................................... (25.1)
Contributions received.................................... 25.0
---------
Net Cash Provided by Financing Activities................... 1,077.6
---------
Increase in Cash and Cash Equivalents....................... 25.2
Cash and Cash Equivalents at Beginning of Period............ --
---------
Cash and Cash Equivalents at End of Period.................. $ 25.2
=========
Cash Paid for Interest...................................... $ 8.7
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE> 131
EAST COAST POWER L.L.C.
CONSOLIDATED STATEMENT OF MEMBERS' EQUITY
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
FEBRUARY 4,
1999 TO
MARCH 31,
1999
--------------
<S> <C>
Balance at Beginning of Period.............................. $ --
Contributions............................................. 105.0
Distributions............................................. (25.0)
Net loss.................................................. (3.6)
------
Balance at End of Period.................................... $ 76.4
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE> 132
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
East Coast Power L.L.C. ("ECP" or the "Company") is a Delaware limited
liability company that was formed on December 18, 1998 by Joint Energy
Development Investments II Limited Partnership ("JEDI II"), a limited
partnership in which Enron Corp. and the California Public Employees' Retirement
System ("CalPERS") each own a 50% interest. On February 4, 1999, the limited
liability company agreement of ECP was amended and restated to convert JEDI II's
initial membership to that of a Class A Member and to admit Enron Capital &
Trade Resources Corp. ("ECT"), a wholly-owned subsidiary of Enron Corp., and
CalPERS as Class B Members. ECP and its wholly owned subsidiaries own equity
interests in and control and operate three power generation facilities located
in New Jersey (the "Facilities").
The Class B members are entitled to preferential distributions in an amount
equal to $25.0 million each plus interest prior to any distributions to the
Class A member. After the Class B members have received these preferential
distributions, all distributions will be made to the Class A member until the
Class A member has received distributions equal to $80.0 million plus specified
rates of return. After the Class A member has received its preferential
distributions, all distributions will be made 90% to the Class A member and 10%
to the Class B members.
ECP had no assets or liabilities and conducted no operations prior to
February 4, 1999. On February 4, 1999 ECP indirectly acquired equity interests
in the Facilities (the "Acquisition") through the acquisition of entities that
were under the common control of Robert C. McNair, members of his immediate
family and related trusts (collectively the "Cogen Tech Group"). The Cogen Tech
Group included McNair Energy Services Corporation ("MESC"), a Texas corporation,
and its wholly owned subsidiary Cogen Technologies NJ, Inc. ("NJ Inc."), a New
Jersey corporation, Cogen Technologies Linden, Ltd. ("Linden Ltd."), a Texas
limited partnership, and Cogen Technologies Camden GP Limited Partnership
("Camden GP"), a Delaware limited partnership.
Linden Ltd. is the managing general partner of Cogen Technologies Linden
Venture, L.P. ("Linden Venture"), a Delaware limited partnership that owns and
operates a 715-megawatt cogeneration facility in Linden, New Jersey. Camden GP
is the managing general partner of Camden Cogen L.P. ("Camden Venture"), a
Delaware limited partnership that owns and operates a 146-megawatt cogeneration
facility in Camden, New Jersey. Prior to the Acquisition, NJ Inc. was the
managing general partner of Cogen Technologies NJ Venture ("Bayonne Venture"), a
New Jersey general partnership that owns and operates a 176-megawatt
cogeneration facility in Bayonne, New Jersey.
Basis of Consolidation and Presentation
The accompanying consolidated financial statements present the consolidated
financial position of ECP and its wholly-owned subsidiaries as of March 31, 1999
and the results of its operations, cash flows and changes in its members' equity
for the period from which it commenced operations on February 4, 1999 to March
31, 1999. All material transactions between the consolidated entities have been
eliminated.
ECP's investments in Linden Venture, Camden Venture and Bayonne Venture
(collectively, the "Ventures") are accounted for using the equity method of
accounting since the other partners have substantive participating rights with
respect to the partnerships' operations.
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 March 31, 1999, $13.0
million of ECP's cash was held by Linden Ltd. and all of such cash was
restricted either to service Linden Ltd.'s debt or, if necessary, to make
working capital loans to
F-14
<PAGE> 133
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Linden Venture. Also at March 31, 1999, the use of $25.8 million of ECP's cash
was restricted to use in the payment of costs and expenses associated with the
Acquisition and the Notes discussed in Note 3. Of the $25.8 million in
restricted cash, $20.9 million is expected to be used to pay financing costs and
has been classified in Other Assets in ECP's balance sheet at March 31, 1999.
Derivative Financial Instruments
From time to time ECP uses derivatives to manage interest rate risk. ECP's
policy is to use derivatives for risk management purposes only and does not
enter into such contracts for trading purposes. To date, ECP has entered into
one interest rate swap agreement with ECT, which was outstanding at March 31,
1999.
Instruments used as hedges must be effective in managing risk associated
with the exposure being hedged and must be designated as a hedge at the
inception of the contract. Accordingly, changes in the market values or cash
flows of hedge instruments must have a high degree of inverse correlation with
changes in market values or cash flows of the underlying hedged items.
Derivatives that meet the hedge criteria are accounted for under the deferral or
accrual method as discussed in Note 6.
Credit Risk
Financial instruments which potentially subject ECP to credit risk consist
primarily of cash and accounts receivable. Cash accounts are held by major
financial institutions and accounts receivable are from parties who are
affiliated with Robert C. McNair.
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.
Income Taxes
As limited liability companies and partnerships, ECP and its consolidated
subsidiaries are not subject to state or federal income taxes. Such taxes accrue
to the owners of ECP and, accordingly, such income taxes have not been
recognized in the consolidated financial statements.
Recent Accounting Pronouncements
The Financial Statement Accounting Standards ("FASB") adopted Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," in June 1998. The statement requires that
all derivatives be recognized at fair value as assets or liabilities and that
changes in fair value be recorded in earnings or other comprehensive income. In
May 1999, FASB proposed an amendment to SFAS No. 133 that would defer its
required adoption date by one year to fiscal years beginning after June 15,
2000. The Company's analysis of the potential impact of this statement has not
been completed.
(2) THE ACQUISITION
In a series of transactions on February 4 and 5, 1999, ECP acquired the
assets and liabilities of the Cogen Tech Group. For financial statement purposes
the acquisition was accounted for as a purchase and, accordingly, the results of
operations of the assets acquired are included in ECP's consolidated financial
statements with effect from the date of acquisition. The aggregate purchase
price, including the costs of the acquisition, has been allocated to the assets
and liabilities acquired based on their estimated fair value. A
F-15
<PAGE> 134
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
portion of the purchase price has been allocated to the acquired equity
investments in Linden Venture, Camden Venture and Bayonne Venture. The
difference between the purchase price allocated to each venture and the
historical equity in such ventures is being amortized over the remaining useful
lives of the Facilities, which range from 20 to 24 years.
In connection with the Acquisition, on February 4, 1999, ECP borrowed
$831.0 million under the terms of a credit agreement with NationsBank N.A. (the
"bridge loan") and $250.0 million under the terms of a Credit and Subordination
Agreement with Enron Corp. (the "Enron subordinated note"). The $250.0 million
borrowed under the Enron subordinated note was used to purchase shares of Enron
Corp. common stock which were used as consideration in the Acquisition.
In addition, on February 4, 1999, ECP received a $25.0 million contribution
from CalPERS in the form of a guaranty on the bridge loan, and on February 5,
1999, ECP received a contribution valued at $25.0 million from ECT in the form
of an indirect interest in one of the Facilities. Such contributions were
received in respect to the Class B memberships of ECT and CalPERS.
In the Acquisition, ECP acquired assets with a fair value of $1,310.7
million, as follows (in millions of dollars):
<TABLE>
<S> <C>
Cash paid................................................... $ 825.7
Enron common stock.......................................... 250.0
Accrued liabilities......................................... 20.5
Liabilities assumed......................................... 214.5
--------
Fair value of assets acquired (including cash acquired of
$17.7 million)............................................ $1,310.7
========
</TABLE>
The acquisition of the Cogen Tech Group is presented in the Consolidated
Statement of Cash Flows net of $17.7 million of cash acquired and does not
reflect the following noncash items: (i) $250.0 million of Enron Corp. common
stock used as consideration in the acquisition; (ii) $20.5 million of costs
associated with the Acquisition which were accrued and paid subsequent to March
31, 1999; and (iii) $214.5 million of liabilities assumed in the Acquisition.
F-16
<PAGE> 135
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following unaudited proforma results of operations for the three months
ended March 31, 1999 have been prepared as if the Acquisition had occurred
January 1, 1999. The pro forma results include amortization of the excess of the
purchase price allocated to the Ventures over the historical equity in the
Ventures, interest expense on borrowings related to the Acquisition and the
reversal of income taxes since ECP is not subject to such taxes. The historical
combined results of operations represent the combined results of operations of
the Cogen Tech Group for the period January 1, 1999 to February 4, 1999 and ECP
for the period February 4, 1999 to March 31, 1999. The proforma results of
operations do not purport to be indicative of the results that would have
occurred had the acquisition occurred January 1, 1999, nor do they purport to be
indicative of the results of future operations.
<TABLE>
<CAPTION>
HISTORICAL
------------------------
COGEN TECH
GROUP PRO FORMA
1/1/99 TO ECP 2/4/99 1/1/99 TO
2/4/99 TO 3/31/99 3/31/99
---------- ---------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Revenues........................................... $(51.5)(1) $14.7 $(41.2)
Income (loss) from operations...................... (54.1) 13.3 (45.2)
Income (loss) before income taxes.................. (56.0) (3.6) (73.0)
Net income (loss).................................. (57.7) (3.6) (73.0)
</TABLE>
- ---------------
(1) The equity in earnings of affiliates included in the results of operations
of the Cogen Tech Group for the period January 1, 1999 to February 4, 1999
includes the effect of $66.8 million in one-time payments made by Linden
Venture and Camden Venture to terminate certain management services and gas
management contracts.
(3) SUBSEQUENT EVENTS
On April 14, 1999 the interest rate swap with ECT was canceled and ECP
received a payment of $8.9 million in connection with the cancellation.
On April 20, 1999 ECP sold $850.0 million of senior secured notes (the
"Notes") in three tranches as follows: $296.0 million of 6.737% Notes due 2008
(the "2008 Notes"), $236.0 million of 7.066% Notes due 2012 (the "2012 Notes")
and $318.0 million of 7.536% Notes due 2017 (the "2017 Notes"). The 2008 Notes
bear interest at 6.737% per annum and are repayable in 36 quarterly installments
of varying amounts beginning on June 30, 1999 with the final payment due March
31, 2008. The 2012 Notes bear interest at 7.066% per annum and are repayable in
17 quarterly installments of varying amounts beginning on March 31, 2008 with
the final payment due March 31, 2012. The 2017 Notes bear interest at 7.536% per
annum and are repayable in 22 quarterly installments of varying amounts
beginning on March 31, 2012 with the final payment due June 30, 2017. Interest
on the Notes is payable quarterly with the first interest payment due June 30,
1999.
The Notes are senior secured obligations which rank senior to all existing
and future subordinated indebtedness; rank pari passu in right of payment with
all existing and future senior secured indebtedness; and are structurally
subordinated to all indebtedness and other liabilities, including trade
payables, of ECP's subsidiaries and to the distribution rights of minority
partners in the Ventures. The Notes are secured by the pledge by the owners of
ECP of their interest in ECP, the pledge by ECP of its ownership interests in
certain of the subsidiaries that own interests in the Facilities and the pledge
of Linden Ltd.'s $289.6 million intercompany subordinated note payable to ECP.
The Notes may be redeemed at any time at a redemption price that includes a
make-whole premium based on comparable treasury securities plus 50 basis points.
The Notes are manditorily redeemable at prices specified in the indenture upon
the occurrence of certain events, including certain loss events, power contract
buyouts or change of control. In addition, the terms of the Notes limit ECP's
ability to pay dividends, incur
F-17
<PAGE> 136
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
additional indebtedness, make payments on subordinated debt and make certain
other restricted payments. The terms of the Notes also require ECP to fund a
debt service reserve account unless it provides acceptable debt service credit
support in the form of an Enron undertaking or an acceptable letter of credit.
Enron has provided the required undertaking, and ECP is not currently funding
the debt service reserve account. Aggregate maturities for the Notes for the
next five years (for the twelve-month period ended March 31) are as follows:
2000 -- $23.2 million; 2001 -- $14.6 million; 2002 -- $23.8 million;
2003 -- $34.0 million; and 2004 -- $30.2 million.
Also on April 20, 1999, in accordance with the terms of the limited
liability company agreement, JEDI II made a $80.0 million capital contribution
to ECP. Such amount is reflected in ECP's March 31, 1999 balance sheet as
Contributions Receivable.
The proceeds from the sale of the Notes and the capital contribution by
JEDI II were used to repay the bridge loan, make a $25.0 million cash
distribution to ECT (which is reflected in ECP's March 31, 1999 balance sheet as
Distributions Payable), repay $62.1 million of the principal amount of the Enron
subordinated note and make a $12.0 million purchase price adjustment payment in
connection with the Acquisition. The repayment of the bridge loan resulted in
the release of the $25.0 million guaranty on the loan by CalPERS. The release
was deemed to be a distribution to CalPERS.
In June 1999, the Company entered into a letter of intent with Tosco
Refining Company that contemplates an expansion of the Linden Facility through
the addition of a sixth turbine generator to provide electricity and steam
service to Tosco's Bayway Refinery. Completion of the transactions contemplated
by the letter of intent are subject to, among other things, further
negotiations, completion of due diligence and receipt of necessary approvals.
(4) INVESTMENT IN AFFILIATES
The following table reflects the changes in ECP's investments in affiliates
for the period February 4, 1999 to March 31, 1999 (in millions of dollars):
<TABLE>
<CAPTION>
LINDEN CAMDEN BAYONNE
VENTURE VENTURE VENTURE
------- ------- -------
<S> <C> <C> <C>
Balance at beginning of period......................... $ -- $ -- $ --
Acquisition of interests............................... 918.6 179.0 185.4
Equity in earnings..................................... 12.6 3.0 7.9
Amortization of excess cost............................ (6.2) (1.1) (1.5)
Distributions received................................. (9.1) (1.8) (3.0)
------ ------ ------
$915.9 $179.1 $188.8
====== ====== ======
</TABLE>
F-18
<PAGE> 137
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents summary unaudited balance sheet information
for ECP's affiliates at March 31, 1999 (in millions of dollars):
<TABLE>
<CAPTION>
LINDEN CAMDEN BAYONNE
VENTURE VENTURE VENTURE
------- ------- -------
<S> <C> <C> <C>
Assets
Current assets....................................... $ 53.7 $ 20.2 $ 29.8
Property, plant and equipment, net................... 409.7 102.2 70.2
Other assets......................................... -- -- 1.1
------ ------ ------
$463.4 $122.4 $101.1
====== ====== ======
Liabilities and Partners' Capital
Current liabilities.................................. $ 24.5 $ 13.9 $ 11.0
Long-term debt....................................... -- 76.9 63.1
Other long-term liabilities.......................... 0.6 -- --
Partners' capital.................................... 438.3 31.6 27.0
------ ------ ------
$463.4 $122.4 $101.1
====== ====== ======
</TABLE>
The following table presents summary unaudited income statement information
for ECP's affiliates for the periods January 1, 1999 to February 4, 1999 and
February 5, 1999 to March 31, 1999 (in millions of dollars):
<TABLE>
<CAPTION>
LINDEN VENTURE CAMDEN VENTURE BAYONNE VENTURE
----------------------------- ----------------------------- -----------------------------
FEBRUARY 5 JANUARY 1 FEBRUARY 5 JANUARY 1 FEBRUARY 5 JANUARY 1
TO MARCH 31, TO FEBRUARY 4, TO MARCH 31, TO FEBRUARY 4, TO MARCH 31, TO FEBRUARY 4,
1999 1999 1999 1999 1999 1999
------------ -------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Electricity.......... $37.4 $ 23.9 $11.2 $ 8.2 $17.2 $11.1
Steam................ 0.8 0.6 -- -- 0.7 0.4
----- ------ ----- ------ ----- -----
38.2 24.5 11.2 8.2 17.9 11.5
----- ------ ----- ------ ----- -----
Costs and Expenses
Fuel................. 16.1 16.2 4.7 4.8 5.7 3.6
Operating and
maintenance....... 3.1 1.9 1.0 0.6 1.5 1.1
Depreciation and
amortization...... 2.5 1.4 0.5 0.4 0.4 0.3
General and
administrative.... 0.9 47.5 0.2 13.0 0.5 0.3
Taxes, other than
income............ 0.3 0.2 0.1 -- 0.1 --
----- ------ ----- ------ ----- -----
22.9 67.2 6.5 18.8 8.2 5.3
----- ------ ----- ------ ----- -----
Income (Loss) from
Operations........... 15.3 (42.7) 4.7 (10.6) 9.7 6.2
Other Income (Expense)
Interest and other
income............ 0.8 0.1 0.1 -- -- --
Interest expense..... -- -- (1.0) (0.7) (1.1) (0.8)
----- ------ ----- ------ ----- -----
Net Income (Loss)...... $16.1 $(42.6) $ 3.8 $(11.3) $ 8.6 $ 5.4
===== ====== ===== ====== ===== =====
</TABLE>
F-19
<PAGE> 138
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The results of operations of Linden Venture and Camden Venture for the
period ended February 4, 1999 include the effect of one-time payments in
connection with the termination of certain gas management and management
services agreements of $52.4 million and $14.4 million, respectively.
The following table presents unaudited statement of cash flows information
for ECP's affiliates for the periods January 1, 1999 to February 4, 1999 and
February 5, 1999 to March 31, 1999 (in millions of dollars):
<TABLE>
<CAPTION>
LINDEN VENTURE CAMDEN VENTURE BAYONNE VENTURE
----------------------------- ----------------------------- -----------------------------
FEBRUARY 5 JANUARY 1 FEBRUARY 5 JANUARY 1 FEBRUARY 5 JANUARY 1
TO MARCH 31, TO FEBRUARY 4, TO MARCH 31, TO FEBRUARY 4, TO MARCH 31, TO FEBRUARY 4,
1999 1999 1999 1999 1999 1999
------------ -------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Cash provided by (used
in) operating
activities............ $ 22.1 $(42.7) $ 7.2 $(13.1) $11.4 $ 3.1
Cash provided by (used
in) investing
activities............ -- -- -- -- -- --
Cash provided by (used
in) financing
activities............ (12.4) 32.7 (5.4) 13.9 (6.2) (4.1)
------ ------ ----- ------ ----- -----
Increase (decrease) in
cash and cash
equivalents........... $ 9.7 $(10.0) $ 1.8 $ 0.8 $ 5.2 $(1.0)
====== ====== ===== ====== ===== =====
</TABLE>
Under the terms of Linden Venture's partnership agreement, monthly cash
distributions are allocated, 1% to Linden Ltd. and 99% to the limited partner up
to a specified rate of return (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 the period subsequent
to the Acquisition, Linden Ltd. received 73% 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, 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 the period
subsequent to the Acquisition, Linden Ltd. was allocated 78% of Linden Venture's
net income.
Under the terms of Camden Venture's partnership agreement, monthly cash
distributions are allocated 1% to Camden GP and 99% to the limited partner up to
a specified cumulative rate of return (approximately $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 GP 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 GP and 10% to the limited partner.
Camden Venture's debt agreements contain covenants which, among other things,
limit Camden Venture's ability to make cash distributions. During the period
subsequent to the Acquisition, Camden GP received 84% of Camden Venture's cash
distributions (excluding a $3.3 million distribution associated with the
Acquisition to the limited partner). Camden Venture'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 GP and 1% to
the limited partner. Losses are allocated 100% to Camden GP until its capital
account equals zero, then to the limited partner until its capital account
equals zero, the remainder to Camden GP. Depreciation is allocated 100% to the
limited partner until its capital account equals zero and the remainder to
Camden GP. During the period subsequent to the Acquisition, Camden GP was
allocated 79% of Camden Venture's net income.
F-20
<PAGE> 139
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under the terms of Bayonne Venture's joint venture agreement partners are
allocated profits and losses and receive cash distributions based on ownership
percentage. Bayonne Venture's debt agreements contain covenants which, among
other things, limit Bayonne Venture's ability to make cash distributions. ECP is
allocated 91.75% of Bayonne Venture's profits and losses and receives 91.75% of
all cash distributions.
(5) LONG-TERM DEBT
Bridge Loan
In connection with the Acquisition, on February 4, 1999 ECP borrowed $831.0
million under the terms of the bridge loan agreement. The bridge loan included a
$105.0 million tranche bearing interest at LIBOR plus 0.35% and a $726.0 million
tranche bearing interest at LIBOR plus 1.25%. The applicable LIBOR rate is the
one, three, six or, if commercially available, nine or twelve month rates as
elected by ECP. Amounts outstanding under the bridge loan were secured by the
same collateral as the Notes. All amounts outstanding under the bridge loan were
repaid on April 20, 1999 using a portion of the proceeds from the sale of the
Notes and the pledges and assignments serving the bridge loan were released.
Enron Subordinated Note
In connection with the Acquisition, on February 4,1999 ECP borrowed $250.0
million under the terms of the Enron subordinated note. Amounts outstanding
under the Enron subordinated note bear interest at 9% per annum and interest is
payable quarterly. The principal amount is repayable in 32 installments of
varying amounts beginning March 31, 2008, with the final payment due on December
31, 2015. The Enron subordinated note is subordinated to the bridge loan and the
Notes.
The Enron subordinated note contains provisions that allow the lender to
assign all or a portion of its interest in the loan to third parties. In the
event of such an assignment the lender may, in consultation with ECP, adjust the
interest rate and term and other terms and provisions of the agreement, other
than the aggregate principal amount of the loan, to achieve an assignment which
is satisfactory to the lender. The Enron subordinated note also contains
provisions that, among other things, may limit ECP's ability to make
distributions to its members.
On April 20, 1999 ECP repaid $62.1 million of the principal amount of the
Enron subordinated note with a portion of the proceeds from the sale of the
Notes. The prepayment reduced the required principal payments on a pro rata
basis.
Linden Ltd.
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. At March 31, 1999 $202.3 million was outstanding under the terms
of the agreement, comprised of a fixed rate portion ($100.2 million), a floating
rate portion ($92.1 million) and a working capital portion ($10.0 million).
Under the terms of the agreement the fixed rate portion bears interest at 8.8%
(an unamortized premium balance of $4.3 million is being amortized using the
interest method, resulting in an effective interest rate of approximately 9.6%
per annum), the floating rate portion bears interest at LIBOR plus 1.65% and the
working capital portion bears interest at a one month financial commercial paper
rate plus 0.55%. Principal and interest payments are made quarterly in varying
amounts. Borrowings under the agreement are secured by Linden Ltd.'s interest in
Linden Venture. The agreement contains certain restrictions that limit or
prohibit, among other things, the ability of Linden Ltd. to incur indebtedness,
pay distributions, make investments, engage in transactions with affiliates,
create liens, sell assets and engage in acquisitions, mergers and
consolidations.
F-21
<PAGE> 140
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate maturities for the next five years (for the twelve-month period
ended March 31) are as follows: 2000 -- $14.3 million; 2001 -- $16.0 million;
2002 -- $17.9 million; 2003 -- $20.0 million; and 2004 -- $22.4 million.
Camden GP
In February 1992 Camden GP entered into a $36.5 million Term Loan Agreement
with General Electric Capital Corporation. Borrowings under the agreement, which
totaled $14.8 million, bore interest at LIBOR plus 4.25% and were secured by
Camden GP's holdings in Camden Venture. On February 4, 1999, prior to the
Acquisition, Camden GP repaid the outstanding balance under the loan agreement
($12.5 million, including prepayment penalties and accrued interest of $0.3
million). The funds necessary to make the repayments were provided by
contributions from the general and limited partners of Camden GP.
(6) DERIVATIVE FINANCIAL INSTRUMENTS
ECP has entered into a $600.0 million notional amount interest rate swap
agreement with ECT to hedge its exposure to the floating interest rates of the
bridge loan. The agreement is a contract to exchange fixed and floating interest
rate payments periodically over the term of the bridge loan without the exchange
of the underlying notional amount. Differences paid or received are accrued in
the financial statements as part of interest expense on the underlying debt over
the life of the agreement. During the period ended March 31, 1999 ECP recorded
interest expense of $0.5 million in connection with the interest rate swap.
(7) RELATED PARTY TRANSACTIONS
ECT provides ECP with services such as legal, finance and human resources.
In addition ECP is allocated certain expenses such as building rent and
miscellaneous office services. ECP believes such charges for services and
allocations of expenses represent those that would be obtained in the market.
During the period ended March 31, 1999 the amount charged to ECP with respect to
such costs and services totaled $0.2 million.
Enron Corp. maintains a noncontributory defined benefit retirement plan
that covers substantially all Enron employees, including ECP employees. ECP
employees also participate in Enron plans that provide certain medical, life
insurance, dental and other benefits to eligible employees. During the period
ended March 31, 1999 costs with respect to such employee benefit plans totaled
$31,000.
At March 31, 1999 amounts due to Enron Corp. and ECT, which are reflected
in the consolidated balance sheet as Accounts Payable, Affiliates, totaled $2.5
million, including $1.6 million due to ECT with respect to certain items related
to the Acquisition.
(8) COMMITMENTS AND CONTINGENCIES
The McNair Interests have indemnified ECP against any and all damages,
losses, liabilities and expenses with respect to an environmental lawsuit filed
in Louisiana state court against a predecessor entity of MESC.
There are certain claims and legal actions pending against ECP, its
subsidiaries 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 ECP.
(9) 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
F-22
<PAGE> 141
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
balance sheet. The fair value disclosed herein is not representative of the
amount that could be realized or settled. The following table reflects the fair
value of long-term debt at March 31, 1999 (in millions of dollars):
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- -----
<S> <C> <C>
East Coast Power
Bridge Loan............................................... $831.0 $831.0
Enron Subordinated Note................................... 250.0 250.0
Linden Ltd.................................................. 206.6 205.7
</TABLE>
The fair value of Linden Ltd.'s fixed-rate long-term debt has been
determined based on the differential between the fixed interest rate and
interest rates of long-term treasury securities at the date of the borrowing and
the balance sheet date. The fair value of the Enron subordinated note reflects
certain provisions of the agreement related to the assignment of the note. The
carrying amount of floating rate debt approximates fair value due to the
market-sensitive interest rate on such debt.
At March 31, 1999 ECP had a $600.0 million interest rate swap agreement
with respect to the bridge loan. The agreement was canceled in April 1999 and
ECP received an $8.9 million payment in respect of the cancellation.
The carrying amount of current assets and liabilities are considered to be
reasonable estimates of their fair values due to their short-term nature. The
carrying amount of the long-term receivable from an affiliate is considered to
be a reasonable estimate of fair value since interest is earned at market rates.
F-23
<PAGE> 142
COGEN TECH GROUP
COMBINED STATEMENTS OF INCOME (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JANUARY 1, FOR THE THREE
1999 TO MONTHS ENDED
FEBRUARY 4, MARCH 31,
1999 1998
--------------- -------------
<S> <C> <C>
Revenues
Equity in earnings (loss) of
Cogen Technologies Linden Venture, L.P. (Linden
Venture).............................................. $(44.6) $17.4
Camden Cogen L.P. (Camden Venture)..................... (11.9) 4.7
Cogen Technologies NJ Venture (Bayonne Venture)........ 5.0 15.1
------ -----
(51.5) 37.2
Cost and Expenses
Operating overhead........................................ 0.9 9.3
General and administrative................................ 1.7 4.9
------ -----
2.6 14.2
------ -----
Income (Loss) from Operations............................... (54.1) 23.0
Other Income (Expense)
Interest and other income................................. 0.1 3.4
Interest expense.......................................... (2.0) (5.3)
------ -----
Income (Loss) Before Income Taxes........................... (56.0) 21.1
Income taxes.............................................. (1.7) (4.7)
------ -----
Net Income (Loss)........................................... $(57.7) $16.4
====== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE> 143
COGEN TECH GROUP
COMBINED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JANUARY 1, FOR THE THREE
1999 TO MONTHS ENDED
FEBRUARY 4, MARCH 31,
1999 1998
--------------- -------------
<S> <C> <C>
Operating Activities
Net income (loss)......................................... $(57.7) $ 16.4
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Equity in (earnings) losses of affiliates
Cogen Technologies Linden Venture, L.P. (Linden
Venture)............................................ 44.6 (17.4)
Camden Cogen L.P. (Camden Venture)................... 11.9 (4.7)
Cogen Technologies NJ Venture (Bayonne Venture)...... (5.0) (15.1)
Distributions received from affiliates
Cogen Technologies Linden Venture, L.P. (Linden
Venture)............................................ 13.4 18.7
Camden Cogen L.P. (Camden Venture)................... 2.1 4.8
Cogen Technologies NJ Venture (Bayonne Venture)...... 4.8 9.2
Deferred income taxes.................................. 0.6 1.4
Changes in operating assets and liabilities............... (9.9) (1.4)
------ ------
Net Cash Provided by Operating Activities................... 4.8 11.9
------ ------
Investing Activities
Net change in long-term receivable, affiliate............. -- 1.4
Contributions to affiliates............................... (70.1) --
------ ------
Net Cash Provided by (Used in) Investing Activities......... (70.1) 1.4
------ ------
Financing Activities
Principal payments on long-term borrowings................ (12.4) (3.1)
Contributions received.................................... 82.7 --
Cash distributions........................................ -- (10.1)
------ ------
Net Cash Provided by (Used in) Financing Activities......... $ 70.3 $(13.2)
------ ------
Increase in Cash and Cash Equivalents....................... 5.0 0.1
Cash and Cash Equivalents at Beginning of Period............ 12.7 12.6
------ ------
Cash and Cash Equivalents at End of Period.................. $ 17.7 $ 12.7
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE> 144
COGEN TECH GROUP
COMBINED STATEMENT OF OWNERS' EQUITY (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JANUARY 1,
1999 TO
FEBRUARY 4,
1999
---------------
<S> <C>
Balance at Beginning of Period.............................. $ 16.7
Contributions............................................. 82.7
Net loss.................................................. (57.7)
------
Balance at End of Period.................................... $ 41.7
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE> 145
COGEN TECH 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 Tech Group (the "Group")
includes McNair Energy Services Corporation ("MESC") and its wholly owned
subsidiary Cogen Technologies NJ, Inc., a Delaware corporation ("NJ Inc."),
Cogen Technologies Linden, Ltd. ("Linden Ltd.") and Cogen Technologies Camden GP
Limited Partnership ("Camden GP"). The financial statements of the Group are
presented on a combined basis since all such entities were under the common
control and management of Robert C. McNair, members of his immediate family and
related trusts (the "McNair Interests") during the period presented. All
material transactions between the combined entities have been eliminated.
The accompanying unaudited combined financial statements of the Cogen Tech
Group reflect, in the opinion of management, all adjustments, consisting only of
normal and recurring adjustments, necessary to present fairly the Group's
results of operations and cash flows for the period January 1, 1999 to February
4, 1999 and the three months ended March 31, 1998. 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 audited financial statements of the Cogen Tech
Group included elsewhere in this prospectus.
In a series of transactions that are discussed below, certain contracts of
Linden Ltd. and Camden GP were terminated and the interests in Linden Ltd.,
Camden GP and MESC held by the McNair Interests were acquired by East Coast
Power L.L.C. ("ECP"). ECP is a Delaware limited liability company formed by
Joint Energy Development Investments II Limited Partnership, a limited
partnership in which Enron Corp. and the California Public Employees' Retirement
System each own a 50% interest.
Linden Ltd.
Linden Ltd. is a Texas limited partnership whose general partner prior to
the February 4, 1999 transactions discussed below, RCM Holdings, Inc., is owned
100% by the McNair Interests. Under the terms of Linden Ltd.'s partnership
agreement, RCM Holdings, Inc. was allocated 82% of Linden Ltd.'s profits and
losses and received 82% of all cash distributions. Linden Ltd. provides
planning, operational and financial management services as managing general
partner of Cogen Technologies Linden Venture, L.P. ("Linden Venture"), a
Delaware limited partnership that owns and operates a 715-megawatt cogeneration
facility in Linden, New Jersey.
On February 4, 1999, Linden Venture terminated its management services
agreement with Linden Ltd. and Linden Ltd. terminated its management services
agreement with RCM Management Services, L.P. ("RCM Management"). To terminate
such agreement, Linden Ltd. made a capital contribution to Linden Venture of
$46.4 million and Linden Venture made a one-time payment to Linden Ltd. of $46.4
million. Subsequently, Linden Ltd. made a one-time payment to RCM Management of
$46.4 million. Also on February 4, 1999, Linden Venture terminated a gas
management agreement with an affiliate. To terminate such agreement, Linden Ltd.
made a capital contribution of $6.0 million Linden Venture and Linden Venture
made a one-time payment to the affiliate of $6.0 million. These transactions are
reflected in the financial statements of Linden Ltd. in the period ended
February 4, 1999. Such transactions have no effect on the liquidity or financial
condition of Linden Ltd. since the amounts necessary to make the payments were
provided by contributions from the partners.
Subsequently on February 4, 1999, ECP acquired 47.5% of the general and
limited partnership interests in Linden Ltd. for $146.6 million in cash and
$250.0 million in Enron Corp. common stock. Following that transaction, Linden
Ltd. redeemed the 52.5% of the general and limited partnership interests not
controlled by East Coast Power in return for the distribution of $289.4 million
in cash and a $149.0 million account receivable from an affiliate. The cash
portion of the redemption was paid using the proceeds from a
F-27
<PAGE> 146
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (Unaudited) -- (Continued)
$289.4 million loan from Morgan Stanley & Co. Incorporated. The loan, plus
accrued interest of $0.2 million, was repaid on February 5, 1999 using the
proceeds from a loan from ECP.
Camden GP
Camden GP is a Delaware limited partnership whose general partner prior to
the February 4, 1999 transactions discussed below, Cogen Technologies Camden
Inc. ("CTCI") is owned 100% by the McNair Interests. Under the terms of Camden
GP's partnership agreement, Camden Inc. was allocated 82% of Camden GP's profits
and losses and received 82% of all cash distributions. CTCI provided planning,
operational and financial management services as managing general partner of
Camden Cogen L.P. ("Camden Venture"), a Delaware limited partnership that owns
and operates a 146-megawatt cogeneration facility in Camden, New Jersey.
On February 4, 1999, Camden Venture terminated its management services
agreement with Camden GP and Camden GP terminated its management services
agreement with RCM Management. To terminate such agreement, Camden GP made a
capital contribution to Camden Venture of $12.8 million and Camden Venture made
a one-time payment to Camden GP of $12.8 million. Subsequently, Camden GP made a
one-time payment to RCM Management of $12.8 million. Also on February 4, 1999,
Camden Venture terminated a gas management agreement with an affiliate. To
terminate such agreement, Camden GP made a capital contribution of $1.6 million
to Camden Venture and Camden Venture made a one-time payment to the affiliate of
$1.6 million. These transactions are reflected in the financial statements of
Camden GP in the period ended February 4, 1999. Such transactions have no effect
on the liquidity or financial condition of Camden GP since the amounts necessary
to make the payments were provided by contributions from the partners.
Also on February 4, 1999, Camden GP repaid the outstanding balance under
its term loan agreement ($12.5 million, including prepayment penalties and
accrued interest of $0.3 million). The funds necessary to make the repayments
were provided by contributions from the general and limited partners.
Subsequently on February 4, 1999, ECP acquired 100% of the general and
limited partnership interests in Camden GP for $140.0 million in cash.
MESC
MESC is a Texas corporation that prior to the February 4, 1999 transactions
discussed below was owned approximately 82% by the McNair Interests. MESC owned
100% of NJ Inc., which provided planning, operational and financial management
services as managing general partner for Cogen Technologies NJ Venture ("Bayonne
Venture"), a New Jersey general partnership that owns and operates a
176-megawatt cogeneration facility in Bayonne, New Jersey.
On February 4, 1999, NJ Inc. was merged with and into MESC. Also on
February 4, MESC redeemed 90% of its outstanding common shares for $216.0
million in notes (the "MESC Notes"). Subsequently on February 4, Enron Capital &
Trade Resources Corp. ("ECT"), a wholly owned subsidiary of Enron Corp.,
acquired all of the outstanding common shares of MESC for $24.0 million in cash.
On February 5, MESC was merged with and into ECT and ECT contributed its
interest in Bayonne Venture to ECP. In addition, ECP retired the $216.0 million
of MESC Notes.
Investments in Affiliates
The Group's investments in Linden Venture, Camden Venture and Bayonne
Venture are accounted for using the equity method of accounting since the other
partners have substantive participating rights with respect to the partnerships'
operations.
F-28
<PAGE> 147
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
(2) 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. On October 2, 1998, the court denied class certification to the
plaintiffs, and discovery on the merits of the case is expected to begin in
1999. Management 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 Cogen
Tech 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-29
<PAGE> 148
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To East Coast Power L.L.C.:
We have audited the accompanying combined balance sheets of Cogen Tech
Group (a group of cogeneration investing entities owned by Robert C. McNair and
affiliates) as of December 31, 1998 and 1997, and the related combined
statements of income, owners' equity and cash flows for each of the three years
in the period ended December 31, 1998. 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 Tech Group as of
December 31, 1998 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
March 2, 1999
F-30
<PAGE> 149
COGEN TECH GROUP
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1998 1997 1996
------ ------ ------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Revenues
Equity in Earnings of
Cogen Technologies Linden Venture, L.P. (Linden
Venture).............................................. $ 75.3 $ 73.8 $ 78.7
Camden Cogen L.P. (Camden Venture)..................... 14.2 14.5 13.7
Cogen Technologies NJ Venture (Bayonne Venture)........ 47.6 17.5 18.1
------ ------ ------
137.1 105.8 110.5
------ ------ ------
Costs and Expenses
Operating overhead........................................ 21.6 11.6 9.6
General and administrative................................ 20.2 19.9 10.9
------ ------ ------
41.8 31.5 20.5
------ ------ ------
Income from Operations...................................... 95.3 74.3 90.0
Other Income (Expense)
Interest and other income................................. 12.6 15.5 16.7
Interest expense.......................................... (19.3) (21.8) (23.3)
Allowance for long-term receivable........................ -- 10.3 (10.3)
------ ------ ------
Income Before Income Taxes.................................. 88.6 78.3 73.1
Income taxes.............................................. (14.6) (4.2) (4.1)
------ ------ ------
Net Income.................................................. $ 74.0 $ 74.1 $ 69.0
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE> 150
COGEN TECH GROUP
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
--------- ---------
(IN MILLIONS OF DOLLARS)
<S> <C> <C>
Current Assets
Cash and cash equivalents................................. $ 12.7 $ 12.6
Accounts receivable, affiliate............................ 0.2 --
Other current assets...................................... -- 0.1
------ ------
12.9 12.7
------ ------
Investments in Affiliates
Cogen Technologies Linden Venture, L.P. (Linden
Venture)............................................... 61.9 60.6
Camden Cogen L.P. (Camden Venture)........................ 11.9 12.7
Cogen Technologies NJ Venture (Bayonne Venture)........... 10.0 2.4
------ ------
83.8 75.7
------ ------
Other Assets
Accounts receivable, affiliate............................ 149.0 160.8
Other..................................................... 1.5 1.6
------ ------
150.5 162.4
------ ------
$247.2 $250.8
====== ======
LIABILITIES AND OWNERS' EQUITY
Current Liabilities
Accounts payable, affiliate............................... $ -- $ 11.7
Current maturities on long-term debt...................... 14.5 12.9
Income taxes payable...................................... 4.4 0.1
Interest payable.......................................... 1.8 2.0
------ ------
20.7 26.7
Long-Term Debt.............................................. 203.5 218.0
Other Long-Term Liabilities................................. -- 13.0
Deferred Income Taxes....................................... 6.3 4.7
Commitments and Contingencies (Note 7)
Owners' Equity.............................................. 16.7 (11.6)
------ ------
$247.2 $250.8
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE> 151
COGEN TECH GROUP
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997 1996
------ ------ ------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Operating Activities
Net income................................................ $ 74.0 $ 74.1 $ 69.0
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in earnings of affiliates:
Cogen Technologies Linden Venture, L.P. (Linden
Venture)............................................ (75.3) (73.8) (78.7)
Camden Cogen L.P. (Camden Venture)................... (14.2) (14.5) (13.7)
Cogen Technologies NJ Venture (Bayonne Venture)...... (47.6) (17.5) (18.1)
Distributions received from affiliates:
Cogen Technologies Linden Venture, L.P. (Linden
Venture)............................................ 74.0 75.6 77.7
Camden Cogen L.P. (Camden Venture)................... 15.0 8.6 14.5
Cogen Technologies NJ Venture (Bayonne Venture)...... 39.5 18.1 24.5
Deferred income taxes.................................. 1.6 1.2 0.7
Allowance for long-term receivable..................... -- (10.3) 10.3
Changes in other operating assets and liabilities
Decrease (increase) in accounts receivable,
affiliate............................................. (0.2) 5.2 1.4
Decrease (increase) in other current assets............ 0.1 0.7 0.2
Increase (decrease) in accounts payable, affiliate..... (11.7) (1.4) (9.3)
Increase (decrease) in interest payable................ (0.2) 0.3 (0.4)
Increase (decrease) in income taxes payable............ 4.3 0.1 0.3
Net change in other assets and liabilities............. 0.1 0.3 (0.1)
------ ------ ------
Net Cash Provided by Operating Activities................. 59.4 66.7 78.3
------ ------ ------
Investing Activities
Investment in Cogen Technologies NJ Venture (Bayonne
Venture)............................................... (12.5) -- --
Net change in long-term receivable, affiliate............. 11.8 7.8 17.2
------ ------ ------
Net Cash Provided by (used in) Investing Activities......... (0.7) 7.8 17.2
------ ------ ------
Financing Activities
Principal payments on long-term borrowings................ (12.9) (16.0) (15.3)
Cash distributions........................................ (45.7) (58.3) (80.4)
------ ------ ------
Net Cash Used in Financing Activities....................... (58.6) (74.3) (95.7)
------ ------ ------
Net Increase in Cash and Cash Equivalents................... 0.1 0.2 (0.2)
Cash and Cash Equivalents at Beginning of Year.............. 12.6 12.4 12.6
------ ------ ------
Cash and Cash Equivalents at End of Year.................... $ 12.7 $ 12.6 $ 12.4
====== ====== ======
Cash Payments for
Income taxes.............................................. $ 7.9 $ 2.6 $ 3.4
====== ====== ======
Interest.................................................. $ 19.5 $ 21.4 $ 23.4
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE> 152
COGEN TECH GROUP
COMBINED STATEMENTS OF OWNERS' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997 1996
------ ------ ------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Owners' Equity at Beginning of Year......................... $(11.6) $(27.4) $(16.0)
Net income................................................ 74.0 74.1 69.0
Distributions............................................. (45.7) (58.3) (80.4)
------ ------ ------
Owners' Equity at End of Year............................... $ 16.7 $(11.6) $(27.4)
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE> 153
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
The combined financial statements of the Cogen Tech Group (the "Group")
includes McNair Energy Services Corporation ("MESC") and its wholly owned
subsidiary Cogen Technologies NJ, Inc., a Delaware corporation ("NJ Inc."),
Cogen Technologies Linden, Ltd. ("Linden Ltd.") and Cogen Technologies Camden GP
Limited Partnership ("Camden GP"). 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.
Linden Ltd. is a Texas limited partnership whose general partner, RCM
Holdings, Inc., is owned 100% by the McNair Interests. Under the terms of Linden
Ltd.'s partnership agreement, RCM Holdings, Inc. 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, L.P. ("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 3.
Camden GP is a Delaware limited partnership whose general partner, Cogen
Technologies Camden Inc. ("CTCI") is owned 100% by the McNair Interests. Under
the terms of Camden GP's partnership agreement, Camden Inc. is allocated 82% of
Camden GP's profits and losses and receives 82% of all cash distributions. CTCI
provides planning, operational and financial management services as managing
general partner of Camden Cogen L.P. ("Camden Venture"), a Delaware limited
partnership that owns and operates a 146-megawatt cogeneration facility in
Camden, New Jersey. The allocation of Camden Venture's earnings and cash
distributions to Camden GP is discussed in Note 3.
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. NJ Inc. provides planning, operational and
financial management services as managing general partner for Cogen Technologies
NJ Venture ("Bayonne Venture"), a New Jersey general partnership that owns and
operates a 176-megawatt cogeneration facility in Bayonne, New Jersey. The
allocation of Bayonne Venture's earnings and cash distributions to NJ Inc. is
discussed in Note 3.
The Group's investments in Linden Venture, Camden Venture and Bayonne
Venture are accounted for using the equity method of accounting since the other
partners have substantive participating rights with respect to the partnerships'
operations.
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, 1998 and
1997, all 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.
F-35
<PAGE> 154
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
Federal and state income taxes with respect to Linden Ltd. and Camden GP
are not levied at the partnership or corporate levels but rather on the
individual partner or shareholder level. Accordingly, such income taxes have not
been recognized in the combined financial statements for such entities. MESC
accounts for federal and 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.
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.
(2) SUBSEQUENT EVENTS
On February 4, 1999, Linden Venture and Camden Venture terminated their
respective management services agreements with Linden Ltd. and Camden GP and
Linden Ltd. and Camden GP terminated their respective management services
agreements with RCM Management Services, L.P. ("RCM Management"). To terminate
such agreements, Linden Ltd. and Camden GP made capital contributions to Linden
Venture and Camden Venture of $46.4 million and $12.8 million, respectively, and
Linden Venture and Camden Venture made one-time payments to Linden Ltd. and
Camden GP of $46.4 million and $12.8 million, respectively. Subsequently, Linden
Ltd. and Camden GP made one-time payments to RCM Management of $46.4 million and
$12.8 million, respectively. These transactions will be reflected in the
financial statements of Linden Ltd., Camden GP, Linden Venture and Camden
Venture in the first quarter of 1999. Such transactions have no effect on the
liquidity or financial condition of such entities since the amounts necessary to
make the payments were provided by contributions from the partners.
On February 4, 1999, Linden Venture and Camden Venture terminated certain
gas management agreements with an affiliate. To terminate such agreements,
Linden Ltd. and Camden GP made capital contributions of $6.0 million and $1.6
million to Linden Venture and Camden Venture, respectively, and Linden Venture
and Camden Venture made one-time payments to the affiliate of $6.0 million and
$1.6 million, respectively. These transactions will be reflected in the
financial statements of Linden Venture and Camden Venture in the first quarter
of 1999. Such transactions have no effect on the liquidity or financial
condition of such entities since the amounts necessary to make the payments were
provided by contributions from the partners.
On February 4, 1999, East Coast Power acquired 47.5% of the general and
limited partnership interests in Linden Ltd. for $146.6 million in cash and
$250.0 million in Enron Corp. common stock. Subsequently on February 4, Linden
Ltd. redeemed the 52.5% of the general and limited partnership interests not
controlled by East Coast Power in return for the distribution of $289.4 million
in cash and a $149.0 million account receivable from an affiliate. The cash
portion of the redemption was paid using the proceeds from a
F-36
<PAGE> 155
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
$289.4 million loan from Morgan Stanley & Co. Incorporated. The loan, plus
accrued interest of $0.2 million, was repaid on February 5, 1999 using the
proceeds from a loan from East Coast Power.
On February 4, 1999, East Coast Power acquired 100% of the general and
limited partnership interests in Camden GP for $140.0 million in cash.
On February 4, 1999, Camden GP repaid the outstanding balance under its
term loan agreement ($12.5 million, including prepayment penalties and accrued
interest of $0.3 million). The funds necessary to make the repayments were
provided by contributions from the general and limited partners.
On February 4, 1999, NJ Inc. was merged with and into MESC. Also on
February 4, MESC redeemed 90% of its outstanding common shares for $216.0
million in Notes (the "MESC Notes"). Subsequently on February 4, Enron Capital &
Trade Resources Corp. ("ECT"), a wholly owned subsidiary of Enron Corp.,
acquired all of the outstanding common shares of MESC for $24.0 million in cash.
On February 5, MESC was merged with and into ECT and ECT contributed its
interest in Bayonne Venture to East Coast Power L.L.C. ("East Coast Power"). In
addition, East Coast Power assumed and subsequently retired the $216.0 million
of MESC Notes. East Coast Power is a Delaware limited liability company formed
by JEDI II, a limited partnership in which Enron Corp. and the California Public
Employees' Retirement System each own a 50% interest.
(3) INVESTMENTS IN AFFILIATES
The following table reflects the changes in the Group's investments in
affiliates (in millions of dollars):
<TABLE>
<CAPTION>
LINDEN CAMDEN VENTURE
VENTURE VENTURE BAYONNE(1)
------- ------- ----------
<S> <C> <C> <C>
Balance at December 31, 1995............................. $ 61.4 $ 7.6 $ (3.8)
Equity in earnings....................................... 78.7 13.7 18.5
Distributions............................................ (77.7) (14.5) (24.5)
Amortization of excess cost.............................. -- -- (0.3)
------ ------ ------
Balance at December 31, 1996............................. 62.4 6.8 (10.1)
Equity in earnings....................................... 73.8 14.5 17.9
Distributions............................................ (75.6) (8.6) (18.1)
Amortization of excess cost.............................. -- -- (0.3)
------ ------ ------
Balance at December 31, 1997............................. 60.6 12.7 (10.6)
Investment............................................... -- -- 12.5
Equity in earnings....................................... 75.3 14.2 47.9
Distributions............................................ (74.0) (15.0) (39.5)
Amortization of excess cost.............................. -- -- (0.3)
------ ------ ------
Balance at December 31, 1998............................. $ 61.9 $ 11.9 $ 10.0
====== ====== ======
</TABLE>
- ---------------
(1) Through December 31, 1997, NJ Inc. received distributions from Bayonne
Venture that were $13.0 million in excess of its proportionate share of
Bayonne Venture's partners' capital before distributions ($12.7 million at
December 31, 1996 and $6.6 million at December 31, 1995). 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
December 31, 1997 balance sheet. The amount reflected as Investments in
affiliates, Bayonne Venture at December 31, 1997 represents NJ Inc.'s
unamortized cost in excess of its equity in the underlying net assets of
Bayonne Venture, and such amount is being amortized over the remaining life
of Bayonne Venture's power purchase agreements.
F-37
<PAGE> 156
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
In July 1998, NJ Inc. purchased an additional 5.25% limited partnership
interest in Bayonne Venture for $12.5 million in cash from an unaffiliated
party. On a pro forma basis, assuming the transaction took place on January 1,
1998, such transaction would have increased the Group's equity in the earnings
of Bayonne Venture for the year ended December 31, 1998 by $1.5 million and the
Group's net income for such period by $1.0 million. NJ Inc.'s cost in excess of
its equity in the underlying net assets of Bayonne Venture at the time of the
purchase, $2.6 million, is being amortized over ten years.
The following table presents summary balance sheet information for the
Group's affiliates at December 31, 1998 and 1997 (in millions of dollars):
<TABLE>
<CAPTION>
LINDEN VENTURE CAMDEN VENTURE BAYONNE VENTURE
--------------- --------------- ---------------
1998 1997 1998 1997 1998 1997
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets............................ $ 57.0 $ 64.2 $ 18.3 $ 19.0 $25.9 $25.0
Property, plant and equipment, net........ 413.6 428.2 103.1 106.3 70.9 73.8
Other assets.............................. -- -- -- -- 1.6 0.2
------ ------ ------ ------ ----- -----
$470.6 $492.4 $121.4 $125.3 $98.4 $99.0
====== ====== ====== ====== ===== =====
Liabilities and Partners' Capital
Current liabilities....................... $ 24.5 $ 31.8 $ 13.7 $ 11.8 $12.8 $18.9
Long-term debt............................ -- -- 78.5 84.7 64.1 67.9
Other long-term liabilities............... 1.6 2.2 -- 0.8 -- --
Partners' capital......................... 444.5 458.4 29.2 28.0 21.5 12.2
------ ------ ------ ------ ----- -----
$470.6 $492.4 $121.4 $125.3 $98.4 $99.0
====== ====== ====== ====== ===== =====
</TABLE>
The following table presents summary income statement information for the
Group's affiliates for the years ended December 31, 1998, 1997 and 1996 (in
millions of dollars):
<TABLE>
<CAPTION>
LINDEN VENTURE CAMDEN VENTURE BAYONNE VENTURE
------------------------ --------------------- ----------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
------ ------ ------ ----- ----- ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Electricity................ $262.8 $283.5 $290.4 $73.1 $80.2 $77.2 $112.8 $92.8 $90.4
Steam...................... 11.3 15.5 15.1 -- -- -- 3.8 3.7 4.9
------ ------ ------ ----- ----- ----- ------ ----- -----
274.1 299.0 305.5 73.1 80.2 77.2 116.6 96.5 95.3
------ ------ ------ ----- ----- ----- ------ ----- -----
Costs and Expenses:
Fuel....................... 118.1 138.1 138.6 33.3 39.2 38.4 38.6 43.2 45.2
Operating & maintenance.... 19.9 22.1 22.6 7.0 7.7 6.4 10.9 14.4 10.2
Depreciation &
amortization............ 15.4 22.3 22.2 3.7 6.9 6.8 3.0 6.9 6.9
General & administrative... 10.1 11.4 10.7 2.2 2.6 2.6 3.1 2.9 2.8
Taxes, other than income... 1.6 0.6 1.7 0.4 0.6 0.6 0.5 0.5 0.5
------ ------ ------ ----- ----- ----- ------ ----- -----
165.1 194.5 195.8 46.6 57.0 54.8 56.1 67.9 65.6
------ ------ ------ ----- ----- ----- ------ ----- -----
Income from Operations....... 109.0 104.5 109.7 26.5 23.2 22.4 60.5 28.6 29.7
Other Income (Expense)
Interest and other
income..................... 0.8 1.1 0.6 0.4 0.4 0.4 1.2 0.1 0.1
Interest expense........... -- -- (0.1) (7.4) (7.7) (8.2) (7.7) (8.1) (8.5)
------ ------ ------ ----- ----- ----- ------ ----- -----
Net Income................... $109.8 $105.6 $110.2 $19.5 $15.9 $14.6 $ 54.0 $20.6 $21.3
====== ====== ====== ===== ===== ===== ====== ===== =====
</TABLE>
F-38
<PAGE> 157
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents statement of cash flows information for the
Group's affiliates for the years ended December 31, 1998, 1997 and 1996 (in
millions of dollars):
<TABLE>
<CAPTION>
LINDEN VENTURE CAMDEN VENTURE BAYONNE VENTURE
------------------------ ---------------------- ---------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
------ ------ ------ ----- ----- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash provided by operating
activities.................. $120.4 $134.4 $130.4 $24.2 $21.7 $21.9 $51.2 $26.9 $30.0
Cash used in investing
activities.................. (0.8) (0.4) (1.7) (0.5) (4.4) (0.4) (0.1) -- (0.3)
Cash used in financing
activities.................. (123.7) (127.6) (129.3) (23.9) (16.7) (22.1) (47.2) (24.0) (31.2)
------ ------ ------ ----- ----- ----- ----- ----- -----
Increase (decrease) in cash
and cash equivalents........ $ (4.1) $ 6.4 $ (0.6) $(0.2) $ 0.6 $(0.6) $ 3.9 $ 2.9 $(1.5)
====== ====== ====== ===== ===== ===== ===== ===== =====
</TABLE>
Under the terms of Linden Venture's partnership agreement, monthly cash
distributions are allocated, 1% to Linden Ltd. and 99% to the limited partner up
to a specified rate of return (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 1998, 1997 and 1996,
Linden Ltd. received 60%, 59% and 60%, 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, 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 1998, 1997 and
1996, Linden Ltd. was allocated 69%, 70% and 71%, respectively, of Linden
Venture's net income.
Under the terms of Camden Venture's partnership agreement, monthly cash
distributions are allocated 1% to Camden GP 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 GP 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 GP and 10% to the
limited partner. During 1998, 1997 and 1996, Camden GP received 82%, 74% and
83%, respectively, of Camden Venture's cash distributions. Camden Venture'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 GP and 1% to the limited partner. Losses are allocated
100% to Camden GP until its capital account equals zero, then to the limited
partner until its capital account equals zero, the remainder to Camden GP.
Depreciation is allocated 100% to the limited partner until its capital account
equals zero and the remainder to Camden GP. During 1998, 1997 and 1996, Camden
GP was allocated 73%, 91% and 94%, respectively, of Camden Venture's net income.
Under the terms of Bayonne Venture's joint venture agreement, NJ Inc. is
allocated profits and losses and receives cash distributions based on its
ownership percentage. Through July 1998, NJ Inc. was allocated 86.5% of Bayonne
Venture's profits and losses and received 86.5% of all cash distributions.
Subsequent to the acquisition of an additional 5.25% interest in July 1998, NJ
Inc. has been allocated 91.75% of Bayonne Venture's profits and losses and
received 91.75% of all cash distributions. For the year ended December 31, 1998,
NJ Inc. was allocated 88.7% of Bayonne Venture's profits and losses and received
88.4% of all cash distributions.
F-39
<PAGE> 158
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(4) LONG-TERM DEBT
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 one month
financial commercial paper rate (as reported in Federal Statistical Release H.15
(514) or successor publication) plus 0.55%. Borrowings under the agreement are
secured by Linden Ltd.'s partnership interest in Linden Venture. Principal and
interest payments are made quarterly at varying amounts in accordance with the
terms of the agreement. The agreement contains 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.
In February 1992, Camden GP entered into a $36.5 million Term Loan
Agreement with General Electric Capital Corporation (the "Camden GP Term Loan
Agreement") 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 GP's holdings in Camden 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, 1998 and 1997 consisted of the following (in
millions of dollars):
<TABLE>
<CAPTION>
1998 1997
------------------- -------------------
CURRENT LONG-TERM CURRENT LONG-TERM
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Linden Ltd.
Fixed rate...................................... $ 6.7 $ 87.0 $ 6.0 $ 93.7
Floating rate................................... 7.2 94.7 6.4 101.9
Working capital................................. -- 10.0 -- 10.0
----- ------ ----- ------
13.9 191.7 12.4 205.6
----- ------ ----- ------
Camden GP......................................... 0.6 11.8 0.5 12.4
----- ------ ----- ------
$14.5 $203.5 $12.9 $218.0
===== ====== ===== ======
</TABLE>
Aggregate total maturities during the next five years are as follows:
1999 -- $14.5 million; 2000 -- $16.2 million; 2001 -- $18.1 million;
2002 -- $20.3 million; and 2003 -- $22.7 million.
(5) RELATED PARTY TRANSACTIONS
Linden Ltd. has advanced funds to Cogen Technologies Financial Services,
L.P. ("Financial Services"), an investment company which is controlled by the
McNair Interests, which amounted to $149.0 million and $160.8 million at
December 31, 1998 and 1997, respectively. Such amount is classified as a
long-term receivable in the combined balance sheets. The receivable bears
interest at 8.8%, and Linden Ltd. has earned net interest of $11.8 million in
1998, $14.6 million in 1997 and $15.6 million in 1996.
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, which is the only liquid asset the
partnership holds, 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,
F-40
<PAGE> 159
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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 and $10.3 million
in 1996. At December 31, 1998 and 1997, the cumulative allowance recognized with
respect to such receivable was zero.
From time to time advances are made between Financial Services and Camden
GP. At December 31, 1997, $1.9 million was payable to Financial Services by
Camden GP, and at December 31, 1998, $0.2 million was payable by Financial
Services to Camden GP. Advances bear interest at 9.3%, and during 1998, 1997 and
1996 Camden GP recorded interest income totaling $0.2 million, $0.6 million and
$0.9 million, respectively.
Camden GP provides planning, operational and financial management services
to Camden Venture for a monthly management fee equal to 1.5% of Camden Venture's
gross revenues. Such fees charged to Camden Venture in 1998, 1997 and 1996
totaled $1.1 million, $1.2 million and $1.2 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 1998, 1997 and 1996 totaled $4.2 million, $4.6 million and $4.5 million,
respectively. RCM Management Services, L.P. ("RCM Management"), which is
controlled by the McNair Interests, provides planning, operational and financial
management services to Camden GP and Linden Ltd. for a monthly management fee
equal to 1.5% of the gross revenues of Camden Venture and Linden Venture,
respectively. Such fees charged were as follows in 1998, 1997 and 1996: (i)
Camden GP -- $1.1 million, $1.2 million and $1.2 million, respectively; and (ii)
Linden Ltd. -- $4.2 million, $4.6 million and $4.5 million, respectively.
Under the terms of an agreement between RCM Management and NJ Inc., RCM
Management provides planning, operational and financial management services
directly to Bayonne Venture for a monthly management fee equal to 1.5% of
Bayonne Venture's gross revenues. Such fees charged to Bayonne Venture totaled
$1.7 million, $1.4 million and $1.4 million in 1998, 1997 and 1996,
respectively. Under the terms of such agreement, Bayonne Venture has assumed the
cost and pays such fee directly to RCM Management.
Cogen Technologies Capital Company, L.P. ("Cogen Capital"), in which the
McNair Interests have a 1% general partner and an approximate 81% limited
partner interest, charges Camden GP, Linden Ltd., and NJ Inc. for certain
management, financial and administrative support services. Such fees charged
were as follows in 1998, 1997 and 1996: (i) Linden Ltd. -- $28.3 million, $21.2
million and $13.7 million, respectively; (ii) Camden GP -- $5.8 million, $4.3
million and $2.9 million, respectively; and (iii) NJ Inc. -- $7.0 million, $5.2
million and $3.3 million, respectively. 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 $5.9 million in 1998, $2.2 million in 1997 and $2.0 million in
1996 for certain management, financial and administrative support services. The
costs of such services are accumulated primarily based on employee time
allocations.
See Note 2 with respect to the cancellation of certain agreements with
related parties.
F-41
<PAGE> 160
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(6) INCOME TAXES
As explained in Note 1, certain entities in the Cogen Tech Group are
tax-paying entities. Income tax expense for such entities for the years ended
December 31, 1998, 1997 and 1996 consisted of (in millions of dollars):
<TABLE>
<CAPTION>
1998 1997 1996
----- ---- ----
<S> <C> <C> <C>
Current
Federal................................................... $12.0 $2.6 $3.1
State..................................................... 1.0 0.4 0.3
----- ---- ----
13.0 3.0 3.4
----- ---- ----
Deferred
Federal................................................... 1.4 0.4 0.7
State..................................................... 0.2 0.8 --
----- ---- ----
1.6 1.2 0.7
----- ---- ----
Total............................................. $14.6 $4.2 $4.1
===== ==== ====
</TABLE>
Deferred tax liabilities (assets) at December 31, 1998 and 1997 are
composed of the following differences between financial and tax reporting
amounts (in millions of dollars):
<TABLE>
<CAPTION>
1998 1997
---- -----
<S> <C> <C>
Deferred income tax liabilities
Tax depreciation in excess of book depreciation........... $5.7 $ 6.4
State tax depreciation in excess of book depreciation..... 0.1 --
Maintenance accrual....................................... 0.5 --
Deferred income tax assets
Alternative minimum tax credit carryforward............... -- (0.8)
Book depreciation in excess of state tax depreciation..... -- (0.1)
Maintenance accrual....................................... -- (0.8)
---- -----
Net deferred income tax liability........................... $6.3 $ 4.7
==== =====
</TABLE>
A reconciliation of income tax expense computed by applying the statutory
federal income tax rate to income before income taxes for the years ended
December 31, 1998, 1997 and 1996 is presented in the following table (in
millions of dollars):
<TABLE>
<CAPTION>
1998 1997 1996
----- ---- ----
<S> <C> <C> <C>
Federal income taxes at statutory rate...................... $13.8 $3.5 $3.9
Increase resulting from:
State income taxes, net of federal effect................. 0.8 0.2 0.2
Other..................................................... -- 0.5 --
----- ---- ----
$14.6 $4.2 $4.1
===== ==== ====
</TABLE>
(7) 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
F-42
<PAGE> 161
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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. On October 2, 1998, the court denied class
certification to the plaintiffs, and discovery on the merits of the case is
expected to begin in the first quarter of 1999. Management 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 Cogen
Tech Group and its equity investees. While the outcome of such proceedings
cannot be predicted with certainty, management does not expect these matters to
have a material adverse effect on the financial condition or results of
operations of the Group.
(8) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 "Disclosures About Fair Value of Financial Instruments"
requires the disclosure, to the extent practicable, of the fair value of
financial instruments which are recognized or unrecognized in the balance sheet.
The fair value disclosed herein is not representative of the amount that could
be realized or settled, nor does the fair value amount consider tax
consequences, if any, of realization or settlement. The following table reflects
the fair value of long-term debt at December 31, 1998 and 1997 (in millions of
dollars):
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Long-Term Debt
Camden GP....................................... $ 12.4 $ 12.4 $ 12.9 $ 12.9
Linden Ltd...................................... 205.6 229.3 218.0 225.5
</TABLE>
The fair value of fixed-rate long-term debt has been determined based on
the differential between the interest rates of long-term treasury securities of
equivalent maturities and the effective interest rates on the debt at the date
of the borrowing plus the interest rates on similar treasury securities at the
balance sheet date. With respect to floating rate debt, the carrying amount
approximates fair value due to the market-sensitive interest rate on such debt.
The carrying amount of current assets and liabilities are considered to be
reasonable estimates of their fair values due to their short-term nature. The
carrying amount of the long-term receivable from an affiliate is considered to
be a reasonable estimate of fair value since interest is earned at market rates.
F-43
<PAGE> 162
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(9) SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1 QTR 2 QTR 3 QTR 4 QTR YEAR
------ ------ ----- ----- ------
<S> <C> <C> <C> <C> <C>
1998
Revenues.................................. $ 37.2 $ 28.5 $35.1 $36.3 $137.1
Costs and expenses........................ (14.2) (12.7) (8.1) (6.8) (41.8)
Income from operations.................... 23.0 15.8 27.0 29.5 95.3
Other income (expense).................... (1.9) (1.6) (1.8) (1.4) (6.7)
Income taxes.............................. (4.7) (2.1) (3.7) (4.1) (14.6)
Net income................................ 16.4 12.1 21.5 24.0 74.0
Gross profit(1)........................... 27.9 20.6 32.5 34.5 115.5
1997
Revenues.................................. $ 26.4 $ 22.2 $30.9 $26.3 $105.8
Costs and expenses........................ (7.8) (7.2) (8.2) (8.3) (31.5)
Income from operations.................... 18.6 15.0 22.7 18.0 74.3
Other income (expense)(2)................. (3.9) 7.8 1.1 (1.0) 4.0
Income taxes.............................. (0.7) (1.8) (1.1) (0.6) (4.2)
Net income................................ 14.0 21.0 22.7 16.4 74.1
Gross profit(1)........................... 23.5 19.3 28.0 23.4 94.2
</TABLE>
- ---------------
(1) Income from operations plus general and administrative expense.
(2) 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.
F-44
<PAGE> 163
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED STATEMENTS OF INCOME (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
FEBRUARY 5, JANUARY 1, THREE MONTHS
1999 TO 1999 TO ENDED
MARCH 31, FEBRUARY 4, MARCH 31,
1999 1999 1998
----------- ----------- ------------
<S> <C> <C> <C>
Revenues
Electricity............................................ $65.8 $ 43.2 $118.5
Steam.................................................. 1.5 1.0 4.5
----- ------ ------
67.3 44.2 123.0
----- ------ ------
Costs and Expenses
Fuel................................................... 26.5 24.6 50.2
Operating and maintenance.............................. 5.6 3.6 9.1
Depreciation and amortization.......................... 3.4 2.1 5.5
General and administrative............................. 1.6 60.8 4.3
Taxes, other than income............................... 0.5 0.2 0.6
----- ------ ------
37.6 91.3 69.7
----- ------ ------
Income (Loss) from Operations............................ 29.7 (47.1) 53.3
Other Income (Expense)
Interest and other income.............................. 0.9 0.1 0.9
Interest expense....................................... (2.1) (1.5) (3.8)
----- ------ ------
Net Income (Loss)........................................ $28.5 $(48.5) $ 50.4
===== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-45
<PAGE> 164
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
1999 DECEMBER 31,
(UNAUDITED) 1998
----------- ------------
(IN MILLIONS OF DOLLARS)
<S> <C> <C>
Current Assets
Cash and cash equivalents................................. $ 45.6 $ 39.1
Accounts receivable....................................... 38.6 42.7
Inventories............................................... 17.7 16.7
Other current assets...................................... 1.5 2.7
------- -------
103.4 101.2
------- -------
Property, Plant and Equipment, at cost...................... 827.6 827.6
Accumulated depreciation.................................. (245.5) (240.0)
------- -------
582.1 587.6
------- -------
Other Assets................................................ 1.1 1.6
------- -------
$ 686.6 $ 690.4
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Accounts payable.......................................... $ 28.3 $ 29.1
Accounts payable, affiliate............................... -- 0.4
Current maturities on long-term debt...................... 10.7 10.4
Short-term debt........................................... -- 0.9
Interest payable.......................................... 2.9 3.1
Other current liabilities................................. 7.2 7.1
------- -------
49.1 51.0
Long-Term Debt.............................................. 140.0 142.6
Other Long-Term Liabilities................................. 0.6 1.6
Commitments and Contingencies (Note 3)
Partners' Capital........................................... 496.9 495.2
------- -------
$ 686.6 $ 690.4
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-46
<PAGE> 165
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
FEBRUARY 5, JANUARY 1, THREE MONTHS
1999 TO 1999 TO ENDED
MARCH 31, FEBRUARY 4, MARCH 31,
1999 1999 1998
----------- ----------- ------------
<S> <C> <C> <C>
Operating Activities
Net income (loss)...................................... $ 28.5 $(48.5) $ 50.4
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 3.4 2.1 5.5
Changes in other operating assets and liabilities
Net change in other assets and liabilities.......... 8.8 (6.3) (12.5)
------ ------ ------
Net Cash Provided by (Used In) Operating Activities...... 40.7 (52.7) 43.4
------ ------ ------
Investing Activities
Additions to property, plant and equipment............. -- -- (0.1)
------ ------ ------
Net Cash Used in Investing Activities.................... -- -- (0.1)
------ ------ ------
Financing Activities
Net change in borrowings............................... (2.9) (0.3) (2.1)
Cash contributions by partners......................... -- 70.1 --
Cash distributions to partners......................... (21.1) (27.3) (47.6)
------ ------ ------
Net Cash Used in Financing Activities.................... (24.0) 42.5 (49.7)
------ ------ ------
Net Increase (Decrease) in Cash and Cash Equivalents..... 16.7 (10.2) (6.4)
Cash and Cash Equivalents at Beginning of Period......... 28.9 39.1 39.5
------ ------ ------
Cash and Cash Equivalents at End of Period............... $ 45.6 $ 28.9 $ 33.1
====== ====== ======
Cash Payments for Interest............................... $ 3.7 $ 0.1 $ 3.9
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-47
<PAGE> 166
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, 1998................................ $ 79.1 $416.1 $495.2
Contributions............................................. 70.1 -- 70.1
Net income (loss)......................................... (51.5) 3.0 (48.5)
Distributions............................................. (20.3) (7.0) (27.3)
------ ------ ------
Balance at February 4, 1999................................. 77.4 412.1 489.5
Net income (loss)......................................... 23.4 5.1 28.5
Distributions............................................. (13.9) (7.2) (21.1)
------ ------ ------
Balance at March 31, 1999................................... $ 86.9 $410.0 $496.9
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-48
<PAGE> 167
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 "Operating Partnerships") includes (i) Cogen
Technologies NJ Venture ("Bayonne Venture"); (ii) Camden Cogen L.P. ("Camden
Venture"); and (iii) Cogen Technologies Linden Venture, L.P. ("Linden Venture").
The Operating Partnerships are engaged in the operation of natural gas-fired
cogeneration facilities in the state of New Jersey. The financial statements of
the Operating Partnerships are presented on a combined basis since all such
entities are under common equity ownership and management by general partners
that are under common control. All material transactions between the combined
entities have been eliminated.
At December 31, 1998 the Operating Partnerships were under the common
control of Robert C. McNair, members of his immediate family and related trusts
(the "McNair Interests"). At December 31, 1998 the McNair Interests (i)
indirectly owned approximately 82% of NJ Inc., the managing partner of Bayonne
Venture, (ii) owned 100% of the 82% general partner of Cogen Technologies Camden
GP Limited Partnership ("Camden GP"), the managing partner of Camden Venture,
and (iii) owned 100% of the 82% general partner of Cogen Technologies Linden,
Ltd. ("Linden Ltd."), the managing partner of Linden Venture.
On February 4, 1999 East Coast Power L.L.C. ("East Coast Power") acquired
100% of the general and limited partnership interests in Camden GP and Linden
Ltd. Also on February 4, Enron Capital & Trade Resources Corp., a wholly owned
subsidiary of Enron Corp., acquired 91.75% of the partnership interests in
Bayonne Venture (including the interests controlled by the McNair Interests) and
contributed such interests to East Coast Power. East Coast Power subsequently
contributed its interest in Bayonne Venture to JEDI Bayonne GP, L.L.C. ("Bayonne
GP"), a limited liability company in which East Coast Power owns 100% of the
membership interests, and Bayonne GP was named managing partner of Bayonne
Venture. East Coast Power is a Delaware limited liability company formed by JEDI
II, a limited partnership in which Enron Corp. and the California Public
Employees' Retirement System each own a 50% interest.
Bayonne Venture, a New Jersey general partnership, owns and operates a
176-megawatt cogeneration facility in Bayonne, New Jersey. Through July 1998,
the managing partner was allocated 86.5% of Bayonne Venture's profits and losses
and received 86.5% of all cash distributions. At such time an additional 5.25%
interest in Bayonne Venture was acquired and subsequent to such acquisition the
managing partner has been allocated 91.75% of Bayonne Venture's profits and
losses and has received 91.75% of all cash distributions.
Camden Venture, a Delaware limited partnership, owns and operates a
146-megawatt cogeneration facility in Camden, New Jersey. Camden GP is the
managing partner of Camden Venture. Under the terms of Camden Venture's
partnership agreement, monthly cash distributions are allocated 99% to the
limited partner and 1% to Camden GP 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 GP 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 GP and 10% to the limited partner. During the first
three months of 1999 and 1998, Camden GP received 86% (excluding a $3.3 million
special distribution to the limited partner related to the East Coast Power
acquisition) and 89%, respectively, of Camden Venture's cash distributions.
Camden Venture'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 GP and 1% to the limited
partner. Losses are allocated 100% to Camden GP until its capital account equals
zero and then 100% to the limited partner until its capital account equals zero
and then 100% to Camden GP. Depreciation is allocated 100% to the limited
partner until its capital account equals zero and then to Camden GP. During the
first three months of 1999 and 1998, Camden GP was allocated 80% (excluding the
$14.4 million of one-time payments in connection with the termination of the gas
management
F-49
<PAGE> 168
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
and management services agreements that were allocated 100% to Camden GP's share
of income) and 78%, respectively, of Camden Venture's net income.
Linden Venture, a Delaware limited partnership, owns and operates a
715-megawatt cogeneration facility in Linden, New Jersey. Linden Ltd. is the
managing partner of Linden Venture. 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 the first
three months of 1999 and 1998, Linden Ltd. received 70% and 59%, respectively,
of Linden Venture's cash distributions. Linden Venture's income before
depreciation is allocated to the partners on the basis of cash distributed with
any excess primarily allocated 99% to Linden Ltd. Losses are allocated 100% to
Linden Ltd. until its capital account equals zero and then to the limited
partners until their capital accounts equal zero with any remainder allocated
100% to Linden Ltd. Depreciation up to $525.0 million is allocated 5% to Linden
Ltd. and 95% to the limited partners. All remaining depreciation is allocated
99% to Linden Ltd. During the first three months of 1999 and 1998, Linden Ltd.
was allocated 77% (excluding the $52.4 million of one-time payments in
connection with the termination of the gas management and management services
agreements that were allocated 100% to Linden Ltd.'s share of income) and 65%,
respectively, of Linden Venture's net income.
The accompanying unaudited combined financial statements of the Operating
Partnerships reflect, in the opinion of management, all adjustments, consisting
only of normal and recurring adjustments, necessary to present fairly the
Operating Partnerships' financial position at March 31, 1999 and the Operating
Partnerships' results of operations and cash flows for the period January 1,
1999 to February 4, 1999, the period February 5, 1999 to March 31, 1999 and the
three-month period ended March 31, 1998. 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 audited financial statements of the Operating Partnerships
included elsewhere in this prospectus.
(2) RELATED PARTY TRANSACTIONS
On February 4, 1999, Linden Venture and Camden Venture terminated their
respective management services agreements with Linden Ltd. and Camden GP. To
terminate such agreements, Linden Ltd. and Camden GP made capital contributions
to Linden Venture and Camden Venture, respectively, and Linden Venture and
Camden Venture made one-time payments to Linden Ltd. and Camden GP of $46.4
million and $12.8 million, respectively. Also on February 4, Linden Venture and
Camden Venture terminated certain gas management agreements with an affiliate.
To terminate such agreements, Linden Ltd. and Camden GP made capital
contributions to Linden Venture and Camden Venture, respectively, and Linden
Venture and Camden Venture made one-time payments to the affiliate of $6.0
million and $1.6 million, respectively. These transactions are reflected in the
results of operations in the period January 1, 1999 to February 4, 1999. Such
transactions have no effect on the liquidity or financial condition of such
entities since the amounts necessary to make the payments were provided by
contributions from the partners.
(3) CONTINGENCIES
In 1997 Linden Venture initiated an arbitration proceeding against Ebasco
Constructors, Inc. and ENSERCH (the "Respondents") for alleged design
deficiencies and warranty claims with respect to the construction of the Linden
Facility. In July 1998 the Respondents filed a counterclaim that alleged delay
and disruption of the performance of the construction contract. In April 1999
the proceeding was settled and Linden Venture received a cash payment of $1.2
million.
F-50
<PAGE> 169
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
There are other claims and legal actions pending against the Operating
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 Operating
Partnerships.
(4) SUBSEQUENT EVENTS
In June 1999, Linden Venture entered into a letter of intent with Tosco
Refining Company that contemplates an expansion of the Linden Facility through
the addition of a sixth turbine generator to provide electricity and steam
service to Tosco's Bayway Refinery. Completion of the transactions contemplated
by the letter of intent are subject to, among other things, further
negotiations, completion of due diligence and receipt of necessary approvals.
F-51
<PAGE> 170
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To East Coast Power L.L.C.:
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, 1998 and 1997, and the related combined statements of income,
partners' capital and cash flows for each of the three years in the period ended
December 31, 1998. 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, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
March 2, 1999
F-52
<PAGE> 171
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
1998 1997 1996
------ ------ ------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Revenues
Electricity............................................... $448.7 $456.5 $458.0
Steam..................................................... 15.1 19.2 20.0
------ ------ ------
463.8 475.7 478.0
------ ------ ------
Costs and Expenses
Fuel...................................................... 190.0 220.5 222.2
Operating and maintenance................................. 37.8 44.2 39.2
Depreciation and amortization............................. 22.1 36.1 35.9
General and administrative................................ 15.4 16.9 16.1
Taxes, other than income.................................. 2.5 1.7 2.8
------ ------ ------
267.8 319.4 316.2
------ ------ ------
Income from Operations...................................... 196.0 156.3 161.8
Other Income (Expense)
Interest and other income................................. 2.4 1.6 1.1
Interest expense.......................................... (15.1) (15.8) (16.8)
------ ------ ------
Net Income.................................................. $183.3 $142.1 $146.1
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-53
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COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
---------- ----------
(IN MILLIONS OF DOLLARS)
<S> <C> <C>
Current Assets
Cash and cash equivalents................................. $ 39.1 $ 39.5
Accounts receivable....................................... 42.7 44.6
Inventories............................................... 16.7 21.2
Other current assets...................................... 2.7 2.9
------- -------
101.2 108.2
------- -------
Property, Plant and Equipment, at cost...................... 827.6 826.2
Accumulated depreciation.................................. (240.0) (217.9)
------- -------
587.6 608.3
------- -------
Other Assets................................................ 1.6 0.2
------- -------
$ 690.4 $ 716.7
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Accounts payable.......................................... $ 29.1 $ 38.6
Accounts payable, affiliate............................... 0.4 --
Current maturities on long-term debt...................... 10.4 9.4
Short-term debt........................................... 0.9 --
Interest payable.......................................... 3.1 3.2
Other current liabilities................................. 7.1 11.3
------- -------
51.0 62.5
Long-Term Debt.............................................. 142.6 152.6
Other Long-Term Liabilities................................. 1.6 3.0
Commitments and Contingencies (Note 5)
Partners' Capital........................................... 495.2 498.6
------- -------
$ 690.4 $ 716.7
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-54
<PAGE> 173
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1998 1997 1996
------- ------- -------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Operating Activities
Net income................................................ $ 183.3 $ 142.1 $ 146.1
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 22.1 36.1 35.9
Changes in other operating assets and liabilities
Decrease (increase) in accounts receivable............. 1.9 8.3 (10.6)
Decrease (increase) in inventories..................... 4.5 (3.8) (1.6)
Decrease (increase) in other current assets............ 0.2 0.3 (0.4)
Increase (decrease) in accounts payable................ (9.5) (1.6) 10.5
Increase (decrease) in accounts payable, affiliate..... 0.4 (0.5) (2.8)
Increase (decrease) in interest payable................ (0.1) (0.3) (0.1)
Increase (decrease) in other current liabilities....... (4.2) 2.9 7.2
Net change in other assets and liabilities............. (2.8) (0.5) (1.9)
------- ------- -------
Net Cash Provided by Operating Activities................... 195.8 183.0 182.3
------- ------- -------
Investing Activities
Additions to property, plant and equipment................ (1.4) (4.8) (2.4)
------- ------- -------
Net Cash Used in Investing Activities....................... (1.4) (4.8) (2.4)
------- ------- -------
Financing Activities
Principal payments on long-term borrowings................ (9.0) (8.1) (7.4)
Net change in short-term debt............................. 0.9 -- --
Cash distributions to partners............................ (186.7) (160.2) (175.2)
------- ------- -------
Net Cash Used in Financing Activities....................... (194.8) (168.3) (182.6)
------- ------- -------
Net Increase (Decrease) in Cash and Cash Equivalents........ (0.4) 9.9 (2.7)
Cash and Cash Equivalents at Beginning of Year.............. 39.5 29.6 32.3
------- ------- -------
Cash and Cash Equivalents at End of Year.................... $ 39.1 $ 39.5 $ 29.6
======= ======= =======
Cash Payments for Interest.................................. $ 15.3 $ 16.0 $ 16.9
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-55
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COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------- -------- -------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
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
Net income................................................ 137.3 46.0 183.3
Purchase (sale) of interests.............................. 9.9 (9.9) --
Distributions............................................. (128.5) (58.2) (186.7)
------- ------ -------
Balance at December 31, 1998................................ $ 79.0 $416.2 $ 495.2
======= ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-56
<PAGE> 175
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 "Operating Partnerships") includes (i) Cogen
Technologies NJ Venture ("Bayonne Venture"); (ii) Camden Cogen L.P. ("Camden
Venture"); and (iii) Cogen Technologies Linden Venture, L.P. ("Linden Venture").
The Operating Partnerships are engaged in the operation of natural gas-fired
cogeneration facilities in the state of New Jersey. The financial statements of
the Operating Partnerships are presented on a combined basis since all such
entities were under common equity ownership and management by general partners
that were under the common control of the McNair Interests (as defined herein)
at December 31, 1998. All material transactions between the combined entities
have been eliminated.
Bayonne 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 Corporation ("MESC"), a Texas corporation that at December 31,
1998 was owned approximately 82% by Robert C. McNair, members of his immediate
family and related trusts (the "McNair Interests"), is the managing partner of
Bayonne Venture and provides planning, operational and financial management
services. Through July 1998, NJ Inc. was allocated 86.5% of Bayonne Venture's
profits and losses and received 86.5% of all cash distributions. At such time NJ
Inc. acquired an additional 5.25% interest in Bayonne Venture and subsequent to
such acquisition NJ Inc. has been allocated 91.75% of Bayonne Venture's profits
and losses and has received 91.75% of all cash distributions. During 1998 NJ
Inc. was allocated 88.7% of Bayonne Venture's profits and losses and received
88.4% of all cash distributions.
Camden Venture, a Delaware limited partnership, owns and operates a
146-megawatt cogeneration facility in Camden, New Jersey. Cogen Technologies
Camden GP Limited Partnership ("Camden GP"), whose 82% general partner was owned
100% by the McNair Interests at December 31, 1998, is the managing partner of
Camden Venture and provides planning, operational and financial management
services. Under the terms of Camden Venture's partnership agreement, monthly
cash distributions are allocated 99% to the limited partner and 1% to Camden GP
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 GP 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 GP and 10% to the
limited partner. During 1998, 1997 and 1996, Camden GP received $15.0 million,
$8.6 million and $14.5 million, respectively, which represented 82%, 74% and
83%, respectively, of Camden Venture's cash distributions. Camden Venture'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 GP and 1% to the limited partner. Losses are
allocated 100% to Camden GP until its capital account equals zero and then 100%
to the limited partner until its capital account equals zero and then 100% to
Camden GP. Depreciation is allocated 100% to the limited partner until its
capital account equals zero and then to Camden GP. During 1998, 1997 and 1996,
Camden GP was allocated 73%, 91% and 94%, respectively, of Camden Venture'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
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COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
amount of Tranche 1 and the remainder 90% to Linden Ltd. and 10% to the limited
partner. During 1998, 1997 and 1996, Linden Ltd. received $74.0 million, $75.6
million and $77.7 million, respectively, which represented 60%, 59% and 60%,
respectively, of Linden Venture's cash distributions. Linden Venture's income
before depreciation is allocated to the partners on the basis of cash
distributed with any excess primarily allocated 99% to Linden Ltd. Losses are
allocated 100% to Linden Ltd. until its capital account equals zero and then to
the limited partners until their capital accounts equal zero with any remainder
allocated 100% to Linden Ltd. Depreciation up to $525.0 million is allocated 5%
to Linden Ltd. and 95% to the limited partners. All remaining depreciation is
allocated 99% to Linden Ltd. During 1998, 1997 and 1996, Linden Ltd. was
allocated 69%, 70% and 71%, respectively, of Linden Venture's net income.
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, 1998 and
1997, $26.7 million and $23.3 million, respectively, of the Operating
Partnerships' cash was held in accounts to secure certain current liabilities.
Inventories
Spare parts inventories at December 31, 1998 and 1997 were $12.9 million
and $16.5 million, respectively, and at such dates kerosene and butane
inventories were $3.8 million and $4.7 million, respectively. Inventories are
valued at average cost.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Effective January 1, 1998,
the Operating 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 Operating
Partnerships sell electricity, to 30 years. In addition, the Operating
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 1998 of $14.2 million.
During the first quarter of 1996, the Operating 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 Operating 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, 1998, 1997 and 1996, $11.8 million, $13.7 million and
$11.6 million, respectively, was charged to expense with respect to major
maintenance and routine maintenance and repairs.
Revenue Recognition
The Operating 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;
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COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
and (iii) a fuel cost component. Accordingly, the Operating 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, 1998 and 1997 such
prepayments totaled $1.6 million and $2.2 million, respectively, and are
included in Other Long-Term Liabilities in the balance sheet. The butane
inventory is expensed and the revenue is recognized when the butane is consumed.
Income Taxes
Income taxes with respect to the Operating 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) SUBSEQUENT EVENTS
On February 4, 1999, Linden Venture and Camden Venture terminated their
respective management services agreements with Linden Ltd. and Camden GP. To
terminate such agreements, Linden Ltd. and Camden GP made capital contributions
to Linden Venture and Camden Venture, respectively, and Linden Venture and
Camden Venture made one-time payments to Linden Ltd. and Camden GP of $46.4
million and $12.8 million, respectively. Also on February 4, Linden Venture and
Camden Venture terminated certain gas management agreements with an affiliate.
To terminate such agreements, Linden Ltd. and Camden GP made capital
contributions to Linden Venture and Camden Venture, respectively, and Linden
Venture and Camden Venture made one-time payments to the affiliate of $6.0
million and $1.6 million, respectively. These transactions will be reflected in
the financial statements of Linden Venture and Camden Venture in the first
quarter of 1999. Such transactions have no effect on the liquidity or financial
condition of such entities since the amounts necessary to make the payments were
provided by contributions from the partners.
On February 4, 1999, NJ Inc. was merged with and into MESC and MESC was
designated managing general partner of Bayonne Venture. Subsequently, East Coast
Power L.L.C. ("East Coast Power") acquired all of the outstanding common shares
of MESC. Also on February 4, East Coast Power acquired control of Camden GP and
Linden Ltd. East Coast Power is a Delaware limited liability company formed by
Joint Energy Development Investments II Limited Partnership ("JEDI II"), a
Delaware limited partnership in which Enron Corp. and the California Public
Employees' Retirement System each own a 50% interest.
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COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(3) FINANCING AND DEBT
Long-term debt at December 31, 1998 and 1997 consisted of the following (in
millions of dollars):
<TABLE>
<CAPTION>
1998 1997
------------------- -------------------
CURRENT LONG-TERM CURRENT LONG-TERM
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Bayonne Venture
Term Loan.................................... $ 3.9 $ 64.1 $3.5 $ 67.9
Equipment Loan............................... 0.4 -- 0.4 --
----- ------ ---- ------
4.3 64.1 3.9 67.9
----- ------ ---- ------
Camden Venture
Term loan-Tranche A.......................... 5.1 56.4 4.6 61.5
Term loan-Tranche B.......................... 1.0 22.1 0.9 23.2
----- ------ ---- ------
6.1 78.5 5.5 84.7
----- ------ ---- ------
$10.4 $142.6 $9.4 $152.6
===== ====== ==== ======
</TABLE>
Aggregate total maturities during the next five years are as follows:
1999 -- $10.4 million; 2000 -- $11.0 million; 2001 -- $12.1 million;
2002 -- $13.3 million; and 2003 -- $14.7 million.
Under the terms of a 1987 twenty-year term loan agreement with The
Prudential Insurance Company of America, Bayonne Venture had an outstanding
principal balance of $68.0 million at December 31, 1998. The principal bears
interest at 10.85% per annum, and principal and interest are payable quarterly
through October 2008. All of Bayonne 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, Bayonne
Venture had an outstanding balance of $0.4 million at December 31, 1998
(including accrued interest of $0.2 million). The principal balance and accrued
interest is payable upon the execution of a new steam sale agreement. The
principal balance bears interest at the prime rate of First National Bank of
Chicago plus 1%.
Camden Venture'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
Venture has entered into an interest rate swap agreement with General Electric
Capital Corporation ("GECC") 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, 1998, 1997 and 1996 was to increase such expense by
$0.2 million, $0.2 million and $0.3 million, respectively. The Tranche B loan
with GECC bears interest at 11.4% with principal and interest payable quarterly
through May 1, 2009.
Under the terms of an agreement between Bayonne Venture and a bank, the
bank has agreed to lend to Bayonne 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 Bayonne Venture must
pay a commitment fee of 0.25% on the average unused principal amount. At
December 31, 1998, $0.9 million was outstanding under the terms of the
agreement. In February 1999, Bayonne Venture repaid all amounts outstanding
under the terms of the agreement and the agreement was terminated.
GECC provides standby letters of credit for Linden Venture to secure
various obligations with Con Ed and Bayway Refining Company. As of December 31,
1998 and 1997 letters of credit totaling $10.0 million and $57.2 million,
respectively, were outstanding. GECC receives a monthly fee equal to 0.75% of
each
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COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
outstanding letter of credit. Such fees totaled $0.3 million, $0.7 million and
$1.0 million in 1998, 1997 and 1996, respectively.
A bank provides a letter of credit for Bayonne Venture to secure certain
obligations to Public Service Electric & Gas Company ("PSE&G"). As of December
31, 1998 and 1997 letters of credit in the amounts of $4.6 million and $4.4
million, respectively, were outstanding. The letter of credit expires in May
1999.
GECC provides a letter of credit for Camden Venture to secure certain
obligations under the Tranche A loans. As of December 31, 1998 and 1997 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 Venture and Bayonne 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.
(4) RELATED PARTY TRANSACTIONS
Camden GP provides planning, operational and financial management services
to Camden Venture for a monthly fee equal to 1.5% of Camden Venture's gross
revenues. Such fees charged to Camden Venture in 1998, 1997 and 1996 totaled
$1.1 million, $1.2 million and $1.2 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 1998,
1997 and 1996 totaled $4.2 million, $4.6 million and $4.5 million, respectively.
RCM Management Services, L.P. ("RCM Management"), which is controlled by the
McNair Interests, provides similar services to Bayonne Venture for a monthly
management fee equal to 1.5% of Bayonne Venture's gross revenues. Such fees
charged to Bayonne Venture in 1998, 1997 and 1996 totaled $1.7 million, $1.4
million and $1.4 million, respectively.
Periodically Cogen Technologies Financial Services, L.P. ("Financial
Services") advances funds to the Operating Partnerships for working capital
purposes. At December 31, 1998 such amount totaled $0.4 million.
Camden Venture and Linden Venture pay a natural gas management fee of $0.02
per thousand cubic feet of gas purchased to an affiliate. During 1998, 1997 and
1996, Camden Venture 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.
Bayonne Venture purchases natural gas and standby electricity from PSE&G
(an affiliate of one of Bayonne Venture's limited partners). In 1998, 1997 and
1996 such purchases totaled $38.2 million, $42.2 million and $39.9 million,
respectively. In addition, Bayonne Venture pays wheeling charges to PSE&G, and
in 1998, 1997 and 1996 such charges totaled $1.5 million, $1.4 million and $1.4
million, respectively.
CT Global Insurance, Ltd. ("CT Global"), which is controlled by the McNair
Interests, provides property and general liability insurance coverage to the
Operating Partnerships. During 1998, 1997 and 1996, the Operating Partnerships
paid CT Global $0.8 million, $0.7 million and $1.7 million, respectively, for
such insurance coverage.
See Note 2 with respect to the cancellation of certain agreements with
related parties.
(5) COMMITMENTS AND CONTINGENCIES
Bayonne Venture
Bayonne 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
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COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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 Bayonne 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
Bayonne Venture consisting of a capacity payment plus an energy payment which
includes a fixed component plus factors for inflation and fuel costs.
Bayonne 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 Facility 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 Inc. 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, which was
subsequently assigned by NJ Inc. to Bayonne Venture, provides for the sale to
IMTT- Bayonne of 100% of its steam needs at its tank terminal facility and, at
Bayonne Venture's option, the sale of electricity. Bayonne 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 Bayonne 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 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 Facility 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.
Bayonne 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. Bayonne 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 Facility's continuing status as a Qualifying Facility. The
Bayonne Facility's supply is subject to 100% interruption on eight hours notice.
Bayonne 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.
Bayonne 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
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COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Facility site within the IMTT-Bayonne facility (the "Bayonne Site"). The Bayonne
Site Lease provides Bayonne 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 Facility.
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 Bayonne Venture elects to terminate
the lease. Base rent for the Bayonne Facility is pre-paid for 20 years.
In June 1997, Bayonne 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 1998 and 1997, Bayonne Venture paid $0.2 million and
$0.1 million, respectively, in bonuses under the terms of the agreement with GE.
Camden Venture
Camden Venture'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 Venture consisting of a
capacity payment plus an energy payment which includes a fixed component plus
factors for inflation and fuel costs. Camden Venture sells steam to Camden
Paperboard Company 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 Venture's property, rights, titles and interests are pledged
as collateral to secure the term loan discussed in Note 3 and to secure certain
obligations under the power purchase agreement with PSE&G.
Camden Venture 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 Venture 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 of approximately $16,000 per month beginning in
August 1998 and the payment of bonuses if certain operating targets are met.
During 1998 and 1997, Camden Venture paid $0.2 million and $0.1 million,
respectively, in bonuses under the terms of the agreement with GE.
Linden Venture
Linden Venture sells its electrical capacity to ConEd pursuant to a 25-year
power purchase agreement which expires in May 2017, with two five-year renewal
periods subject to the approval of both parties. The agreement establishes a
sales price of the electricity based primarily on capacity, fuel costs and
operating and maintenance costs.
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
F-63
<PAGE> 182
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
GE. The agreement provides for all operating and routine maintenance of the
facility at direct costs plus a minimum fee of approximately $31,000 per month
beginning in August 1998 and the payment of bonuses if certain operating targets
are met. During 1998 and 1997, Linden Venture paid $0.3 million and $0.1
million, respectively, 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 1999 are approximately
$0.4 million and subsequent annual lease payments will be escalated by the
change in the Consumer Price Index. Lease expense during each of 1998, 1997 and
1996 was $0.4 million.
Other
In July 1998, in connection with an arbitration proceeding brought in 1997
by Linden Venture at the American Arbitration Association 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 Facility. 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
Operating Partnerships.
There are other claims and legal actions pending against the Operating
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 Operating
Partnerships.
(6) MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK
Major Customers
The Operating 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 Operating Partnerships'
revenues in the years ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
ConEd....................................................... 57% 60% 61%
PSE&G....................................................... 20% 21% 21%
JCP&L....................................................... 20% 15% 15%
</TABLE>
Concentration of Credit Risk
Financial instruments which potentially subject the Operating 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 Operating Partnerships'
electricity under long-term agreements. The Operating Partnerships do not
require collateral or other security to support accounts receivable. Accounts
receivable are net of Bayonne Venture's allowance for doubtful accounts of $0.3
million at December 31, 1998 and 1997. The Operating Partnerships have no other
financial instruments which subject them to credit risk.
F-64
<PAGE> 183
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(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, 1998 and 1997 (in millions of
dollars):
<TABLE>
<CAPTION>
1998 1997
---------------- ----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Long-Term Debt
Camden Venture.................................... $84.6 $86.0 $90.2 $89.4
Bayonne Venture................................... 68.4 85.3 71.8 86.3
</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 Venture's interest rate swap is estimated to be
$1.9 million, the approximate amount that GECC would pay to terminate the
agreement at December 31, 1998, 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.
(8) 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>
1998
Revenues....................................... $123.0 $110.9 $116.4 $113.5 $ 463.8
Costs and expenses............................. (69.7) (66.8) (65.4) (65.9) (267.8)
Income from operations......................... 53.3 44.1 51.0 47.6 196.0
Other income (expense)......................... (2.9) (3.4) (3.5) (2.9) (12.7)
Net income..................................... 50.4 40.7 47.5 44.7 183.3
Gross profit(1)................................ 57.6 47.6 54.5 51.7 211.4
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
</TABLE>
- ---------------
(1) Income from operations plus general and administrative expenses.
F-65
<PAGE> 184
- ---------------------------------------------------------
- ---------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward-Looking Statements............. i
Prospectus Summary..................... 1
Summary of the Exchange Offer.......... 6
Summary of Terms of the New Notes...... 8
Risk Factors........................... 12
Our Owners............................. 16
Use of Proceeds........................ 18
Capitalization......................... 19
Selected Financial Data................ 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 25
Our Business........................... 45
Regulation............................. 60
Our Management......................... 69
The Exchange Offer..................... 71
Description of the New Notes........... 81
Certain United States Income Tax
Considerations....................... 106
Plan of Distribution................... 111
Legal Matters.......................... 112
Independent Public Accountants......... 112
Available Information.................. 112
Glossary of Technical Terms............ 113
Index to Financial Statements.......... F-1
</TABLE>
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
PROSPECTUS
EAST COAST POWER L.L.C.
OFFER TO EXCHANGE
6.737% Series A Senior Secured Notes due 2008
7.066% Series A Senior Secured Notes due 2012
7.536% Series A Senior Secured Notes due 2017
FOR ALL OUTSTANDING
6.737% Series A Senior Secured Notes due 2008
7.066% Series A Senior Secured Notes due 2012
7.536% Series A Senior Secured Notes due 2017
, 1999
- ---------------------------------------------------------
- ---------------------------------------------------------
<PAGE> 185
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 18-108 of the Delaware Limited Liability Company Act provides:
Subject to such standards and restrictions, if any, as are set forth in its
limited liability company agreement, a limited liability company may, and shall
have the power to, indemnify and hold harmless any member or manager or other
person from and against any and all claims and demands whatsoever.
Section 6.03 of the Company's Amended and Restated Limited Liability
Company Agreement provides:
Indemnification. (a) To the fullest extent permitted by Law, the Company
shall indemnify the officers of the Company and the Class A Member, ECM and
their respective officers, directors, employees, agents and controlling Persons,
and each Class B Member and its officers, directors, employees, agents and
controlling Persons (each, an "Indemnified Person"), on request by the
Indemnified Person, and hold each of them harmless from and against all losses,
costs, liabilities, damages and expenses (including reasonable costs of suit and
attorney's fees) any of them may incur as an officer, a Member of the Company or
as a controlling Person of such Member, in performing the obligations of an
officer, the Class A Member or ECM with respect to the Company, or in exercising
rights of a Class B Member, INCLUDING ANY MATTER ARISING OUT OF OR RESULTING
FROM THE INDEMNIFIED PERSON'S OWN SIMPLE, PARTIAL, OR CONCURRENT NEGLIGENCE,
except for any such loss, cost, liability, damage or expense primarily
attributable to the Indemnified Person's breach or reckless disregard of
fiduciary duties, gross negligence, willful misconduct, fraud or material breach
of this Agreement. If an Indemnified Person becomes involved in any action,
proceeding or investigation with respect to which indemnity may be available
under this Section 6.03, the Company may reimburse the Indemnified Person for
its reasonable legal and other expenses (including the cost of investigation and
preparation) as they are incurred, provided, that the Indemnified Person shall
promptly repay to the Company the amount of any such expense paid if it is
ultimately determined that the Indemnified Person was not entitled to
indemnification hereunder. Any amounts payable in respect of indemnification
hereunder shall be recoverable only from the assets of the Company.
(b) Promptly after receipt by an Indemnified Person of notice of any claim
or the commencement of any action with respect to which indemnity may be
available under this Section 6.03, the Indemnified Person shall, if a claim in
respect thereof is to be made against the Company under this Section 6.03,
notify the Company in writing of the claim or the commencement of the action;
provided, that the failure to notify the Company shall not relieve it from any
liability which it may have to an Indemnified Person other than under this
Section 6.03 except to the extent that the Company is prejudiced thereby. If any
such claim or action shall be brought against an Indemnified Person, and it
shall notify the Company thereof, the Company shall be entitled to participate
therein, and, to the extent that it wishes, to assume the defense thereof with
counsel reasonably satisfactory to the Indemnified Person. After notice from the
Company to the Indemnified Person of its election to assume the defense of such
claim or action, the Company shall not be liable to the Indemnified Person under
this Sections 6.03 for any legal or other expenses subsequently incurred by the
Indemnified Person in connection with the defense thereof other than reasonable
costs of investigation; provided, that all of the Indemnified Persons shall have
the right to employ one counsel to represent them if, in the opinion of counsel
to the Indemnified Persons (which, in the case of Investor, may be its internal
counsel), there are available to them defenses not available to the Company and
in that event the fees and expenses of such separate counsel shall be paid by
the Company. In no event shall the Company be required to indemnify an
Indemnified Person with respect to amounts paid in settlement of a claim unless
such claim was settled with the consent of the Company.
II-1
<PAGE> 186
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following instruments and documents are included as Exhibits to this
Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
3.1 -- Amended and Restated Limited Liability Company Agreement
of East Coast Power L.L.C. dated as of February 4, 1999
4.1 -- Indenture between East Coast Power L.L.C. and The Bank of
New York, as trustee, dated as of April 20, 1999.
4.3 -- Registration Rights Agreement dated April 14, 1999, among
East Coast Power L.L.C., NationsBanc Montgomery
Securities LLC, Credit Suisse First Boston Corporation,
Lehman Brothers Inc. and SG Cowen Securities Corporation.
4.4 -- CalPERS Security Agreement dated as of April 20, 1999,
made by California Public Employees' Retirement System,
as Grantor, to The Bank of New York, as trustee.
4.5 -- Common Security Agreement dated as of April 20, 1999,
made by the signatories thereto, as Grantors, to The Bank
of New York, as trustee, and to The Bank of New York, as
Account Collateral Securities Intermediary.
4.6 -- East Coast Power Holding Company Security Agreement dated
as of April 20, 1999, made by East Coast Power Holding
Company L.L.C., as Grantor, to The Bank of New York, as
trustee.
4.7 -- ECT Merchant Investments Corp. Security Agreement dated
as of April 20, 1999, made by ECT Merchant Investments
Corp., as Grantor, to The Bank of New York, as trustee.
*5.1 -- Opinion of Vinson & Elkins L.L.P. regarding Legality.
*8.1 -- Opinion of Vinson & Elkins, L.L.P. regarding Tax Matters.
10.1 -- Transaction Agreement dated as of October 25, 1998, among
Enron Corp., Enron Capital & Trade Resources Corp., RCM
Holdings, Inc., Cogen Technologies Camden, Inc., Cogen
Technologies Capital Company, L.P., Cogen Technologies
Limited Partners Joint Venture, the Partners of Cogen
Technologies Limited Partners Joint Venture and the
Shareholders of McNair Energy Services Corporation.
10.2 -- Amendment No. 1 dated as of November 6, 1998, to
Transaction Agreement dated as of October 25, 1998.
*10.3 -- Amendment No. 2 dated as of November 13, 1998, to
Transaction Agreement dated as of October 25, 1998.
*10.4 -- Amendment No. 3 dated as of February 1, 1999, to
Transaction Agreement dated as of October 25, 1998.
*10.5 -- Corporate Services Agreement effective as of February 5,
1999, between East Coast Power L.L.C. and Enron Capital &
Trade Resources Corp.
*10.6 -- Credit Support Agreement dated as of April 20, 1999,
between East Coast Power L.L.C. and Enron Corp.
*10.7 -- Subordinated Promissory Note dated as of February 5, 1999
by Cogen Technologies Linden, Ltd. in favor of East Coast
Power L.L.C.
10.8(a) -- Power Purchase Agreement dated as of April 14, 1989, by
and between Consolidated Edison Company of New York, Inc.
and Cogen Technologies, Inc. (n/k/a RCM Holdings, Inc.)
(incorporated by reference to Exhibit 10.1 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
</TABLE>
II-2
<PAGE> 187
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
*(b) -- Assignment of Power Purchase Agreement dated as of July
21, 1989, by Cogen Technologies, Inc. to Cogen
Technologies Linden, Ltd. with the consent of
Consolidated Edison Company of New York, Inc. on August
3, 1989.
*(c) -- Assignment of Power Purchase Agreement dated as of
December 22, 1989, by Cogen Technologies Linden, Ltd. to
Cogen Technologies Linden Venture, L.P. with the consent
of Consolidated Edison Company of New York, Inc. on
December 22, 1989.
10.9 -- First Amendment dated September 17, 1990 to Power
Purchase Agreement dated April 14, 1989 between
Consolidated Edison Company of New York, Inc. and Cogen
Technologies, Inc. (incorporated by reference to Exhibit
10.2 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.10 -- 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. (incorporated by reference to Exhibit
10.3 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.11 -- Gas Service Agreement by and among Cogen Technologies
Linden Venture, L.P., Public Service Electric and Gas
Company and Elizabethtown Gas Company dated July 13, 1990
(incorporated by reference to Exhibit 10.4 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
25, 1998).
*10.12 -- Agreement between Cogen Technologies Linden Venture, L.P.
and Exxon Corporation for the Sale of Steam dated August
1, 1990, as amended and restated by agreement by and
between Cogen Technologies Linden Venture, L.P. and
Infineum USA L.P. dated as of January 1, 1999.
*10.13 -- Agreement between Cogen Technologies Linden Venture, L.P.
and Bayway Refining Company for the Sale of Steam dated
as of April 8, 1993.
10.14 -- Backup Fuel Storage and Supply Agreement between Cogen
Technologies Linden Venture, L.P. and Exxon Corporation
dated October 4, 1991 (incorporated by reference to
Exhibit 10.6 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.15(a) -- Ground Lease Agreement dated as of August 1, 1990, by and
between Cogen Technologies Linden Venture, L.P. and Exxon
Corporation (incorporated by reference to Exhibit 10.7 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
*(b) -- Amendment of Ground Lease Agreement by Letter Agreement
dated as of September 27, 1991, by Exxon Corporation,
agreed to by Cogen Technologies Linden Venture, L.P. and
consented to by General Electric Power Funding
Corporation.
*(c) -- Amendment to Ground Lease Agreement dated as of July 31,
1992, by and between Cogen Technologies Linden Venture,
L.P. and Exxon Corporation.
*(d) -- Assignment of Cogen Lease dated as of April 8, 1993, by
and between Exxon Corporation and Bayway Refining Company
(as confirmed by Confirmation of Assignment of Cogen
Lease dated as of April 8, 1993, by and between Exxon
Corporation and Bayway Refining Company).
*(e) -- Second Amendment to Ground Lease Agreement dated as of
April 13, 1994, by and between Bayway Refining Company
and Cogen Technologies Linden Venture, L.P.
</TABLE>
II-3
<PAGE> 188
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.16 -- Operation and Maintenance Agreement by and between Cogen
Technologies Linden Venture, L.P. and General Electric
Company dated June 6, 1997 (incorporated by reference to
Exhibit 10.8 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.17 -- 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
(incorporated by reference to Exhibit 10.9 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.18 -- 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 (incorporated by reference to
Exhibit 10.10 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
*10.19 -- Second Amendment, dated as of February 4, 1999, 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.
10.20 -- Amended and Restated Agreement of Limited Partnership of
Cogen Technologies Linden Venture, L.P., dated as of
September 15, 1992 (incorporated by reference to Exhibit
10.11 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.21 -- 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 (incorporated by reference to Exhibit 10.12 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
*10.22 -- Second Amendment, dated as of February 4, 1999, of the
Amended and Restated Agreement of Limited Partnership of
Cogen Technologies Linden Venture, L.P., dated as of
September 15, 1992.
10.23 -- Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd., effective as of June 28, 1989 (incorporated
by reference to Exhibit 10.13 to Registration Statement
on Form S-1 (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on May 26, 1998).
10.24 -- First Amendment, dated as of February 14, 1990, to the
Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd. (incorporated by reference to Exhibit 10.14
to Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.25 -- Second Amendment, dated as of July 31, 1990, to the
Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd. (incorporated by reference to Exhibit 10.15
to Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
*10.26 -- Third Amendment, dated as of February 4, 1999, to the
Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd.
*10.27 -- Redemption and Conversion of Partnership Interests and
Fourth Amendment to the Agreement of Limited Partnership
of Cogen Technologies Linden, Ltd., dated as of February
4, 1999.
</TABLE>
II-4
<PAGE> 189
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.28 -- 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 (incorporated by
reference to Exhibit 10.16 to Registration Statement on
Form S-1/A (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on August 14, 1998).
*10.29 -- Easement Crossing Agreement dated as of December 17,
1990, by and between Coastal Pipeline Company and Cogen
Technologies Linden Venture, L.P., assigned to
Consolidated Edison Company of New York, Inc. pursuant to
the Assignment and Conveyance Agreement dated as of
December 22, 1993, by and between Cogen Technologies
Linden Venture, L.P. and Consolidated Edison Company of
New York, Inc.
*10.30 -- Letter Agreement dated June 12, 1991 between Cogen
Technologies Linden Venture, L.P. and Colonial Pipeline
Company.
*10.31 -- Indenture dated as of May 9, 1991 between the People of
the State of New York, acting by their Commissioner of
the Office of General Services and Cogen Technologies
Linden Venture, L.P.
10.32 -- 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 (incorporated by reference to
Exhibit 10.17 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.33 -- Assignment and Security agreement dated February 15, 1990
between Cogen Technologies Linden, Ltd. and General
Electric Power Funding Corporation and Assignment
Agreement, dated as of September 15, 1992, among General
Electric Power Funding Corporation, State Street Bank and
Trust Company or Connecticut, National Association, as
trustee, and Cogen Technologies Linden, Ltd.
(incorporated by reference to Exhibit 10.19 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.34 -- Collateral Agency Agreement dated as of February 15, 1990
between Cogen Technologies Linden, Ltd. and General
Electric Power Funding Corporation and Assignment
Agreement, dated as of September 15, 1992, among General
Electric Power Funding Corporation, State Street Bank and
Trust Company or Connecticut, National Association, as
trustee, and Cogen Technologies Linden, Ltd.
(incorporated by reference to Exhibit 10.20 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.35 -- Letter of Credit and Reimbursement Agreement dated as of
September 17, 1992 between Cogen Technologies Linden
Venture, L.P. and General Electric Capital Corporation
(incorporated by reference to Exhibit 10.27 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.36 -- Power Purchase and Interconnection Agreement, dated April
15, 1988, between Public Service Electric and Gas Company
and Camden Cogen, L.P. (incorporated by reference to
Exhibit 10.30 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
</TABLE>
II-5
<PAGE> 190
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.37 -- 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. (incorporated by reference to Exhibit
10.31 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.38 -- Second Amendment, dated August 21, 1990, to the Power
Purchase and Interconnection Agreement, dated April 15,
1988, between Public Service Electric and Gas Company and
Camden Cogen, L.P. (incorporated by reference to Exhibit
10.32 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.39 -- Gas Service Agreement, dated May 15, 1991, between Camden
Cogen L.P. and Public Service Electric and Gas Company
(incorporated by reference to Exhibit 10.33 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
25, 1998).
10.40 -- 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
(incorporated by reference to Exhibit 10.34 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.41(a) -- Energy Purchase Agreement, dated December 18, 1989,
between Camden Cogen, L.P. and Camden Paperboard
Corporation (incorporated by reference to Exhibit 10.35
to Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
*(b) -- First Amendment dated as of March 5, 1992, to Energy
Purchase Agreement dated December 18, 1989.
10.42 -- 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, L.P., the lenders
from time to time parties to the Agreement, and General
Electric Capital Corporation (incorporated by reference
to Exhibit 10.36 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.43 -- Amendment No. 1 dated as of December 22, 1993, by and
among Camden Cogen L.P., the lenders from time to time
parties to the Agreement, The Bank of Tokyo Trust
Company, The Toronto-Dominion Bank Trust Company and
General Electric Capital Corporation, 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 Camden Cogen L.P. and General Electric
Capital Corporation (incorporated by reference to Exhibit
10.37 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
*10.44 -- Amendment No. 2 dated as of July 31, 1998, by and among
Camden Cogen L.P., The Bank of Tokyo-Mitsubishi Trust
Company (f/k/a The Bank of Tokyo Trust Company),
Commerzbank AG, New York Branch, Commerzbank AG, Atlanta
Agency, The Fuji Bank Limited, Credit Lyonnais, New York
Branch and General Electric Capital Corporation, 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 Camden Cogen L.P. and General
Electric Capital Corporation.
</TABLE>
II-6
<PAGE> 191
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
*10.45 -- Amendment No. 3 dated as of February 4, 1999, by and
among Camden Cogen L.P., the Tranche A Lenders and
Tranche B Lenders, The Bank of Tokyo-Mitsubishi Trust
Company (f/k/a The Bank of Tokyo Trust Company),
Commerzbank AG, New York Branch, and General Electric
Capital Corporation, 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 Camden
Cogen L.P. and General Electric Capital Corporation.
10.46 -- Agreement of Limited Partnership of Cogen Technologies
Camden GP Limited Partnership, dated as of July 26, 1991
(incorporated by reference to Exhibit 10.40 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.47 -- 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
(incorporated by reference to Exhibit 10.41 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
*10.48 -- Second Amendment, dated as of February 4, 1999, to the
Agreement of Limited Partnership of Cogen Technologies
Camden GP Limited Partnership, dated as of July 26, 1991.
10.49 -- Amended and Restated Agreement of Limited Partnership of
Camden Cogen L.P., dated as of February 9, 1993
(incorporated by reference to Exhibit 10.42 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.50 -- 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 (incorporated by
reference to Exhibit 10.43 to Registration Statement on
Form S-1 (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on May 26, 1998).
10.51 -- 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
(incorporated by reference to Exhibit 10.44 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
*10.52 -- Amendment No. 3 dated as of February 4, 1999, to the
Agreement of Limited Partnership of Camden Cogen L.P.,
dated as of February 9, 1993.
10.53 -- Operation and Maintenance Agreement by and between Camden
Cogen L.P. and General Electric Company dated June 6,
1997 (incorporated by reference to Exhibit 10.45 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.54(a) -- 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
(incorporated by reference to Exhibit 10.46 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
*(b) -- Assignment of Mortgage by Toronto Dominion (Texas), Inc.
to Commerzbank AG, New York Branch, dated as of July 31,
1998.
</TABLE>
II-7
<PAGE> 192
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.55 -- Second Amended and Restated Security Deposit Agreement
dated December 22, 1993 among 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 (incorporated by reference to Exhibit 10.47 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
*10.56 -- Amendment No. 1, dated as of July 31, 1998, by and among
Camden Cogen L.P., Toronto Dominion (Texas), Inc.(f/k/a
The Toronto-Dominion Bank Trust Company), The
Toronto-Dominion Bank, General Electric Capital
Corporation, Cogen Technologies Camden GP Limited
Partnership, The Bank of Tokyo-Mitsubishi Trust Company
(f/k/a The Bank of Tokyo Trust Company), Commerzbank AG,
New York Branch, Commerzbank AG, Atlanta Agency, The Fuji
Bank Limited and Credit Lyonnais, New York Branch, to the
Second Amended and Restated Security Deposit Agreement
dated as of December 22, 1993.
*10.57 -- Second Successor Security Deposit Agent Agreement dated
as of July 31, 1998, by and among Commerzbank AG, New
York Branch, Commerzbank AG, Atlanta Agency, The Bank of
Tokyo- Mitsubishi Trust Company (f/k/a The Bank of Tokyo
Trust Company), Camden Cogen L.P., Cogen Technologies
Camden GP Limited Partnership, The Fuji Bank Limited,
Credit Lyonnais, New York Branch, Toronto Dominion
(Texas), Inc. (f/k/a The Toronto-Dominion Bank Trust
Company), The Toronto-Dominion Bank and General Electric
Capital Corporation (superseding Successor Security
Deposit Agent Agreement dated as of December 22, 1993, by
and among The Toronto-Dominion Bank Trust Company, Cogen
Technologies Camden GP Limited Partnership, General
Electric Capital Corporation, Camden Cogen L.P.,
Midatlantic National Bank, The Bank of Tokyo Trust
Company and The Toronto-Dominion Bank).
*10.58 -- Second Successor Agency Agreement dated as of July 31,
1998, by and among Commerzbank AG, New York Branch,
Commerzbank AG, Atlanta Agency, The Bank of
Tokyo-Mitsubishi Trust Company, General Electric Capital
Corporation, Toronto Dominion (Texas), Inc., The Fuji
Bank Limited, Credit Lyonnais, New York Branch, The
Toronto-Dominion Bank and consented to by Camden Cogen
L.P.
10.59 -- Security Agreement dated as of February 4, 1992, between
General Electric Capital Corporation and Camden Cogen
L.P., as amended by Amendment No. 1 dated April 1, 1993
and Amendment No. 2 dated December 22, 1993 (incorporated
by reference to Exhibit 10.48 to Registration Statement
on Form S-1/A (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on August 14, 1998).
10.60 -- Pledge and Security Agreement dated as of February 4,
1992, between General Electric Capital Corporation and
Cogen Technologies Camden Inc., as amended by Amendment
No. 1 dated April 1, 1993 and Amendment No. 2 dated
December 22, 1993 (incorporated by reference to Exhibit
10.49 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.61 -- Mortgage from Camden Cogen L.P., Mortgagor, to General
Electric Power Funding Corporation, Mortgagee, dated as
of February 4, 1992 (incorporated by reference to Exhibit
10.50 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
</TABLE>
II-8
<PAGE> 193
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.62 -- Second Mortgage from Camden Cogen L.P., Mortgagor, to
Public Service Electric and Gas Company, Mortgagee, dated
as of February 4, 1992 (incorporated by reference to
Exhibit 10.51 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.63 -- Interest Rate and Currency Exchange Agreement dated April
1, 1993 between General Electric Capital Corporation and
Camden Cogen L.P., as amended by Amendment No. 1 dated as
of December 22, 1993 and Confirmation Letter dated April
1, 1993 and Amendment No. 1 dated December 22, 1993
(incorporated by reference to Exhibit 10.52 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.64 -- 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 22, 1986 and
Consent to Assignment dated December 15, 1988
(incorporated by reference to Exhibit 10.54 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
*10.65 -- Easement Agreement dated as of April 1, 1993, by and
between Camden Cogen L.P. and Public Service Electric and
Gas Company.
*10.66 -- Easement Agreement dated as of December 18, 1992, by and
between MacAndrews & Forbes Company and Camden Cogen
L.P., as amended by Amendment to Easement Agreement dated
as of March 22, 1993, by and between Mafco Worldwide
Corporation (f/k/a Mac Andrews & Forbes Company) and
Camden Cogen L.P.
*10.67 -- Easement Agreement dated as of February 22, 1993, by and
between Camden Paperboard Corporation and Camden Cogen
L.P.
10.68 -- Agreement for the Sale of Steam dated as of February 27,
1987 between Cogen Technologies NJ Venture and Exxon
Company U.S.A., as amended by Amendment dated August 21,
1988, assigned to General Electric Power Funding
Corporation pursuant to an Assignment Agreement dated as
of February 27, 1987, by and between Cogen Technologies
NJ Venture and General Electric Power Funding Corporation
(incorporated by reference to Exhibit 10.55 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.69 -- Letter Agreement for Gas Service between Public Service
Electric and Gas Company and Cogen Technologies NJ
Venture dated October 10, 1986 (incorporated by reference
to Exhibit 10.56 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.70 -- Water Supply Agreement between the City of Bayonne and
Cogen Technologies NJ Venture dated June 1, 1988
(incorporated by reference to Exhibit 10.57 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.71 -- Lease Agreement between Bayonne Industries, Inc.,
IMTT-Bayonne and Cogen Technologies NJ Venture dated
October 18, 1986 (incorporated by reference to Exhibit
10.58 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
</TABLE>
II-9
<PAGE> 194
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.72 -- Easement from Bayonne Industries, Inc. and IMTT-Bayonne
to Cogen Technologies NJ Venture dated October 20, 1986,
as amended by First Amendment dated December 15, 1988
(incorporated by reference to Exhibit 10.59 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.73 -- Power Purchase and Operations Coordination Agreement
between Public Service Electric and Gas Company and Cogen
Technologies NJ Venture dated June 5, 1989 (incorporated
by reference to Exhibit 10.60 to Registration Statement
on Form S-1 (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on May 26, 1998).
10.74 -- Agreement for Purchase of Electric Power between Cogen
Technologies NJ, Inc. and Jersey Central Power & Light
Company dated October 29, 1985 (incorporated by reference
to Exhibit 10.61 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.75 -- First 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 (incorporated by reference to Exhibit
10.62 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
*10.76 -- Assignment Agreement dated as of September 8, 1986, by
and between Cogen Technologies NJ, Inc. and Cogen
Technologies NJ Venture.
10.77 -- Second 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 (incorporated by reference to Exhibit
10.63 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.78 -- Operation and Maintenance Agreement by and between Cogen
Technologies NJ Venture and General Electric Company
dated June 6, 1997 (incorporated by reference to Exhibit
10.64 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.79 -- Revised Transmission Service and Interconnection
Agreement between Public Service Electric and Gas Company
and Cogen Technologies NJ Venture dated April 27, 1987
(incorporated by reference to Exhibit 10.65 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.80 -- Term Loan Agreement dated as of November 1, 1987 between
Cogen Technologies NJ Venture and The Prudential
Insurance Company of America (incorporated by reference
to Exhibit 10.66 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.81 -- 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 (incorporated by reference to Exhibit
10.67 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.82 -- 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 (incorporated by reference to Exhibit
10.68 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
</TABLE>
II-10
<PAGE> 195
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.83 -- Amended and Restated Joint Venture Agreement of Cogen
Technologies NJ Venture dated August 25, 1986, by and
among Cogen Technologies NJ, Inc., Enron Cogeneration
Five Company, CEA Bayonne, Inc. (the name of which was
changed to PSEG Bayonne Inc. and was recently merged into
Cogen Technologies NJ, Inc.), PSVO Bayonne, Inc. and
Transco Cogeneration Company (incorporated by reference
to Exhibit 10.71 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.84 -- Option Agreement between Bayonne Industries, Inc. and
Cogen Technologies NJ, Inc. dated May 22, 1986
(incorporated by reference to Exhibit 10.72 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.85 -- Purchase and Sale Agreement among Bayonne Industries,
Inc., IMTT-Bayonne and Cogen Technologies NJ, Inc. dated
May 22, 1986 (incorporated by reference to Exhibit 10.73
to Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.86 -- Steam Producing Facilities Lease Agreement between Cogen
Technologies NJ, Inc. and IMTT-Bayonne dated May 22, 1986
and Consent to Assignment dated December 15, 1998
(incorporated by reference to Exhibit 10.74 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.87 -- Mortgage and Security Agreement between The Prudential
Insurance Company of America and Cogen Technologies NJ
Venture dated December 15, 1988 (incorporated by
reference to Exhibit 10.75 to Registration Statement on
Form S-1/A (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on August 14, 1998).
10.88 -- 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 27, 1995 and Waiver of Consent by The
Prudential Insurance Company of America dated July 28,
1995 (incorporated by reference to Exhibit 10.76 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.89 -- Disbursement and Security Agreement between The
Prudential Insurance Company of America, Midlantic
National Bank and Cogen Technologies NJ Venture dated
December 15, 1988, as amended by Amendment No. 1 dated
February 9, 1989 (incorporated by reference to Exhibit
10.77 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.90 -- Kerosene Fuel Storage Agreement dated May 17, 1994
between IMTT-Bayonne and Cogen Technologies NJ Venture
(incorporated by reference to Exhibit 10.78 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
*10.91 -- License Agreement for Wire, Pipe and Cable Transverse
Crossings and Longitudinal Occupations dated as of August
21, 1992, by and between Consolidated Rail Corporation
and Camden Cogen L.P.
*10.92 -- Lease Agreement dated as of May 22, 1986, by and among
Bayonne Industries, Inc., IMTT-Bayonne and Cogen
Technologies NJ, Inc.
*10.93 -- Letter Agreement dated as of March 15, 1990 by and
between Texas Eastern Cryogenics, Inc. and Cogen
Technologies, Inc. (n/k/a RCM Holdings, Inc.).
</TABLE>
II-11
<PAGE> 196
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
*10.94 -- Agreement for Maintenance and Operations of IMTT-Bayonne
Chem South Boilers dated as of April 3, 1998, by and
between IMTT-Bayonne and Cogen Technologies NJ Venture,
as amended by Letter Agreement dated as of April 3, 1998,
by and between General Electric O&M Services and Cogen
Technologies NJ Venture, as assigned to The Prudential
Insurance Company of America pursuant to a Security
Agreement and Assignment dated as of December 15, 1988,
by and between Cogen Technologies NJ Venture and The
Prudential Insurance Company of America, and consented to
by IMTT-Bayonne pursuant to a Consent to Assignment dated
as of April 3, 1998, by IMTT-Bayonne in favor of Cogen
Technologies NJ Venture.
*10.95 -- Security Agreement dated as of May 22, 1986, by and
between Cogen Technologies NJ, Inc. and Bayonne
Industries, Inc.
10.96 -- Assignment and Security Agreement, dated February 4,
1992, made by Cogen Technologies Camden GP Limited
Partnership in favor of General Electric Capital
Corporation (incorporated by reference to Exhibit 10.79
to Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
25, 1998).
12.1 -- Computation of Ratio of Earnings to Fixed Charges.
*21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit
5.1).
*24.1 -- Power-of-attorney.
25.1 -- Statement of Eligibility of Trustee.
*27.1 -- Financial Data Schedule.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Letter to Clients.
99.3 -- Form of Letter to Registered Holders and DTC
Participants.
99.4 -- Form of Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules
None.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in the documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
II-12
<PAGE> 197
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Houston, State of Texas, on June 25, 1999.
EAST COAST POWER L.L.C.
By /s/ JOSEPH M. BOLLINGER
-----------------------------------
Name: Joseph M. Bollinger
Title: President, Generating
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROSS D. AIN President, Business Development June 25, 1999
- ----------------------------------------------------- (principal executive officer)
Ross D. Ain
/s/ JOSEPH M. BOLLINGER President, Generating (principal June 25, 1999
- ----------------------------------------------------- executive, financial and
Joseph M. Bollinger accounting officer)
Director of Enron Capital II
- ----------------------------------------------------- Corp., the indirect general
Mark A. Frevert partner of the Company's
managing member
/s/ JAMES V. DERRICK, JR. Director of Enron Capital II June 25, 1999
- ----------------------------------------------------- Corp., the indirect general
James V. Derrick, Jr. partner of the Company's
managing member
/s/ KENNETH D. RICE Director of Enron Capital II June 25, 1999
- ----------------------------------------------------- Corp., the indirect general
Kenneth D. Rice partner of the Company's
managing member
</TABLE>
II-13
<PAGE> 198
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
3.1 -- Amended and Restated Limited Liability Company Agreement
of East Coast Power L.L.C. dated as of February 4, 1999
4.1 -- Indenture between East Coast Power L.L.C. and The Bank of
New York, as trustee, dated as of April 20, 1999.
4.3 -- Registration Rights Agreement dated April 14, 1999, among
East Coast Power L.L.C., NationsBanc Montgomery
Securities LLC, Credit Suisse First Boston Corporation,
Lehman Brothers Inc. and SG Cowen Securities Corporation.
4.4 -- CalPERS Security Agreement dated as of April 20, 1999,
made by California Public Employees' Retirement System,
as Grantor, to The Bank of New York, as trustee.
4.5 -- Common Security Agreement dated as of April 20, 1999,
made by the signatories thereto, as Grantors, to The Bank
of New York, as trustee, and to The Bank of New York, as
Account Collateral Securities Intermediary.
4.6 -- East Coast Power Holding Company Security Agreement dated
as of April 20, 1999, made by East Coast Power Holding
Company L.L.C., as Grantor, to The Bank of New York, as
trustee.
4.7 -- ECT Merchant Investments Corp. Security Agreement dated
as of April 20, 1999, made by ECT Merchant Investments
Corp., as Grantor, to The Bank of New York, as trustee.
*5.1 -- Opinion of Vinson & Elkins L.L.P. regarding Legality.
*8.1 -- Opinion of Vinson & Elkins, L.L.P. regarding Tax Matters.
10.1 -- Transaction Agreement dated as of October 25, 1998, among
Enron Corp., Enron Capital & Trade Resources Corp., RCM
Holdings, Inc., Cogen Technologies Camden, Inc., Cogen
Technologies Capital Company, L.P., Cogen Technologies
Limited Partners Joint Venture, the Partners of Cogen
Technologies Limited Partners Joint Venture and the
Shareholders of McNair Energy Services Corporation.
10.2 -- Amendment No. 1 dated as of November 6, 1998, to
Transaction Agreement dated as of October 25, 1998.
*10.3 -- Amendment No. 2 dated as of November 13, 1998, to
Transaction Agreement dated as of October 25, 1998.
*10.4 -- Amendment No. 3 dated as of February 1, 1999, to
Transaction Agreement dated as of October 25, 1998.
*10.5 -- Corporate Services Agreement effective as of February 5,
1999, between East Coast Power L.L.C. and Enron Capital &
Trade Resources Corp.
*10.6 -- Credit Support Agreement dated as of April 20, 1999,
between East Coast Power L.L.C. and Enron Corp.
*10.7 -- Subordinated Promissory Note dated as of February 5, 1999
by Cogen Technologies Linden, Ltd. in favor of East Coast
Power L.L.C.
10.8(a) -- Power Purchase Agreement dated as of April 14, 1989, by
and between Consolidated Edison Company of New York, Inc.
and Cogen Technologies, Inc. (n/k/a RCM Holdings, Inc.)
(incorporated by reference to Exhibit 10.1 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
</TABLE>
<PAGE> 199
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
*(b) -- Assignment of Power Purchase Agreement dated as of July
21, 1989, by Cogen Technologies, Inc. to Cogen
Technologies Linden, Ltd. with the consent of
Consolidated Edison Company of New York, Inc. on August
3, 1989.
*(c) -- Assignment of Power Purchase Agreement dated as of
December 22, 1989, by Cogen Technologies Linden, Ltd. to
Cogen Technologies Linden Venture, L.P. with the consent
of Consolidated Edison Company of New York, Inc. on
December 22, 1989.
10.9 -- First Amendment dated September 17, 1990 to Power
Purchase Agreement dated April 14, 1989 between
Consolidated Edison Company of New York, Inc. and Cogen
Technologies, Inc. (incorporated by reference to Exhibit
10.2 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.10 -- 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. (incorporated by reference to Exhibit
10.3 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.11 -- Gas Service Agreement by and among Cogen Technologies
Linden Venture, L.P., Public Service Electric and Gas
Company and Elizabethtown Gas Company dated July 13, 1990
(incorporated by reference to Exhibit 10.4 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
25, 1998).
*10.12 -- Agreement between Cogen Technologies Linden Venture, L.P.
and Exxon Corporation for the Sale of Steam dated August
1, 1990, as amended and restated by agreement by and
between Cogen Technologies Linden Venture, L.P. and
Infineum USA L.P. dated as of January 1, 1999.
*10.13 -- Agreement between Cogen Technologies Linden Venture, L.P.
and Bayway Refining Company for the Sale of Steam dated
as of April 8, 1993.
10.14 -- Backup Fuel Storage and Supply Agreement between Cogen
Technologies Linden Venture, L.P. and Exxon Corporation
dated October 4, 1991 (incorporated by reference to
Exhibit 10.6 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.15(a) -- Ground Lease Agreement dated as of August 1, 1990, by and
between Cogen Technologies Linden Venture, L.P. and Exxon
Corporation (incorporated by reference to Exhibit 10.7 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
*(b) -- Amendment of Ground Lease Agreement by Letter Agreement
dated as of September 27, 1991, by Exxon Corporation,
agreed to by Cogen Technologies Linden Venture, L.P. and
consented to by General Electric Power Funding
Corporation.
*(c) -- Amendment to Ground Lease Agreement dated as of July 31,
1992, by and between Cogen Technologies Linden Venture,
L.P. and Exxon Corporation.
*(d) -- Assignment of Cogen Lease dated as of April 8, 1993, by
and between Exxon Corporation and Bayway Refining Company
(as confirmed by Confirmation of Assignment of Cogen
Lease dated as of April 8, 1993, by and between Exxon
Corporation and Bayway Refining Company).
*(e) -- Second Amendment to Ground Lease Agreement dated as of
April 13, 1994, by and between Bayway Refining Company
and Cogen Technologies Linden Venture, L.P.
</TABLE>
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<CAPTION>
EXHIBIT
NUMBER EXHIBIT
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<C> <S>
10.16 -- Operation and Maintenance Agreement by and between Cogen
Technologies Linden Venture, L.P. and General Electric
Company dated June 6, 1997 (incorporated by reference to
Exhibit 10.8 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.17 -- 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
(incorporated by reference to Exhibit 10.9 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.18 -- 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 (incorporated by reference to
Exhibit 10.10 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
*10.19 -- Second Amendment, dated as of February 4, 1999, 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.
10.20 -- Amended and Restated Agreement of Limited Partnership of
Cogen Technologies Linden Venture, L.P., dated as of
September 15, 1992 (incorporated by reference to Exhibit
10.11 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.21 -- 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 (incorporated by reference to Exhibit 10.12 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
*10.22 -- Second Amendment, dated as of February 4, 1999, of the
Amended and Restated Agreement of Limited Partnership of
Cogen Technologies Linden Venture, L.P., dated as of
September 15, 1992.
10.23 -- Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd., effective as of June 28, 1989 (incorporated
by reference to Exhibit 10.13 to Registration Statement
on Form S-1 (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on May 26, 1998).
10.24 -- First Amendment, dated as of February 14, 1990, to the
Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd. (incorporated by reference to Exhibit 10.14
to Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.25 -- Second Amendment, dated as of July 31, 1990, to the
Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd. (incorporated by reference to Exhibit 10.15
to Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
*10.26 -- Third Amendment, dated as of February 4, 1999, to the
Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd.
*10.27 -- Redemption and Conversion of Partnership Interests and
Fourth Amendment to the Agreement of Limited Partnership
of Cogen Technologies Linden, Ltd., dated as of February
4, 1999.
</TABLE>
<PAGE> 201
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.28 -- 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 (incorporated by
reference to Exhibit 10.16 to Registration Statement on
Form S-1/A (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on August 14, 1998).
*10.29 -- Easement Crossing Agreement dated as of December 17,
1990, by and between Coastal Pipeline Company and Cogen
Technologies Linden Venture, L.P., assigned to
Consolidated Edison Company of New York, Inc. pursuant to
the Assignment and Conveyance Agreement dated as of
December 22, 1993, by and between Cogen Technologies
Linden Venture, L.P. and Consolidated Edison Company of
New York, Inc.
*10.30 -- Letter Agreement dated June 12, 1991 between Cogen
Technologies Linden Venture, L.P. and Colonial Pipeline
Company.
*10.31 -- Indenture dated as of May 9, 1991 between the People of
the State of New York, acting by their Commissioner of
the Office of General Services and Cogen Technologies
Linden Venture, L.P.
10.32 -- 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 (incorporated by reference to
Exhibit 10.17 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.33 -- Assignment and Security agreement dated February 15, 1990
between Cogen Technologies Linden, Ltd. and General
Electric Power Funding Corporation and Assignment
Agreement, dated as of September 15, 1992, among General
Electric Power Funding Corporation, State Street Bank and
Trust Company or Connecticut, National Association, as
trustee, and Cogen Technologies Linden, Ltd.
(incorporated by reference to Exhibit 10.19 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.34 -- Collateral Agency Agreement dated as of February 15, 1990
between Cogen Technologies Linden, Ltd. and General
Electric Power Funding Corporation and Assignment
Agreement, dated as of September 15, 1992, among General
Electric Power Funding Corporation, State Street Bank and
Trust Company or Connecticut, National Association, as
trustee, and Cogen Technologies Linden, Ltd.
(incorporated by reference to Exhibit 10.20 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.35 -- Letter of Credit and Reimbursement Agreement dated as of
September 17, 1992 between Cogen Technologies Linden
Venture, L.P. and General Electric Capital Corporation
(incorporated by reference to Exhibit 10.27 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.36 -- Power Purchase and Interconnection Agreement, dated April
15, 1988, between Public Service Electric and Gas Company
and Camden Cogen, L.P. (incorporated by reference to
Exhibit 10.30 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
</TABLE>
<PAGE> 202
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.37 -- 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. (incorporated by reference to Exhibit
10.31 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.38 -- Second Amendment, dated August 21, 1990, to the Power
Purchase and Interconnection Agreement, dated April 15,
1988, between Public Service Electric and Gas Company and
Camden Cogen, L.P. (incorporated by reference to Exhibit
10.32 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.39 -- Gas Service Agreement, dated May 15, 1991, between Camden
Cogen L.P. and Public Service Electric and Gas Company
(incorporated by reference to Exhibit 10.33 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
25, 1998).
10.40 -- 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
(incorporated by reference to Exhibit 10.34 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.41(a) -- Energy Purchase Agreement, dated December 18, 1989,
between Camden Cogen, L.P. and Camden Paperboard
Corporation (incorporated by reference to Exhibit 10.35
to Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
*(b) -- First Amendment dated as of March 5, 1992, to Energy
Purchase Agreement dated December 18, 1989.
10.42 -- 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, L.P., the lenders
from time to time parties to the Agreement, and General
Electric Capital Corporation (incorporated by reference
to Exhibit 10.36 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.43 -- Amendment No. 1 dated as of December 22, 1993, by and
among Camden Cogen L.P., the lenders from time to time
parties to the Agreement, The Bank of Tokyo Trust
Company, The Toronto-Dominion Bank Trust Company and
General Electric Capital Corporation, 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 Camden Cogen L.P. and General Electric
Capital Corporation (incorporated by reference to Exhibit
10.37 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
*10.44 -- Amendment No. 2 dated as of July 31, 1998, by and among
Camden Cogen L.P., The Bank of Tokyo-Mitsubishi Trust
Company (f/k/a The Bank of Tokyo Trust Company),
Commerzbank AG, New York Branch, Commerzbank AG, Atlanta
Agency, The Fuji Bank Limited, Credit Lyonnais, New York
Branch and General Electric Capital Corporation, 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 Camden Cogen L.P. and General
Electric Capital Corporation.
</TABLE>
<PAGE> 203
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
*10.45 -- Amendment No. 3 dated as of February 4, 1999, by and
among Camden Cogen L.P., the Tranche A Lenders and
Tranche B Lenders, The Bank of Tokyo-Mitsubishi Trust
Company (f/k/a The Bank of Tokyo Trust Company),
Commerzbank AG, New York Branch, and General Electric
Capital Corporation, 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 Camden
Cogen L.P. and General Electric Capital Corporation.
10.46 -- Agreement of Limited Partnership of Cogen Technologies
Camden GP Limited Partnership, dated as of July 26, 1991
(incorporated by reference to Exhibit 10.40 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.47 -- 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
(incorporated by reference to Exhibit 10.41 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
*10.48 -- Second Amendment, dated as of February 4, 1999, to the
Agreement of Limited Partnership of Cogen Technologies
Camden GP Limited Partnership, dated as of July 26, 1991.
10.49 -- Amended and Restated Agreement of Limited Partnership of
Camden Cogen L.P., dated as of February 9, 1993
(incorporated by reference to Exhibit 10.42 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.50 -- 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 (incorporated by
reference to Exhibit 10.43 to Registration Statement on
Form S-1 (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on May 26, 1998).
10.51 -- 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
(incorporated by reference to Exhibit 10.44 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
*10.52 -- Amendment No. 3 dated as of February 4, 1999, to the
Agreement of Limited Partnership of Camden Cogen L.P.,
dated as of February 9, 1993.
10.53 -- Operation and Maintenance Agreement by and between Camden
Cogen L.P. and General Electric Company dated June 6,
1997 (incorporated by reference to Exhibit 10.45 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.54(a) -- 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
(incorporated by reference to Exhibit 10.46 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
*(b) -- Assignment of Mortgage by Toronto Dominion (Texas), Inc.
to Commerzbank AG, New York Branch, dated as of July 31,
1998.
</TABLE>
<PAGE> 204
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.55 -- Second Amended and Restated Security Deposit Agreement
dated December 22, 1993 among 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 (incorporated by reference to Exhibit 10.47 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
*10.56 -- Amendment No. 1, dated as of July 31, 1998, by and among
Camden Cogen L.P., Toronto Dominion (Texas), Inc.(f/k/a
The Toronto-Dominion Bank Trust Company), The
Toronto-Dominion Bank, General Electric Capital
Corporation, Cogen Technologies Camden GP Limited
Partnership, The Bank of Tokyo-Mitsubishi Trust Company
(f/k/a The Bank of Tokyo Trust Company), Commerzbank AG,
New York Branch, Commerzbank AG, Atlanta Agency, The Fuji
Bank Limited and Credit Lyonnais, New York Branch, to the
Second Amended and Restated Security Deposit Agreement
dated as of December 22, 1993.
*10.57 -- Second Successor Security Deposit Agent Agreement dated
as of July 31, 1998, by and among Commerzbank AG, New
York Branch, Commerzbank AG, Atlanta Agency, The Bank of
Tokyo- Mitsubishi Trust Company (f/k/a The Bank of Tokyo
Trust Company), Camden Cogen L.P., Cogen Technologies
Camden GP Limited Partnership, The Fuji Bank Limited,
Credit Lyonnais, New York Branch, Toronto Dominion
(Texas), Inc. (f/k/a The Toronto-Dominion Bank Trust
Company), The Toronto-Dominion Bank and General Electric
Capital Corporation (superseding Successor Security
Deposit Agent Agreement dated as of December 22, 1993, by
and among The Toronto-Dominion Bank Trust Company, Cogen
Technologies Camden GP Limited Partnership, General
Electric Capital Corporation, Camden Cogen L.P.,
Midatlantic National Bank, The Bank of Tokyo Trust
Company and The Toronto-Dominion Bank).
*10.58 -- Second Successor Agency Agreement dated as of July 31,
1998, by and among Commerzbank AG, New York Branch,
Commerzbank AG, Atlanta Agency, The Bank of
Tokyo-Mitsubishi Trust Company, General Electric Capital
Corporation, Toronto Dominion (Texas), Inc., The Fuji
Bank Limited, Credit Lyonnais, New York Branch, The
Toronto-Dominion Bank and consented to by Camden Cogen
L.P.
10.59 -- Security Agreement dated as of February 4, 1992, between
General Electric Capital Corporation and Camden Cogen
L.P., as amended by Amendment No. 1 dated April 1, 1993
and Amendment No. 2 dated December 22, 1993 (incorporated
by reference to Exhibit 10.48 to Registration Statement
on Form S-1/A (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on August 14, 1998).
10.60 -- Pledge and Security Agreement dated as of February 4,
1992, between General Electric Capital Corporation and
Cogen Technologies Camden Inc., as amended by Amendment
No. 1 dated April 1, 1993 and Amendment No. 2 dated
December 22, 1993 (incorporated by reference to Exhibit
10.49 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.61 -- Mortgage from Camden Cogen L.P., Mortgagor, to General
Electric Power Funding Corporation, Mortgagee, dated as
of February 4, 1992 (incorporated by reference to Exhibit
10.50 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
</TABLE>
<PAGE> 205
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.62 -- Second Mortgage from Camden Cogen L.P., Mortgagor, to
Public Service Electric and Gas Company, Mortgagee, dated
as of February 4, 1992 (incorporated by reference to
Exhibit 10.51 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.63 -- Interest Rate and Currency Exchange Agreement dated April
1, 1993 between General Electric Capital Corporation and
Camden Cogen L.P., as amended by Amendment No. 1 dated as
of December 22, 1993 and Confirmation Letter dated April
1, 1993 and Amendment No. 1 dated December 22, 1993
(incorporated by reference to Exhibit 10.52 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.64 -- 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 22, 1986 and
Consent to Assignment dated December 15, 1988
(incorporated by reference to Exhibit 10.54 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
*10.65 -- Easement Agreement dated as of April 1, 1993, by and
between Camden Cogen L.P. and Public Service Electric and
Gas Company.
*10.66 -- Easement Agreement dated as of December 18, 1992, by and
between MacAndrews & Forbes Company and Camden Cogen
L.P., as amended by Amendment to Easement Agreement dated
as of March 22, 1993, by and between Mafco Worldwide
Corporation (f/k/a Mac Andrews & Forbes Company) and
Camden Cogen L.P.
*10.67 -- Easement Agreement dated as of February 22, 1993, by and
between Camden Paperboard Corporation and Camden Cogen
L.P.
10.68 -- Agreement for the Sale of Steam dated as of February 27,
1987 between Cogen Technologies NJ Venture and Exxon
Company U.S.A., as amended by Amendment dated August 21,
1988, assigned to General Electric Power Funding
Corporation pursuant to an Assignment Agreement dated as
of February 27, 1987, by and between Cogen Technologies
NJ Venture and General Electric Power Funding Corporation
(incorporated by reference to Exhibit 10.55 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.69 -- Letter Agreement for Gas Service between Public Service
Electric and Gas Company and Cogen Technologies NJ
Venture dated October 10, 1986 (incorporated by reference
to Exhibit 10.56 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.70 -- Water Supply Agreement between the City of Bayonne and
Cogen Technologies NJ Venture dated June 1, 1988
(incorporated by reference to Exhibit 10.57 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.71 -- Lease Agreement between Bayonne Industries, Inc.,
IMTT-Bayonne and Cogen Technologies NJ Venture dated
October 18, 1986 (incorporated by reference to Exhibit
10.58 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
</TABLE>
<PAGE> 206
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.72 -- Easement from Bayonne Industries, Inc. and IMTT-Bayonne
to Cogen Technologies NJ Venture dated October 20, 1986,
as amended by First Amendment dated December 15, 1988
(incorporated by reference to Exhibit 10.59 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.73 -- Power Purchase and Operations Coordination Agreement
between Public Service Electric and Gas Company and Cogen
Technologies NJ Venture dated June 5, 1989 (incorporated
by reference to Exhibit 10.60 to Registration Statement
on Form S-1 (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on May 26, 1998).
10.74 -- Agreement for Purchase of Electric Power between Cogen
Technologies NJ, Inc. and Jersey Central Power & Light
Company dated October 29, 1985 (incorporated by reference
to Exhibit 10.61 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.75 -- First 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 (incorporated by reference to Exhibit
10.62 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
*10.76 -- Assignment Agreement dated as of September 8, 1986, by
and between Cogen Technologies NJ, Inc. and Cogen
Technologies NJ Venture.
10.77 -- Second 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 (incorporated by reference to Exhibit
10.63 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.78 -- Operation and Maintenance Agreement by and between Cogen
Technologies NJ Venture and General Electric Company
dated June 6, 1997 (incorporated by reference to Exhibit
10.64 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.79 -- Revised Transmission Service and Interconnection
Agreement between Public Service Electric and Gas Company
and Cogen Technologies NJ Venture dated April 27, 1987
(incorporated by reference to Exhibit 10.65 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.80 -- Term Loan Agreement dated as of November 1, 1987 between
Cogen Technologies NJ Venture and The Prudential
Insurance Company of America (incorporated by reference
to Exhibit 10.66 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.81 -- 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 (incorporated by reference to Exhibit
10.67 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.82 -- 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 (incorporated by reference to Exhibit
10.68 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
</TABLE>
<PAGE> 207
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.83 -- Amended and Restated Joint Venture Agreement of Cogen
Technologies NJ Venture dated August 25, 1986, by and
among Cogen Technologies NJ, Inc., Enron Cogeneration
Five Company, CEA Bayonne, Inc. (the name of which was
changed to PSEG Bayonne Inc. and was recently merged into
Cogen Technologies NJ, Inc.), PSVO Bayonne, Inc. and
Transco Cogeneration Company (incorporated by reference
to Exhibit 10.71 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.84 -- Option Agreement between Bayonne Industries, Inc. and
Cogen Technologies NJ, Inc. dated May 22, 1986
(incorporated by reference to Exhibit 10.72 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.85 -- Purchase and Sale Agreement among Bayonne Industries,
Inc., IMTT-Bayonne and Cogen Technologies NJ, Inc. dated
May 22, 1986 (incorporated by reference to Exhibit 10.73
to Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.86 -- Steam Producing Facilities Lease Agreement between Cogen
Technologies NJ, Inc. and IMTT-Bayonne dated May 22, 1986
and Consent to Assignment dated December 15, 1998
(incorporated by reference to Exhibit 10.74 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.87 -- Mortgage and Security Agreement between The Prudential
Insurance Company of America and Cogen Technologies NJ
Venture dated December 15, 1988 (incorporated by
reference to Exhibit 10.75 to Registration Statement on
Form S-1/A (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on August 14, 1998).
10.88 -- 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 27, 1995 and Waiver of Consent by The
Prudential Insurance Company of America dated July 28,
1995 (incorporated by reference to Exhibit 10.76 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.89 -- Disbursement and Security Agreement between The
Prudential Insurance Company of America, Midlantic
National Bank and Cogen Technologies NJ Venture dated
December 15, 1988, as amended by Amendment No. 1 dated
February 9, 1989 (incorporated by reference to Exhibit
10.77 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.90 -- Kerosene Fuel Storage Agreement dated May 17, 1994
between IMTT-Bayonne and Cogen Technologies NJ Venture
(incorporated by reference to Exhibit 10.78 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
*10.91 -- License Agreement for Wire, Pipe and Cable Transverse
Crossings and Longitudinal Occupations dated as of August
21, 1992, by and between Consolidated Rail Corporation
and Camden Cogen L.P.
*10.92 -- Lease Agreement dated as of May 22, 1986, by and among
Bayonne Industries, Inc., IMTT-Bayonne and Cogen
Technologies NJ, Inc.
*10.93 -- Letter Agreement dated as of March 15, 1990 by and
between Texas Eastern Cryogenics, Inc. and Cogen
Technologies, Inc. (n/k/a RCM Holdings, Inc.).
</TABLE>
<PAGE> 208
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
*10.94 -- Agreement for Maintenance and Operations of IMTT-Bayonne
Chem South Boilers dated as of April 3, 1998, by and
between IMTT-Bayonne and Cogen Technologies NJ Venture,
as amended by Letter Agreement dated as of April 3, 1998,
by and between General Electric O&M Services and Cogen
Technologies NJ Venture, as assigned to The Prudential
Insurance Company of America pursuant to a Security
Agreement and Assignment dated as of December 15, 1988,
by and between Cogen Technologies NJ Venture and The
Prudential Insurance Company of America, and consented to
by IMTT-Bayonne pursuant to a Consent to Assignment dated
as of April 3, 1998, by IMTT-Bayonne in favor of Cogen
Technologies NJ Venture.
*10.95 -- Security Agreement dated as of May 22, 1986, by and
between Cogen Technologies NJ, Inc. and Bayonne
Industries, Inc.
10.96 -- Assignment and Security Agreement, dated February 4,
1992, made by Cogen Technologies Camden GP Limited
Partnership in favor of General Electric Capital
Corporation (incorporated by reference to Exhibit 10.79
to Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
25, 1998).
12.1 -- Computation of Ratio of Earnings to Fixed Charges.
*21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit
5.1).
*24.1 -- Power-of-attorney.
25.1 -- Statement of Eligibility of Trustee.
*27.1 -- Financial Data Schedule.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Letter to Clients.
99.3 -- Form of Letter to Registered Holders and DTC
Participants.
99.4 -- Form of Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
================================================================================
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
EAST COAST POWER L.L.C.
A DELAWARE LIMITED LIABILITY COMPANY
================================================================================
<PAGE> 2
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
EAST COAST POWER L.L.C.
A DELAWARE LIMITED LIABILITY COMPANY
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1
DEFINITIONS
1.01 Definitions.....................................................................................1
1.02 Construction....................................................................................8
ARTICLE 2
ORGANIZATION
2.01 Formation; Construction.........................................................................8
2.02 Name............................................................................................8
2.03 Registered Office; Registered Agent; Principal Office in the United States; Other
Offices.........................................................................................9
2.04 Purposes........................................................................................9
2.05 Foreign Qualification...........................................................................9
2.06 Term............................................................................................9
ARTICLE 3
MEMBERSHIP; DISPOSITIONS OF INTERESTS
3.01 Members........................................................................................10
3.02 Representations, Warranties and Covenants......................................................10
3.03 Dispositions of Membership Interests...........................................................12
3.04 Creation of Additional Membership Interest.....................................................15
3.05 Access to Information..........................................................................16
3.06 Confidential Information.......................................................................16
3.07 Liability to Third Parties.....................................................................16
3.08 Certificates...................................................................................16
3.09 Put and Call...................................................................................17
ARTICLE 4
CAPITAL CONTRIBUTIONS
4.01 Initial Capital Contributions..................................................................18
4.02 Subsequent Capital Contributions...............................................................19
4.03 Return of Contributions........................................................................19
4.04 Loans..........................................................................................19
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
4.05 Capital Accounts...............................................................................19
ARTICLE 5
DISTRIBUTIONS
5.01 Distributions..................................................................................20
5.02 Distributions on Dissolution and Winding Up....................................................21
5.03 Allocations....................................................................................21
5.04 True-Up........................................................................................22
ARTICLE 6
MANAGEMENT
6.01 Management of Company Affairs..................................................................23
6.02 Standards of Performance and Conflicts of Interest.............................................25
6.03 Indemnification................................................................................27
6.04 Officers; Day-to-Day Management................................................................28
6.05 Monitoring Representative......................................................................28
ARTICLE 7
TAXES
7.01 Tax Returns....................................................................................29
7.02 Tax Elections..................................................................................29
7.03 Tax Matters Member.............................................................................29
ARTICLE 8
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
8.01 Maintenance of Books...........................................................................29
8.02 Bank Accounts..................................................................................29
ARTICLE 9
DISSOLUTION, WINDING-UP AND TERMINATION
9.01 Dissolution....................................................................................30
9.02 Winding-Up and Termination.....................................................................30
9.03 Certificate of Cancellation....................................................................31
ARTICLE 10
GENERAL PROVISIONS
10.01 Offset.........................................................................................31
10.02 Notices........................................................................................31
10.03 Entire Agreement; Superseding Effect...........................................................31
10.04 Effect of Waiver or Consent....................................................................31
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
10.05 Amendment or Restatement.......................................................................32
10.06 Binding Effect.................................................................................32
10.07 Governing Law; Severability....................................................................32
10.08 Further Assurances.............................................................................32
10.09 Waiver of Certain Rights.......................................................................32
10.10 Characterization of Interests..................................................................32
10.11 Counterparts...................................................................................32
</TABLE>
EXHIBIT:
A Members
B General Valuation Procedure
C Form of Certificate
SCHEDULE:
1 CalPERS Fiduciaries
2 Reporting Parties
3 Initial Approved Contracts
iii
<PAGE> 5
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
EAST COAST POWER L.L.C.
A Delaware Limited Liability Company
This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF EAST
COAST POWER L.L.C. (this "Agreement"), dated as of February 4, 1999 (the
"Effective Date"), is adopted, executed and agreed to, for good and valuable
consideration, by JOINT ENERGY DEVELOPMENT INVESTMENTS II LIMITED PARTNERSHIP, a
Delaware limited partnership ("JEDI II"), ENRON CAPITAL & TRADE RESOURCES CORP.,
a Delaware corporation ("ECT"), and the California Public Employees' Retirement
System, a unit of the State and Consumer Services Agency of the State of
California ("Investor" or "CalPERS").
RECITALS
1. East Coast Power L.L.C. (the "Company") was formed as a Delaware
limited liability company on December 18, 1998 (the "Formation Date"), by the
filing of a Certificate of Formation (the "Delaware Certificate") with the
Delaware Secretary of State. JEDI II was admitted to the Company as the initial
Member, effective as of the Formation Date, pursuant to that certain Limited
Liability Company Agreement of the Company, dated as of the Formation Date (the
"Original Agreement").
2. JEDI II, ECT and Investor now desire to amend and restate the
Original Agreement in its entirety and, in connection therewith, to evidence the
admission of ECT and Investor as Members.
NOW, THEREFORE, for good and valuable consideration, JEDI II, ECT and
Investor hereby amend and restate the Original Agreement as follows:
ARTICLE 1
DEFINITIONS
1.01 DEFINITIONS. As used in this Agreement, the following terms have
the respective meanings set forth below or set forth in the Sections referred to
below (and grammatical variations of such terms have correlative meanings):
ACQUISITION DATE - the Closing Date as that term is defined in the
Transaction Agreement.
ACT - the Delaware Limited Liability Company Act.
ACTIVITIES - Section 6.02(b).
<PAGE> 6
AFFILIATE - with respect to any Person, any other Person
controlling, controlled by, or under common control with that first
Person. The term "control" and correlative terms includes the
possession, directly or indirectly and whether acting alone or in
conjunction with others, of the authority to direct or cause the
direction of the management or policies of a Person, whether through
the ownership of voting securities, by contract, or otherwise.
Notwithstanding the foregoing, (a) Investor shall not be considered to
be an Affiliate of Enron or of the Class A Member, and (b) the Company
shall not be considered an Affiliate of Enron, for purposes of this
Agreement.
AFFILIATE APPROVALS - Section 6.05.
AGREEMENT - introductory paragraph.
ASSIGNEE - any Person that acquires a Membership Interest or any
portion thereof through a Disposition; provided, however, that, an
Assignee shall have no right to be admitted to the Company as a Member
except in accordance with Section 3.03(b).
BANKRUPTCY or BANKRUPT - with respect to any Person, that (a) such
Person (i) makes a general assignment for the benefit of creditors;
(ii) files a voluntary bankruptcy petition; (iii) becomes the subject
of an order for relief or is declared insolvent in any federal or state
bankruptcy or insolvency proceedings; (iv) files a petition or answer
seeking for such Person a reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any
Law; (v) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against such
Person in a proceeding of the type described in subclauses (i) through
(iv) of this clause (a); or (vi) seeks, consents to, or acquiesces in
the appointment of a trustee, receiver, or liquidator of such Person or
of all or any substantial part of such Person's assets; or (b) against
such Person, a proceeding seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief
under any Law has been commenced and 120 Days have expired without
dismissal thereof or with respect to which, without such Person's
consent or acquiescence, a trustee, receiver, or liquidator of such
Person or of all or any substantial part of such Person's assets has
been appointed and 90 Days have expired without the appointment's
having been vacated or stayed, or 90 Days have expired after the date
of expiration of a stay, if the appointment has not previously been
vacated.
BAYONNE INTEREST - the partnership interest in Cogen Technologies
NJ Venture acquired by ECT pursuant to the Transaction Agreement.
BAYONNE SELLER NOTES - the meaning specified in the Senior Loan
Agreement.
BRIDGE MATURITY DATE - November 4, 1999.
BUSINESS DAY - any day other than a Saturday, a Sunday, or a
holiday on which national banking associations in the States of New
York or Texas are closed.
2
<PAGE> 7
CAPITAL ACCOUNT - the account to be maintained by the Company for
each Member in accordance with Section 4.05.
CAPITAL CONTRIBUTION - with respect to any Member, the amount of
money and the net agreed value of any assets (other than money)
contributed to the Company by the Member. Any reference in this
Agreement to the Capital Contribution of a Member shall include a
Capital Contribution of its predecessors in interest.
CERTIFICATES - Section 3.08.
CLAIM - any and all judgments, claims, causes of action, demands,
lawsuits, suits, proceedings, Governmental investigations or audits,
losses, assessments, fines, penalties, administrative orders,
obligations, costs, expenses, liabilities and damages (whether actual,
consequential or punitive), including interest, penalties, reasonable
attorneys' fees, disbursements and costs of investigations,
deficiencies, levies, duties and imposts.
CLASS A MEMBER - JEDI II and any other Person hereafter admitted
to the Company as a Class A Member as provided in this Agreement, but
such term does not include any Person who has ceased to be a Class A
Member of the Company.
CLASS A PREFERENCE AMOUNT - at any time, to the extent not
previously distributed to the Class A Member, distributions from the
Company equal to the sum of (i) $80,000,000, plus (ii) the amount
necessary to provide the Class A Member with an Internal Rate of Return
on such $80,000,000 (without duplication of distributions described in
clause (i) above (i.e. the return of such $80,000,000), calculated from
the Acquisition Date until distributions equal to the full Class A
Preference Amount have been made, of (a) 31%, if the full Class B
Preference Amounts have been distributed (including deemed
distributions) to the respective Class B Members on or before the
Bridge Maturity Date, or (b) 21.5%, if the full Class B Preference
Amounts have not been distributed (including deemed distributions) to
the respective Class B Members on or before the Bridge Maturity Date.
CLASS B MEMBER - Each of ECT, Investor and any other Person
hereafter admitted to the Company as a Class B Member as provided in
this Agreement, but such term does not include any Person who has
ceased to be a Class B Member of the Company.
CLASS B PREFERENCE AMOUNT - at any time, to the extent not
previously distributed to a Class B Member, distributions (including
deemed distributions pursuant to this Agreement) from the Company equal
to sum of (i) $25,000,000, plus (ii) interest on such $25,000,000, for
the Pre-Conversion Period, at the interest rate payable under the
Tranche A-2 Bridge Note, plus (iii) additional interest on such
$25,000,000, for the Pre-Conversion Period, equal to 150 basis points
per annum, plus (iv) if the full amounts described in clauses (i), (ii)
and (iii) above have not been distributed (or deemed distributed) to
such Class B Member on or before the Bridge Maturity Date, the amount
necessary to provide such Class B Member with an Internal Rate of
Return of 12% on such $25,000,000 (without duplication of distributions
described in clause (i) above (i.e., the return of such $25,000,000)),
calculated from the Acquisition Date until distributions equal to the
full Class B Preference Amount have been
3
<PAGE> 8
made; provided, however, that for purposes of calculating the Internal
Rate of Return on such $25,000,000, any distributions (or deemed
distributions) received pursuant to clause (ii) hereof shall be
ignored.
CODE - the Internal Revenue Code of 1986, as amended.
COMPANY - Recital 1.
DAY - a calendar day; provided, however, that, if any period of
Days referred to in this Agreement shall end on a Day that is not a
Business Day, then the expiration of such period shall be automatically
extended until the end of the first succeeding Business Day.
DELAWARE CERTIFICATE -Recital 1.
DISPOSE, DISPOSING or DISPOSITION - with respect to any asset
(including a Membership Interest or any portion thereof), a sale,
assignment, transfer, conveyance, gift, exchange or other disposition
of such asset, whether such disposition be voluntary, involuntary or by
operation of Law, including the following: (a) in the case of an asset
owned by a natural person, a transfer of such asset upon the death of
its owner, whether by will, intestate succession or otherwise; (b) in
the case of an asset owned by an entity, (i) a merger or consolidation
of such entity (other than where such entity is the survivor thereof),
(ii) a conversion of such entity into another type of entity, or (iii)
a distribution of such asset, including in connection with the
dissolution, liquidation, winding-up or termination of such entity; and
(c) a disposition in connection with, or in lieu of, a foreclosure of
an Encumbrance; but such terms shall not include the creation of an
Encumbrance.
DISSOLUTION EVENT - Section 9.01.
ECM - Section 6.02.
ECT - introduction.
ECT LOAN - the loan in the original principal amount of
$25,000,000 from NationsBank, N.A., as Agent, and the Lenders from time
to time party thereto, to ECT made on the Acquisition Date.
EFFECTIVE DATE - introductory paragraph.
ENCUMBER, ENCUMBERING, or ENCUMBRANCE - the creation of a security
interest, lien, pledge, mortgage or other encumbrance, whether such
encumbrance be voluntary, involuntary or by operation of Law.
ENRON - Enron Corp., an Oregon corporation.
EQUITY SUBSCRIPTION AGREEMENT - the meaning specified in the
Senior Loan Agreement.
4
<PAGE> 9
ERISA - Section 3.02(e).
FORMATION DATE - Recital 1.
GOVERNMENTAL AUTHORITY (or GOVERNMENTAL) - a federal, state, local
or foreign governmental authority; a state, province, commonwealth,
territory or district thereof; a county or parish; a city, town,
township, village or other municipality; a district, ward or other
subdivision of any of the foregoing; any executive, legislative or
other governing body of any of the foregoing; any agency, authority,
board, department, system, service, office, commission, committee,
council or other administrative body of any of the foregoing; any court
or other judicial body; and any officer, official or other
representative of any of the foregoing.
INCLUDING and INCLUDES - including, without limitation.
INTERNAL RATE OF RETURN - the discount rate at which the present
value of a series of future cash flows of an investment equals the cost
of the investment, as calculated using the "XIRR" function on Microsoft
Excel Version 4.0 or higher or any other acceptable spreadsheet program
agreed to in writing by the Members.
INVESTMENT COMPANY ACT - Investment Company Act of 1940, as
amended.
INVESTOR - introduction.
INVESTOR GUARANTY - the Guaranty, dated as of February 4, 1999,
from Investor in favor of NationsBank, N.A., as Agent and the other
Secured Parties referred to therein.
JEDI II - introduction.
LAW - any applicable constitutional provision, statute, act, code
(including the Code), law, regulation, rule, ordinance, order, decree,
ruling, proclamation, resolution, judgment, decision, declaration, or
interpretative or advisory opinion or letter of a Governmental
Authority having valid jurisdiction.
LOAN DOCUMENTS - the collective reference to the Senior Loan
Documents and the Subordinated Note Documents.
LOAN PARTIES - the meaning specified in the Senior Loan Agreement.
MEMBER - either a Class A Member or a Class B Member, or any
Person hereafter admitted to the Company as a member as provided in
this Agreement, but such term does not include any Person who has
ceased to be a member of the Company.
MEMBERSHIP INTEREST - with respect to any Member, (a) that
Member's status as a Member; (b) that Member's right to receive
distributions from the Company; and (c) all other rights, benefits and
privileges enjoyed by that Member (under the Act, this Agreement, or
5
<PAGE> 10
otherwise) in its capacity as a Member, including that Member's rights
to vote, consent and approve and otherwise to participate in the
management of the Company.
MONITORING REPRESENTATIVE - the Monitoring Representative
designated as provided in Section 6.05.
NET INCOME -for any period, the excess, if any, of the Company's
items of income and gain (other than income and gain allocated pursuant
to Section 5.03(c)) for such period over the Company's items of loss
and deduction for such period, including items described in Section
705(a)(1)(B) and 705(a)(2)(B) of the Code.
NET LOSS - for any period, the excess, if any, of the Company's
items or loss and deduction for such period over the Company's items of
income and gain (other than income and gain allocated pursuant to
Section 5.03(c)) for such period, including items described in Sections
705(a)(1)(B) and 705(a)(2)(B) of the Code.
NET OFFERING PROCEEDS - an amount equal to the proceeds from the
sale of the Refinancing Securities minus the sum of the Offering Costs
and the Offering Proceeds Repayment Amount.
OFFERING - the offering, sale and delivery of the Refinancing
Securities.
OFFERING COSTS - with respect to the Offering, commercially
reasonable brokerage commissions, underwriting fees and discounts (or
initial purchaser fees or discounts in the context of an offering in
which resales are to be made pursuant to Rule 144A promulgated pursuant
to the Securities Act), legal fees, finder's fees and other similar
fees and commissions to the extent, but only to the extent, that such
fees and commissions are actually paid to a Person that is not an
Affiliate of the Company or Enron and are properly attributable to the
Offering; provided that for the purposes of the definition of Net
Offering Proceeds, the term "Offering Costs" shall not include such
fees and commissions that are paid from sources other than the proceeds
of the Offering.
OFFERING DATE - the date the Refinancing Securities are delivered
against payment therefor.
OFFERING PROCEEDS REPAYMENT AMOUNT - the meaning specified in the
Subordinated Loan Agreement.
ORIGINAL AGREEMENT - Recital 1.
PERSON - any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated
organization or government or any agency, instrumentality or political
subdivision thereof, or any other form of entity.
6
<PAGE> 11
POST-CONVERSION PERIOD - the period commencing on the Bridge
Maturity Date to, but excluding, the date distributions equal to the
full Class B Preference Amount have been made to each Class B Member.
PRE-CONVERSION PERIOD - the period commencing on the Acquisition
Date to, but excluding, the earlier of (i) the Bridge Maturity Date and
(ii) the date distributions equal to the full Class B Preference Amount
have been made to each Class B Member.
PURPA - the Public Utility Regulatory Policies Act of 1978, as
amended, the Federal Energy Regulatory Commission's regulations
thereunder, and regulatory and judicial interpretations thereof.
RECORD HOLDER - the Person in whose name a Membership Interest is
registered in the books and records of the Company as contemplated in
Section 3.08.
REFINANCING SECURITIES - the meaning specified in the Subordinated
Loan Agreement.
SECURITIES ACT - the Securities Act of 1933, as amended.
SENIOR LENDERS - the meaning specified in the Subordinated Loan
Agreement.
SENIOR LOAN AGREEMENT - the Credit Agreement dated as of February
4, 1999, among the Company, NationsBank N.A., as Agent, and the Lenders
from time to time party thereto, as such Credit Agreement may be
amended, modified or supplemented from time to time, including
amendments, modifications, supplements and restatements thereof giving
effect to increases, renewals, extensions, refundings, deferrals,
restructurings, replacements or refinancings with the same or different
lenders of, or additions to, the arrangements provided in such Credit
Agreement.
SENIOR LOAN DOCUMENTS - the meaning specified in the Subordinated
Loan Agreement.
SENIOR NOTES - the promissory notes of the Borrower outstanding
from time to time under the Senior Loan Agreement.
SHARING RATIOS - shall mean 90% for the Class A Member and 10% for
the Class B Members (5% for the Investor and 5% for ECT).
SUBORDINATED LOAN AGREEMENT - the Credit and Subordination
Agreement dated as of February 4, 1999, between Enron and the Company,
as such Credit and Subordination Agreement may be amended, modified or
supplemented from time to time, including amendments, modifications,
supplements and restatements thereof giving effect to increases,
renewals, extensions, refundings, deferrals, restructurings,
replacements or refinancings with the same or different lenders of, or
additions to, the arrangements provided in such Credit and
Subordination Agreement.
7
<PAGE> 12
SUBORDINATED NOTE DOCUMENTS - the meaning specified in the
Subordinated Loan Agreement.
SUBORDINATED OBLIGATIONS - the meaning specified in the Senior
Loan Agreement.
TERM - Section 2.06.
TRANCHE A-2 BRIDGE ADVANCE - the meaning specified in the Senior
Loan Agreement.
TRANCHE A-2 BRIDGE NOTE - the meaning specified in the Senior Loan
Agreement.
TRANSACTION AGREEMENT - the Transaction Agreement among Enron
Corp., Enron Capital & Trade Resources Corp. and RCM Holdings, Inc.,
Cogen Technologies Camden, Inc., Camden Cogen Technologies Capital
Company, L.P., Cogen Technologies Limited Partners Joint Venture, the
Partners of Cogen Technologies Limited Partners Joint Venture and the
shareholders of McNair Energy Services Corporation, dated October 25,
1998, as amended by amendments dated November 6, 1998, November 13,
1998, and February 1, 1999.
UTILITY AFFILIATE - Section 5.04.
1935 ACT - Section 3.02(f).
Other terms defined herein have the meanings so given them.
1.02 CONSTRUCTION. Unless the context requires otherwise: (a) the
gender (or lack of gender) of all words used in this Agreement includes the
masculine, feminine, and neuter; (b) references to Articles and Sections refer
to Articles and Sections of this Agreement; (c) references to an Exhibit refer
to the Exhibit attached to this Agreement, which is made a part hereof for all
purposes; (d) references to Laws refer to such Laws as they may be amended from
time to time, and references to particular provisions of a Law include any
corresponding provisions of any succeeding Law; and (e) references to money or
the sign "$" refer to legal currency of the United States of America.
ARTICLE 2
ORGANIZATION
2.01 FORMATION; CONSTRUCTION. The Company was formed as a Delaware
limited liability company by the filing of the Delaware Certificate as of the
Formation Date. JEDI II, ECT and Investor hereby continue the Company pursuant
to the terms and conditions of this Agreement.
2.02 NAME. The name of the Company shall continue to be "East Coast
Power L.L.C.", and all Company business must be conducted in that name or such
other names that comply with Law as the Class A Member may select.
8
<PAGE> 13
2.03 REGISTERED OFFICE; REGISTERED AGENT; PRINCIPAL OFFICE IN THE
UNITED STATES; OTHER OFFICES. The registered office of the Company required by
the Act to be maintained in the State of Delaware shall be the office of the
registered agent named in the Delaware Certificate or such other office (which
need not be a place of business of the Company) as the Company may designate in
the manner provided by Law. The registered agent of the Company in the State of
Delaware shall be the registered agent named in the Delaware Certificate or such
other Person or Persons as the Company may designate in the manner provided by
Law. The principal office of the Company in the United States shall be at such
place as the Company may designate, which need not be in the State of Delaware,
and the Company shall maintain records there or such other place as the Company
shall designate and shall keep the street address of such principal office at
the registered office of the Company in the State of Delaware. The Company may
have such other offices as the Company may designate. The Company shall notify
each Member of any change in the registered office, the registered agent, or the
street address of the principal office of the Company.
2.04 PURPOSES. The purposes of the Company are to engage in the
acquisition, development, lease, ownership and sale (directly or indirectly
through one or more subsidiary entities), and the operation, maintenance,
financing, modification, and expansion, of electric power, steam, water and
other utility production and related steam consumption assets and any real or
personal property associated therewith, including the Bayonne Plant (as defined
in the Transaction Agreement), the Linden Plant (as defined in the Transaction
Agreement), the Camden Plant (as defined in the Transaction Agreement) and the
other assets acquired by the Company and its subsidiaries pursuant to the
Transaction Agreement, the purchasing, ownership, use, transmission, marketing
and sale of any input, output or right associated therewith, and all actions
incidental, necessary or appropriate to the foregoing that may be engaged in by
a limited liability company formed under the Act.
2.05 FOREIGN QUALIFICATION. The Company shall qualify as a foreign
limited liability company in New Jersey. Prior to the Company's conducting
business in any jurisdiction other than Delaware or New Jersey, the Company
shall comply, to the extent procedures are available and those matters are
reasonably within the control of the Company, with all requirements necessary to
qualify the Company as a foreign limited liability company in that jurisdiction.
At the request of the Company, each Member shall execute, acknowledge, swear to,
and deliver all certificates and other instruments conforming with this
Agreement that are necessary or appropriate to qualify, continue, and terminate
the Company as a foreign limited liability company in all such jurisdictions in
which the Company may conduct business.
2.06 TERM. The period of existence of the Company (the "Term")
commenced on the Formation Date and shall end at such time as a certificate of
cancellation is filed with the Secretary of State of Delaware in accordance with
Section 10.03.
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ARTICLE 3
MEMBERSHIP; DISPOSITIONS OF INTERESTS
3.01 MEMBERS. (a) JEDI II was admitted to the Company as the initial
Member, effective as of the Formation Date, pursuant to the Original Agreement.
(b) Effective as of the Effective Date, there are hereby created two
classes of Members in the Company, Class A Members and Class B Members, and each
shall have the respective rights accorded it under this Agreement. JEDI II's
Membership Interest is hereby converted into that of the initial Class A Member,
and ECT and Investor are hereby admitted as the initial Class B Members. Each of
ECT and Investor initially shall own 50% of the interests of the Class B
Members.
3.02 REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Member hereby
represents, warrants and covenants to the Company and each other Member that the
following statements are true and correct as of the Effective Date (and, in the
case of Section 3.02(e), shall remain true and correct for so long as it is a
Member):
(a) that Member is duly incorporated, organized or formed (as
applicable), validly existing and (if applicable) in good standing
under the Law of the jurisdiction of its incorporation, organization or
formation; if required by applicable Law, that Member is duly qualified
and in good standing in the jurisdiction of its principal place of
business, if different from its jurisdiction of incorporation,
organization or formation; and that Member has full power and authority
to execute and deliver this Agreement and to perform its obligations
hereunder, and all necessary actions by the board of directors,
shareholders, managers, members, partners, trustees, beneficiaries, or
other applicable Persons necessary for the due authorization,
execution, delivery, and performance of this Agreement by that Member
have been duly taken;
(b) that Member has duly executed and delivered this Agreement,
and it constitutes the legal, valid and binding obligation of that
Member enforceable against it in accordance with its terms (except as
may be limited by bankruptcy, insolvency or similar Laws of general
application and by the effect of general principles of equity,
regardless of whether considered at law or in equity);
(c) that Member's authorization, execution, delivery and
performance of this Agreement do not (i) conflict with, or result in a
breach, default or violation of, (A) the organizational documents of
such Member, (B) any contract or agreement to which that Member is a
party, or (C) any Law to which that Member is subject; or (ii) require
any consent, approval or authorization from, filing or registration
with, or notice to, any Governmental Authority, unless such requirement
has already been satisfied;
(d) that Member is not required to register as an "investment
company" within the meaning of the Investment Company Act;
(e) in the case of Investor, (i) ownership of a Membership
Interest by it may be treated as ownership by one person for purposes
of Section 3(c)(1)(A) of the Investment
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Company Act of 1940, and (ii) it is a governmental plan, as such term
is defined in Section 3(32) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA");
(f) in the case of a Class B Member or a Person to which a Class B
Member Membership Interest is Disposed:
(i) it is acquiring its Membership Interest for its own
account and not with a view to the resale or distribution of all
or any part thereof in violation of applicable securities Laws; it
understands that the Membership Interest being acquired by it has
not been registered under the Securities Act or applicable state
securities Laws and, therefore, it will be necessary for it to
continue to hold the Membership Interest being acquired by it and
continue to bear the economic risk of the investment therein
unless and until the offering and sale of such Membership Interest
by it are registered or qualified under the Securities Act and
applicable state securities Laws or an exemption from registration
or qualification is available;
(ii) it understands that it may not sell or transfer its
Membership Interest, except in accordance with Section 3.03;
(iii) it acknowledges that it has no right to require the
Company to register or qualify the offering and sale of its
Membership Interest under the Securities Act or any applicable
state securities Laws;
(iv) it has carefully reviewed this Agreement and any other
relevant information furnished to it in writing by the Class A
Member and its Affiliates, and it understands the risks of, and
other considerations relating to, an investment in its Membership
Interest;
(v) it has been furnished all materials, if any, that it
requested relating to the Company and the purchase of Membership
Interests, and it has been afforded the opportunity to obtain any
additional information and to ask all questions it deemed
necessary regarding information about Membership Interests, the
Company, the Class A Member, its Affiliates, and the Company's
business activities, and the Class A Member has given it such
answers concerning those matters as it deems sufficient to make an
informed investment decision with respect to its investment in the
Company;
(vi) it has such knowledge and experience (based on actual
participation) in financial and business matters that it is
capable of evaluating the merits and risks of an investment in
Membership Interests and of making an informed investment
decision;
(vii) it understands that any information furnished to it
concerning the federal income tax consequences arising from an
investment in the Company is necessarily general in nature, and
the specific tax consequences to it of an investment
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in the Company will depend on its individual circumstances, and it
affirms that it has been advised to seek appropriate legal counsel
with respect to such tax consequences;
(viii) it understands that the Class A Member and the Company
are relying on its representations and warranties in selling the
Membership Interests or recognizing their transfer without
registration under the securities Laws;
(ix) in the case of Class B Members other than the ECT, at the
time of its investment in the Company and at all times while it
remains a Member it (A) does not and will not own or operate any
facility used for the generation, transmission or distribution for
sale of electric energy or any facility used for the retail
distribution of natural or manufactured gas, each within the
meaning of the Public Utility Holding Company Act of 1935, as
amended and the rules and regulations of the Securities and
Exchange Commission thereunder (the "1935 Act"), (B) is not and
will not be an "electric utility company" or a "gas utility
company" within the meaning of the 1935 Act, (C) is not and will
not be (1) a "holding company," (2) a "subsidiary company," an
"affiliate" or "associate company" of a "holding company" or (3)
an "affiliate" of a "subsidiary company" of a "holding company,"
each within the meaning of the 1935 Act, and (D) is not and will
not be subject to regulation as a public utility, public utility
holding company (except to the extent certain acquisitions may be
subject to the regulatory approval of the Securities and Exchange
Commission pursuant to Section 9(a)(2) of the 1935 Act) or public
service company (or similar designation) by any Governmental
Authority;
(x) in the case of Class B Members other than Investor, if
such Class B Member has or may have or does at any time have, more
than 10% of the aggregate Sharing Ratio of the Company, that, at
the time of its investment in the Company and at all times during
the existence of the Company, no facts do or will exist with
respect to such Class B Member that will deprive the Company of an
exemption from the Investment Company Act of 1940 by reason of
Section 3(c)(1) thereof; and
(xi) at the time of its investment in the Company and at all
times while it remains a Member, such Class B Member does not and
will not constitute an employee benefit plan (as defined in
Section 3(3) of ERISA), or a plan (as defined in Section 4975(e)
of the Code), or a trustee of any such plan acting on behalf of
such plan, or an entity whose underlying assets include plan
assets by reason of a plan's investment in the entity other than a
governmental plan (as defined in Section 3(32) of ERISA or Section
414(d) of the Code); and if it constitutes a governmental plan,
such Class B Member does not treat itself as subject to the
Department of Labor Regulations Section 2510.3-101 or interpret
applicable state law as incorporating similar rules.
3.03 DISPOSITIONS OF MEMBERSHIP INTERESTS. (a) GENERAL RESTRICTION. A
Member may not Dispose of all or any portion of its Membership Interest except
by complying with all of the following requirements: (i) such Member must obtain
the consent of the other Members; provided, however, that no such consent shall
be required for a Disposition of a Membership Interest by (A)
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the Class A Member or ECT to Enron or any of its wholly-owned Affiliates or (B)
the Class A Member or ECT if, in connection therewith, the Membership Interest
of Investor (and, at the election of ECT, the Membership Interest of ECT) is
redeemed by the Company or acquired by the Class A Member, Enron, an Affiliate
of the Class A Member or Enron, or a third party designated by the Class A
Member in accordance with Exhibit B; (ii) such Member must comply with the
requirements of Section 3.03(c), Section 3.08 and, if the Assignee is to be
admitted as a Member, Section 3.03(b) and (iii) such Disposition must not cause
any power plant in which the Company owns a direct or indirect interest to lose
its status as a "qualifying facility" under PURPA, unless the Class A Member
determines in its reasonable discretion that such loss of "qualifying facility"
status under PURPA would not materially adversely affect such facility, the
Company or its Members. (References in this Section 3.03 to Dispositions of a
"Membership Interest" shall also refer to Dispositions of a portion of a
Membership Interest.) Any attempted Disposition of a Membership Interest, other
than in strict accordance with this Section 3.03, shall be, and is hereby
declared, null and void ab initio. The Members agree that a breach of the
provisions of this Section 3.03 may cause irreparable injury to the Company and
to the other Members for which monetary damages (or other remedy at law) are
inadequate in view of (A) the complexities and uncertainties in measuring the
actual damages that would be sustained by reason of the failure of a Member to
comply with such provision and (B) the uniqueness of the Company's business and
the relationship among the Members. Accordingly, the Members agree that the
provisions of this Section 3.03 may be enforced by specific performance.
(b) ADMISSION OF ASSIGNEE AS A MEMBER. An Assignee has the right to be
admitted to the Company as a Member, with the Membership Interest so transferred
to such Assignee, only if (i) the Disposing Member making the Disposition has
granted the Assignee either (A) the Disposing Member's entire Membership
Interest or (B) the express right to be so admitted; and (ii) such Disposition
is effected in strict compliance with this Section 3.03.
(c) REQUIREMENTS APPLICABLE TO ALL DISPOSITIONS AND ADMISSIONS. In
addition to the requirements set forth in Sections 3.03(a), 3.03(b) and 3.08 any
Disposition of a Membership Interest and any admission of an Assignee as a
Member shall also be subject to the following requirements, and such Disposition
(and admission, if applicable) shall not be effective unless such requirements
are complied with; provided, however, that the non-Disposing Members, in their
sole and absolute discretion, may waive any of the following requirements:
(i) DISPOSITION DOCUMENTS. The following documents must be
delivered to the non-Disposing Members and must be reasonably
satisfactory, in form and substance, to the non-Disposing Members:
(A) DISPOSITION INSTRUMENT. A copy of the instrument pursuant
to which the Disposition is effected.
(B) RATIFICATION OF THIS AGREEMENT. An instrument, executed by
the disposing Member and its Assignee, containing the following
information and agreements, to the extent they are not contained in
the instrument described in Section 3.03(c)(i)(A): (I) the notice
address of the Assignee; (II) the portion of the Membership
Interest to be held after the Disposition by the Disposing Member
and its Assignee (which together must total the Membership Interest
of the Disposing
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Member before the Disposition); (III) the Assignee's ratification
of this Agreement and agreement to be bound by it, and its
affirmation that the representations and warranties in Section 3.02
are true and correct with respect to it; and (IV) representations
and warranties by the Disposing Member and its Assignee that the
Disposition and admission are being made in accordance with all
applicable Laws.
(C) SECURITIES LAW OPINION. Unless the Membership Interest
subject to the Disposition is registered under the Securities Act
and any applicable state securities Law, a favorable opinion of the
Company's legal counsel, or of other legal counsel acceptable to
the non-Disposing Members (which in the case of Investor, may be
its internal counsel), to the effect that the Disposition and
admission are being made pursuant to a valid exemption from
registration under those Laws and in accordance with those Laws;
provided, however, that this Section 3.03(c)(i)(c) shall not apply
to a Disposition by the Class A Member to one of its Affiliates.
(ii) PAYMENT OF EXPENSES. The Disposing Member and its Assignee
shall pay, or reimburse the Company for, all reasonable costs and
expenses incurred by the Company in connection with the Disposition and
admission, including the reasonable legal fees incurred in connection
with the legal opinion referred to in Section 3.03(c)(i)(C), on or
before the tenth Day after the receipt by that Person of the Company's
invoice for the amount due.
(iii) NO RELEASE. No Disposition of a Membership Interest shall
effect a release of the Disposing Member from any liabilities to the
Company or the other Members arising from events occurring prior to the
Disposition.
(d) If Investor is required by law or regulation enacted or adopted or
court decision rendered following the Effective Date to divest itself of all or
any part of its Membership Interest and delivers to the Company an opinion of
legal counsel reasonably acceptable to the Class A Member (which may be
Investor's internal counsel) to that effect, then subject to the provisions of
this Section 3.03(d), Investor may assign all or that part of its Membership
Interest to the Class A Member or its designee or to a third party (which may
include another Member) reasonably acceptable to the Class A Member at a price
to be mutually determined between Investor and the Class A Member or such
designee or third party, as applicable. If within 120 days following the
occurrence of an event specified in this Section 3.03(d), Investor is unable to
make such assignment on terms reasonably acceptable to it, the Company will
redeem or (at the election of the Class A Member) Enron, an Affiliate of Enron
or a third party designated by Enron will purchase, the Membership Interest of
Investor (and, at the election of the Class A Member, the Membership Interest of
ECT) in accordance with Exhibit B.
(e) (i) If any of the representations set forth in Section 3.02(f)
(ix), (x) or (xi) becomes false with respect to any Class B Member, such Class B
Member, as soon as practicable after the occurrence of any event that makes such
representation untrue (a "Trigger Event"), shall assign all of its Membership
Interest, effective for all purposes as of the close of Company business on the
day prior to the occurrence of the Trigger Event (the "Repurchase Date"), to any
Person (which may
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include another Class B Member) reasonably acceptable to the Class A Member. If
the Disposition of the Membership Interest of such Class B Member has not been
effected on or before the expiration of 60 days following the Trigger Event, the
Class A Member shall have the option, exercisable by notice to such Class B
Member on or before the 90th day following the Trigger Event, to purchase (or to
cause one of its Affiliates or a third party designated by it to purchase) the
Membership Interest of such Class B Member, effective as of the Repurchase Date,
at the higher of (A) the price determined in accordance with Exhibit B and (B)
the cash price offered for such Membership Interest by a third party unrelated
to any Member pursuant to a bona fide written offer therefor executed by that
third party, which offer does not contain any financing condition (other than
customary conditions in a firm commitment letter from a responsible financial
institution), and a copy of which offer must have been delivered to the Class A
Member on or before the 75th day following the occurrence of such Trigger Event.
On the third Business Day following the determination of the price in accordance
with Exhibit B, the Class A Member or its designated Affiliate or third party
shall pay to the owner of such Membership Interest the price therefor determined
in accordance with this Section 3.02(e)(i) and the consideration described in
Section 3.02(e)(ii), whereupon that Membership Interest shall become the
property of the Class A Member or its designated Affiliate or third party, and
such other Class B Member shall cease to be a Member, all effective as of the
Repurchase Date.
(ii) The purchase price for any Membership Interest acquired by the
Class A Member or its designated Affiliate or third party upon the exercise of
the option granted in Section 3.03(e)(i) shall be payable in cash.
(iii) Notwithstanding any purchase of its Membership Interest pursuant
to Section 3.03(e)(i), any Class B Member or former Class B Member whose
representations given in Section 3.02(f) (ix), (x) or (xi) became false shall be
liable to the Company and the Class A Member for any damages caused to the
Company, the Class A Member or any Affiliate of either thereof arising out of or
related to any such representation being false at any period.
3.04 CREATION OF ADDITIONAL MEMBERSHIP INTERESTS. Additional Membership
Interests may be created and issued to existing Members or to other Persons, and
such other Persons may be admitted to the Company as Members, with the unanimous
consent of the existing Members, on such terms and conditions as the existing
Members may unanimously determine at the time of admission. The terms of
admission or issuance may provide for the creation of different classes or
groups of Members having different rights, powers, and duties. The Class A
Member may reflect the creation of any new class or group in an amendment to
this Agreement indicating the different rights, powers, and duties, and such an
amendment need be executed only by the Class A Member (if the consent described
in the first sentence of this Section 3.04 has already been obtained). Any such
admission is effective only after the new Member has executed and delivered to
the Members an instrument containing the notice address of the new Member, the
new Member's ratification of this Agreement and agreement to be bound by it, and
its affirmation that the representations and warranties in Section 3.02 are true
and correct with respect to it. The provisions of this Section 3.04 shall not
apply to Dispositions of Membership Interests or admissions of Assignees in
connection therewith, such matters being governed by Section 3.03.
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3.05 ACCESS TO INFORMATION. Each Member shall be entitled to receive
any information that it may reasonably request concerning the Company; provided,
however, that this Section 3.05 shall not obligate the Company or any Member to
create any information that does not already exist at the time of such request
(other than to convert existing information from one medium to another, such as
providing a printout of information that is stored in a computer database). Each
Member shall also have the right, upon reasonable notice, and at all times
during usual business hours to inspect the assets of the Company and to audit,
examine and make copies of the books of account and other records of the
Company. Such right may be exercised through any agent or employee of such
Member designated in writing by it or by an independent public accountant,
attorney or other consultant so designated. The Member making the request shall
bear all costs and expenses incurred in any inspection, examination or audit
made on such Member's behalf. Confidential information obtained pursuant to this
Section 3.05 shall be subject to the provisions of Section 3.06.
3.06 CONFIDENTIAL INFORMATION. (a) The Members acknowledge that, from
time to time, they may receive information from or regarding the Company, the
Class A Member, Enron or Enron's Affiliates (each a "Subject Person") in the
nature of trade secrets or that otherwise is confidential, the release of which
may be damaging to the Subject Person or to Persons with which it does business.
Unless the Subject Person (the Class A Member if the Company is the Subject
Person) consents otherwise, each Member shall hold in strict confidence and not
use (except for matters involving the Company) any information it receives
regarding the Subject Person that is identified as being confidential (and if
that information is provided in writing, that is so marked) and may not disclose
it to any Person other than another Member, except for disclosures (i) required
by Law or applicable stock exchange regulations (but the Member must notify the
Subject Person (the Class A Member if the Company is the Subject Person)
promptly of any request for that information, before disclosing it if
practicable), (ii) to advisers or representatives of the Member or Persons to
which that Member's Membership Interest may be Disposed as permitted by this
Agreement, but only if the recipients have agreed to be bound by the provisions
of this Section 3.06, or (iii) of information that is publicly available or that
such Member also has received from a source independent of the Subject Person
that the Member reasonably believes obtained that information and disclosed it
to that Member without breach of any obligation of confidentiality. The Members
acknowledge that breach of the provisions of this Section 3.06 may cause
irreparable injury to the Subject Person for which monetary damages are
inadequate, difficult to compute, or both. Accordingly, the Members agree that
the provisions of this Section 3.06 may be enforced by specific performance,
including specifically through injunctive relief. The provisions of this Section
3.06 may be specifically enforced by any applicable Subject Person.
(b) The provisions of this Section 3.06 shall terminate on the earlier
of (i) the second anniversary of the end of the Term and (ii) with respect to
any Member that ceases to be a Member, the second anniversary of the date such
Member ceases to be a Member.
3.07 LIABILITY TO THIRD PARTIES. No Member shall be liable for the
debts, obligations or any other liabilities of the Company of whatever nature,
whether now existing or arising in the future.
3.08 CERTIFICATES. (a) Certificates ("Certificates") evidencing the
Membership Interests shall be in the form attached as Exhibit C. The Company
shall issue to each Member a Certificate
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certifying the Membership Interest (and the class and Sharing Ratio of such
Membership Interest) held by such Member. Certificates shall be consecutively
numbered and shall be entered in the books and records of the Company as they
are issued and shall exhibit the holder's name.
(b) The Company shall keep or cause to be kept on behalf of the Company
a register that will provide for the registration and transfer of Membership
Interests. The Company shall not recognize transfers of Membership Interests
unless the same are effected in compliance with Section 3.03 and in the manner
described in this Section 3.08. Upon surrender for registration of transfer of
any Certificate, and subject to the provisions of Section 3.08(c), the Company
shall issue, in the name of the holder or the designated Assignee or Assignees,
as required pursuant to the Record Holder's instructions, one or more new
Certificates evidencing the same class and the same aggregate Sharing Ratio of
Membership Interest as was evidenced by the Certificate so surrendered.
(c) The Company shall not recognize any transfer of a Membership
Interest until the Certificate evidencing such Membership Interest is
surrendered to the Company for registration of transfer and the requirements of
Section 3.03 have been satisfied. No charge shall be imposed for such transfer;
provided, however, that, as a condition to the issuance of any new Certificate
under this Section 3.08, the Company may require the payment of a sum sufficient
to cover any tax or other Governmental charge that may be imposed with respect
thereto.
(d) If the Assignee has the right, pursuant to Section 3.03(b), to be
admitted to the Company as a Member, such Assignee shall become a Member when
such transfer and admission is reflected in the books and records of the
Company.
(e) Each distribution in respect of a Membership Interest shall be paid
by the Company only to the Record Holder thereof as of the date of such
distribution, unless otherwise directed by the Record Holder. Such payment shall
constitute full payment and satisfaction of the Company's liability in respect
of such payment, regardless of any claim of any Person who may have an interest
in such payment by reason of assignment or otherwise.
(f) If any mutilated Certificate is surrendered to the Company, then
the Company shall issue a new Certificate evidencing the same class and Sharing
Ratio of Membership Interest as the Certificate so surrendered. Upon delivery by
the Record Holder of an affidavit, in form and substance satisfactory to the
Company, that a previously issued Certificate has been lost, destroyed or
stolen, the Company shall issue a new Certificate evidencing the same class and
Sharing Ratio of Membership Interest as the Certificate that was lost, destroyed
or stolen.
3.09 PUT AND CALL. (a) Investor may at its option require the Class A
Member to purchase (which purchase may, at the option of the Class A Member, be
made through a redemption by the Company or a purchase by the Class A Member, an
Affiliate of the Class A Member or a third party designated by the Class A
Member) all (but not part) of Investor's Membership Interest effective on a date
(that date or any date similarly designated under Section 3.09(c) called the
"Option Exercise Date") that is (i) the fifth anniversary of the Effective Date
or (ii) the first day of any calendar year thereafter, as provided in this
Section 3.09. To exercise this option, Investor must give the Class A Member
notice of the exercise (an "Option Exercise Notice") on or before the 180th day
prior to the Option Exercise Date.
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(b) Promptly after receipt of an Option Exercise Notice from Investor,
the Class A Member shall notify ECT in writing of the receipt of the Option
Exercise Notice and shall afford ECT the option, exercisable for a period of
fifteen Business Days following receipt of such notice from the Class A Member,
to (i) require the Class A Member to purchase (which purchase may, at the option
of the Class A Member, be made through a redemption by the Company or a purchase
by the Class A Member, an Affiliate of the Class A Member or a third party
designated by the Class A Member) all (but not part) of ECT's Membership
Interest effective on the Option Exercise Date, or (ii) remain as a Class B
Member of the Company. A failure to respond to the notice given by the Class A
Member within the fifteen Business Day period described above shall constitute
an election by ECT to remain a Class B Member of the Company.
(c) The Class A Member may at its option cause the Company to redeem
from Investor, or require Investor to sell to the Class A Member (or an
Affiliate of the Class A Member or a third party designated by the Class A
Member), all (but not part) of such Investor's Membership Interest effective on
an Option Exercise Date that is (i) the fifth anniversary of the Effective Date
or (ii) the first day of any calendar year thereafter, as provided in this
Section 3.09. To exercise this option, the Class A Member must give Investor
notice of the exercise on or before the 180th day prior to the Option Exercise
Date.
(d) The price for any redemption or purchase and sale of a Membership
Interest under this Section 3.09 shall be the amount determined in accordance
with Exhibit B. The purchase price shall be payable in cash. On the Option
Exercise Date (or if that day is not a Business Day, on the next succeeding
Business Day), the Company, the Class A Member (or its designated Affiliate or
third party) shall pay the redemption or purchase price to the applicable Class
B Member, and if such interest is purchased, the Class A Member (or its
designated Affiliate or third party) automatically shall become the owner of
that Membership Interest and such Class B Member shall cease to be a Member in
the Company, effective as of the Option Exercise Date.
ARTICLE 4
CAPITAL CONTRIBUTIONS
4.01 INITIAL CAPITAL CONTRIBUTIONS. Each Member shall make the
following initial Capital Contributions:
(a) On the Effective Date, Investor shall make a Capital Contribution
by execution of the Investor Guaranty. Investor agrees that, as between Investor
and the Company, Investor shall be responsible for the payment to the Senior
Lenders of the principal of and interest on the Tranche A-2 Bridge Advances as
provided in the Investor Guaranty. The Members agree that the value of the
Capital Contribution made by Investor is $25,000,000.
(b) Within one Day after the Effective Date, ECT, at its option, shall
make a contribution to the Company of (i) $994,800.01 plus the Bayonne Interest,
and the Company shall assume ECT's obligations under the Bayonne Seller Notes,
pursuant to assignment documentation acceptable to ECT and to the other Members,
or (ii) $25,000,000. The Members agree that the value of the Capital
Contribution to be made by ECT is $25,000,000.
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4.02 SUBSEQUENT CAPITAL CONTRIBUTIONS. (a) On the earliest to occur of
(i) the Offering Date, (ii) the Bridge Maturity Date and (iii) the date such
contribution is required under the Equity Subscription Agreement, JEDI II shall
make an additional Capital Contribution in the amount of $80,000,000; provided,
however, that if the Net Offering Proceeds exceed the sum of (x) the Class B
Preference Amount for both Class B Members and (y) the full amount of the
Subordinated Obligations, then the additional Capital Contribution required
under this Section 4.02(a) shall be reduced by the amount of such excess.
(b) Except as provided in Section 4.02(a), no Member shall have any
obligation to make any additional Capital Contributions.
(c) No Class B Member may make any additional Capital Contributions
without the consent of the Class A Member. A Class A Member may make additional
Capital Contributions (i) without the consent of any other Member and (ii)
without offering to any other Member the opportunity to make such Capital
Contributions.
4.03 RETURN OF CONTRIBUTIONS. Except as expressly provided herein, a
Member is not entitled to the return of any part of its Capital Contributions. A
Member is not entitled to be paid interest in respect of its Capital
Contributions. An unrepaid Capital Contribution is not a liability of the
Company or of any Member. A Member is not required to contribute or to lend any
cash or assets to the Company to enable the Company to return any Member's
Capital Contributions.
4.04 LOANS. No Member may make any loans to the Company without the
consent of the Class A Member; provided, however, that subject to Section
6.01(b), the Company may obtain loans from the Class A Member, its Affiliates or
any other Persons (a) without the consent of any other Member, (b) without
offering to any other Member or any Affiliate of another Member the opportunity
to make such loans, and (c) without accounting to, or sharing the results or
profits of such contracts or arrangements with, the Company, its subsidiaries,
any other Member or any Affiliate of another Member. Notwithstanding the
foregoing, any such loan must satisfy the following requirements: (a) it must
not subject any Member to personal liability for its repayment (unless the
Member expressly agrees to guarantee the loan); and (b) if the loan is made by
the Class A Member or its Affiliates, its terms (including the interest rate)
must be no less favorable to the Company than the Company could have obtained
from Persons who are not Affiliated with the Members. A loan described in this
Section 4.04 shall bear interest at a rate determined by the Class A Member from
the date of the advance until the date of payment and is not a Capital
Contribution.
4.05 CAPITAL ACCOUNTS. A Capital Account shall be established and
maintained for each Member. Each Member's Capital Account shall be increased by
(a) the amount of money contributed by that Member to the Company, (b) the fair
market value of property (including the Investor Guaranty) contributed by that
Member to the Company (net of liabilities secured by such contributed property
that the Company is considered to assume or take subject to under Section 752 of
the Code), and (c) allocations to that Member of Company income and gain (or
items thereof), including income and gain exempt from tax and income and gain
described in Treasury Regulation Section 1.704-1(b)(2)(iv)(g), but excluding
income and gain described in Treasury Regulation Section 1.704-1(b)(4)(i), and
shall be decreased by (d) the amount of money distributed to that Member (or in
the case of the Investor, amounts paid to the Senior Lenders on behalf of the
Investor)
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by the Company, (e) the fair market value of property distributed to
that Member by the Company (net of liabilities secured by such distributed
property that such Member is considered to assume or take subject to under
Section 752 of the Code), (f) allocations to that Member of expenditures of the
Company described (or treated as described) in Section 705(a)(2)(B) of the Code,
and (g) allocations of Company loss and deduction (or items thereof), including
loss and deduction described in Treasury Regulation Section
1.704-1(b)(2)(iv)(g), but excluding items described in (f) above and loss or
deduction described in Treasury Regulation Section 1.704-1(b)(4)(i) or
1.704-1(b)(4)(iii). The Members' Capital Accounts shall also be maintained and
adjusted as permitted by the provisions of Treasury Regulation Section
1.704-1(b)(2)(iv)(f) and as required by the other provisions of Treasury
Regulation Sections 1.704-1(b)(2)(iv) and 1.704-1(b)(4), including adjustments
to reflect the allocations to the Members of depreciation, depletion,
amortization, and gain or loss as computed for book purposes rather than the
allocation of the corresponding items as computed for tax purposes, as required
by Treasury Regulation Section 1.704-1(b)(2)(iv)(g). Thus, the Members' Capital
Accounts shall be increased or decreased to reflect a revaluation of the
Company's property on its books based on the fair market value of the Company's
property on the date of adjustment immediately prior to (A) the contribution of
money or other property to the Company by a new or existing Member as
consideration for a Membership Interest or an increased Sharing Ratio, (B) the
distribution of money or other property by the Company to a Member as
consideration for a Membership Interest, or (C) the liquidation of the Company.
Upon the Disposition of all or a portion of a Membership Interest, the Capital
Account of the Disposing Member that is attributable to such Membership Interest
shall carry over to the Assignee in accordance with the provisions of Treasury
Regulation Section 1.704-1(b)(2)(iv)(l).
ARTICLE 5
DISTRIBUTIONS
5.01 DISTRIBUTIONS. Distributions to the Members shall be made as
follows:
(a) From the Effective Date until the earlier to occur of (i) the
Offering Date and (ii) the Bridge Maturity Date, the Company shall (A) make a
distribution to Investor from time to time by paying to the Senior Lenders, on
Investor's behalf, any accrued and unpaid interest on the Tranche A-2 Bridge
Note then due and payable (each an "Interest Payment"), thereby reducing
Investor's obligations under the Investor Guaranty by a like amount, and (B)
make a distribution of any cash it is permitted to distribute under the Loan
Documents (1) to the Class B Members (other than the Investor) in an amount
equal to the amount described in (A), and (2) to the Class B Members, pro rata,
up to the accrued but unpaid portion of the amount specified in clauses (ii) and
(iii) of the definition of "Class B Preference Amount" less, amounts described
in clauses (A) and (B)(1) of this Section 5.01(a).
(b) On (or within one Day after) the Offering Date, the Company shall
distribute to each of the Class B Members 25% of the Net Offering Proceeds until
each Class B Member has received the Class B Preference Amount; provided,
however, that Investor directs the Company to pay up to the full amount of any
such distribution, on Investor's behalf, (i) to the Senior Lenders to the extent
necessary to pay any principal of and interest on the Tranche A-2 Bridge Note
then outstanding and
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(ii) to the Company to the extent necessary to reimburse it for any principal of
and interest on the Tranche A-2 Bridge Note otherwise paid by the Company on
Investor's behalf.
(c) From and after the Bridge Maturity Date (and after the Offering
Date if the Offering Date has occurred and each of the Class B Members has not
received distributions equal to the Class B Preference Amount), the Company
shall distribute, at such times as may be determined by the Class A Member but
no less often than once each calendar quarter, any cash it is permitted to
distribute under the Loan Documents (other than reasonable reserves and other
amounts the Class A Member determines are necessary or appropriate for the
expected business needs of the Company) to the Class B Members, pro rata, until
each Class B Member has received the Class B Preference Amount.
(d) After each of the Class B Members has received distributions equal
to the Class B Preference Amount, the Company shall distribute, at such times as
may be determined by the Class A Member, any cash it is permitted to distribute
under the Loan Documents (other than reasonable reserves and other amounts the
Class A Member determines are necessary or appropriate for the expected business
needs of the Company) to the Class A Member until the Class A Member has
received distributions equal the Class A Preference Amount.
(e) After the Class A Member has received distributions equal to the
Class A Preference Amount, the Company shall distribute, at such times as may be
determined by the Class A Member, any cash it is permitted to distribute under
the Loan Documents (other than reasonable reserves and other amounts the Class A
Member determines are necessary or appropriate for the expected business needs
of the Company) to the Members in accordance with the Sharing Ratios.
5.02 DISTRIBUTIONS ON DISSOLUTION AND WINDING UP. Upon the dissolution
and winding up of the Company, all available proceeds distributable to the
Members as determined under Section 10.02 shall be distributed as follows:
(a) The proceeds shall be distributed first to the Class B Members
until each Class B Member has received the Class B Preference Amount.
(b) After the Class B Members have received distributions equal to the
Class B Preference Amount, proceeds shall be distributed to the Class A Members
until the Class A Members have received distributions equal the Class A
Preference Amount.
(c) After the Class A Members have received distributions equal to the
Class A Preference Amount, proceeds shall be distributed in accordance with the
Sharing Ratios.
5.03 ALLOCATIONS. (a) Except as may be required by Code Section 704(c)
and Treasury Regulation Section 1.704-1(b)(2)(iv)(d)(3), Net Income shall be
allocated as follows:
(i) First, to the Class A Member until the cumulative amount of
Net Income allocated pursuant to this Section 5.03(a)(i) for the current taxable
period and all prior taxable periods equals the cumulative amount of Net Loss,
if any, allocated pursuant to Section 5.03(b)(iv) for all prior taxable periods.
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(ii) Next, to the Class B Members until the cumulative amount of
Net Income allocated pursuant to this Section 5.03(a)(ii) for the current
taxable period and all prior taxable periods equals, the sum of the amounts
described in clauses (ii), (iii) and (iv) of the definition of Class B
Preference Amount, plus the cumulative amount of Net Loss, if any, allocated
pursuant to Section 5.03(b)(iii) for all prior taxable periods;
(iii) Next, to the Class A Member until the cumulative amount of
Net Income allocated pursuant to this Section 5.03(a)(iii) for the current
taxable period and all prior taxable periods equals the amount described in
clause (ii) of the definition of Class A Preference Amount, plus the cumulative
amount of Net Loss, if any, allocated pursuant to Section 5.03(b)(ii) for all
prior taxable periods ; and
(iv) Thereafter, to the Members in accordance with the Sharing
Ratios.
(b) Except as may be required by Code Section 704(c) and Treasury
Regulation Section 1.704-1(b)(2)(iv)(d)(3), Net Loss shall be allocated as
follows:
(i) First, to the Members in accordance with the Sharing Ratios
until the cumulative amount of Net Loss allocated pursuant to this Section
5.03(b)(i) for the current taxable period and all prior taxable periods equals
the cumulative amount of Net Income, if any, allocated pursuant to Section
5.03(a)(iv) for all prior taxable periods;
(ii) Next, to the Class A Member until the cumulative amount of
Net Loss allocated pursuant to this Section 5.03(b)(ii) for the current taxable
period and all prior taxable periods equals the cumulative amount of Net Income,
if any, allocated pursuant to Section 5.03(a)(iii) for all prior taxable
periods;
(iii) Next, to the Class B Members until the cumulative amount of
Net Loss allocated pursuant to this Section 5.03(b)(iii) for the current taxable
period and all prior taxable periods equals, the cumulative amount of Net
Income, if any, allocated pursuant to Section 5.03(a)(ii) for all prior taxable
periods; and
(iv) Thereafter, to the Class A Member.
5.04 TRUE-UP. In order to ensure that, in the aggregate, no "electric
utility company" or affiliate of an "electric utility company," each as defined
in the Federal Power Act (each, a "Utility Affiliate"), receives in excess of a
fifty percent (50%) derivative share of the "stream of benefits" (as such term
is used by the Federal Energy Regulatory Commission in applying the "QF
Ownership Criteria") from the Company, to the extent that any provision of this
Agreement results or has resulted in an allocation or payment to the Utility
Affiliate or to the extent that any payment under any other agreement is
determined or has been determined to be included in the "stream of benefits"
attributable to the Utility Affiliate such that the portion of the "stream of
benefits" attributable to the Utility Affiliate would exceed fifty percent (50%)
of the aggregate "stream of benefits" of the Company, then unless the Class A
Member determines in its reasonable discretion that failure to satisfy the QF
Ownership Criteria would not materially adversely affect the Company or its
Members, the Utility Affiliate shall pay over to the other Members that are not
Utility Affiliates (in
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proportion to their respective Sharing Ratios) such amounts as is necessary so
that the portion so attributable to the Utility Affiliate shall not exceed fifty
percent (50%).
ARTICLE 6
MANAGEMENT
6.01 MANAGEMENT OF COMPANY AFFAIRS. (a) Except for the day-to-day
management duties delegated to the officers of the Company pursuant to Section
6.04 (which the Class A Member shall oversee) and for situations in which the
approval of other Members is expressly required by this Agreement or by
non-waivable provisions of applicable Law, the Class A Member shall have full,
complete, and exclusive authority to manage and control the business and affairs
of the Company.
(b) Notwithstanding the provisions of Sections 6.01(a), 6.04 and
6.02(c), (i) until a Class B Member has received distributions (including deemed
distributions) equal to the Class B Preference Amount, the Company may do any of
the following only with the consent of such Class B Member:
(A) enter into, amend or waive any material rights of
the Company under any material agreement between the Company
and the Class A Member, Enron or any Affiliate of Enron;
(B) indemnify the Class A Member, Enron or any
Affiliate of Enron or advance funds to the Class A Member,
Enron or any Affiliate of Enron in accordance with Section
6.03; or
(C) settle any claim of the Company against the Class
A Member, Enron or any Affiliate of Enron other than a claim
of less than $250,000 in the aggregate or settle any claim by
the Class A Member, Enron or any Affiliate of Enron against
the Company other than claims aggregating less than $250,000
per annum; and
(ii) the Company may do any of the following only with the
consent of the Class B Members:
(A) engage in any business other than as described in
Section 2.04;
(B) amend the Senior Loan Documents or the Subordinated
Note Documents if, as a result thereof, the obligations or
liabilities of any of the Class B Members (whether as guarantors,
pledgors of security or otherwise) thereunder would be increased;
or
(C) merge or consolidate with or into another limited
liability company or other business entity, or enter into an
agreement to do so;
provided, however, that if Investor fails to provide its consent to any action
contemplated by Section 6.01(b)(ii)(C), at the election of the Class A Member,
the Company may redeem, or the Class A
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Member, Enron, an Affiliate of the Class A Member or Enron, or a third party
designated by the Class A Member may purchase, the Membership Interest of
Investor (and, at the election of the Class A Member, the Membership Interest of
ECT) in accordance with Exhibit B.
(c) The Class A Member shall have the right to request that the Class B
Members grant any consent or approval or make any designation regarding the
matters referred to in this Section 6.01, and any Class B Member may, but shall
have no obligation to, grant its consent, approval or designation. In any
request to another Member for its consent, approval or determination, the Class
A Member may specify a response period that is reasonable and that ends no
earlier than the 10th Business Day following the date on which the Member whose
consent, approval or determination is sought receives the request as described
in this Section 6.01(c). Each Class B Member agrees that in the event the Class
A Member requests its consent, approval or determination regarding a matter,
such Class B Member will respond within the response period specified in the
notice. In the event the Class A Member follows such procedures and a Class B
Member fails to respond within the response period specified in the notice given
in accordance with this Section 6.01(c), the request of the Class A Member will
be deemed to have been denied by such Class B Member. In the event the Class B
Members grant a consent or approval or make a designation pursuant to this
Section 6.01(c), the Class A Member shall take action in a manner consistent, or
refrain from taking action pursuant to this Agreement in a manner inconsistent,
with such consent, approval or designation.
(d) If requested by any Class B Member, the Company shall assert a
claim it may have against Enron or any Affiliate of Enron.
(e) No Member (other than the Class A Member) has the authority or
power to act for or on behalf of the Company, to do any act that would be
binding on the Company or to incur any expenditures on behalf of the Company.
(f) Any Person dealing with the Company, other than a Member, may rely
on the authority of the Class A Member or the officers of the Company in taking
any action in the name of the Company without inquiry into the provisions of
this Agreement or compliance with them, regard less of whether that action
actually is taken in accordance with the provisions of this Agreement.
(g)(i) For purposes of this provision, the following definitions
apply:
1. "CalPERS fiduciary" means the individuals listed in Schedule
1. Investor reserves the right to amend this list, upon notice
to the Contractor, and without amending this agreement.
2. "Contractor" includes the Company, as well as its directors,
officers and the persons specified on Schedule 2 (as well as
the successors to such persons, collectively the "Reporting
Parties").
3. "Gift" means anything for which no corresponding consideration
has been given, with a value over $10.
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4. "Political contribution" means a "contribution" as defined by
the Political Reform Act (Cal. Gov. Code sec. 81000 et seq.,
sec. 82015), or any contribution made in connection with a
CalPERS Board member election provided for in Cal. Gov. Code
sec. 20090(g).
(ii) By January 31 of each year that CalPERS is a Member, the
Contractor (on behalf of itself and its directors, officers and the Reporting
Parties) shall disclose in writing to the CalPERS Chief Executive Officer
whether the Contractor provided, or was requested to provide, during the
previous calendar year, any gifts or political or other contributions to a
CalPERS fiduciary, or to a candidate for California State Treasurer or
Controller. For each solicitation, the disclosure shall include the following
information: the date of the solicitation; the name of the individual who made
the solicitation; the amount solicited; the manner of solicitation; and the
purpose of the solicitation. For gifts and contributions provided, the
disclosure shall include: the nature of the item provided (gift or type of
contribution); a brief description of the item provided; the approximate value;
the date provided; and the recipient.
(iii) The Company represents and warrants to Investor that the officers
and directors of the Company and the Reporting Parties constitute all of the
persons authorized to act for the Company with regard to its relationship with
CalPERS. The Company agrees to amend or supplement Schedule 2 from time to time
so long as CalPERS is a Member so that the officers and directors of the Company
and the Reporting Parties continue to constitute all the persons authorized to
act for the Company with regard to its relationship with CalPERS.
6.02 STANDARDS OF PERFORMANCE AND CONFLICTS OF INTEREST. (a) Except as
provided otherwise in this Agreement, the Class A Member (and Enron Capital
Management II Limited Partnership, its general partner ("ECM")) shall manage the
business and affairs of the Company and oversee the day-to-day management of the
Company by the officers of the Company as provided in Section 6.01 in good faith
and in accordance with prudent industry standards toward the best interests of
the Company. Each of the Class A Member and ECM is liable for errors or
omissions in performing its duties with respect to the Company only in the case
of breach or reckless disregard of fiduciary duties, gross negligence, willful
misconduct, fraud or material breach of this Agreement, but not otherwise, IT
BEING SPECIFICALLY AGREED THAT NEITHER OF THE CLASS A MEMBER NOR ECM IS LIABLE
FOR ITS OWN SIMPLE, PARTIAL, OR CONCURRENT NEGLIGENCE. In no event shall the
Class A Member or ECM be liable for any action or course of conduct approved or
consented to by the Class B Members or any action or course of conduct based on
a determination by the Class B Members, INCLUDING SPECIFICALLY MATTERS FOR WHICH
THE CLASS A MEMBER OR ECM WOULD BE LIABLE IN THE ABSENCE OF THIS SECTION 6.02,
SUCH AS ITS OWN SIMPLE, PARTIAL OR CONCURRENT NEGLIGENCE, absent a material
misstatement or omission or fraud in obtaining the approval; provided, that
notwithstanding the existence of a material misstatement or omission, in no
event shall the Class A Member or ECM be liable for any such action or course of
conduct if the Class A Member or ECM, as applicable, at the time of the Class B
Members' consent, approval or determination, did not know of, and in the
exercise of a standard of care not constituting bad faith, gross negligence,
willful misconduct or fraud could not have known of, the material misstatement
or omission. Each of the Class A Member and ECM shall devote such time and
effort to the duties described in Section 6.01 as is necessary to promote fully
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the interests of the Company. In no event shall the provisions of this Section
6.02 relieve the Class A Member or ECM from liability pursuant to the provisions
of any contract or transaction that may be entered into hereafter between the
Company and the Class A Member.
(b) A Member and its Affiliates may engage in, and possess interests
in, other businesses, activities, ventures, enterprises and investments of any
and every type and description (collectively, "Activities"), independently or
with others, including Activities in competition with the Company and its
subsidiaries, with no duty or obligation (express, implied, fiduciary or
otherwise) (i) to refrain from engaging in such Activities, (ii) to offer the
right to participate in such Activities to the Company, its subsidiaries, any
other Member or any Affiliate of another Member, or (iii) to account to, or to
share the results or profits of such Activities with, the Company, its
subsidiaries, any other Member or any Affiliate of another Member; and any
doctrines of non-competition, "company opportunity" or similar doctrines are
hereby expressly disclaimed. Without limiting the generality of the foregoing,
the Members recognize and agree that Enron and its Affiliates currently engage,
and may engage in the future, in various Activities that are the same or similar
to the Activities proposed to be engaged in by the Company and its subsidiaries.
(c) The Company may, and may permit any direct or indirect subsidiary
of the Company or other Person in which the Company owns, directly or
indirectly, an equity interest to, transact business with (including entering
into or modifying any contractual arrangements with) any Member or Affiliate of
a Member, provided, that unless the Class A Member determines in its reasonable
discretion that the loss of "qualifying facility" status under PURPA by the
power plants in which the Company owns a direct or indirect interest would not
materially adversely affect such facility, the Company or its Members, (i) the
terms of any such transactions with the Class A Member or one of its Affiliates
(including, for the purposes of this Section 6.02(c), Enron and any Affiliate
thereof) are comparable to, or at least as favorable to the Company or the
applicable subsidiary or other Person as, the terms of transactions at arms'
length between unaffiliated parties and (ii) if the transaction is with Enron or
any Affiliate thereof, the terms of the transaction have been approved by either
(A) Investor or (B) any Person that is (1) an equity interest holder in the
subsidiary or other Person that is a party to such transaction and (2) not an
"electric utility", "electric utility holding company", or a wholly or partially
owned subsidiary of either, within the meaning of PURPA. Any transaction between
the Company and a Member or its Affiliates that has been approved by the Class B
Members after full disclosure shall be deemed to have satisfied the standard set
forth in the previous sentence. Each Member hereby approves the entering into by
the Company of each of the agreements with Affiliates of Enron listed on
Schedule 3. A Member or Affiliate that transacts business with the Company owes
no duty to the Company or the other Members to exercise or to refrain from
exercising in any particular manner its rights or powers as a participant in
that transaction, including those arising under any contract with the Company,
and (subject to the proviso in the first sentence of this Section 6.02(c)) such
Member or such Affiliate of a Member may realize profits from that transaction.
(d) The Class B Members acknowledge that the Class A Member, Enron and
their respective Affiliates do not guarantee the performance of the Company or
the Class A Member or ECM. In the absence of gross negligence, willful
misconduct or fraud by the Class A Member or ECM in performing the duties
described in Section 6.01, neither Enron nor any other Affiliate of Enron (other
than the Class A Member and ECM) shall have any liability for the acts,
omissions or
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courses of conduct of the Company or the Class A Member or ECM. As a result of
the foregoing, Enron and its Affiliates (other than the Class A Member and ECM)
shall have NO LIABILITY FOR THE SIMPLE, PARTIAL OR CONCURRENT NEGLIGENCE OF THE
CLASS A MEMBER, ECM, ENRON OR ANY OF THEIR AFFILIATES in connection with the
acts, omissions or courses of conduct of the Company or the Class A Member or
ECM. Nothing herein shall prohibit a Class B Member or the Company from
asserting valid claims other than as provided in this Section 6.02. In no event
shall the provisions of this Section 6.02(d) relieve the Class A Member, ECM,
Enron or any of their respective Affiliates from liability pursuant to the
provisions of any contract or transaction that may be entered into hereafter
between the Company and Enron or any of its Affiliates.
(e) This Section 6.02 constitutes a modification and disclaimer of
duties and obligations (express, implied, fiduciary or otherwise) with respect
to the matters described in this Section 6.02, pursuant to Section 18-1101 of
the Act. The Members agree that the provisions of this Section 6.02 are
"express" and "conspicuous" for all purposes of applicable Law.
6.03 INDEMNIFICATION. (a) To the fullest extent permitted by Law, the
Company shall indemnify the officers of the Company and the Class A Member, ECM
and their respective officers, directors, employees, agents and controlling
Persons, and each Class B Member and its officers, directors, employees, agents
and controlling Persons (each, an "Indemnified Person"), on request by the
Indemnified Person, and hold each of them harmless from and against all losses,
costs, liabilities, damages and expenses (including reasonable costs of suit and
attorney's fees) any of them may incur as an officer, a Member of the Company or
as a controlling Person of such Member, in performing the obligations of an
officer, the Class A Member or ECM with respect to the Company, or in exercising
rights of a Class B Member, INCLUDING ANY MATTER ARISING OUT OF OR RESULTING
FROM THE INDEMNIFIED PERSON'S OWN SIMPLE, PARTIAL, OR CONCURRENT NEGLIGENCE,
except for any such loss, cost, liability, damage or expense primarily
attributable to the Indemnified Person's breach or reckless disregard of
fiduciary duties, gross negligence, willful misconduct, fraud or material breach
of this Agreement. If an Indemnified Person becomes involved in any action,
proceeding or investigation with respect to which indemnity may be available
under this Section 6.03, the Company may reimburse the Indemnified Person for
its reasonable legal and other expenses (including the cost of investigation and
preparation) as they are incurred, provided, that the Indemnified Person shall
promptly repay to the Company the amount of any such expense paid if it is
ultimately determined that the Indemnified Person was not entitled to
indemnification hereunder. Any amounts payable in respect of indemnification
hereunder shall be recoverable only from the assets of the Company.
(b) Promptly after receipt by an Indemnified Person of notice of any
claim or the commencement of any action with respect to which indemnity may be
available under this Section 6.03, the Indemnified Person shall, if a claim in
respect thereof is to be made against the Company under this Section 6.03,
notify the Company in writing of the claim or the commencement of the action;
provided, that the failure to notify the Company shall not relieve it from any
liability which it may have to an Indemnified Person other than under this
Section 6.03 except to the extent that the Company is prejudiced thereby. If any
such claim or action shall be brought against an Indemnified Person, and it
shall notify the Company thereof, the Company shall be entitled to participate
therein, and, to the extent that it wishes, to assume the defense thereof with
counsel reasonably satisfactory
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to the Indemnified Person. After notice from the Company to the Indemnified
Person of its election to assume the defense of such claim or action, the
Company shall not be liable to the Indemnified Person under this Sections 6.03
for any legal or other expenses subsequently incurred by the Indemnified Person
in connection with the defense thereof other than reasonable costs of
investigation; provided, that all of the Indemnified Persons shall have the
right to employ one counsel to represent them if, in the opinion of counsel to
the Indemnified Persons (which, in the case of Investor, may be its internal
counsel), there are available to them defenses not available to the Company and
in that event the fees and expenses of such separate counsel shall be paid by
the Company. In no event shall the Company be required to indemnify an
Indemnified Person with respect to amounts paid in settlement of a claim unless
such claim was settled with the consent of the Company.
6.04 OFFICERS; DAY-TO-DAY MANAGEMENT. (a) Officers of the Company may
be appointed, and may be removed and replaced, by the Class A Member, and such
officers shall have such titles, authority, duties and salary or other
compensation, if any, as the Class A Member shall determine. Each officer shall
hold office until his successor shall be duly designated or until his death or
earlier resignation or removal. Any officer may resign as such at any time.
(b) Subject to the policies and guidelines adopted by the Class A
Member and the other restrictions set forth in this Agreement, the Company's
officers shall have the full authority to and shall manage, control and oversee
the day-to-day business and affairs of the Company and shall perform all other
acts as are customary or incident to the management of such business and
affairs, which will include the general and administrative affairs of the
Company and the operation and maintenance of the Company's assets in accordance
with annual budgets approved by the Class A Member and the other provisions of
this Agreement.
6.05 MONITORING REPRESENTATIVE. (a) To facilitate granting consents and
approvals by Investor pursuant to Sections 6.01(b)(i)(A) and 6.02(c) (the
"Affiliate Approvals"), Investor may designate, by notice to the Class A Member,
a Person to serve as the Monitoring Representative. The duties of the Monitoring
Representative shall be as separately agreed between Investor and the Monitoring
Representative so designated. Prior to the appointment of the Monitoring
Representative or the designation of a successor Monitoring Representative,
Investor shall notify and shall consult with the Class A Member regarding the
identity of any such Monitoring Representative. The Class A Member shall have no
obligation to recognize or otherwise deal with any Monitoring Representative the
appointment of which or whom the Class A Member reasonably believes would
adversely affect the Company, and so notifies Investor in writing. After the
Class A Member objects as provided in the foregoing sentence to the appointment
of a Monitoring Representative, the Class A Member may deal solely with Investor
as to all matters related to Investor's status as a Class B Member until the
appointment of a substitute Monitoring Representative as to which or whom the
Class A Member does not so object. A Monitoring Representative shall serve in
that capacity until Investor notifies the Class A Member that such Person no
longer serves in that capacity and either designates a replacement or indicates
that no replacement will then be named.
(b) The Monitoring Representative shall have the power to exercise
those specific rights, responsibilities or decision making powers relating to
Affiliate Approvals granted to Investor as a Class B Member under this Agreement
as are designated by Investor to the Class A Member in
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writing from time to time. While a Monitoring Representative has been appointed
and is acting, all references herein to a Class B Member shall, as it pertains
to Investor, be deemed to be references to the Monitoring Representative in
respect of each area as is designated by Investor by notice thereof to the Class
A Member as herein provided. Any consent or approval relating to an Affiliate
Approval given or made by the Monitoring Representative under this Agreement and
consistent with the notice given by Investor as provided in this Section 6.05(b)
shall bind Investor as a Class B Member without further act or inquiry, absent
fraud or a material misstatement or omission in obtaining the consent and
approval. If a Monitoring Representative is designated, the Company shall
deliver notices with respect to Affiliate Approvals to the Monitoring
Representative at the same time and in the same manner as notice is required to
be given to Investor.
ARTICLE 7
TAXES
7.01 TAX RETURNS. The Company shall prepare and timely file all
federal, state and local tax returns required to be filed by the Company. The
Company shall bear the costs of the preparation and filing of its returns.
7.02 TAX ELECTIONS. The Company shall make and maintain the following
elections for tax purposes:
(a) to adopt the calendar year as the Company's taxable year;
(b) to adopt the accrual method of accounting and to keep a set of
the Company's books and records on such method for income tax purposes;
and
(c) any other election the Class A Member may deem appropriate.
7.03 TAX MATTERS MEMBER. The Class A Member shall be the "tax matters
partner" of the Company pursuant to Code Section 6231(a)(7) (the "Tax Matters
Member"). Any cost or expense incurred by the Tax Matters Member in connection
with its duties, including the preparation for or pursuance of administrative or
judicial proceedings, shall be paid by the Company.
ARTICLE 8
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
8.01 MAINTENANCE OF BOOKS. The Company shall keep or cause to be kept
at the principal office of the Company or at such other location the Company
deems appropriate complete and accurate books and records of the Company,
supporting documentation of the transactions with respect to the conduct of the
Company's business and minutes of the proceedings of its Members, and any other
books and records that are required to be maintained by applicable Law.
8.02 BANK ACCOUNTS. Funds of the Company shall be deposited in such
banks or other depositories as shall be designated from time to time by the
Company. All withdrawals from any
29
<PAGE> 34
such depository shall be made only as authorized by the Company and shall be
made only by check, wire transfer, debit memorandum or other written
instruction.
ARTICLE 9
DISSOLUTION, WINDING-UP AND TERMINATION
9.01 DISSOLUTION. The Company shall dissolve and its affairs shall be
wound up on the first to occur of the following events (each a "Dissolution
Event"):
(a) the unanimous consent of the Members; or
(b) entry of a decree of judicial dissolution of the Company under
Section 18-802 of the Act.
9.02 WINDING-UP AND TERMINATION. (a) On the occurrence of a Dissolution
Event, the Class A Member shall proceed diligently to wind up the affairs of the
Company and make final distributions as provided herein and in the Act. The
costs of winding up shall be borne as a Company expense. Until final
distribution, the Class A Member shall continue to operate the Company's assets
with the same power and authority it had prior to the Dissolution Event. The
steps to be accomplished by the Class A Member are as follows:
(i) as promptly as possible after dissolution and again after
final winding up, the Class A Member shall cause a proper accounting to
be made by a recognized firm of certified public accountants of the
Company's assets, liabilities, and operations through the last calendar
day of the month in which the dissolution occurs or the final winding
up is completed, as applicable;
(ii) the Class A Member shall discharge from the Company's funds
all of the debts, liabilities and obligations of the Company (including
all expenses incurred in winding up and any loans described in Section
4.04) or otherwise make adequate provision for payment and discharge
thereof (including the establishment of a cash escrow fund for
contingent liabilities in such amount and for such term as the Class A
Member may reasonably determine); and
(iii) all remaining assets of the Company shall be distributed to
the Members as follows:
(A) the Class A Member may sell any or all the Company's
assets, including to Members; and
(B) the Company's assets (including cash) shall be
distributed among the Members in accordance with Section 5.02;
provided, however, that no assets other than cash may be
distributed to Investor without its consent.
30
<PAGE> 35
(b) The distribution of cash or other assets to a Member in accordance
with the provisions of this Section 9.02 constitutes a complete return to the
Member of its Capital Contributions and a complete distribution to the Member of
its Membership Interest and all the Company's assets and constitutes a
compromise to which all Members have consented pursuant to Section 18-502(b) of
the Act. To the extent that a Member returns funds to the Company, it has no
claim against any other Member for those funds.
9.03 CERTIFICATE OF CANCELLATION. On completion of the distribution of
Company assets as provided herein, the Members (or such other Person or Persons
as the Act may require or permit) shall file a certificate of cancellation with
the Secretary of State of Delaware, cancel any other filings made pursuant to
Section 2.05, and take such other actions as may be necessary to terminate the
existence of the Company. Upon the filing of such certificate of cancellation,
the existence of the Company shall terminate (and the Term shall end), except as
may be otherwise provided by the Act or other applicable Law.
ARTICLE 10
GENERAL PROVISIONS
10.01 OFFSET. Whenever the Company is to pay any sum to any Member, any
Capital Contributions that Member owes the Company may be deducted from that sum
before payment.
10.02 NOTICES. Except as expressly set forth to the contrary in this
Agreement, all notices, requests or consents provided for or permitted to be
given under this Agreement must be in writing and must be delivered to the
recipient in person, by courier or mail or by facsimile or other electronic
transmission. A notice, request or consent given under this Agreement is
effective on receipt by the Member to receive it; provided, however, that a
facsimile or other electronic transmission that is transmitted after the normal
business hours of the recipient shall be deemed effective on the next Business
Day. All notices, requests and consents to be sent to a Member must be sent to
or made at the addresses given for that Member on Exhibit A, or such other
address as that Member may specify by notice to the other Members. Any notice,
request or consent to the Company must be given to all of the Members. Whenever
any notice is required to be given by Law, the Delaware Certificate or this
Agreement, a written waiver thereof, signed by the Person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
10.03 ENTIRE AGREEMENT; SUPERSEDING EFFECT. This Agreement constitutes
the entire agreement of the Members relating to the Company and the transactions
contemplated hereby and supersedes all provisions and concepts contained in all
prior contracts or agreements (including the Original Agreement) between the
Members with respect to the Company and the transactions contemplated hereby,
whether oral or written.
10.04 EFFECT OF WAIVER OR CONSENT. Except as otherwise provided in this
Agreement, a waiver or consent, express or implied, to or of any breach or
default by any Member in the performance by that Member of its obligations with
respect to the Company is not a consent or waiver to or of any other breach or
default in the performance by that Member of the same or any
31
<PAGE> 36
other obligations of that Member with respect to the Company. Except as
otherwise provided in this Agreement, failure on the part of a Member to
complain of any act of any Member or to declare any Member in default with
respect to the Company, irrespective of how long that failure continues, does
not constitute a waiver by that Member of its rights with respect to that
default until the applicable statute-of-limitations period has run.
10.05 AMENDMENT OR RESTATEMENT. This Agreement or the Delaware
Certificate may be amended or restated only by a written instrument executed
(or, in the case of the Delaware Certificate, approved) by all of the Members.
10.06 BINDING EFFECT. Subject to the restrictions on Dispositions set
forth in this Agreement, this Agreement is binding on and shall inure to the
benefit of the Members and their respective successors and permitted assigns.
10.07 GOVERNING LAW; SEVERABILITY. THIS AGREEMENT IS GOVERNED BY AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE,
EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE
OR THE CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION. In the
event of a direct conflict between the provisions of this Agreement and any
mandatory, non-waivable provision of the Act, such provision of the Act shall
control. If any provision of the Act provides that it may be varied or
superseded in a limited liability company agreement (or otherwise by agreement
of the members or managers of a limited liability company), such provision shall
be deemed superseded and waived in its entirety if this Agreement contains a
provision addressing the same issue or subject matter. If any provision of this
Agreement or the application thereof to any Member or circumstance is held
invalid or unenforceable to any extent, (a) the remainder of this Agreement and
the application of that provision to other Members or circumstances is not
affected thereby, and (b) the Members shall negotiate in good faith to replace
that provision with a new provision that is valid and enforceable and that puts
the Members in substantially the same economic, business and legal position as
they would have been in if the original provision had been valid and
enforceable.
10.08 FURTHER ASSURANCES. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
10.09 WAIVER OF CERTAIN RIGHTS. Each Member irrevocably waives any
right it may have to maintain any action for dissolution of the Company or for
partition of the assets of the Company.
10.10 CHARACTERIZATION OF INTERESTS. Interests in the Company are
"securities" governed by Article 8 of the Uniform Commercial Code in effect from
time to time in all jurisdictions where such Article 8 or equivalent provision
is adopted.
10.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document. All counterparts shall be construed together and constitute the same
instrument.
32
<PAGE> 37
IN WITNESS WHEREOF, the Members have executed this Agreement as of the
date first set forth above.
CLASS A MEMBER: JOINT ENERGY DEVELOPMENT INVESTMENTS II LIMITED
PARTNERSHIP
By: Enron Capital Management II Limited
Partnership,
its general partner
By: Enron Capital II Corp.,
its general partner
By: /s/ JEREMY M. BLACHMAN
---------------------------------------
Jeremy M. Blachman
Vice President
CLASS B MEMBERS: ENRON CAPITAL & TRADE RESOURCES CORP.
By: /s/ JEFFREY M. DONAHUE, JR.
---------------------------------------
Jeffrey M. Donahue, Jr.
Vice President
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
By: /s/ RICHARD J. HAYES
---------------------------------------------
Name: Richard J. Hayes
-------------------------------------------
Title: Principal Investment Officer
------------------------------------------
33
<PAGE> 38
EXHIBIT A
Members
- --------------------------------------------------------------------------------
NAME AND ADDRESS
CLASS A MEMBER:
Joint Energy Development Investments II Limited Partnership
1400 Smith Street
Houston, Texas 77002
Attention: Jeremy M. Blachman
Fax No. (713) 646-8174
With Copies To:
Enron Capital & Trade Resources Corp Legal
Department
1400 Smith Street
Houston, Texas 77002
Attention: Travis McCullough
Fax No. (713) 646-3393
Enron Capital & Trade Resources Corp.
Compliance Department
1400 Smith Street
Houston, Texas 77002
Attention: Donna W. Lowry
Fax No. (713) 646-4039 or (713) 646-4996
- --------------------------------------------------------------------------------
<PAGE> 39
- --------------------------------------------------------------------------------
Name and Address
CLASS B MEMBERS:
Enron Capital & Trade Resources Corp.
1400 Smith Street
Houston, Texas 77002
Attention: W. David Duran
Fax No. (713) 646-8863
With Copies To:
Enron Capital & Trade Resources Corp Legal
Department
1400 Smith Street
Houston, Texas 77002
Attention: Travis McCullough
Fax No. (713) 646-3393
Enron Capital & Trade Resources Corp.
Compliance Department
1400 Smith Street
Houston, Texas 77002
Attention: Donna W. Lowry
Fax No. (713) 646-4039 or (713) 646-4996
California Public Employees' Retirement System
Lincoln Plaza
400 "P" Street
Sacramento, California 92812-2749
Attention: Senior Investment Officer
Fax No. (916) 558-4058
With copies to:
Jones, Day, Reavis & Pogue
555 West Fifth Street, Suite 4600
Los Angeles, California 90013-1025
Attention: Dulcie D. Brand, Esq.
Fax No. (213) 243-2539
- --------------------------------------------------------------------------------
2
<PAGE> 40
EXHIBIT B
GENERAL VALUATION PROCEDURE
1. When any provision of the Agreement to which this Exhibit B is attached
requires the value of a Membership Interest to be determined in accordance with
this Exhibit B, the purchaser and the seller first shall negotiate in good faith
in an effort to agree on the price of the Membership Interest to be purchased
and sold. Regardless of the succeeding provisions of this Exhibit B, if the
purchaser and the seller at any time agree on the price of the Membership
Interest, that shall be the price. As used in this Exhibit B, the term "seller"
means the Class B Members or other holders of the applicable Membership
Interest.
2. At any time on or after the 15th day following the notice that a Member
desires to commence good faith negotiations under paragraph 1 above, provided
the purchaser and the seller have not yet agreed on the price, the Person
desiring to purchase or sell (the "first party") may elect to have the price
determined by appraisal under this Exhibit B by notifying the other party, which
notice must state that the first party is electing to have the price determined
by appraisal under this Exhibit B and designating an appraiser. On or before the
15th day following the notice electing to have an appraisal, the other party may
agree to the appraiser nominated by the first party or designate a second
appraiser by notice to the first party. The appraisers so designated shall
attempt to agree on a third appraiser, but if they fail so to agree on or before
the 15th day following the notice designating the second appraiser, either
appraiser may request the American Arbitration Association, New York, New York
to designate the third appraiser, and any appraiser so designated shall act as
the third appraiser. If the party receiving the initial notice of election to
have the price determined by appraisal does not notify the first party of a
second appraiser, then all determinations will be made by the single appraiser
designated by the first party. For any designation of an appraiser to be valid,
the appraiser designated (a) must be recognized investment banking firm or an
appraiser with experience in the operation and valuation of U.S. electric
generation assets, (b) unless the purchaser and the seller consent in writing
otherwise, may not be or be employed by any Member or Affiliate of a Member or
any Person transacting a significant portion of its business with any Member or
Affiliate of a Member, and (b) must agree in writing to abide by the
confidentiality restrictions set forth in Section 3.06 as if that appraiser were
a Member.
3. If any appraiser, once designated, ceases to serve (whether due to
resignation, death, incapacity, or other cause), the Persons designating that
appraiser shall appoint a substitute; provided, however, that if that appraiser
had been functioning as a single appraiser, that designation shall be treated as
an initial designation under the first sentence of paragraph 2 and entitles the
other party to designate a second appraiser and further appraisal to be
conducted by three appraisers in accordance with paragraph 2.
4. Each appraiser shall determine the fair market value of the Company
assets, net of any liabilities with respect thereto and the fair market value of
the Membership Interest based thereon, taking into account (if applicable) the
right of the holder of such Membership Interest to participate in future Company
distributions and based on the following assumptions:
<PAGE> 41
(a) no further Capital Contributions (other than for working
capital) will be made;
(b) the Class A Member will not be obligated to make advances
under Section 4.04 or to pay liabilities of the Company;
(c) the Company will remain a going concern; and
(d) such assumptions and predictions about discount rates,
interests rates, costs, prices and other matters as the
purchaser and the seller may establish in writing or as the
appraiser may deem appropriate.
5. The Company and the Class A Member shall allow each appraiser such access
to information about the Company as the appraiser deems necessary.
6. Each appraiser shall complete his calculation of the amount referred to in
paragraph 4 or 5 above, as applicable, as soon as reasonably possible and shall
use all reasonable efforts to do so on or before the 30th day following the
designation of the last appraiser (or if there is one appraiser, the expiration
of the period during which a second appraiser could have been designated). Each
appraiser shall report his calculation of such amount to the purchaser, the
seller, and each other appraiser on a single date agreed to by the appraisers,
but in any event on or before the 45th day following the designation of the last
appraiser (or, if there is one appraiser, the expiration of the period during
which a second appraiser could have been designated).
7. If there is only one appraiser, the price for the Membership Interest
shall be the amount determined by that appraiser in accordance with paragraph 4
or 5, as the case may be. If there are three appraisers, the price for the
Membership Interest shall be the median appraisal. If an appraisal is expressed
as a range, the mid-point of the range shall be deemed the appraisal. The
determination of the appraisers shall be final and binding on the purchaser, the
seller, all Members, and the Company and shall be considered to have been
determined as of the time the report(s) are given under paragraph 6 above.
8. The Company shall pay all costs and expenses of the appraisers.
2
<PAGE> 42
EXHIBIT C
CERTIFICATE EVIDENCING MEMBERSHIP INTEREST
IN A LIMITED LIABILITY COMPANY
<TABLE>
<S> <C> <C>
- ------ -------------------
NUMBER MEMBERSHIP INTEREST
CLASS A
001 EAST COAST POWER L.L.C. 90% SHARING RATIO
- ------ -------------------
THIS CERTIFICATE IS A LIMITED LIABILITY COMPANY UNDER THE
TRANSFERABLE LAWS OF THE STATE OF DELAWARE
IN NEW YORK, NEW YORK
</TABLE>
THIS CERTIFIES THAT Joint Energy Development Investments II Limited Partnership
is the owner of a Class A Membership Interest representing a 90% Sharing Ratio
(the "Membership Interest") in East Coast Power L.L.C. (hereinafter referred to
as the "Company") transferable on the books of the Company by the holder hereof
in person or by duly authorized attorney upon surrender of this certificate
properly endorsed. The designations, preferences and relative participating,
optional or other special rights, powers and duties of the Membership Interest
are set forth in, and this Certificate, and the Membership Interest represented
hereby, is issued and shall in all respects be subject to all of the provisions
of, the Amended and Restated Limited Liability Company Agreement of the Company,
as amended, supplemented or restated from time to time (the "Company
Agreement"). Copies of the Company Agreement are on file at, and will be
furnished without charge on delivery of written request to the Company at, the
principal office of the Company located at 1400 Smith Street, Houston, Texas
77002. Capitalized terms used but not defined herein shall have the meaning
given them in the Company Agreement.
The holder hereof, by accepting this Certificate, is deemed to have (i)
requested admission as, and agreed to become, a Member and to have agreed to
comply with and be bound by and to have executed the Company Agreement, (ii)
represented and warranted that the holder has all right, power and authority
and, if an individual, the capacity necessary to enter into the Company
Agreement, (iii) given the powers of attorney provided for in the Company
Agreement and (iv) made the waivers and given the consents and approvals
contained in the Company Agreement.
THE OFFERING, SALE AND DELIVERY OF THE MEMBERSHIP INTEREST REPRESENTED BY
THIS CERTIFICATE WERE NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND THUS NEITHER SUCH MEMBERSHIP
INTEREST NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH TRANSACTION IS REGISTERED
UNDER SUCH LAWS OR IN THE OPINION OF COUNSEL TO THE COMPANY THE DISPOSITION IS
BEING MADE PURSUANT TO A VALID EXEMPTION FROM REGISTRATION UNDER SUCH LAWS. THE
MEMBERSHIP INTEREST REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TRANSFER
RESTRICTIONS SET FORTH
<PAGE> 43
IN SECTION 3.03 OF THE COMPANY AGREEMENT AND MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS SUCH TRANSFER, SALE OR HYPOTHECATION
COMPLIES WITH THE TERMS OF SUCH AGREEMENT.
Witness the signature of the duly authorized representative of the Company.
By: Joint Energy Development Investments II Limited
Partnership, its Class A Member
By: Enron Capital Management II Limited Partnership,
General Partner
By: Enron Capital II Corp., General Partner
By:
-------------------------------------
Jeremy Blachman
Vice President
Dated: February __, 1999
2
<PAGE> 44
EAST COAST POWER L.L.C.
The Company will furnish without charge to each Member who so requests a
statement of the designations, preferences and relative participating, optional
or other special rights, powers and duties relating to the Membership Interest.
Any such request should be made to the Secretary of the Company at its principal
place of business.
For Value Received, ______________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE,
OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
of the Membership Interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer said Membership Interest on the books of the within-named Company
with full power of substitution in the premises.
Dated
----------------------
---------------------------------------------
---------------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATSOEVER.
SIGNATURE(S) GUARANTEED:
---------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
3
<PAGE> 45
CERTIFICATE EVIDENCING MEMBERSHIP INTEREST
IN A LIMITED LIABILITY COMPANY
<TABLE>
<S> <C> <C>
- ------ -------------------
NUMBER MEMBERSHIP INTEREST
CLASS B
002 EAST COAST POWER L.L.C. 5% SHARING RATIO
- ------ -------------------
THIS CERTIFICATE IS A LIMITED LIABILITY COMPANY UNDER THE
TRANSFERABLE LAWS OF THE STATE OF DELAWARE
IN NEW YORK, NEW YORK
</TABLE>
THIS CERTIFIES THAT Enron Capital & Trade Resources Corp. is the owner of a
Class B Membership Interest representing a 5% Sharing Ratio (the "Membership
Interest") in East Coast Power L.L.C. (hereinafter referred to as the "Company")
transferable on the books of the Company by the holder hereof in person or by
duly authorized attorney upon surrender of this certificate properly endorsed.
The designations, preferences and relative participating, optional or other
special rights, powers and duties of the Membership Interest are set forth in,
and this Certificate, and the Membership Interest represented hereby, is issued
and shall in all respects be subject to all of the provisions of, the Amended
and Restated Limited Liability Company Agreement of the Company, as amended,
supplemented or restated from time to time (the "Company Agreement"). Copies of
the Company Agreement are on file at, and will be furnished without charge on
delivery of written request to the Company at, the principal office of the
Company located at 1400 Smith Street, Houston, Texas 77002. Capitalized terms
used but not defined herein shall have the meaning given them in the Company
Agreement.
The holder hereof, by accepting this Certificate, is deemed to have (i)
requested admission as, and agreed to become, a Member and to have agreed to
comply with and be bound by and to have executed the Company Agreement, (ii)
represented and warranted that the holder has all right, power and authority
and, if an individual, the capacity necessary to enter into the Company
Agreement, (iii) given the powers of attorney provided for in the Company
Agreement and (iv) made the waivers and given the consents and approvals
contained in the Company Agreement.
THE OFFERING, SALE AND DELIVERY OF THE MEMBERSHIP INTEREST REPRESENTED BY
THIS CERTIFICATE WERE NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND THUS NEITHER SUCH MEMBERSHIP
INTEREST NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH TRANSACTION IS REGISTERED
UNDER SUCH LAWS OR IN THE OPINION OF COUNSEL TO THE COMPANY THE DISPOSITION IS
BEING MADE PURSUANT TO A VALID EXEMPTION FROM REGISTRATION UNDER SUCH LAWS. THE
MEMBERSHIP INTEREST REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TRANSFER
RESTRICTIONS SET FORTH
<PAGE> 46
IN SECTION 3.03 OF THE COMPANY AGREEMENT AND MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS SUCH TRANSFER, SALE OR HYPOTHECATION
COMPLIES WITH THE TERMS OF SUCH AGREEMENT.
Witness the signature of the duly authorized representative of the Company.
By: Joint Energy Development Investments II Limited
Partnership, its Class A Member
By: Enron Capital Management II Limited Partnership,
General Partner
By: Enron Capital II Corp., General Partner
By:
-------------------------------------
Jeremy Blachman
Vice President
Dated: February __, 1999
2
<PAGE> 47
EAST COAST POWER L.L.C.
The Company will furnish without charge to each Member who so requests a
statement of the designations, preferences and relative participating, optional
or other special rights, powers and duties relating to the Membership Interest.
Any such request should be made to the Secretary of the Company at its principal
place of business.
For Value Received, ______________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE,
OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
of the Membership Interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer said Membership Interest on the books of the within-named Company
with full power of substitution in the premises.
Dated
----------------------
---------------------------------------------
---------------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATSOEVER.
SIGNATURE(S) GUARANTEED:
---------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
3
<PAGE> 48
CERTIFICATE EVIDENCING MEMBERSHIP INTEREST
IN A LIMITED LIABILITY COMPANY
<TABLE>
<S> <C> <C>
- ------ -------------------
NUMBER MEMBERSHIP INTEREST
CLASS B
003 EAST COAST POWER L.L.C. 5% SHARING RATIO
- ------ -------------------
THIS CERTIFICATE IS A LIMITED LIABILITY COMPANY UNDER THE
TRANSFERABLE LAWS OF THE STATE OF DELAWARE
IN NEW YORK, NEW YORK
</TABLE>
THIS CERTIFIES THAT the California Public Employees' Retirement System is the
owner of a Class B Membership Interest representing a 5% Sharing Ratio (the
"Membership Interest") in East Coast Power L.L.C. (hereinafter referred to as
the "Company") transferable on the books of the Company by the holder hereof in
person or by duly authorized attorney upon surrender of this certificate
properly endorsed. The designations, preferences and relative participating,
optional or other special rights, powers and duties of the Membership Interest
are set forth in, and this Certificate, and the Membership Interest represented
hereby, is issued and shall in all respects be subject to all of the provisions
of, the Amended and Restated Limited Liability Company Agreement of the Company,
as amended, supplemented or restated from time to time (the "Company
Agreement"). Copies of the Company Agreement are on file at, and will be
furnished without charge on delivery of written request to the Company at, the
principal office of the Company located at 1400 Smith Street, Houston, Texas
77002. Capitalized terms used but not defined herein shall have the meaning
given them in the Company Agreement.
The holder hereof, by accepting this Certificate, is deemed to have (i)
requested admission as, and agreed to become, a Member and to have agreed to
comply with and be bound by and to have executed the Company Agreement, (ii)
represented and warranted that the holder has all right, power and authority
and, if an individual, the capacity necessary to enter into the Company
Agreement, (iii) given the powers of attorney provided for in the Company
Agreement and (iv) made the waivers and given the consents and approvals
contained in the Company Agreement.
THE OFFERING, SALE AND DELIVERY OF THE MEMBERSHIP INTEREST REPRESENTED BY
THIS CERTIFICATE WERE NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND THUS NEITHER SUCH MEMBERSHIP
INTEREST NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH TRANSACTION IS REGISTERED
UNDER SUCH LAWS OR IN THE OPINION OF COUNSEL TO THE COMPANY THE DISPOSITION IS
BEING MADE PURSUANT TO A VALID EXEMPTION FROM REGISTRATION UNDER SUCH LAWS. THE
MEMBERSHIP INTEREST REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TRANSFER
RESTRICTIONS SET FORTH
<PAGE> 49
IN SECTION 3.03 OF THE COMPANY AGREEMENT AND MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS SUCH TRANSFER, SALE OR HYPOTHECATION
COMPLIES WITH THE TERMS OF SUCH AGREEMENT.
Witness the signatures of the duly authorized representative of the Company.
By: Joint Energy Development Investments II Limited
Partnership, its Class A Member
By: Enron Capital Management II Limited Partnership,
General Partner
By: Enron Capital II Corp., General Partner
By:
-------------------------------------
Jeremy Blachman
Vice President
Dated: February __, 1999
2
<PAGE> 50
EAST COAST POWER L.L.C.
The Company will furnish without charge to each Member who so requests a
statement of the designations, preferences and relative participating, optional
or other special rights, powers and duties relating to the Membership Interest.
Any such request should be made to the Secretary of the Company at its principal
place of business.
For Value Received, ______________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE,
OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
of the Membership Interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer said Membership Interest on the books of the within-named Company
with full power of substitution in the premises.
Dated
----------------------
---------------------------------------------
---------------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATSOEVER.
SIGNATURE(S) GUARANTEED:
---------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
3
<PAGE> 51
Schedule 1
CalPERS Alternative Investment Management Program
List of Fiduciaries
(1/7/99)
The CalPERS Board of Administration (Board) requires firms that do, or seek to
do, business for gain with CalPERS to disclose whether they have made political
contributions to, or were solicited for contributions from, "CalPERS
fiduciaries." As of the date of this list, the following people are covered by
this policy, as it relates to investment transaction decisions:
Current Board Members
- ---------------------
Ronald L. Alvarado Michael T. Flaherman
Phil Angelides Marty Morgenstern
Robert F. Carlson Michael Quevedo, Jr.
Thomas J. Clark William B. Rosenberg
Kathleen Connell Joseph A. Thomas
William D. Crist Charles P. Valdes
Rob Feckner
Current Board Alternates
- ------------------------
Fred R. Buenrostro Christine C. Drevalas
Julie Bornstein Ted White
Timothy Cromartie
Executive Staff
- ---------------
James E. Burton, Chief Executive Officer
James H. Gomez, Deputy Executive Officer
Robert Aguallo, Assistant Executive Officer
Vincent P. Brown, Assistant Executive Officer
Kayla J. Gillan, General Counsel
Barbara Hegdal, Assistant Executive Officer
Patricia K. Macht, Chief, Public Affairs
Sheryl K. Pressler, Chief Investment Officer
Ronald L. Seeling, Chief Actuary
Margaret T. Stanley, Assistant Executive Officer
Robert D Walton, Assistant Executive Officer
<PAGE> 52
Senior Management
- -----------------
Bob L. Boldt Ron Kraft
Thomas A. Britting Jeff Lung
Jack R. Corrie Kenneth W. Marzion
Tom Fischer David A. Mullins
Tim Garza Chris Nishioka
Barry J. Gonder Michael J. Ogata
Pat Harris Tom Pettey
Mitzi Higashidani Steve Phillips
Linda Hoff Anne Stausboll
Bryant Hughes Fred Steinmetz
Guy F. Jaquier Janet Toney
Gary M. Jones Casey L. Young
Michael W. Koester
John A. Korach
2
<PAGE> 53
Schedule 2
Reporting Parties
<TABLE>
<CAPTION>
Enron Corp.
- -----------
<S> <C>
Kenneth L. Lay Chairman and Chief Executive Officer
Jeffrey K. Skilling President and Chief Operating Officer
Richard A. Causey Senior Vice President and Chief Accounting & Information Officer
Andrew S. Fastow Senior Vice President and Chief Financial Officer
Kenneth D. Rice Chairman and Chief Executive Officer - ECT North America
Kevin P. Hananon President and Chief Operating Officer - ECT North America
Gene Humphrey Vice Chairman - ECT North America
Rebecca P. Mark Vice Chairman - Enron
Mark E. Frevert Chairman and Chief Executive Officer - ECT Europe and Enron Europe Ltd.
Richard B. Buy Senior Vice President and Chief Risk Officer
Jeffrey McMahon Senior Vice President, Finance and Treasurer
</TABLE>
<TABLE>
<CAPTION>
Enron Covered Entities
- ----------------------
<S> <C>
Kenneth D. Rice Chairman and Chief Executive Officer - ECT North America
Kevin P. Hannon President and Chief Operating Officer - ECT North America
Gene Humphrey Vice Chairman - ECT North America
Jere Overdyke President - Merchant Finance
David W. Delainey Managing Director - ECT
W. Craig Childers Managing Director - ECT
Timothy J. Detmering Vice President - ECT
Monte Gleason Vice President - ECT
Eric Gonzales Vice President - ECT
John C. Gorman Vice President - ECT
Jay Fitzgerald Vice President - ECT
Kyle Kitagawa Vice President - ECT
James R. McBride Vice President - ECT
Mario M. Yzaguirre Vice President - ECT
Matthew Scrimshaw Vice President - ECT
John Cleveland Vice President - ECT
Steve Horn Vice President - ECT
Robert Greer Vice President - ECT
Kevin Garland Vice President - ECT
Jaime Alatorre Vice President - ECT
Jempy Neyman Vice President - ECT
Michael J. Beyer Vice President - ECT
Jeffery M. Donahue Vice President - ECT
W. David Duran Vice President - ECT
Jeremy Blachman Vice President
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
East Coast Power Officers
- -------------------------
<S> <C>
Joseph M. Bollinger Co-President
Ross D. Ain Co-President
Colin Harper Vice President - ECT
</TABLE>
2
<PAGE> 55
Schedule 3
Initial Approved Contracts
1. $250,000,000 Credit and Subordination Agreement dated as of February 4,
1999 between the Company and Enron.
2. Stock Purchase Agreement dated as of February 4, 1999 between the
Company and Enron.
3. Subordinated Promissory Note dated February 4, 1999 in the original
principal amount of $250,000,000 from the Company in favor of Enron.
4. Sublease dated as of February 4, 1999 between the Company and Enron.
<PAGE> 1
EXHIBIT 4.1
================================================================================
EAST COAST POWER L.L.C.
Issuer
and
The Bank of New York
Trustee
--------------------
INDENTURE
Dated as of April 20, 1999
---------------------
$296,000,000 6.737% Senior Secured Notes Due 2008
$236,000,000 7.066% Senior Secured Notes Due 2012
$318,000,000 7.536% Senior Secured Notes Due 2017
================================================================================
<PAGE> 2
EAST COAST POWER L.L.C.
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT
OF 1939 AND INDENTURE, DATED AS OF APRIL 20, 1999
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
Section 310(a)(1) ................................... 608
(a)(2) ................................... 608
(b) ................................... 609
Section 312(a) ................................... 701
(b) ................................... 701
(c) ................................... 702
Section 313(a) ................................... 702
(c) ................................... 702
Section 314(a) ................................... 703
(a)(4) ................................... 1008(a)
(b) ................................... 1302
(c)(1) ................................... 103
(c)(2) ................................... 103
(e) ................................... 103
Section 315(a) ................................... 601
(b) ................................... 602
(c) ................................... 601
(d) ................................... 601
Section 316(a)(last
sentence) ................................... 101 ("Outstanding")
(a)(1)(A) ................................... 502, 512
(a)(1)(B) ................................... 513
(b) ................................... 508
(c) ................................... 105(d)
Section 317(a)(1) ................................... 503
(a)(2) ................................... 504
(b) ................................... 1004
Section 318(a) ................................... 111
(c) ................................... 114
- --------------------
Note: This reconciliation and tie shall not, for any purpose, be deemed part of
the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
<S> <C> <C> <C>
SECTION 101. Definitions.........................................................................................2
SECTION 102. Incorporation by Reference of Trust Indenture Act..................................................21
SECTION 103. Compliance Certificates and Opinions...............................................................22
SECTION 104. Form of Documents Delivered to Trustee.............................................................23
SECTION 105. Acts of Holders....................................................................................23
SECTION 106. Notices, etc., to Trustee and Company..............................................................24
SECTION 107. Notice to Holders; Waiver..........................................................................25
SECTION 108. Effect of Headings and Table of Contents...........................................................25
SECTION 109. Successors and Assigns.............................................................................26
SECTION 110. Separability Clause................................................................................26
SECTION 111. Benefits of Indenture..............................................................................26
SECTION 112. Governing Law......................................................................................26
SECTION 113. Legal Holidays.....................................................................................26
SECTION 114. Conflict of Any Provision of Indenture with Trust Indenture Act....................................26
SECTION 115. No Adverse Interpretation of Other Agreements......................................................27
SECTION 116. Counterparts.......................................................................................27
ARTICLE TWO
NOTE FORMS
SECTION 201. Forms Generally....................................................................................27
SECTION 202. Restrictive Legends................................................................................29
ARTICLE THREE
THE NOTES
SECTION 301. Title and Terms....................................................................................31
SECTION 302. Denominations......................................................................................31
SECTION 303. Execution, Authentication, Delivery and Dating.....................................................32
SECTION 304. Temporary Notes....................................................................................33
SECTION 305. Registration, Registration of Transfer and Exchange................................................34
SECTION 306. Book-Entry Provisions for Global Notes.............................................................35
SECTION 307. Special Transfer Provisions........................................................................36
</TABLE>
<PAGE> 4
ii
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
SECTION 308. Mutilated, Destroyed, Lost and Stolen Notes........................................................40
SECTION 309. Payment of Interest; Interest Rights Preserved.....................................................40
SECTION 310. Persons Deemed Owners..............................................................................42
SECTION 311. Cancellation.......................................................................................42
SECTION 312. Issuance of Additional Notes.......................................................................42
SECTION 313. Computation of Interest............................................................................43
SECTION 314. CUSIP and CINS Numbers.............................................................................43
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture............................................................43
SECTION 402. Application of Trust Money.........................................................................44
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default..................................................................................44
SECTION 502. Acceleration of Maturity; Rescission and Annulment.................................................46
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee....................................47
SECTION 504. Trustee May File Proofs of Claim...................................................................48
SECTION 505. Trustee May Enforce Claims Without Possession of Notes.............................................49
SECTION 506. Application of Money Collected.....................................................................49
SECTION 507. Limitation on Suits................................................................................50
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest..........................................................................50
SECTION 509. Restoration of Rights and Remedies.................................................................51
SECTION 510. Rights and Remedies Cumulative.....................................................................51
SECTION 511. Delay or Omission Not Waiver.......................................................................51
SECTION 512. Control by Holders.................................................................................51
SECTION 513. Waiver of Past Defaults............................................................................52
SECTION 514. Waiver of Stay or Extension Laws...................................................................52
SECTION 515. Undertaking for Costs..............................................................................52
</TABLE>
<PAGE> 5
iii
<TABLE>
<CAPTION>
PAGE
ARTICLE SIX
THE TRUSTEE
<S> <C> <C> <C>
SECTION 601. Duties of Trustee..................................................................................53
SECTION 602. Notice of Defaults.................................................................................54
SECTION 603. Certain Rights of Trustee..........................................................................54
SECTION 604. Trustee Not Responsible for Recitals or Issuance of Notes..........................................56
SECTION 605. May Hold Notes.....................................................................................56
SECTION 606. Money Held in Trust................................................................................56
SECTION 607. Compensation and Reimbursement.....................................................................57
SECTION 608. Corporate Trustee Required; Eligibility............................................................58
SECTION 609. Resignation and Removal; Appointment of Successor..................................................58
SECTION 610. Acceptance of Appointment by Successor.............................................................60
SECTION 611. Merger, Conversion, Consolidation or Succession to Business........................................60
SECTION 612. No Liability for Clean-up of Hazardous Materials...................................................61
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of Holders.......................................................61
SECTION 702. Reports by Trustee.................................................................................61
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 801. Company May Consolidate, etc., Only on Certain Terms...............................................62
SECTION 802. Successor Substituted..............................................................................63
ARTICLE NINE
SUPPLEMENTS AND AMENDMENTS TO
INDENTURE AND SECURITY DOCUMENTS
SECTION 901. Without Consent of Holders.........................................................................63
SECTION 902. With Consent of Holders............................................................................64
SECTION 903. Execution of Supplemental Indentures...............................................................65
</TABLE>
<PAGE> 6
iv
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
SECTION 904. Effect of Supplemental Indentures and Amendments...................................................66
SECTION 905. Conformity with Trust Indenture Act................................................................66
SECTION 906. Reference in Notes to Supplemental Indentures......................................................66
SECTION 907. Notice of Supplemental Indentures..................................................................66
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, If Any, and Interest...............................................66
SECTION 1002. Maintenance of Office or Agency...................................................................67
SECTION 1003. Money for Note Payments to Be Held in Trust.......................................................67
SECTION 1004. Existence.........................................................................................69
SECTION 1005. Payment of Taxes and Other Claims.................................................................69
SECTION 1006. Operation and Maintenance; Maintenance of Properties..............................................70
SECTION 1007. Insurance.........................................................................................70
SECTION 1008. Statement by Officers as to Default and Debt Service Reserve
Account...............................................................................70
SECTION 1009. Reports...........................................................................................70
SECTION 1010. Limitation on Indebtedness of the Company.........................................................71
SECTION 1011. Limitation on Indebtedness of the Company's Subsidiaries..........................................72
SECTION 1012. Limitation on Restricted Payments.................................................................72
SECTION 1013. Limitation on Transactions with Affiliates........................................................73
SECTION 1014. Limitation on Liens...............................................................................73
SECTION 1015. Purchase of Notes upon a Change of Control........................................................74
SECTION 1016. Limitation on Certain Asset Sales.................................................................76
SECTION 1017. Waiver of Certain Covenants.......................................................................76
SECTION 1018. Maintenance of QF Status..........................................................................77
SECTION 1019. Project Documents.................................................................................77
SECTION 1020. Nature of the Business............................................................................78
SECTION 1021. Government Approvals; Compliance with Laws........................................................78
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. Optional Redemption...............................................................................78
SECTION 1102. Mandatory Redemption at Par.......................................................................78
SECTION 1103. Applicability of Article..........................................................................79
SECTION 1104. Election to Redeem; Notice to Trustee.............................................................79
</TABLE>
<PAGE> 7
v
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
SECTION 1105. Selection by Trustee of Notes to Be Redeemed......................................................80
SECTION 1106. Notice of Redemption..............................................................................80
SECTION 1107. Deposit of Redemption Price.......................................................................81
SECTION 1108. Notes Payable on Redemption Date..................................................................81
SECTION 1109. Notes Redeemed in Part............................................................................82
ARTICLE TWELVE
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company Option to Effect Legal Defeasance or
Covenant Defeasance...................................................................82
SECTION 1202. Legal Defeasance and Discharge....................................................................82
SECTION 1203. Covenant Defeasance...............................................................................83
SECTION 1204. Conditions to Legal Defeasance or Covenant Defeasance.............................................83
SECTION 1205. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions.........................................84
SECTION 1206. Reinstatement.....................................................................................85
ARTICLE THIRTEEN
SECURITY
SECTION 1301. Collateral........................................................................................85
SECTION 1302. Recording, Etc....................................................................................86
SECTION 1303. Debt Service Reserve Account......................................................................86
SECTION 1304. Investment of Funds in Debt Service Reserve Account...............................................87
</TABLE>
<PAGE> 8
vi
EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit A - Form of Note.........................................................................A-1
Exhibit B - Form of Certificate to Be Delivered upon
Termination of Restricted Period.....................................................B-1
Exhibit C - Form of Certificate to Be Delivered in Connection with Transfers
to Non-QIB Institutional Accredited Investors .......................................C-1
Exhibit D - Form of Certificate to Be Delivered in Connection with Transfers
Pursuant to Regulation S.............................................................D-1
Exhibit E - Form of Undertaking..................................................................E-1
</TABLE>
<PAGE> 9
EXHIBIT 4.1
INDENTURE, dated as of April 20, 1999, among East Coast Power
L.L.C., a Delaware limited liability company (the "Company"), and The Bank of
New York, a New York banking corporation, as trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of and issue of
6.737% Senior Secured Notes Due 2008 (the "2008 Notes"), 7.066% Senior Secured
Notes Due 2012 (the "2012 Notes") and 7.536% Senior Secured Notes Due 2017 (the
"2017 Notes" and, together with the 2008 Notes and the 2012 Notes, the "Initial
Notes") and 6.737% Series B Senior Secured Notes Due 2008 (the "Series B 2008
Notes") 7.066% Series B Senior Secured Notes Due 2012 (the "Series B 2012
Notes") and 7.536% Series B Senior Secured Notes Due 2017 (the "Series B 2017
Notes") (collectively, the "Exchange Notes" and, together with the Initial Notes
and any Additional Notes (as defined below), the "Notes") of substantially the
tenor and amount hereinafter set forth, and to provide therefor the Company has
duly authorized the execution and delivery of this Indenture. In addition, the
Company has duly authorized the creation and issue of additional series of
senior notes, subject to compliance with the covenants contained in Article Ten
hereof.
All things necessary have been done to make the Notes, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company and to make this
Indenture a valid agreement of the Company, each in accordance with their
respective terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Notes by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Notes, as follows:
<PAGE> 10
2
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article One have the meanings
assigned to them in this Article One and include the plural as well as
the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein, and the terms "cash transaction" and
"self-liquidating paper", as used in TIA Section 311, shall have the
meanings assigned to them in the rules of the Commission adopted under
the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(d) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision;
(e) the word "or" is not exclusive; and
(f) provisions of this Indenture apply to successive events
and transactions.
"Act", when used with respect to any Holder, has the meaning
specified in Section 105.
"Account Collateral Securities Intermediary" has the meaning
set forth in the Common Security Agreement.
"Additional Notes" has the meaning specified in Section 312.
"Acceptable Credit Provider" means a bank or trust company
authorized to engage in the banking business having a combined capital and
surplus of at least $500,000,000 or the equivalent thereof whose long-term
unsecured debt is rated "A-" or higher by S&P or "A3" or higher by Moody's or,
if both of such rating agencies are no longer in business or no longer rating
<PAGE> 11
3
unsecured debt of banks or trust companies, a comparable rating of another
internationally recognized rating agency selected by the Company and reasonably
acceptable to the Trustee.
"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.
"Authenticating Agent" means the Trustee or any Person
authorized by the Trustee to act on behalf of the Trustee to authenticate Notes.
"Available Amount" means, at any time, (a) with respect to any
item of Debt Service Credit Support consisting of an undertaking of Enron (or
its successor) in substantially the form of Exhibit E hereto, the "Maximum
Amount" under such undertaking at such time, and (b) with respect to any item of
Debt Service Credit Support consisting of a letter of credit from an Acceptable
Credit Provider, the maximum amount available to be drawn under such letter of
credit at such time.
"Base Case Financial Model" means the model so titled in the
Independent Engineer's report attached to the Offering Memorandum as Appendix A,
as amended, from time to time and certified by the Independent Engineer for
purposes of calculating the Forward Debt Service Coverage Ratio.
"Bayonne Facility" means the 176 MW base load, gas-fired,
combined-cycle cogeneration facility located inside the IMTT facility in
Bayonne, New Jersey.
"Bayonne GP" means JEDI Bayonne GP, L.L.C., a Delaware limited
liability company and wholly owned Subsidiary of the Company.
"Bayonne Venture" means Cogen Technologies NJ Venture, a New
Jersey general partnership that owns and operates the Bayonne Facility.
"Bridge Loan" means the $831,000,000 loan from NationsBank,
N.A. and certain others to the Company pursuant to the $831,000,000 Credit
Agreement dated as of February 4, 1999 in connection with the acquisition of the
Facilities.
<PAGE> 12
4
"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.
"CalPERS" means the California Public Employees' Retirement
System, a unit of the State and Consumer Services Agency of the State of
California.
"CalPERS Security Agreement" means the security agreement
dated the Issue Date between CalPERS and the Trustee.
"Camden Venture" means Camden Cogen L.P., a Delaware limited
partnership, that owns the Camden Facility.
"Camden Facility" means the 146 MW base load, gas-fired,
combined-cycle cogeneration facility located in Camden, New Jersey.
"Camden GP" means Cogen Technologies Camden GP Limited
Partnership, a Delaware limited partnership, that is the managing general
partner of Camden Venture.
"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.
"Cashflow" means during any period the sum of: (i) all amounts
received by the Company pursuant to distributions from the Operating
Partnerships (other than damages or penalties received by the Company pursuant
to the Project Documents); (ii) all proceeds received by the Company from
business interruption insurance; (iii) all interest income or hedging receipts
(net of costs) received by the Company; (iv) all other amounts received by the
Company in respect of the Facilities and Operating Partnerships; and (v) any
amounts released to the Company after the Issue Date from the expense account
established in connection with the Bridge Loan.
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" means a combination of (i) Enron and (ii)
CalPERS and/or other third party institutional investors ceases to be the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of at least a majority of the voting power of all classes of Voting
Stock of the Company; provided, however, that a Change of Control shall not be
deemed to occur if (A) the holders of 66 2/3% of the aggregate principal amount
of the outstanding Notes consent to the transaction that results in such
combination of (i) Enron and
<PAGE> 13
5
(ii) CalPERS and/or other third party institutional investors ceasing to be the
beneficial owner of at least a majority of voting power of all classes of Voting
Stock of the Company or (B) after giving effect to the transaction that results
in such combination of (i) Enron and (ii) CalPERS and/or other third party
institutional investors ceasing to be the beneficial owner of at least a
majority of the voting power of all classes of Voting Stock of the Company, the
then current rating of the Notes is at least as high as the rating of the Notes
on the Issue Date, and the Rating Agencies confirm that a Rating Downgrade will
not result.
"Change of Control Offer" has the meaning specified in Section
1015.
"CINS" means the CUSIP International Numbering System.
"Collateral" has the meaning set forth in Section 1301.
"Collateral Investments" has the meaning set forth in Section
1304.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act or, if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Security Agreement" means the common security
agreement dated the Issue Date among the Company, certain of its Subsidiaries
and the Trustee.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its Managing Member, or any
Chairman, President, Vice President, Treasurer, Assistant Treasurer, Secretary
or Assistant Secretary and delivered to the Trustee.
"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 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 Notes to be redeemed.
"Comparable Treasury Price" means (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)
<PAGE> 14
6
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.
"Corporate Trust Office" means the principal corporate trust
office of the Trustee, at which at any particular time its corporate trust
business shall be administered, which office at the date of execution of this
Indenture is located at 101 Barclay Street, Floor 21 West, New York, NY 10286,
attention: Corporate Trust Trustee Administration, except that with respect to
presentation of Notes for payment or for registration of transfer or exchange,
such term shall mean the office or agency of the Trustee at which, at any
particular time, its corporate trust and agency business shall be conducted.
"corporation" includes corporations, associations, companies
and business trusts.
"Covenant Defeasance" has the meaning set forth in Section
1203.
"CUSIP" means the Committee on Uniform Securities
Identification Procedures.
"Debt Service Coverage Ratio" means for any period, without
duplication, a ratio the numerator of which is Net Cashflow for that period, and
the denominator of which is principal, interest and commitment fees,
underwriting fees and other similar fees owed by the Company due for such period
on the Notes and other Indebtedness which ranks pari passu with the Notes
(without giving effect to any amounts paid from the expense account established
in connection with the Bridge Loan). For purposes of calculating the Debt
Service Coverage Ratio for the first four quarters ending after the Issue Date
in connection with Section 1012, historical numbers shall be used for completed
quarters (the first quarter being deemed to be the period from February 4, 1999
to June 30, 1999) and projected numbers (as provided in or based upon the
Independent Engineer's Report attached as Appendix A to the Offering Memorandum)
shall be used or relied upon for the remaining quarters.
"Debt Service Credit Support" means (i) an undertaking to
advance money to the Trustee for the benefit of the Holders from (A) Enron, if
and so long as Enron's senior long-term unsecured debt has an Investment Grade
Rating or (B) any successor to Enron resulting from a Change of Control, merger,
consolidation or similar transaction resulting in a change in the beneficial
ownership of the Company, if and so long as such Person's senior long-term
unsecured debt has an Investment Grade Rating, or (ii) a letter or letters of
credit from an Acceptable Credit Provider.
<PAGE> 15
7
"Debt Service Deficiency" has the meaning set forth in Section
1303.
"Debt Service Reserve Account" has the meaning set forth in
Section 1303.
"Debt Service Reserve Requirement" means, as of any date, an
amount in U.S. Dollars equal to the aggregate principal and interest payments on
the Notes scheduled to be paid on the two Payment Dates immediately following
such date.
"Default" means an event or condition that, with giving of
notice or lapse of time or both, would become an Event of Default.
"Defaulted Payments" has the meaning specified in Section 309.
"Dollar Permitted Investments" means any of the following
investments, to the extent not having a maturity of greater than 180 days from
the date of acquisition thereof: (a) readily marketable direct obligations of,
or obligations of any other Person the principal and interest of which are
unconditionally guaranteed or insured by, the United States of America or an
instrumentality or agency thereof; (b) interest bearing deposit accounts (which
may be represented by short-term certificates of deposit, time deposits, open
account agreements or other short-term deposit instruments) in national or state
banks having (i) a combined capital and surplus of not less than $500 million
(ii) whose deposits are insured by the Federal Deposit Insurance Corporation,
and (iii) whose senior unsecured debt is rated "A2" or better (or the equivalent
thereof) by Moody's or "A" or better (or the equivalent thereof) by S&P; (c)
prime dollar-denominated commercial paper of a foreign or domestic issuer rated
"P-2" or better (or the equivalent thereof) by Moody's or "A-2" or better (or
the equivalent thereof) by S&P; (d) dollar denominated certificates of deposit
of a foreign or domestic bank with a rating of "A-2" or better (or the
equivalent thereof) by Moody's or "A" or better (or the equivalent thereof) by
S&P; (e) dollar-denominated bankers' acceptances issued by foreign or domestic
banks with a rating of "A-2" or better (or the equivalent thereof) by Moody's or
"A" or better (or the equivalent thereof) by S&P; (f) money market or mutual
funds sponsored by any securities broker-dealer of recognized national standing
having an investment policy that requires substantially all of the invested
assets of such fund to be invested in investment described in any one or more of
the foregoing clauses (including those for which the Trustee or an affiliate of
the Trustee is investment manager or advisor, administrator, shareholder
servicing agent, custodian or subcustodian, notwithstanding that (A) the Trustee
or an affiliate of the Trustee charges and collects fees and expenses from such
funds for services rendered (provided that such charges, fees and expenses are
on terms consistent with terms negotiated at arm's length) and (B) the Trustee
charges and collects fees and expenses for services rendered, pursuant to this
Indenture).
"DTC" means The Depository Trust Company, its nominees and
successors.
"DTC Participants" or "Participants" has the meaning set forth
in Section 306.
<PAGE> 16
8
"ECP Holding Company" means East Coast Power Holding Company
L.L.C., a Delaware limited liability company.
"ECP Holding Company Security Agreement" means the security
agreement dated the Issue Date between ECP Holding Company and the Trustee.
"ECT Merchant" means ECT Merchant Investments Corp., a
Delaware corporation.
"ECT Merchant Security Agreement" means the security agreement
dated the Issue Date between ECT Merchant and the Trustee.
"Enron" means Enron Corp., an Oregon corporation.
"Equity Interests" means, with respect to any Person, shares
of capital stock of (or other ownership or profit interests in) such Person,
warrants, options or other rights for the purchase or other acquisition from
such Person of shares of capital stock of (or other ownership or profit
interests in) such Person, securities convertible into or exchangeable for
shares of capital stock of (or other ownership or profit interests in) such
Person or warrants, rights or options for the purchase or other acquisition from
such Person of such shares (or such other interests), and other ownership or
profit interests in such Person (including, without limitation, partnership,
member or trust interests therein), whether voting or nonvoting, and whether or
not such shares, warrants, options, rights or other interests are authorized or
otherwise existing on any date of determination.
"Euroclear" means the accounts of purchasers at the Euroclear
System.
"Event of Default" has the meaning specified in Section 501.
"Event of Loss" means any compulsory transfer or taking, or
taking or transfer under threat of compulsory transfer or taking, of all or
substantially all of any Facility by any Governmental Authority, or any event
which causes all or substantially all of any Facility to be damaged, destroyed
or rendered unfit for normal use for any reason whatsoever.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" has the meaning stated in the first recital
of this Indenture and refers to any Exchange Notes containing terms
substantially identical to the Initial Notes (except that such Exchange Notes
shall not contain terms with respect to the interest rate step-up provision and
transfer restrictions) that are issued and exchanged for the Initial Notes
pursuant to the Registration Rights Agreement and this Indenture.
<PAGE> 17
9
"Exchange Offer" means the exchange offer that may be effected
pursuant to the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the exchange
offer registration statement as defined in the Registration Rights Agreement.
"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 a fair market value in excess of $10
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 sale,
exchange of assets or lease by the Company or any of its Subsidiaries (as
lessor) made in the ordinary course of business (excluding any forward sale,
sale of receivables or similar transactions); (iv) an issuance or sale of equity
interests by a Subsidiary of the Company to the Company or to another Subsidiary
of the Company; (v) a sale, transfer, assignment or other disposition by the
Company or a Subsidiary of the Company to the Company or another Subsidiary of
the Company; (vi) a dividend or other distribution permitted under Article 10;
(vii) the sale, exchange, lease by the Company or any of its Subsidiaries (as
lessor) or other disposition of obsolete assets not integral to any Line of
Business; (viii) the abandonment or relinquishment of assets in the ordinary
course of business; and (ix) creation of liens, grants of security interests or
pledges or assignments to secure Indebtedness that are not prohibited under
Section 1014.
"Facility" means any of the Bayonne Facility, the Camden
Facility and the Linden Facility and any Facility Expansion, as the context may
require.
"Facility Expansion" means (i) an expansion in the electric
power generating capacity of up to 300 MW at or adjacent to the Linden Facility,
(ii) an expansion in the electric power generating capacity of up to 500 MW at
or adjacent to the Bayonne Facility and (iii) the expansion of transmission,
infrastructure, or fuel storage or transportation facilities at any Facility,
together with related power supply, thermal energy and fuel contracts and
ancillary facilities, services or goods.
"Facility Owner" means, collectively, the Company and each of
its Subsidiaries, including the Operating Partnerships and the Managing General
Partners.
"Forward Debt Service Coverage Ratio" means the projected Debt
Service Coverage Ratio over the life of the Notes with the longest maturity
using as the basis for the calculation of the Debt Service Coverage Ratio the
amounts so shown on the Base Case Financial Model, as amended, from time for
time and certified by the Independent Engineer.
"GAAP" means generally accepted accounting principles in the
United States of America, including those set forth in (i) the opinions and
pronouncements of the Accounting
<PAGE> 18
10
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 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, including
opinions and pronouncements in staff accounting bulletins and similar written
statements from the accounting staff of the Commission.
"Global Note Holder" has the meaning set forth in Section 306.
"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.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Holder" means the Person in whose name a Note is, at the time
of determination, registered on the Security Registrar's books.
"incorporated provision" has the meaning set forth in Section
114.
"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 and other current liabilities 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); and (vi) any guaranty of such Person with
respect to liabilities of a type described in any of clauses (i) through (v) of
this definition.
"Independent Engineer" means Burns and Roe Enterprises, Inc.
or another widely recognized independent engineering firm, engineer and/or
industry consultant who is widely
<PAGE> 19
11
recognized as an expert in electric power or thermal energy generation or
cogeneration retained as independent engineer or consultant by the Company.
"Independent Investment Banker" means NationsBanc Montgomery
Securities LLC or its successor or, if such firm is unwilling or unable to
select the Comparable Treasury Issue, an independent investment banking
institution of national standing appointed by the Company; 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 Company. The Company shall
notify the Trustee when it has appointed an independent investment banking
institution of national standing, other than NationsBanc Montgomery Securities
LLC.
"Indenture" means this instrument as originally executed and
as it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Initial Notes" has the meaning set forth in the first recital
of this Indenture.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement, option or future contract or other
similar agreement or arrangement, in each case, entered into for non-speculative
purposes.
"Investment Grade Rating" means, with respect to any
Indebtedness, a rating of "BBB-" or higher by S&P or "Baa3" or higher by
Moody's, or, if any of such rating agencies is no longer in business or no
longer rating such entity's Indebtedness, a comparable rating of another
internationally recognized rating agency selected by the Company and reasonably
acceptable to the Trustee.
"Issue Date" means the date on which the Notes are originally
issued under the Indenture.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation, assignment for
security, claim, or preference or priority or other encumbrance upon, or with
respect to, any property of any kind, real or personal, movable or immovable,
now owned or hereafter acquired. A Person will be deemed to own subject to a
Lien any property that such Person has acquired or holds subject to the interest
of a vendor or lessor under any conditional sale agreement, capital lease or
other title retention agreement.
"Legal Defeasance" has the meaning set forth in Section 1202.
<PAGE> 20
12
"Linden Facility" means the 715 MW dispatchable, gas-fired,
combined-cycle cogeneration facility located inside the facility of the Bayway
Refinery Company in Linden, New Jersey.
"Linden Ltd." means Cogen Technologies Linden, Ltd., a Texas
limited partnership, that is the managing general partner of Linden Venture.
"Linden Venture" means Cogen Technologies Linden Venture,
L.P., a Delaware limited partnership, that owns the Linden Facility.
"Line of Business" means, with respect to the Company and its
Subsidiaries, the (i) the business of construction, development, acquisition,
servicing, ownership, improvement, operation and management of the 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.
"Make Whole Premium" means, with respect to any series of
Notes (or portion thereof) to be redeemed, an amount equal to the excess, if
any, of:
(a) 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 quarterly basis
(assuming a 360-day year consisting of twelve 30-day months) at a
discount rate equal to the Treasury Rate plus 50 basis points with
respect to the series of Notes being redeemed; over
(b) the Outstanding principal amount of the series of Notes
(or portion thereof) being redeemed.
"Managing General Partners" means Linden Ltd., Camden GP and
Bayonne GP.
"Managing Member" means, with respect to the Company, ECP
Holding Company or any other Person designated by the member of the Company to
be the Company's managing member.
"Mandatory Redemption Price" has the meaning set forth in
Section 1102.
"Material Adverse Effect" means a material adverse effect on
(i) the financial position or results of operation of the Company and its
Subsidiaries, taken as a whole, (ii) the ability of the Company to perform its
obligations under the Notes or (iii) the ability of a Facility
<PAGE> 21
13
Owner to perform any obligation under a Project Document that is material to the
Company and its Subsidiaries taken as a whole.
"Maturity", when used with respect to any Note, means the date
on which the principal of such Note or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, notice of redemption or otherwise.
"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.
"Member Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Managing Member and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Buyout Proceeds" means all cash proceeds and the fair
market value of all non-cash proceeds received by the Company or any of its
Subsidiaries (including the Operating Partnerships and the Managing General
Partners) (without duplication) from a Power Contract Buyout, 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 Cashflow" during any period means the amount determined
in accordance with the definition of Cashflow for that period minus the sum of
(i) all amounts paid by or on behalf of the Company in respect of administration
and overhead other than any subordinated payments and (ii) all taxes paid by the
Company (other than tax reimbursements paid by the Company), without
duplication; provided, however, that net cashflow for the quarter ended June 30,
1999 will be deemed to also include all amounts received by the Company after
February 4, 1999 through the Issue Date minus (i) interest paid on the Bridge
Loan and (ii) all amounts paid by or on behalf of the Company in respect of
administration and overhead between February 4, 1999 and the Issue Date.
"Net Loss Proceeds" means all cash proceeds of insurance
received by the Company on account of an Event of Loss, 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 resulting from an Event of
Loss, in each case, net of all expenses, costs and other amounts expended or
incurred by or on behalf of the recipients of such cash proceeds, cash award or
non-cash proceeds in connection with the collection, enforcement, negotiation,
<PAGE> 22
14
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 to the remediation or the
reimbursement for the cost of remediation of the environmental damage giving
rise to such insurance claim) or similar types of policies.
"Non-U.S. Person" means a Person that is not a "U.S. Person"
as defined in Regulation S and certified to the Trustee and the Security
Registrar by such Person.
"Notes" has the meaning stated in the first recital of this
Indenture and more particularly means any Notes authenticated and delivered
under this Indenture. For all purposes of this Indenture, the term "Notes" shall
include any Additional Notes and any Exchange Notes to be issued and exchanged
for any Notes pursuant to the Registration Rights Agreement and this Indenture
and, for purposes of this Indenture, all Initial Notes, Additional Notes and
Exchange Notes shall vote together as one series of Notes under this Indenture.
"Offering Memorandum"means the Final Offering Memorandum dated
April 14, 1999, relating to the Notes.
"Officers' Certificate" means a certificate signed by an
officer or manager, as the case may be, of the Company or any of its
Subsidiaries, or any authorized partner or member of any of them, as the case
may be.
"Operating Partnerships" or "Operating Partnership" means
collectively or individually, as the case may be, Linden Venture, Camden Venture
and Bayonne Venture.
"Operating Property" means (i) any interest in real property
owned by the Company or its Subsidiaries and (ii) any asset owned by the Company
or its Subsidiaries that is depreciable in accordance with GAAP, excluding, in
either case, (y) any interest of the Company 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, the Company or any of its Subsidiaries or the
Trustee or any of their Affiliates.
"Optional Redemption Price" has the meaning set forth in
Section 1101.
"Outstanding", when used with respect to Notes, means, as of
the date of determination, all Notes theretofore authenticated and delivered
under this Indenture, except:
<PAGE> 23
15
(a) Notes theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(b) Notes, or portions thereof, for which payment or
redemption money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company) in trust
or set aside and segregated in trust by the Company (if the Company
shall act as its own Paying Agent) for the Holders of such Notes;
provided that, if such Notes are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
(c) Notes, except to the extent provided in Sections 1202 and
1203, with respect to which the Company has effected legal defeasance
and/or covenant defeasance as provided in Article Twelve; and
(d) Notes which have been paid pursuant to Section 308 or in
exchange for or in lieu of which other Notes have been authenticated
and delivered pursuant to Section 303;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Notes have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Notes owned by
the Company or any other obligor upon the Notes or any Affiliate of the Company
or any other obligor shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in making
such calculation or in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes which a Responsible Officer of
the Trustee knows to be so owned shall be so disregarded. Notes so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Notes and that the pledgee is not the Company or any other
obligor upon the Notes or any Affiliate of the Company or such other obligor.
"Paying Agent" means The Bank of New York, and any successor
(including the Company acting as Paying Agent) authorized by the Company to pay
the principal of (and premium, if any) or interest on any Notes on behalf of the
Company.
"Payment Dates" means each March 31, June 30, September 30 and
December 31, commencing June 30, 1999.
"Permanent Regulation S Global Note" has the meaning set forth
in Section 201.
<PAGE> 24
16
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, limited liability company, trust,
unincorporated organization or Governmental Authority.
"Physical Notes" have the meaning set forth in Section 201.
"Power Contract Buyout" means the termination of, or the
negotiated reduction of capacity or electricity to be sold under, a Power
Purchase Agreement other than pursuant to such agreement's terms and the payment
by the purchaser made in connection therewith.
"Power Purchase Agreement" means any agreement for the sale of
electrical generating capacity or electricity by a Facility other than any such
agreement that has a term of one year or less or that may be canceled or
terminated by either the power purchaser or seller thereunder on less than one
year's notice without substantial economic detriment.
"Predecessor Note" of any particular Note means every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 308 in exchange for a mutilated
security or in lieu of a lost, destroyed or stolen Note shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Note.
"Preferred Stock" means, with respect to any Person, any and
all shares, interests, partnership interests, participation, rights in or other
equivalents (however designated) of such Person's preferred or preference stock,
whether now outstanding or issued after the Issue Date, and including, without
limitation, all classes and series of preferred or preference stock of such
Person.
"Primary Treasury Dealer" means a primary U.S. Government
securities dealer in New York City selected by the Company.
"Principal Operating Property" means any Operating Property
that consists of any of the following: (i) a real estate site on which any
Facility is located and (ii) any Facility or any turbine located at any
Facility, excluding, however, from each of clauses (i) and (ii), 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.
"Private Placement Legend" has the meaning set forth in
Section 202.
"Project Documents" includes all Power Purchase Agreements,
steam contracts, operating and maintenance agreements, administrative services
contracts, construction contracts (other than purchase orders), transmission
agreements, fuel supply contracts and partnership
<PAGE> 25
17
agreements that relate to a Facility, other than any such agreement that has a
term of one year or less or that may be canceled or terminated by a party
thereto on less than one year's notice without substantial economic detriment.
"Purchase Date" has the meaning set forth in Section 1015.
"PURPA" means the Public Utility Regulatory Policies Act of
1978, as amended, and the implementing regulations.
"QF" or "Qualifying Facility" means a "qualifying cogeneration
facility" in accordance with PURPA.
"QIB" means a "Qualified Institutional Buyer" under Rule 144A.
"Rating" means (i) with respect to the Initial Notes and the
Exchange Notes, the rating of the Initial Notes by the Rating Agencies on the
Issue Date and (ii) with respect to the Additional Notes, the rating of the
Additional Notes by the Rating Agencies on their date of issuance; provided that
if any of the Rating Agencies that initially rated such Notes is no longer in
business or no longer rating the Notes, a comparable rating of another
internationally recognized rating institution selected in good faith by the
Managing Member of the Company.
"Rating Agencies" means Moody's and S&P to the extent that at
each relevant time of determination, each of them has an active and current
rating in effect on the 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 Notes; provided
that if none of them has a current rating on the Notes at any relevant time of
determination, at least 2 other internationally recognized rating institutions
selected in good faith by the Managing Member of the Company.
"Rating Downgrade" means a lowering by one or more of the
Rating Agencies of the Ratings.
"Redemption Date", when used with respect to any Note to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price" means the Optional Redemption Price or the
Mandatory Redemption Price, as the case be.
"Reference Treasury Dealer" means (i) NationsBanc Montgomery
Securities LLC or its successor; provided, however, that if it shall cease to be
a Primary Treasury Dealer, the Company shall substitute therefore another
Primary Treasury Dealer and (ii) any other Primary Treasury Dealer selected by
the Company.
<PAGE> 26
18
"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 Company and the Trustee by such Reference Treasury
Dealer at 5:00 p.m. on the third Business Day preceding such Redemption Date.
"Register" has the meaning specified in Section 305.
"Registration Rights Agreement" means the registration rights
agreement between the Company and the Initial Purchasers named therein, dated as
of April 14, 1999 relating to the Notes.
"Registration Statement" means the registration statement as
defined in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Payment
Date means the March 15, June 15, September 15 or December 15 (whether or not a
Business Day), as the case may be, next preceding such Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Note" has the meaning set forth in
Section 201.
"Regulation S Physical Note" has the meaning set forth in
Section 201.
"Remaining Net Loss Proceeds" means the Net Loss Proceeds with
respect to one or more Events of Loss minus the aggregate amount of all of such
proceeds used toward the restoration, repair, reconstruction or replacement of
the affected Facility.
"Resale Restriction Termination Date" has the meaning set
forth in Section 202.
"Responsible Officer" shall mean, when used with respect to
the Trustee, any officer within the corporate trust department of the Trustee,
including any vice president, assistant vice president, assistant secretary,
assistant treasurer, trust officer or any other officer of the Trustee as
certified to the Company who customarily performs functions similar to those
performed by the Persons who at the time shall be such officers, respectively,
or to whom any corporate trust matter is referred because of such person's
knowledge of and familiarity with the particular subject and who shall have
direct responsibility for the administration of this Indenture.
"Rule 144A" means Rule 144A under the Securities Act.
<PAGE> 27
19
"Rule 144A Global Note" has the meaning set forth in Section
201.
"S&P" means Standard & Poor's Rating Services and its
successors.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, and the rules and regulations thereunder.
"Security Documents" means the ECT Merchant Security
Agreement, the CalPERS Security Agreement, the ECP Holding Company Security
Agreement and the Common Security Agreement.
"Security Registrar" has the meaning specified in Section 305
and any successor authorized by the Company to act as Security Registrar.
"Shelf Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Special Record Date" for the payment of any Defaulted Payment
means a date fixed by the Trustee pursuant to Section 309.
"Stated Maturity" means, when used with respect to any Note or
any installment of interest or principal on any series of Notes, the date on
which such payment of principal or interest is due and payable and, when used
with respect to any other Indebtedness, means the date specified in the
instrument governing such Indebtedness as the fixed date on which the principal
of such Indebtedness or any installment of interest thereon is due and payable,
including pursuant to any mandatory redemption provision.
"Subordinated Indebtedness" means any Indebtedness of the
Company (whether outstanding on the date hereof or thereafter incurred) which
(i) is subordinate or junior in right of payment to the Notes pursuant to a
written agreement to that effect and (ii) is not subject to acceleration, so
long as any Notes are Outstanding under this Indenture, unless the principal of
the Notes has been accelerated under this Indenture.
"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.
"Surviving Entity" has the meaning set forth in Section 801.
<PAGE> 28
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"Temporary Regulation S Global Note" has the meaning set forth
in Section 201.
"Treasury Rate" means 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 quarterly 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.
For the purpose of calculating the Make Whole Premium, the
applicable Treasury Rate will be determined as of the third Business Day
preceding the applicable Redemption Date and the maturity of U.S. treasury
securities will be rounded to the nearest month to determine those with
maturities most closely corresponding to the Notes.
The applicable Treasury Rate is a yield based on the yields on
U.S. treasury securities with comparable maturities and principal amounts to
that of the Notes being redeemed. The applicable Treasury Rate will be
calculated by taking the arithmetic mean of the yields on U.S. treasury
securities published under the heading "Week Ending" under the caption "Treasury
Constant Maturities" in statistical release H.15(519), published weekly by the
Federal Reserve System, with maturities corresponding to the remaining life to
maturity of the Notes. If statistical release H.15(519) or a successor
publication of the Federal Reserve Board is not available, a reasonably
comparable index will be designated for this calculation.
If statistical release H.15(519), or any successor or
alternative index, does not have any U.S. treasury securities with maturities
corresponding exactly to the Notes to be redeemed, the yields on the two U.S.
treasury securities with maturities most closely corresponding to the remaining
life to maturity of the Notes will be used. The applicable Treasury Rate will
then be interpolated or extrapolated, on a straight line basis, based on the
these two published yields.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939 as in force at the date as of which this Indenture was executed except
as provided in Section 905.
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"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"U.S. Government Obligations" means (i) securities that are
(a) direct obligations of the United States of America for the payment of which
the full faith and credit of the United States of America is pledged or (b)
obligations of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case, are not callable or redeemable at the
option of the issuer thereof; and (ii) depositary receipts issued by a bank (as
defined in Section 3(a)(2) of the Securities Act) as custodian with respect to
any U.S. Government Obligation which is specified in clause (i) above and held
by such bank for the account of the holder of such depositary receipt, or with
respect to any specific payment of principal or interest on any U.S. Government
Obligation which is so specified and held; provided that (except as required by
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of principal or interest of the U.S. Government Obligation evidenced by such
depositary receipt.
"U.S. Physical Note" has the meaning set forth in Section 201.
"Voting Stock" means any class or classes of Capital Stock of
a Person pursuant to which the holders thereof have the general voting power
under ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees, or to elect or designate those generally
responsible for managing the business and affairs under ordinary circumstances,
of any Person (irrespective of whether or not, at the time, securities of any
other class or classes has, or might have, voting power by reason of the
happening of any contingency).
SECTION 102. Incorporation by Reference of Trust Indenture
Act.
(a) This Indenture is expressly made subject to the Trust
Indenture Act as if this Indenture were, on the date hereof, subject to the TIA
under the provisions of such statute and such provisions are incorporated by
reference in this Indenture.
(b) Whenever this Indenture refers to a provision of the Trust
Indenture Act, the provision is incorporated by reference in and made a part of
this Indenture. The following Trust Indenture Act terms used in this Indenture
have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder;
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"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the Indenture securities means the Company or any
other obligor on the Notes.
All other Trust Indenture Act terms used in this Indenture
that are defined by the Trust Indenture Act, defined by reference in the Trust
Indenture Act to another statute or defined by a rule of the Commission and not
otherwise defined herein shall have the meanings assigned to them therein.
SECTION 103. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture (including any covenant
compliance which constitutes a condition precedent) relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1008(a)) shall include:
(a) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of each such individual,
he or she has made such examination or investigation as is necessary to
enable him or her to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
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SECTION 104. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 105. Acts of Holders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in Person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are received
in the manner set forth in Section 106 by a Responsible Officer of the Trustee
and, where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section 105.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying
<PAGE> 32
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that the individual signing such instrument or writing acknowledged to him/her
the execution thereof. Where such execution is by a signer acting in a capacity
other than his/her individual capacity, such certificate or affidavit shall also
constitute sufficient proof of the signer's authority. The fact and date of the
execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner that the Trustee
deems sufficient.
(c) The principal amount and serial numbers of Notes held by
any Person, and the date of holding the same, shall be proved by the Register.
(d) If the Company shall solicit from the Holders any request,
demand, authorization, direction, notice, consent, waiver or other Act, the
Company may, at its option, by or pursuant to a Member Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding TIA Section
316(c), such record date shall be the record date specified in or pursuant to
such Member Resolution, which shall be a date not earlier than the date 30 days
prior to the first solicitation of Holders generally in connection therewith and
not later than the date such solicitation is completed. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such record date, but only the Holders
of record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Notes have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other Act,
and for that purpose the Outstanding Notes shall be computed as of such record
date; provided that no such authorization, agreement or consent by the Holders
on such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than eleven months after
the record date.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Note shall bind every future
Holder of the same Note and the Holder of every Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Note.
SECTION 106. Notices, etc., to Trustee and Company.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with:
<PAGE> 33
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(a) the Trustee by any Holder or the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Trustee Administration; or
(b) the Company by the Trustee or any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at 711 Louisiana Street,
Houston, Texas 77002, Attention: President or at any other address
previously furnished in writing to the Trustee by the Company.
The Company, the Trustee or DTC by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
SECTION 107. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to
Holders by the Company or the Trustee, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, or delivered by overnight courier or facsimile, to
each such Holder affected by such event, at his or her address as it appears in
the Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice mailed to a
Holder in the manner herein prescribed shall be conclusively deemed to have been
received by such Holder, whether or not such Holder actually receives such
notice. Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of or irregularities in
regular mail service or by reason of any other cause, it shall be impracticable
to mail notice of any event to Holders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice for every purpose hereunder.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
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SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Notes, express or implied,
shall give to any Person, other than the parties hereto, any Paying Agent, any
Security Registrar and their successors hereunder and the Holders, any benefit
or any legal or equitable right, remedy or claim under this Indenture.
SECTION 112. Governing Law.
This Indenture and the Notes shall be governed by, and
construed in accordance with, the law of the State of New York.
SECTION 113. Legal Holidays.
In any case where any Payment Date, Redemption Date, date
established for payment of Defaulted Payment pursuant to Section 309, Stated
Maturity, Maturity or Change in Control Purchase Date, with respect to any Note
shall not be a Business Day, then (notwithstanding any other provision of this
Indenture or of the Notes) payment of principal or premium, if any, 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 Payment Date, Redemption
Date, date established for payment of Defaulted Payment pursuant to Section 309,
Stated Maturity, Maturity or Change in Control Purchase Date; provided that no
interest shall accrue for the period from and after such date to the next
succeeding Business Day.
SECTION 114. Conflict of Any Provision of Indenture with Trust
Indenture Act.
If and to the extent that any provision of this Indenture
limits, qualifies or conflicts with the duties imposed by Trust Indenture Act
Sections 310 to 318, inclusive, or conflicts with any provision (an
"incorporated provision") required by or deemed to be included in this Indenture
by operation of such Trust Indenture Act sections, such imposed duties or
incorporated provision shall control. If any provision of this Indenture
modifies or excludes any
<PAGE> 35
27
provision of the Trust Indenture Act that may be so modified or excluded, the
latter provision shall be deemed to apply to this Indenture as so modified or
excluded, as the case may be.
SECTION 115. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or any Subsidiary of the Company. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 116. Counterparts.
This Indenture may be signed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Indenture.
ARTICLE TWO
NOTE FORMS
SECTION 201. Forms Generally.
The Notes and the Trustee's certificate of authentication
shall be in substantially the form annexed hereto as Exhibit A. The Notes may
have such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture and may have letters, notations
or other marks of identification and such notations, legends or endorsements
required by law, stock exchange agreements to which the Company is subject or
usage. Any portion of the text of any Note may be set forth on the reverse
thereof, with an appropriate reference thereto on the face of the Note. The
Company shall approve the form of the Notes and any notation, legend or
endorsement on the Notes. Each Note shall be dated the date of its
authentication.
The definitive Notes shall be printed, lithographed or
engraved on steel-engraved borders or may be produced in any other manner
permitted by the rules under any applicable securities laws or any securities
exchange on which the Notes may be listed, all as determined by the officers of
the Company executing such Notes, as evidenced by their execution of such Notes.
The terms and provisions contained in the form of the Notes
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Indenture. To the extent applicable, the Company and the Trustee,
by their execution and delivery of this Indenture, and
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the Holders and beneficial owners of the Notes by their acceptance of the Notes
expressly agree to such terms and provisions and to be bound thereby.
Initial Notes offered and sold to QIBs in reliance on Rule
144A shall be issued initially in the form of one or more permanent global Notes
in registered form, substantially in the form set forth in Exhibit A (each, a
"Rule 144A Global Note"), deposited with, or on behalf of, DTC or with the
Trustee, as custodian for DTC, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The aggregate principal amount of each Rule
144A Global Note may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for DTC or its nominee, as
hereinafter provided.
Initial Notes offered and sold in offshore transactions in
reliance on Regulation S shall be initially issued in the form of one or more
temporary global Notes in registered form, substantially in the form set forth
in Exhibit A (each, a "Temporary Regulation S Global Note"), deposited with, or
on behalf of, DTC or with the Trustee, as custodian for DTC for the accounts of
Euroclear and Cedel, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. Each Temporary Regulation S Global Note will be
exchangeable for one or more permanent global Notes (each, a "Permanent
Regulation S Global Note"; and together with the Temporary Regulation S Global
Notes, the "Regulation S Global Notes") after the 40th day following the Issue
Date upon certification (substantially in the form of Exhibit B hereof) that the
beneficial interests in such global Note are owned by either Non-U.S. persons or
U.S. persons who purchased such interests pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
The aggregate principal amount of each Regulation S Global Note may from time to
time be increased or decreased by adjustments made in the records of the
Trustee, as custodian for DTC or its nominee, as herein provided.
Initial Notes offered and sold to "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act) who are
not QIBs (excluding Non-U.S. Persons) shall initially be issued in the form of
permanent certificated Notes in registered form in substantially the form of
Exhibit A hereto ("U.S. Physical Notes"). Notes issued pursuant to Section 306
in exchange for or upon transfer of interests in a Rule 144A Global Note or a
Regulation S Global Note shall be in the form of U.S. Physical Notes and
permanent certificated Notes in registered form substantially in the form set
forth in Exhibit A (the "Regulation S Physical Note"), respectively.
The U.S. Physical Notes and the Regulation S Physical Notes
are sometimes collectively herein referred to as the "Physical Notes". The
Regulation S Global Notes and the Rule 144A Global Notes are sometimes
collectively referred to as the "Global Notes."
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SECTION 202. Restrictive Legends.
Unless and until (i) an Initial Note is sold under an
effective Registration Statement or (ii) an Initial Note is exchanged for an
Exchange Note in connection with an effective Registration Statement, in each
case pursuant to the Registration Rights Agreement, (A) each Rule 144A Global
Note and each U.S. Physical Note shall bear the legend set forth below (the
"Private Placement Legend") on the face thereof and (B) each Regulations S
Global Note and each Regulation S Physical Note shall bear the legend set forth
below on the face thereof until at least 41 days after the Issue Date and
receipt by the Company and the Trustee of a certificate substantially in the
form of Exhibit B hereto:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED ENCUMBERED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE
WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF
AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE)(THE
"RESALE RESTRICTION TERMINATION DATE"), ONLY: (A) TO THE COMPANY OR ANY
SUBSIDIARY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO
A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER",
AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT
THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES
ACT THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT
OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION
<PAGE> 38
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FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY'S RIGHT, PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i)
PURSUANT TO CLAUSE (D) PRIOR TO THE END OF THE 40-DAY DISTRIBUTION
COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT OR PURSUANT TO CLAUSE (E) OR (F) PRIOR TO THE RESALE
RESTRICTION TERMINATION DATE, TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO THE
COMPANY, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
Each Global Note, whether or not an Initial Note, shall also
bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC OR SUCH OTHER REPRESENTATIVE OF DTC OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO.) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTIONS 306 AND 307 OF THE INDENTURE.
<PAGE> 39
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ARTICLE THREE
THE NOTES
SECTION 301. Title and Terms.
The aggregate principal amount of Initial Notes which may be
authenticated and delivered under this Indenture is unlimited.
The Initial Notes shall be known and designated as the "6.737%
Senior Secured Notes Due 2008", the "7.066% Senior Secured Notes Due 2012" and
the "7.536% Senior Secured Notes Due 2017" and the Exchange Notes shall be known
and designated as the "6.737% Series B Senior Secured Notes Due 2008", "7.066%
Series B Senior Secured Notes Due 2012" and "7.536% Series B Senior Secured
Notes Due 2017", in each case, of the Company. The Stated Maturity of the 2008
Notes, the Series B 2008 Notes, the 2012 Notes, the Series B 2012 Notes, the
2017 Notes and the Series B 2017 Notes shall be March 31, 2008, March 31, 2008,
March 31, 2012, March 31, 2012, June 30, 2017 and June 30, 2017, respectively.
Interest on the 2008 Notes, the Series B 2008 Notes, the 2012 Notes, the Series
B 2012 Notes, the 2017 Notes and the Series B 2017 Notes will accrue at the rate
of 6.737%, 6.737%, 7.066%, 7.066%, 7.536% and 7.536% per annum, respectively,
from April 20, 1999, or from the most recent Payment Date to which interest has
been paid or duly provided for, payable each applicable Payment Date, until the
full principal thereof is paid or duly provided for. Interest will be computed
on the basis of a 360-day year comprising twelve 30-day months.
The principal of, premium, if any, and interest on the Notes shall be
payable and the Notes shall be exchangeable and transferable, at the office or
agency of the Company in the Borough of Manhattan, The City of New York
maintained for such purposes (which initially shall be the Corporate Trust
Office of the Trustee) to the Person in whose name such Note is registered on
the March 15, June 15, September 15 or December 15 immediately preceding the
applicable Payment Date or, at the option of the Company, interest may be paid
by check mailed to the address of the Person entitled thereto as such shall
appear in the Register.
Notes that remain outstanding after the consummation of the
Exchange Offer and Exchange Notes issued in connection with the Exchange Offer
will be treated as a single class of securities under this Indenture.
The Notes shall be redeemable as provided in Article Eleven.
SECTION 302. Denominations.
The Notes shall be issuable only in registered form without
coupons and initially only in denominations of $1,000 and any integral multiple
thereof; provided, however, that initial
<PAGE> 40
32
purchases of the Notes by purchasers who are institutional "accredited
investors" who are not Qualified Institutional Buyers shall be in minimum
amounts of $250,000 and provided further that after initial issuance, Notes may
be issued upon exchange or transfer in such amounts as may be necessary to
evidence the entire unpaid principal amount of any Note surrendered or
exchanged.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Company by its
Chairman, its President or a Vice President, if any, and attested by its
Secretary or an Assistant Secretary. The signature of any of these officers on
the Notes may be manual or facsimile signatures of the present or any future
such authorized officer and may be imprinted or otherwise reproduced on the
Notes.
Notes bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Notes or did
not hold such offices at the date of such Notes.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Notes executed by the
Company to the Authenticating Agent for authentication, together with a Company
Order for the authentication and delivery of such Notes, directing the
Authenticating Agent to authenticate the Notes and certifying that all
conditions precedent to the issuance of Notes contained herein have been fully
complied with, and the Authenticating Agent shall, in accordance with such
Company Order, authenticate and deliver such Notes. On Company Order, the
Trustee shall authenticate for original issue Exchange Notes in an aggregate
principal amount not to exceed the sum of $850,000,000 plus the aggregate
principal amount of any Additional Notes issued; provided that such Exchange
Notes shall be issuable only upon the valid surrender for cancellation of
Initial Notes of a like aggregate principal amount in accordance with an
Exchange Offer pursuant to the Registration Rights Agreement. In each case, the
Authenticating Agent shall receive an Officers' Certificate and an Opinion of
Counsel of the Company in connection with such authentication of Notes. Such
order shall specify the amount of Notes to be authenticated and the date on
which the original issue of Notes is to be authenticated.
Each Note shall be dated the date of its authentication.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Notes. Unless limited by terms of such
appointment, an authenticating agent may authenticate Notes whenever the Trustee
may do so. The Authenticating Agent has the same rights as an agent to deal with
the Company or an Affiliate of the Company.
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No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for in Exhibit
A duly executed by the Trustee by manual signature of an authorized signatory,
and such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder and
is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid, shall have executed an indenture
supplemental hereto with the Trustee pursuant to Article Eight, any of the Notes
authenticated or delivered prior to such consolidation, merger, conveyance,
transfer, lease or other disposition may, from time to time, at the request of
the successor Person, be exchanged for other Notes executed in the name of the
successor Person with such changes in phraseology and form as may be
appropriate, but otherwise in substance of like tenor as the Notes surrendered
for such exchange and of like principal amount; and the Authenticating Agent,
upon Company Request of the successor Person, shall authenticate and deliver
Notes as specified in such request for the purpose of such exchange. If Notes
shall at any time be authenticated and delivered in any new name of a successor
Person pursuant to this Section 303 in exchange or substitution for or upon
registration of transfer of any Notes, such successor Person, at the option of
the Holders but without expense to them, shall provide for the exchange of all
Notes at the time Outstanding for Notes authenticated and delivered in such new
name.
SECTION 304. Temporary Notes.
Pending the preparation of definitive Notes, the Company may
execute, and upon a Company Order, the Authenticating Agent shall authenticate
and deliver temporary Notes which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Notes in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Notes may determine, as conclusively
evidenced by their execution of such Notes.
If temporary Notes are issued, the Company will cause
definitive Notes to be prepared without unreasonable delay. After the
preparation of definitive Notes, the temporary Notes shall be exchangeable for
definitive Notes upon surrender of the temporary Notes at the office or agency
of the Company designated for such purpose pursuant to Section 1002 hereof,
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Notes, the Company shall execute and the Authenticating Agent shall
authenticate and deliver in
<PAGE> 42
34
exchange therefor a like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes.
SECTION 305. Registration, Registration of Transfer and
Exchange.
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency designated pursuant to Section 1002 being herein
sometimes referred to as the "Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Notes and of transfers of Notes. The Register shall be in written form or any
other form capable of being converted into written form within a reasonable
time. At all reasonable times, the Register shall be open to inspection by the
Trustee. The Trustee is hereby initially appointed as security registrar
("Security Registrar") for the purpose of registering Notes and transfers of
Notes as herein provided.
Subject to the provisions of Section 307, upon surrender for
registration of transfer of any Note at the office or agency of the Company
designated pursuant to Section 1002, the Company shall execute, and the
Authenticating Agent shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Notes of any authorized
denomination or denominations of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other
Notes of any authorized denomination and of a like aggregate principal amount,
upon surrender of the Notes to be exchanged at such office or agency. Whenever
any Notes are so surrendered for exchange (including an exchange of Initial
Notes for Exchange Notes), the Company shall execute, and the Authenticating
Agent shall authenticate and deliver, the Notes which the Holder making the
exchange is entitled to receive; provided that no exchange of Initial Notes for
Exchange Notes shall occur until an Exchange Offer Registration Statement shall
have been declared effective by the Commission and that the Initial Notes to be
exchanged for the Exchange Notes shall be canceled by the Trustee.
All Notes issued upon any registration of transfer or exchange
of Notes shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Security
Registrar) be duly endorsed or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar, duly
executed by the Holder thereof or his or her attorney duly authorized in
writing.
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35
No service charge shall be made for any registration of
transfer or exchange or redemption of Notes, but the Company may require payment
in certain circumstances of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Notes, other than exchanges pursuant to Section 304,
906, 1015, 1109 or 1106(e) not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange any Note during a period beginning at the opening of
business 15 days before the selection of Notes to be redeemed under Section 1105
and ending at the close of business on the day of such mailing of the relevant
notice of redemption or (ii) to register the transfer of or exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part.
SECTION 306. Book-Entry Provisions for Global Notes.
(a) Each Global Note initially shall (i) be registered in the
name of Cede & Co., as nominee of DTC (such nominee being referred to herein as
the "Global Note Holder"), (ii) be deposited with, or on behalf of, DTC or with
the Trustee, as custodian for DTC and (iii) bear legends as set forth in Section
202.
Members of, or participants in, DTC (collectively, the
"Participants" or the "DTC Participants") shall have no rights under this
Indenture with respect to any Global Note held on their behalf by DTC, or the
Trustee as its custodian, or under any Global Note, and DTC may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Note for all purposes whatsoever. Notwithstanding
the foregoing, nothing herein shall prevent the Company, the Trustee or any
agent of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by DTC or shall impair, as
between DTC and its Participants, the operation of customary practices governing
the exercise of the rights of a Holder of any Note.
(b) Transfers of any Global Note shall be limited to transfers
of such Global Note in whole, but not in part, to DTC, its successors or their
respective nominees. Interests of beneficial owners in a Global Note may be
transferred in accordance with the applicable rules and procedures of DTC and
the provisions of Section 307. In addition, U.S. Physical Notes or Regulation S
Physical Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in the Rule 144A Global Notes or Regulation S Global
Notes, respectively, if: the Company notifies the Trustee in writing that DTC is
unwilling or unable to continue as depository for the Global Notes or DTC ceases
to be a "Clearing Agency" registered under the Exchange Act and a successor
depository is not appointed by the Company within 90 days or (ii) the Company,
at its option, notifies the Trustee in writing that it elects to have the
Physical Notes so issued.
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36
(c) Any beneficial interest in one of the Global Notes that is
transferred to a person who takes delivery in the form of an interest in the
other Global Note will, upon transfer, cease to be an interest in such Global
Note and become an interest in the other Global Note and, accordingly, will
thereafter be subject to all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(d) In connection with the transfer of an entire Rule 144A
Global Note or Regulation S Global Note to beneficial owners pursuant to
paragraph (b) of this Section 306, the Rule 144A Global Note or Regulation S
Global Note, as the case may be, shall be deemed to be surrendered to the
Trustee for cancellation, and the Company shall execute, and the Authenticating
Agent shall authenticate and deliver, to each beneficial owner identified by DTC
in exchange for its beneficial interest in the Rule 144A Global Note or
Regulation S Global Note, as the case may be, an equal aggregate principal
amount of Certificated Notes of authorized denominations.
(e) Any U.S. Physical Note delivered in exchange for an
interest in the Rule 144A Global Note pursuant to subsection (b) of this Section
306 shall, unless such exchange is made on or after the Resale Restriction
Termination Date, bear the Private Placement Legend.
(f) The registered Global Note Holder may grant proxies and
otherwise authorize any person, including DTC's Participants and persons that
may hold interests through DTC's Participants, to take any action which a Holder
is entitled to take under this Indenture or the Notes.
(g) Beneficial owner of interests in a Global Note may receive
Physical Notes (which shall bear the Private Placement Legend if required by
Section 202 hereof) in accordance with the procedures of DTC. In connection with
the execution, authentication and delivery of such Physical Notes in exchange
for beneficial interests in a Global Note pursuant to this paragraph (g) or
paragraph (b) above, the Security Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the applicable Global
Note in an amount equal to the principal amount of the beneficial interest in
such Global Note to be transferred, and the Company shall execute, and the
Authenticating Agent shall authenticate and deliver one or more Physical Notes
of like tenor and having an equal aggregate principal amount.
SECTION 307. Special Transfer Provisions.
Unless and until (i) an Initial Note is sold under an
effective Registration Statement or (ii) an Initial Note is exchanged for an
Exchange Note in connection with an effective Registration Statement, in each
case pursuant to the Registration Rights Agreement, the following provisions
shall apply:
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37
(a) Transfers to Non-QIB Institutional Accredited Investors.
The following provisions shall apply with respect to the registration
of any proposed transfer of a Note to any institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation
D under the Securities Act) which is not a QIB (excluding Non-U.S.
Persons):
(i) The Security Registrar shall register the
transfer of any Note, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is at
least two years after the original issue date of the Notes or
(y) the proposed transferee has delivered to the Security
Registrar a certificate substantially in the form of Exhibit C
hereto.
(ii) If the proposed transferor is a DTC Participant
holding a beneficial interest in the Rule 144A Global Note,
upon receipt by the Security Registrar of (x) the documents,
if any, required by paragraph (i) above and (y) instructions
given in accordance with DTC's and the Security Registrar's
procedures therefor, the Security Registrar shall reflect on
its books and records the date and a decrease in the principal
amount of the Rule 144A Global Note in an amount equal to the
principal amount of the beneficial interest in the Rule 144A
Global Note to be transferred, and the Company shall execute,
and the Authenticating Agent shall authenticate and deliver,
one or more Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of a U.S.
Physical Note or an interest in the Rule 144A Global Note to a QIB
(excluding Non-U.S. Persons):
(i) If the Note to be transferred consists of (x)
U.S. Physical Notes, the Security Registrar shall register the
transfer and the Company shall execute, and the Authenticating
Agent shall authenticate and deliver, one or more U.S.
Physical Notes if such transfer is being made by a proposed
transferor who has checked the box provided for on the form of
Note stating, or has otherwise advised the Company and the
Security Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee
who has signed the certification provided for on the form of
Note stating, or has otherwise advised the Company and the
Security Registrar in writing, that it is purchasing the Note
for its own account or an account with respect to which it
exercises sole investment discretion and that it, or the
Person on whose behalf it is acting with respect to any such
account, is a QIB within the meaning of Rule 144A , is aware
that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding
the Company as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is
aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from
registration provided by Rule 144A or (y) an interest in
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38
a Rule 144A Global Note, the transfer of such interest may be
effected only through the book-entry system maintained by DTC.
(ii) If the proposed transferee is a DTC Participant,
and the Notes to be transferred consist of U.S. Physical
Notes, upon receipt by the Security Registrar of instructions
given in accordance with DTC's and the Security Registrar's
procedures therefor, the Security Registrar shall reflect on
its books and records the date and an increase in the
principal amount of the Rule 144A Global Note in an amount
equal to the principal amount of the U.S. Physical Notes to be
transferred, and the Trustee shall cancel the U.S. Physical
Notes so transferred.
(c) Transfers of Interests in the Regulation S Global Note or
Regulation S Physical Notes to U.S. Persons. The following provisions
shall apply with respect to any transfer of interests in the Regulation
S Global Note or Regulation S Physical Notes to U.S. Persons:
(i) prior to the removal of the Private Placement
Legend for the Regulation S Global Notes or the Regulation S
Physical Notes pursuant to Section 202, the Security Registrar
shall refuse to register such transfer; and
(ii) after such removal pursuant to Section 202, the
Security Registrar shall register the transfer of any such
Note without requiring any additional certification.
(d) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of an Initial Note
to a Non-U.S. Person:
(i) Prior to May 31, 1999, the Security Registrar
shall register any proposed transfer of an Initial Note to a
Non-U.S. Person upon receipt of a certificate substantially in
the form of Exhibit D hereto from the proposed transferor and
the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Temporary Regulation S Global Notes
or Regulation S Physical Notes of like tenor and amount.
(ii) On and after May 31, 1999, the Security
Registrar shall register any proposed transfer to any Non-U.S.
Person (1) if the Note to be transferred is a Regulation S
Certificated Note, (2) if the Initial Note to be transferred
is a Rule 144A Certificated Note or an interest in the Rule
144A Global Note, upon receipt of a certificate substantially
in the form of Exhibit D from the proposed transferor and, (3)
in the case of either clause (1) or (2), the Company shall
execute, and the Trustee shall authenticate and deliver, one
or more Physical Notes of like tenor and amount.
<PAGE> 47
39
(iii) If the proposed transferor is a DTC Participant
holding a beneficial interest in the Rule 144A Global Note,
upon receipt by the Security Registrar of (1) the document, if
any, required by paragraph (i) and (2) instructions in
accordance with DTC's and the Security Registrar's procedures
therefor, the Security Registrar shall reflect on its books
and records the date and a decrease in the principal amount of
the Rule 144A Global Note in an amount equal to the principal
amount of the beneficial interest in the Rule 144A Global Note
to be transferred and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Physical
Notes of like tenor and amount.
(e) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the
Security Registrar shall deliver Notes that do not bear the Private
Placement Legend. Upon the transfer, exchange or replacement of Notes
bearing the Private Placement Legend, the Security Registrar shall
deliver only Notes that bear the Private Placement Legend unless either
(i) the circumstances contemplated by the fifth paragraph of Section
201 or paragraph (a)(i)(x) of this Section 307 exist or (ii) there is
delivered to the Security Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Security Registrar to the effect
that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the
Securities Act.
(f) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture and
in the Private Placement Legend and agrees that it will transfer such
Note only as provided in this Indenture.
The Security Registrar shall retain until such time as no
Notes remain Outstanding copies of all letters, notices and other written
communications received pursuant to Section 306 or this Section 307. The Company
shall have the right to inspect and make copies of all such letters, notices or
other written communications at any reasonable time upon the giving of
reasonable written notice to the Security Registrar.
Neither the Trustee nor the Security Registrar shall have an
obligation or duty to monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Indenture or under applicable law
with respect to any transfer of any interest in any Note other than to require
delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by the terms
of, this Indenture, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.
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40
SECTION 308. Mutilated, Destroyed, Lost and Stolen Notes.
If (i) any mutilated Note is surrendered to the Trustee or the
Security Registrar or (ii) the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Note, and there is
delivered to the Company and the Trustee such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Company or the Trustee that such Note has been acquired by a bona fide
purchaser, the Company shall execute and upon Company Order the Authenticating
Agent shall authenticate and deliver, in exchange for any such mutilated Note or
in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and
principal amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section 308, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section 308 in lieu of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all benefits of this Indenture equally and proportionately
with any and all other Notes duly issued hereunder.
The provisions of this Section 308 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 309. Payment of Interest; Interest Rights Preserved.
Principal and interest on any Note which is payable, and is
punctually paid or duly provided for, on any Payment Date shall be paid to the
Person in whose name such Note (or one or more Predecessor Notes) is registered
at the close of business on the Regular Record Date for such interest at the
office or agency of the Company in the Borough of Manhattan, The City of New
York maintained for such purposes (which initially shall be the Corporate Trust
Office) pursuant to Section 1002 or, at the option of the Company, interest may
be paid by check mailed to the address of the Person entitled thereto pursuant
to Section 310 as such address appears in the Register; provided that all
payments with respect to the Global Notes and Physical Notes the Holders of
which have given wire transfer instructions to the Trustee (or other Paying
Agent) by
<PAGE> 49
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the Regular Record Date shall be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
Any principal or interest on any Note which is payable, but is
not punctually paid or duly provided for, on any Payment Date shall forthwith
cease to be payable to the Holder on the Regular Record Date by virtue of having
been such Holder, and such defaulted principal or interest and (to the extent
lawful) interest on such defaulted principal or interest at the rate borne by
the Notes plus additional interest at the rate of 1% per annum (such defaulted
interest and interest thereon herein collectively called "Defaulted Payments")
may be paid by the Company, at its election in each case, as provided in clause
(a) or (b) below:
(a) The Company may elect to make payment of any Defaulted
Payment to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Payment, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Payment proposed to be paid on each
Note and the date of the proposed payment and, at the same time, the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Payment or shall make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Payment as provided in this clause. Thereupon the
Trustee shall fix a Special Record Date for the payment of such
Defaulted Payment which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Payment
and the Special Record Date therefor to be given in the manner provided
for in Section 107, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Payment and the
Special Record Date therefor having been so given, such Defaulted
Payment shall be paid to the Persons in whose names the Notes (or their
respective Predecessor Notes) are registered at the close of business
on such Special Record Date and shall no longer be payable pursuant to
the following clause (b).
(b) The Company may make payment of any Defaulted Payment in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed and, upon such
notice as may be required by such exchange, if, after notice given by
the Company to the Trustee of the proposed payment pursuant to this
clause, such manner of payment shall be deemed practicable by the
Trustee.
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42
Subject to the foregoing provisions of this Section 309, each
Note delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Note shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Note.
If the Company shall be required to pay any additional
interest pursuant to the terms of the Registration Rights Agreement, it shall
deliver an Officers' Certificate to the Trustee setting forth the new interest
rate and the period for which such rate is applicable.
SECTION 310. Persons Deemed Owners.
Prior to the due presentment of a Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Note is registered as the owner of such
Note for the purpose of receiving payment of principal of, premium, if any, and
(subject to Sections 305 and 309) interest on such Note and for all other
purposes whatsoever, whether or not such Note be overdue, and none of the
Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 311. Cancellation.
All Notes surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly canceled by it. The Company at
any time may deliver to the Trustee (or to any other Person for delivery to the
Trustee) for cancellation any Notes previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever and any
Notes previously authenticated hereunder which the Company has not issued and
sold, and all Notes so delivered shall be promptly canceled by the Trustee. If
the Company shall so acquire any of the Notes, however, such acquisition shall
not operate as a redemption or satisfaction of the indebtedness represented by
such Notes unless and until the same are surrendered to the Trustee for
cancellation. No Notes shall be authenticated in lieu of or in exchange for any
Notes canceled as provided in this Section 311, except as expressly permitted by
this Indenture. All canceled Notes held by the Trustee shall be disposed of by
the Trustee in accordance with its customary procedures and certification of
their disposal delivered to the Company unless by Company Order the Company
shall direct that canceled Notes be returned to it; provided, however, that the
Trustee shall not be required to destroy such canceled Notes.
SECTION 312. Issuance of Additional Notes.
The Company may, subject to compliance with Article Ten of
this Indenture, issue additional series of senior notes (the "Additional Notes")
in an unlimited aggregate principal amount having identical terms and conditions
as the Notes offered hereby, except that interest
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43
may begin accruing from a date other than the date hereof. Any Additional Notes
will be part of the same issue as the Notes offered hereby, will rank pari passu
in right of payment and will vote on all matters with the Initial Notes offered
hereby, except that any Additional Notes shall have a CUSIP or other identifying
number that differs from such numbers relating to the Outstanding Notes, as
required by DTC.
SECTION 313. Computation of Interest.
Interest on the Notes shall be computed on the basis of a
360-day year of twelve 30-day months.
SECTION 314. CUSIP and CINS Numbers.
The Company in issuing the Notes may use "CUSIP" and "CINS"
numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" or
"CINS" numbers in notices of redemption or exchange as a convenience to Holders;
provided that any such notice shall state that no representation is made as to
the correctness of such numbers either as printed on the Notes or as contained
in any notice of a redemption or exchange, that reliance may be placed only on
the other identification numbers printed on the Notes and that any such
redemption shall not be affected by any defect in or omission of such numbers.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
Upon the request of the Company, this Indenture shall cease to
be of further effect and the Trustee, upon Company Order and at the expense of
the Company, will execute proper instruments acknowledging satisfaction and
discharge of this Indenture when:
(a) either (i) all the Notes theretofore authenticated and
delivered (other than (A) Notes which have been mutilated, destroyed,
lost or stolen and which have been replaced or paid as provided in
Section 308 or (B) Notes that have been subject to defeasance under
Article Twelve) have been delivered to the Trustee for cancellation or
(ii) all Notes not theretofore delivered to the Trustee for
cancellation (A) have become due and payable, (B) will become due and
payable at maturity within one year or (C) are to be called for
redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the
name, and at the expense, of the Company, and the Company, in the case
of (ii)(A), (B) or (C) above, has irrevocably deposited or caused to be
deposited with the Trustee funds in trust for the purpose in an
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amount sufficient to pay and discharge the entire Indebtedness on such
Notes not theretofore delivered to the Trustee for cancellation, for
principal of, premium, if any, and interest on the Notes to the date of
such deposit (in the case of Notes that have become due and payable) or
to the Stated Maturity or Redemption Date, as the case may be;
(b) the Company has paid or caused to be paid all sums payable
under this Indenture by the Company; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided herein relating to the satisfaction and discharge of
this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under Section 607 and,
if money shall have been deposited with the Trustee pursuant to subclause (ii)
of clause (a) of this Section 401, the obligations of the Trustee under Section
402 and the last paragraph of Section 1003 shall survive such satisfaction and
discharge and the resignation and removal of the Trustee.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section
1003, all money deposited with the Trustee pursuant to Section 401 shall be held
in trust and applied by it, in accordance with the provisions of the Notes and
this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal of, premium, if
any, and interest on the Notes for whose payment such money has been deposited
with the Trustee; but such money need not be segregated from other funds except
to the extent required by law.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
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(a) default in the payment of the principal of or premium, if
any, on any Note when it becomes due and payable or the failure to
redeem any Note in the required principal amounts on any Mandatory
Redemption Date;
(b) default in the payment of any interest on any Note when it
becomes due and payable and continuance of such default for a period of
30 days;
(c) default in the performance or breach of any covenant or
agreement of the Company contained in the Notes, the Security Documents
or this Indenture (other than a default in the performance, or breach,
of a covenant or agreement that is specifically dealt with elsewhere
herein) and continuance of such default or breach for a period of 60
days after written notice has been received by the Company from the
Trustee or by the Company and the Trustee from the Holders of at least
25% in aggregate principal amount of the Notes then Outstanding;
(d) the institution by the Company or any other Facility Owner
of proceedings to be adjudicated a bankrupt or insolvent, or the
consent by it to the institution of bankruptcy or insolvency
proceedings against it, or the filing by it of a petition or answer or
consent seeking reorganization or relief under any bankruptcy law or
any other applicable federal or state law, or the consent by it to the
filing of any such petition or to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official)
of the Company or any other Facility Owner or of any substantial part
of its property, or the making by it of an assignment for the benefit
of creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due;
(e) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company or any other
Facility Owner a bankrupt or insolvent, or approving as properly filed
a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company or any other Facility Owner
under any bankruptcy law or any other applicable federal or state law,
or appointing a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company or any other Facility Owner
of any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 60 consecutive days;
(f) there occurs with respect to any issue or issues of
Indebtedness of the Company (i) that ranks pari passu with the Notes or
(ii) that is unsecured and/or unsubordinated and has an Outstanding
principal amount at Maturity in excess of $25 million in the aggregate
for all such issues, whether such Indebtedness now exists or shall
hereafter be created, an event of default that has caused the holder
thereof to declare such Indebtedness to be due and payable prior to its
Stated Maturity;
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(g) any final judgment or decree for the payment of money in
excess of $10 million in the aggregate (other than amounts covered by
in-force insurance for which the insurer has admitted liability) shall
be rendered against the Company and such final judgment or decree is
non-appealable, remains 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; or
(h) (i) on or after the Issue Date, other than in accordance
with the provisions of this Indenture or the Security Documents, if for
any reason, other than the satisfaction in full and discharge of the
obligations secured thereby, any Security Document ceases to be or is
not in full force and effect or the Trustee ceases to have first
priority security interests in the Collateral and, in each case, such
cessation continues for 30 days or (ii) on or after the Issue Date,
other than in accordance with the provisions of this Indenture or the
Security Documents, any grantor under the Security Documents asserts in
writing that any Security Document has ceased to be or is not in full
force and effect.
SECTION 502. Acceleration of Maturity; Rescission and
Annulment.
If an Event of Default (other than an Event of Default
specified in clause (d) or (e) of Section 501) occurs and is continuing, the
Trustee or the Holders of (a) in the case of an Event of Default specified in
clause (a) and (b) of Section 501, not less than 25% or (b) in the event of any
other Event of Default, 51% in aggregate principal amount of the Notes then
Outstanding may, and the Trustee at the written request of such Holders will,
declare the principal of, accrued interest on and Make-Whole Premium, if any,
and any other amounts payable on all of the Outstanding Notes immediately due
and payable and, upon any such declaration, such principal, interest and
Make-Whole Premium, if any, will become due and payable immediately; provided
that in the case of an Event of Default with respect to the Company described in
clause (d) or (e) of Section 501, the entire Outstanding principal amount of,
the accrued interest on and any other amounts payable with respect to such Notes
shall automatically become due and payable without any declaration or other act
on the part of the Trustee or any Holder.
At any time after a declaration of acceleration under this
Indenture, but before a judgment or decree for payment of the principal amount
of Notes then due has been obtained by the Trustee, the Company by written
notice to a Responsible Officer of the Trustee, may rescind and annul such
declaration and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay:
(i) all overdue interest on all Notes;
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(ii) all unpaid principal of and premium, if any, on
any Outstanding Notes that has become due otherwise than by
such declaration of acceleration and interest thereon at the
rate borne by the Notes;
(iii) to the extent that payment of such interest is
lawful, interest upon overdue interest and overdue principal
at the rate borne by the Notes; and
(iv) all sums paid or advanced by the Trustee under
this Indenture and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel; and
(b) all Defaults and Events of Default, other than the
non-payment of amounts of principal of, premium, if any, or interest on
the Notes that have become due solely by such declaration of
acceleration have been cured or waived as provided in Section 513.
No such rescission will affect any subsequent Default or impair any right
consequent thereon.
Notwithstanding the preceding paragraph, in the event of a
declaration of acceleration in respect of the Notes because an Event of Default
specified in Section 501(f) shall have occurred and be continuing and provided
no judgment or decree for payment of the money due has been obtained by the
Trustee, such declaration of acceleration shall be automatically annulled if the
Indebtedness that is the subject of such Event of Default has been discharged or
the holders thereof have rescinded their declaration of acceleration in respect
of such Indebtedness, and written notice of such discharge or rescission, as the
case may be, shall have been given to a Responsible Officer of the Trustee by
the Company and countersigned by the holders of such Indebtedness or a trustee,
fiduciary or agent for such holders, within 30 days after such declaration of
acceleration in respect of the Notes, and no other Event of Default has occurred
during such 30-day period which has not been cured or waived during such period.
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Company covenants that if:
(a) default is made in the payment of any installment of
interest on any Note when such interest becomes due and payable and
such default continues for a period of 30 days, or
(b) default is made in the payment of the principal of or
premium, if any, on any Note when such becomes due and payable, or on
any Mandatory Redemption Date,
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the Company will, upon demand of the Trustee, pay to the Trustee for the benefit
of the Holders of such Notes, the whole amount then due and payable on such
Notes for principal, premium, if any, and interest, and interest on any overdue
principal, premium, if any, and, to the extent that payment of such interest
shall be legally enforceable, upon any overdue installment of interest and
overdue principal, at the rate borne by the Notes, and, in addition thereto,
such further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Notes and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon the Notes,
wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or any other obligor upon the
Notes or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Notes shall
then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Company
for the payment of overdue principal, premium, if any, or interest) shall be
entitled and empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of
principal, premium, if any, and interest, owing and unpaid in respect
of the Notes and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and
of the Holders allowed in such judicial proceeding and
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(b) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same,
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Notes or the rights of any Holder thereof, or to authorize the Trustee to vote
in respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of
Notes.
All rights of action and claims under this Indenture or the
Notes may be prosecuted and enforced by the Trustee without the possession of
any of the Notes or the production thereof in any proceeding relating thereto.
Any such proceeding instituted by the Trustee shall be brought in its own name
and as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Notes in respect of which such judgment
has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article
Five shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal,
premium, if any, or interest, upon presentation of the Notes and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the
Trustee under Section 607;
SECOND: To the payment of the amounts then due and
unpaid for principal of, premium, if any,
and interest on the Notes in respect of
which or for the benefit of which such money
has been collected, ratably, without
preference or priority of any kind,
according to the amounts due and payable on
such Notes for principal, premium, if any,
and interest, respectively; and
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THIRD: The balance, if any, to the Company or any
other Person designated by the Company as
communicated to the Trustee by the Company,
or as a court of competent jurisdiction may
direct.
SECTION 507. Limitation on Suits.
No Holder of any of the Notes has any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture or for the
appointment of a receiver or trustee or for any other remedy hereunder, unless:
(a) such Holder has previously given written notice to a
Responsible Officer of the Trustee of a continuing Default or Event of
Default;
(b) the Holders of a majority in aggregate principal amount of
the Notes then Outstanding affected by such Default or Event of Default
have made written request to the Trustee to institute such proceeding;
(c) such Holder or Holders have offered to the Trustee
security or indemnity reasonably satisfactory to it against the costs,
expenses and liabilities (including fees and expenses of its agents and
counsel) to be incurred in compliance with such request;
(d) the Trustee has failed to institute any such proceeding
within 60 days after receipt of such notice, request and offer of
security or indemnity; and
(e) the Trustee, within such 60-day period, has not received
directions inconsistent with such written request from Holders of a
majority in aggregate principal amount of the Outstanding Notes
affected by such Default or Event of Default;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest.
Notwithstanding any other provision in this Indenture, the
Holder of any Note shall have the right, which is absolute and unconditional, to
receive payment, as provided herein (including, if applicable, Article Twelve)
and in such Note of the principal of, premium, if any, and (subject to Section
309) interest on such Note on the respective Stated Maturities expressed in such
Note (or, in the case of redemption, on the Redemption Date) and to institute
suit for the
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enforcement of any such payment, and such rights shall not be impaired without
the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes in the last paragraph
of Section 308, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right 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.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article Five or by
law to the Trustee or to the Holders may be exercised from time to time and as
often as may be deemed expedient by the Trustee or by the Holders, as the case
may be.
SECTION 512. Control by Holders.
Subject to the provisions of Section 603(e), the Holders of
not less than a majority in aggregate principal amount of the Outstanding Notes
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee; provided that:
(a) such direction shall not be in conflict with any rule of
law or with this Indenture or the Security Documents;
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(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction; and
(c) the Trustee need not take any action which might conflict
with law or this Indenture, involve it in personal liability or be
unjustly prejudicial to the Holders not consenting.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Notes may, by notice to a Responsible Officer of the
Trustee, on behalf of the Holders of all of the Notes, waive any existing
Default or Event of Default and its consequences under this Indenture, except
(a) a continuing Default or Event of Default in the payment of the principal of,
premium, if any, or interest on any Note or (b) in respect of a covenant or
provision that under Article Nine cannot be modified or amended without the
consent of the Holder of each affected Outstanding Note.
Upon any such waiver, such Default or Event of Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of this Indenture and the Notes; but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right consequent thereon.
SECTION 514. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture or any Security Document; and the
Company (to the extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 515. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorney's fees and expenses, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant.
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ARTICLE SIX
THE TRUSTEE
SECTION 601. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform
only those duties that are specifically set forth in this Indenture and
no others, and no implied covenants or obligations shall be read into
this Indenture against the Trustee, it being understood that the
Trustee shall not be liable hereunder except for its negligence or
willful misconduct; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, in the case of any such certificates or
opinions which by any provisions hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture (but need not confirm or investigate the
accuracy of mathematical calculations or other facts stated therein).
(c) The Trustee may not be relieved from liabilities for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section 601;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 512 hereof.
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(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b) and (c) of this Section 601.
SECTION 602. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing
and is known by a Responsible Officer of the Trustee, the Trustee shall mail to
each Holder notice of the Default or Event of Default within 90 days after the
occurrence thereof unless such Default or Event of Default shall have been cured
or waived. However, except in the case of a Default or an Event of Default in
payment of principal of, premium, if any, or interest on any Notes or in the
making of a Mandatory Redemption, the Trustee may withhold the notice to the
Holders if a committee of its Responsible Officers determines in good faith that
withholding such notice is in the interests of the Holders.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of TIA Sections 315(a) through
315(d):
(a) the Trustee may conclusively rely and shall be protected
in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
with sufficient detail as may be requested by the Trustee and any
resolution of the Managing Member may be sufficiently evidenced by a
Member Resolution;
(c) whenever in the administration of this Indenture or any
Security Document the Trustee shall deem it desirable that a matter be
proved or established prior to taking, suffering or omitting any action
hereunder, the Trustee (unless other evidence be herein specifically
prescribed) may require and, in the absence of bad faith on its part,
rely upon an Officers' Certificate and/or an Opinion of Counsel;
(d) the Trustee may consult with counsel of its selection and
the advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder or under any Security Document in
good faith and in reliance hereon;
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(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture or any Security
Document at the request or direction of any of the Holders pursuant to
this Indenture or any Security Document, unless such Holders shall have
offered to the Trustee security or indemnity reasonably satisfactory to
the Trustee against the costs, expenses and liabilities (including fees
and expenses of its agents and counsel) which might be incurred by it
in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into, and may rely upon, the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit and, if the Trustee shall determine
to make such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Company, personally or
by agent or attorney, upon reasonable notice and during regular
business hours;
(g) the Trustee may execute any of the trusts or powers
hereunder or under any Security Document or perform any duties
hereunder or thereunder either directly or by or through agents,
attorneys, accountants, appraisers or other experts or advisers and the
Trustee shall not be responsible for any acts or omissions on the part
of any agent, attorney, accountants, appraisers or other experts or
advisers appointed with due care by it hereunder or thereunder;
(h) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Indenture or any Security Document;
(i) except during the continuance of an Event of Default, the
Trustee need perform only those duties as are specifically set forth in
this Indenture;
(j) the Trustee is hereby authorized and directed to enter
into the Security Documents;
(k) the Trustee shall not be deemed to have notice of any
Default or Event of Default unless a Responsible Officer of the Trustee
has actual knowledge thereof or unless written notice of any event
which is in fact such a default is received by the Trustee at the
Corporate Trust Office of the Trustee, and such notice references the
Notes and this Indenture;
(l) the rights, privileges, protections, immunities and
benefits given to the Trustee, including, without limitation, its right
to be indemnified, are extended to, and
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shall be enforceable by, the Trustee in each of its capacities
hereunder, and to each agent, custodian and other Person employed to
act hereunder and under the Security Documents; and
(m) the Trustee shall have no duty to determine whether to
file, perfect or record or maintain filed, perfected or recorded any
document or instrument hereunder or under the Security Documents.
The Trustee shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder or any Security Document, or in the exercise of any of its
rights or powers hereunder or any Security Document.
SECTION 604. Trustee Not Responsible for Recitals or Issuance
of Notes.
The recitals contained herein and in the Notes, except for the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or the Notes, except that the Trustee represents that it is duly
authorized to execute and deliver this Indenture, authenticate the Notes and
perform its obligations hereunder and, upon the effectiveness of the
Registration Statement, that the statements made by it in a Statement of
Eligibility on Form T-1 supplied to the Company are true and accurate, subject
to the qualifications set forth therein. The Trustee shall not be accountable
for the use or application by the Company of Notes or the proceeds thereof.
SECTION 605. May Hold Notes.
The Trustee, any Paying Agent, any Security Registrar or any
other agent of the Company or of the Trustee, in its individual or other
capacity, may become the owner or pledgee of Notes and, subject to TIA Sections
310(b) and 311, may otherwise deal with the Company with the same rights it
would have if it were not Trustee, Paying Agent, Security Registrar or such
other agent; provided, however, that, if it acquires any conflicting interest
(as defined in TIA Section 310(b)), it must eliminate such conflict upon the
occurrence of an Event of Default or resign.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed with the Company.
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SECTION 607. Compensation and Reimbursement.
The Company agrees:
(a) to pay to the Trustee (in each of its capacities hereunder
and under the Security Documents) from time to time such reasonable
compensation as the Company and the Trustee shall agree in writing for
all services rendered by it hereunder and under the Security Documents
(which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture or under the Security
Documents (including the reasonable compensation and the expenses and
disbursements of its agents, counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or
willful misconduct; and
(c) to indemnify the Trustee or any predecessor Trustee for,
and to hold them harmless against, any loss, liability, damage, claim
or expense incurred without negligence or willful misconduct on its
part, arising out of or in connection with the acceptance or
administration of this trust under this Indenture or in respect of the
performance of its duties as the collateral agent under the Security
Documents, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance
of any of its powers or duties hereunder or thereunder. The Trustee
shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not
relieve the Company of its obligations hereunder. The Company shall
defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel. The Company need not pay
for any settlement made without its consent, which consent shall not be
unreasonably withheld.
The obligations of the Company under this Section 607 to
compensate the Trustee, to pay or reimburse the Trustee for expenses,
disbursements and advances and to indemnify and hold harmless the Trustee shall
constitute additional indebtedness hereunder and shall survive the satisfaction
and discharge of this Indenture and the resignation or removal of the Trustee.
As security for the performance of such obligations of the Company, the Trustee
shall have a lien prior to the Notes upon all property and funds held or
collected by the Trustee as such, except funds held in trust for the payment of
principal of, premium, if any, or interest on particular Notes.
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When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 501(d) or (e), the
expenses (including the reasonable charges and expenses of its counsel) of and
the compensation for such services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law.
The provisions of this Section 607 shall survive the
resignation or removal of the Trustee and termination of this Indenture.
SECTION 608. Corporate Trustee Required; Eligibility.
There shall be at all times a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and which shall have a
combined capital and surplus of at least $50,000,000. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of Columbia supervising
or examining authority, then for the purposes of this Section 608, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section 608, it shall resign immediately in the
manner and with the effect hereinafter specified in this Article Six.
SECTION 609. Resignation and Removal; Appointment of
Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article Six shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 610.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company 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 pursuant to this Article Six and such
specified day. If the instrument of acceptance by a successor Trustee required
by Section 610 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of at least a majority in principal amount of the then Outstanding Notes
(or their attorneys-in-fact), delivered to a Responsible Officer of the Trustee.
In addition, so long as no Event of Default or Default has occurred and is
continuing, the Company may remove the Trustee upon notice to all Holders and
the Trustee and the appointment of a successor Trustee.
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(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of
TIA Section 310(b) after written request therefor by the Company or by
any Holder who has been a bona fide Holder of a Note for at least six
months, except when the Trustee's duty to resign is stayed in
accordance with the provisions of TIA Section 310(b), or
(2) the Trustee shall cease to be eligible under Section 608
and shall fail to resign after written request therefor by the Company
or by any Holder who has been a bona fide Holder of a Note for at least
six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation, winding-up or liquidation,
then, in any such case, (i) the Company, by a Member Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Note for at least six months may, on behalf of himself or
herself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Member Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Notes delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner hereinafter
provided subject to TIA Section 315(e), any Holder who has been a bona fide
Holder of a Note for at least six months may, on behalf of himself or herself
and all others similarly situated, petition any court of competent jurisdiction
for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders in the manner provided for in Section 107. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
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SECTION 610. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder, subject to the retiring Trustee's
rights as provided under the last sentence of Section 607. Upon request of any
such successor Trustee, the Company shall execute any and all instruments for
more fully and certainly vesting in and confirming to such successor Trustee all
such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under the Trust Indenture Act and this Indenture.
SECTION 611. Merger, Conversion, Consolidation or Succession
to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided that such corporation shall be otherwise qualified and
eligible under this Article Six, without the execution or filing of any paper or
any further act on the part of any of the parties hereto. In case any Notes
shall have been authenticated, but not delivered, by the Trustee then in office,
any successor by merger, conversion or consolidation to such authenticating
Trustee may adopt such authentication and deliver the Notes so authenticated
with the same effect as if such successor Trustee had itself authenticated such
Notes. In case at that time any of the Notes shall not have been authenticated
by such predecessor Trustee, any successor Trustee may authenticate such Notes
either in the name of any predecessor hereunder or in the name of the successor
Trustee. In all such cases such certificates shall have the full force and
effect which this Indenture provides that the certificate of authentication of
the Trustee shall have for the certificate of authentication of the Trustee
shall have; provided, however, that the right to adopt the certificate of
authentication of any predecessor Trustee or to authenticate Notes in the name
of any predecessor Trustee shall apply only to its successor or successors by
merger, conversion or consolidation.
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SECTION 612. No Liability for Clean-up of Hazardous Materials.
In the event that the Trustee is required to acquire title to
an asset for any reason, or take any managerial action of any kind in regard
thereto, in order to carry out any fiduciary or trust obligation for the benefit
of another, which in the Trustee's sole discretion may cause the Trustee to be
considered an "owner or operator" under the provisions of the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C.
Sections. 9601, et seq., or otherwise cause the Trustee to incur liability under
CERCLA or any other federal, state or local law, the Trustee reserves the right
to, instead of taking such action, either resign as Trustee or arrange for the
transfer of the title or control of the asset to a court appointed receiver.
The Trustee shall not be liable to the Company or Holders or
any other person for any environmental claims or contribution actions under any
federal, state or local law, rule or regulation by reason of the Trustee's
actions and conduct as authorized, empowered and directed hereunder or relating
to the discharge, release or threatened release of hazardous materials into the
environment, except to the extent of the Trustee's negligence or wilful
misconduct.
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of Holders.
Every Holder of Notes, by receiving and holding the same,
agrees with the Company and the Trustee that none of the Company or the Trustee
or any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
in accordance with TIA Section 312, regardless of the source from which such
information was derived and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under TIA Section
312(b).
SECTION 702. Reports by Trustee.
Within 60 days after May 15 of each year commencing with the
first May 15 after the first issuance of Notes, the Trustee shall transmit to
the Holders, in the manner and to the extent provided in TIA Section 313(c), a
brief report dated as of such May 15 if required by TIA Section 313(a).
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ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 801. Company May Consolidate, etc., Only on Certain
Terms.
The Company shall not, in a single transaction or through a
series of related transactions, consolidate or merge with or into (whether or
not the Company is the surviving corporation), or directly and/or indirectly
through its Subsidiaries, sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets (determined on a
consolidated basis for the Company and its Subsidiaries taken as a whole) in one
or more related transactions to, another corporation, Person or entity unless:
(a) the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such
sale, assignment, transfer, lease, conveyance or other disposition of
all or substantially all the properties and assets of the Company and
its Subsidiaries, taken as a whole, shall have been made (the
"Surviving Entity") is a Person organized or existing under the laws of
the United States, any State thereof or the District of Columbia and
assumes all the obligations of the Company under the Notes;
(b) the Surviving Entity (if other than the Company) executes
a supplemental indenture pursuant to which such Person assumes the due
and punctual payment of the principal of, premium and interest on all
the Notes and the performance of every covenant in this Indenture to be
performed or observed by the Company;
(c) immediately after giving effect to such transaction or
series of transactions and treating any obligation of the Company or
any Subsidiary in connection with or as a result of such transaction as
having been incurred as of the time of such transaction, no Default or
Event of Default has occurred and is continuing; and
(d) the Company or the Surviving Entity delivers, or causes to
be delivered, to the Trustee, an Officers' Certificate and an Opinion
of Counsel, each stating that such consolidation, merger, sale,
assignment, conveyance, transfer, lease or other disposition, and if a
supplemental indenture is required in connection with such transaction,
such supplemental indenture, comply with the requirements of this
Indenture and that all conditions precedent herein provided for
relating to such transaction have been complied with and that such
supplemental indenture is a legal, valid, binding and enforceable
obligation of the new obligor, subject to customary exceptions.
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For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Subsidiaries, the Capital Stock of which constitutes all or substantially
all of the properties and assets of the Company, shall be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company.
SECTION 802. Successor Substituted.
In the event of any transaction described in and complying
with the conditions listed in the first paragraph of Section 801 in which the
Company is not the continuing obligor under this Indenture, the Surviving Entity
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture, and thereafter the Company will, except in
the case of a lease, be discharged from all its obligations and covenants under
this Indenture and Notes.
ARTICLE NINE
SUPPLEMENTS AND AMENDMENTS TO INDENTURE AND SECURITY DOCUMENTS
SECTION 901. Without Consent of Holders.
Without the consent of any Holders, the Company, when
authorized by a Member Resolution, and the Trustee, at any time and from time to
time, may amend or supplement this Indenture or the Notes for any of the
following purposes:
(a) to evidence the succession of another Person to the
Company, or any other obligor on the Notes, and the assumption by any
such successor of the covenants of the Company or such obligor
contained herein and in the Notes;
(b) to add to the covenants of the Company, or any other
obligor upon the Notes, for the benefit of the Holders, or to surrender
any right or power herein conferred upon the Company or any other
obligor upon the Notes, as applicable, in this Indenture and in the
Notes;
(c) to add additional Events of Default;
(d) to provide for uncertificated Notes in addition to or in
place of the certificated Notes;
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(e) to evidence and provide for the acceptance of appointment
of a successor Trustee under this Indenture;
(f) to cure any ambiguity, to correct or supplement any
provision in this Indenture that may be defective or inconsistent with
any other provision in this Indenture, or to make any other provisions
with respect to matters or questions arising under this Indenture which
shall not be inconsistent with the provisions of this Indenture or the
Notes; provided that, in each case, such actions pursuant to this
clause shall not materially adversely affect the interests of the
Holders;
(g) to mortgage, pledge, hypothecate or grant a security
interest in favor of the Trustee for the benefit of the Holders as
additional security for the payment and performance of the Company's
obligations under this Indenture; or
(h) to comply with any requirements of the Commission or the
TIA in order to effect and maintain the qualification of this Indenture
under the TIA.
SECTION 902. With Consent of Holders.
(a) With the consent of the Holders of not less than a
majority in aggregate Outstanding principal amount of the Notes, by Act of said
Holders delivered to the Company and the Trustee, the Company, when authorized
by a Member Resolution, and the Trustee may amend or supplement in any manner
this Indenture or modify in any manner the rights of the Holders under this
Indenture; provided, however, that no such supplement, amendment or modification
may, without the consent of the Holder of each Outstanding Note affected
thereby:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, change the coin or currency in which the principal
of any Note or any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such
payment after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date);
(ii) amend, change or modify the obligation of the Company to
make and consummate a Change of Control Offer in the event of a Change
of Control in accordance with Section 1015 of this Indenture, including
amending, changing or modifying any definition relating thereto;
(iii) reduce the percentage in principal amount of Outstanding
Notes, the consent of whose Holders is required for any waiver of
compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this
Indenture;
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(iv) waive a default in the payment of principal of, premium,
if any, or interest on the Notes;
(v) modify the ranking or priority of the Notes;
(vi) permit the release or termination of all or substantially
all of the security afforded by the Liens under this Indenture and the
Security Documents, except in accordance with the terms thereof; or
(vii) agree to create any Lien on the Collateral or any part
thereof or release or terminate any part of the Liens of the Trustee,
except in accordance with the terms of the Security Documents.
(b) Without the consent of the Holders of not less than a
majority in principal amount of the Outstanding Notes, the Company may not,
except as otherwise provided in the Security Documents, (i) amend, vary or
waive, or consent to any amendment, variation or waiver of, any terms of any of
the Security Documents to which it is a party, (ii) release, surrender, cancel
or terminate any rights or obligations under, or discharge any obligations
(other than by performance) of, the Security Documents to which it is a party or
(iii) affirmatively consent to the assignment by any party to certain Security
Documents of such party's right or obligations under such Security Documents.
(c) It shall not be necessary for any Act of Holders under
this Section 902 to approve the particular form of any proposed supplemental
indenture or any amendment, modification or waiver of any Security Document, but
it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
Upon the request of the Company accompanied by a Member
Resolution authorizing the execution of any amended or supplemental indenture,
the Trustee shall, subject to this Section 903, join with the Company in the
execution of such amended or supplemental indenture authorized or permitted by
the terms of this Indenture. In executing, or accepting the additional trusts
created by, any supplemental indenture permitted by this Article Nine or the
modifications thereby of the trusts created by this Indenture, the Trustee shall
receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture, amendment,
modification or waiver is authorized or permitted by this Indenture or such
Security Document, as the case may be. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustees own rights, duties or immunities under this Indenture or otherwise.
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SECTION 904. Effect of Supplemental Indentures and Amendments.
Upon the execution of any supplemental indenture, amendment,
modification or waiver under this Article Nine, this Indenture or the applicable
Security Document shall be modified in accordance therewith, and such
supplemental indenture, amendment, modification or waiver shall form a part of
this Indenture or applicable Security Document, as the case may be, for all
purposes; and every Holder theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby (except as provided in Section 902).
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article
Nine shall conform to the requirements of the Trust Indenture Act as then in
effect.
SECTION 906. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article Nine may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the Company, to any such
supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding Notes.
Failure to make the appropriate notation of to issue a new Note shall not affect
the validity of such amendment.
SECTION 907. Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of
any supplemental indenture, amendment, modification or waiver pursuant to the
provisions of Section 902, the Trustee shall give notice thereof to the Holders
of each Outstanding Note affected, in the manner provided for in Section 107,
setting forth in general terms the substance of such supplemental indenture,
amendment, modification or waiver.
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ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, If Any, and
Interest.
The Company covenants and agrees for the benefit of the
Holders that it shall duly and punctually pay the principal of, premium, if any,
and interest on the Notes in accordance with the terms of the Notes and this
Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The
City of New York an office or agency where Notes may be presented or surrendered
for payment, where Notes may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Corporate Trust Office of the
Trustee shall be such office or agency of the Company, unless the Company shall
designate and maintain some other office or agency for one or more of such
purposes. The Company shall give prompt written notice to the Trustee of any
change in the location of any such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside of The City of New York) where the
Notes may be presented or surrendered for any or all such purposes and may from
time to time rescind any such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, The City
of New York for such purposes. The Company will give prompt written notice to
the Trustee of any such designation or rescission and any change in the location
of any such other office or agency.
SECTION 1003. Money for Note Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent,
it will, on or before each due date of the principal of, premium, if any, or
interest on any of the Notes, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal of, premium, if
any, or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and will promptly notify the Trustee
of its action or failure so to act.
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Whenever the Company shall have one or more Paying Agents for
the Notes, it will, no later than 10:00 a.m. New York City time, on each due
date of the principal of, premium, if any, or interest on any Notes, deposit
with a Paying Agent a sum sufficient (together with any funds available in the
Debt Service Reserve Account) to pay the principal, premium, if any, or interest
so becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium, or interest and (unless such Paying Agent
is the Trustee) the Company will promptly notify the Trustee of such action or
any failure so to act.
The Company will cause each Paying Agent (other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section 1003, that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal
of, premium, if any, or interest on Notes in trust for the benefit of
the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or
any other obligor upon the Notes) in the making of any payment of
principal, premium, if any, or interest; and
(c) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent. Upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
sums.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of, premium,
if any, or interest on any Note and remaining unclaimed for two years after such
principal, premium, if any, or interest has become due and payable shall be paid
to the Company on Company Request, or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease.
If the Company shall deposit with the Paying Agent prior to
the applicable Payment Date funds for the payment of principal of, premium, if
any, or interest on any Notes
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with respect to such Payment Date, the Paying Agent, at the instruction of the
Company, shall (i) invest and reinvest all such funds in Dollar Permitted
Investments and (ii) invest interest paid on the Dollar Permitted Investments
referred to in clause (i) above, and reinvest other proceeds of any such Dollar
Permitted Investments that may mature or be sold, in each case in such Dollar
Permitted Investments in the name of the Company. The Paying Agent shall sell or
liquidate such Dollar Permitted Investments at such times as the Paying Agent
determines are required to pay such principal, premium and interest. The Paying
Agent shall transfer to the Company any of such funds remaining after the
payment of such principal, premium and interest on such Payment Date. The Paying
Agent shall have no obligation to invest or reinvest any amounts held hereunder
in the absence of written investment direction, and in no event shall the Paying
Agent be liable for (i) the selection of Dollar Permitted Investments or for
investment losses incurred thereon or (ii) losses incurred as a result of the
liquidation pursuant to written instructions of any investment prior to its
stated maturity.
SECTION 1004. Existence.
Subject to Article Eight hereof, the Company will do or cause
to be done all things necessary (a) to preserve and keep in full force and
effect its existence and (b) to preserve all material rights and franchises of
the Company and, so long as it has a controlling equity interest in an Operating
Partnership, each Operating Partnership; provided, however, that the Company
shall not be required to preserve any such right or franchise of any such
Operating Partnership if either (a) the preservation 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 the
partnership interests of an Operating Partnership are owned directly or
indirectly by the Company) or (b) the Managing Member of the Company shall
determine that (i) the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Subsidiaries taken as a whole and
(ii) the loss thereof would not have a Material Adverse Effect.
SECTION 1005. Payment of Taxes and Other Claims.
The Company 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 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.
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SECTION 1006. Operation and Maintenance; Maintenance of
Properties.
The Company will cause all properties owned by the Company or
any of its Subsidiaries or used or held for use in the conduct of its business
or the business of any such Subsidiary to be maintained, operated and repaired
in accordance with prudent industry practices, the failure of which to operate,
maintain or repair would have a Material Adverse Effect.
SECTION 1007. Insurance.
The Company shall cause each of its Subsidiaries 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.
SECTION 1008. Statement by Officers as to Default and Debt
Service Reserve Account.
(a) The Company will deliver to the Trustee, within 120 days
after the end of each fiscal year and 90 days after the end of the first three
fiscal quarters of each fiscal year, a brief certificate from the principal
executive officer, principal financial officer or principal accounting officer
as to his or her knowledge of compliance with all conditions and covenants under
this Indenture (including its Debt Service Reserve Requirements). For purposes
of this Section 1008(a), such compliance shall be determined without regard to
any period of grace or requirement of notice under this Indenture.
(b) When any Default or Event of Default has occurred and is
continuing under this Indenture, the Company shall deliver to a Responsible
Officer of the Trustee by registered or certified mail or by facsimile
transmission an Officers' Certificate specifying such event, notice or other
action within five Business Days of its occurrence.
SECTION 1009. Reports.
Whether or not required by the rules and regulations of the
Commission, so long as any Notes are outstanding, the Company will furnish to
the Holders of Notes, and file with the Trustee, (a) the information specified
in Rule 144A(d)(4) under the Securities Act and (b) within 15 days after it is
or would have been required to file such with the Commission (i) all quarterly
and annual financial information that would be required to be contained in a
filing with the Commission on Forms 10-Q and 10-K if the Company were required
to file such Forms, and, with respect to the annual information only, a report
thereon by the Company's certified independent accountants and (ii) all current
reports that would be required to be filed with the Commission on Form 8-K if
the Company were required to file such reports.
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The Trustee's receipt of such shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein, including the Company's compliance with any of
its covenants hereunder (as to which the Trustee is entitled to rely exclusively
on Officers' Certificates).
SECTION 1010. Limitation on Indebtedness of the Company.
(a) The Company shall not create, issue, assume, guarantee,
suffer to exist or in any other manner become directly or indirectly liable for
the payment of, or otherwise incur (collectively, "incur"), any Indebtedness,
other than
(i) the Notes;
(ii) Indebtedness incurred to finance the making of capital
improvements to the Facilities required to maintain compliance with
applicable law, or anticipated changes therein; provided that no such
Indebtedness may be incurred unless at the time of such incurrence, the
Independent Engineer confirms as reasonable (A) a certification by the
Company that the proposed capital improvements are reasonably expected
to enable such Facility to comply with applicable law or anticipated
changes therein and (B) the calculations of the Company that
demonstrate, after giving effect to the incurrence of such
Indebtedness, the minimum Forward Debt Service Coverage Ratio (x) for
the next four consecutive fiscal quarters, taken as one annual period,
commencing with the quarter in which such Indebtedness is incurred and
(y) for each subsequent fiscal year through the maturity date of the
Notes, will not be less than 1.1 to 1;
(iii) Indebtedness incurred to finance the making of capital
improvements to the Facilities so long as after giving effect to the
incurrence of such Indebtedness (A) no Default or Event of Default has
occurred and is continuing and (B) the then current rating of the Notes
is at least as high as the rating of the Notes on the Issue Date and
the Rating Agencies confirm that the incurrence of such Indebtedness
will not result in a Rating Downgrade;
(iv) Interest Rate Agreements;
(v) Subordinated Indebtedness of the Company; 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) (plus accrued interest and fees and
expenses related to such financing renewal, replacement, defeasance or
refunding); provided that any such refinancing must be on terms no less
favorable in the aggregate to
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the Company than the outstanding Indebtedness refinanced (as determined
by the Managing Member of the Company in good faith).
(b) 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 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.
SECTION 1011. Limitation on Indebtedness of the Company's
Subsidiaries.
No Subsidiary of the Company shall create, incur or suffer to
exist any Indebtedness other than (i) Indebtedness outstanding on the date the
Notes are originally issued and any Indebtedness incurred to refinance, renew,
replace, defease or refund, in whole or part, any such Indebtedness (plus
accrued interest and fees and expenses related to such financing, renewal,
replacement, defeasance or refunding); provided that any such refinancing must
be on terms no less favorable in the aggregate to the Company and its
Subsidiaries than the outstanding Indebtedness refinanced (as determined by the
Managing Member of the Company in good faith); (ii) up to $225 million of
Indebtedness incurred to finance capital improvements to the Facilities so long
as after giving effect to the incurrence of such Indebtedness (A) no Default or
Event of Default has occurred and is continuing and (B) the then current rating
of the Notes is at least as high as the rating of the Notes on the Issue Date
and, the Rating Agencies confirm that the incurrence of such Indebtedness will
not result in a Rating Downgrade; and (iii) up to $25 million of Indebtedness
incurred or assumed solely for the purpose of financing the cost of acquiring or
constructing an asset or for working capital purposes. This Section 1011 does
not prohibit intercompany loans between the Company and any of its Subsidiaries
or between two Subsidiaries of the Company.
SECTION 1012. Limitation on Restricted Payments.
The Company may declare and pay dividends or pay or make any
other distributions on account of its Capital Stock or Subordinated Indebtedness
on a quarterly basis; provided that (a) no Default or Event of Default has
occurred and is continuing, (b) the amount of such dividends or other
distributions paid or made, as applicable, do not exceed 100% of Net Cashflow
after the Issue Date and (c) (1) for restricted payments made through September
30, 2001, the Company (A) has maintained a Debt Service Coverage Ratio of at
least 1.20 to 1 over the four preceding fiscal quarters, taken as one annual
period, and (B) has projected a Debt Service Coverage Ratio (as certified by the
Company to the Trustee) for the next four fiscal quarters, taken as one annual
period, of at least 1.20 to 1 and (2) for restricted payments made after
September 30, 2001, the Company (A) has maintained a Debt Service Coverage Ratio
of at
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least 1.25 to 1 over the four preceding fiscal quarters, taken as one annual
period, and (B) has projected a Debt Service Coverage Ratio (as certified by the
Company to the Trustee) for the next four fiscal quarters, taken as one annual
period, of at least 1.25 to 1. In the event the Company is prevented from paying
dividends or paying or making other distributions on its Capital Stock or
Subordinated Indebtedness pursuant to the provisions of clause (c) in the
preceding sentence, it may not pay dividends or pay or make distributions in
respect of its Capital Stock or Subordinated Indebtedness until the requirements
described in clause (c) above have been met for two consecutive fiscal quarters
(a "restricted payment suspension"); provided, however, that, if the Company
meets for any fiscal quarter during a restricted payment suspension the required
Debt Service Coverage Ratio over the four preceding fiscal quarters, taken as
one annual period, and the projected Debt Service Coverage Ratio for the next
four fiscal quarters, taken as one annual period, as well as the requirements
set forth in clauses (a) and (b) above, then it may pay a dividend or pay or
make a distribution in respect of its Capital Stock or Subordinated Indebtedness
in an amount not to exceed Net Cashflow for such quarter. The fair market value
of distributions of assets, other than cash, in excess of $10 million shall be
determined by an Independent Investment Banker, or if less than $10 million,
shall be determined in good faith by the Managing Member of the Company.
SECTION 1013. Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit any Subsidiary to, enter
into any material transaction or arrangement, whether or not in the ordinary
course of business, with any Affiliate that is not on terms and conditions at
least as favorable as would be obtained in a comparable arm's-length transaction
with a Person other than an Affiliate as determined in good faith by the
Managing Member of the Company.
SECTION 1014. Limitation on Liens.
So long as any Notes are outstanding, the Company may not, and
may not permit any Subsidiary to, create, incur, assume, or suffer to exist any
Indebtedness of the Company or any of its Subsidiaries that is secured by any
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
Notes (together with, if the Company shall so determine, any other Indebtedness
of the Company ranking equally with the 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 to secure Indebtedness incurred pursuant to clause (ii) or
clause (iii) of Section 1011
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hereof; (iv) any Lien on any asset existing thereon at the time of acquisition
of such asset and not created in connection with or in contemplation of such
acquisition; provided that the incurrence of such Indebtedness is permitted
under Sections 1010 or 1011 hereof; (v) any Lien arising solely by operation of
law; (vi) any Lien in the form of a tax or other statutory lien; provided that
any such Lien shall be discharged within 60 days after the date it is created or
arises (unless contested in good faith by the Company or such Subsidiary, in
which case it shall be discharged within 60 days after final adjudication);
(vii) any Lien securing Indebtedness of the Company or any of its Subsidiaries,
all or a portion of the net proceeds of which are used, substantially
concurrently 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 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 Notes), including the amount of all accrued interest thereon and reasonable
fees and expenses and premium, if any, incurred by the Company or any such
Subsidiaries in connection therewith; and (viii) 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 (vii); provided, however, that the principal
amount of Indebtedness secured thereby and not otherwise authorized by said
clauses (ii) to (vii), 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.
SECTION 1015. Purchase of Notes upon a Change of Control.
(a) If a Change of Control occurs at any time, then each
Holder of Notes shall have the right to require that the Company purchase all,
but not less than all, of such Holder's Notes at a purchase price in cash equal
to 101% of the outstanding principal amount of such Notes, plus accrued and
unpaid interest, if any, to the date of purchase, pursuant to the offer
described below (the "Change of Control Offer") and the other procedures set
forth in this Indenture.
(b) Within 30 days following any Change of Control, the
Company shall notify the Trustee thereof and give written notice of such Change
of Control to each Holder in the manner provided in Section 107 stating, among
other things:
(i) that a Change in Control has occurred with respect to the
Company and that such Holder has the right to require the Company to
repurchase all, but not less than all, of such Holder's Notes at a
repurchase price in cash equal to 101% of the outstanding principal
amount thereof plus accrued and unpaid interest to the date of
repurchase
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(subject to the right of Holders of record on the relevant record date
to receive interest due on the relevant interest payment date);
(ii) the purchase price and the expiration date of the Change
of Control Offer, which will be a Business Day no earlier than 30 days
nor later than 60 days from the date such notice is mailed or such
later date as is necessary to comply with any applicable requirements
under the Exchange Act and the purchase date, which will not be more
than five Business days following the expiration date (the "Purchase
Date");
(iii) that any Note not tendered will continue to accrue
interest pursuant to its terms;
(iv) that, unless the Company defaults in the payment of the
purchase price, any Notes accepted for payment pursuant to the Change
of Control Offer will cease to accrue interest on and after the
Purchase Date;
(v) the places where the Notes to be purchased are to be
surrendered;
(vi) that Holders electing to have a Note purchased pursuant
to the Change of Control Offer will be required to surrender the Note,
together with the form entitled "Option of the Holder to Elect
Purchase" on the reverse side of the Note completed, to the Paying
Agent at the address specified in the notice prior to the close of
business on the Business Day immediately preceding the Purchase Date;
(vii) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than the close of business on
the third Business Day immediately preceding the Purchase Date, a
telegram, facsimile transmission or letter setting forth the name of
such Holder, the principal amount of Notes delivered for purchase and a
statement that such Holder is withdrawing his or her election to have
such Notes purchased; and
(viii) any other procedures that a Holder must follow to
accept a Change of Control Offer or to withdraw such acceptance,
including procedures of DTC.
(c) Notwithstanding paragraphs (a) and (b) above, the Company
shall not be required to make a Change of Control Offer upon a Change of Control
if a third party makes the Change of Control Offer in the manner, at the times
and otherwise in compliance with the requirements set forth in this Section 1015
applicable to Change of Control Offer made by the Company and purchases all the
Notes validly tendered and not withdrawn under such Change of Control Offer.
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(d) The Company shall comply with the applicable tender offer
rules, including Rule-14e under the Exchange Act, and any other applicable
securities laws and regulations in connection with a Change of Control Offer. To
the extent that provisions of any applicable securities laws or regulations
conflict with provisions of this Section 1015, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section 1015 by virtue thereof.
(e) Holders electing to have Notes purchased will be required
to surrender such Notes to the Company at the address specified in the notice at
least five Business Days prior to the Purchase Date. Holders will be entitled to
withdraw their election if the Company receives, not later than three Business
Days prior to the Purchase Date, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Notes delivered for
purchase by the Holder as to which his election is to be withdrawn, and a
statement that such Holder is withdrawing his election to have such Notes
purchased.
(f) The Company shall not create or permit to exist or become
effective any restriction (other than restrictions existing under Indebtedness
or the Security Documents as in effect on the date of this Indenture) that would
materially impair the ability of the Company to make a Change of Control Offer
to purchase the Notes or, if such Change of Control Offer is made, to pay for
the Notes tendered for purchase.
SECTION 1016. Limitation on Certain Asset Sales.
Except with respect to a sale of all or substantially all of
the Company's assets pursuant to Article Eight, the Company may not sell,
transfer, assign or otherwise dispose of any Operating Partnership, Managing
General Partner or other Subsidiary of the Company that holds an interest,
directly or indirectly, in any Operating Partnership or Managing General
Partner, or any interest in any of the foregoing, and no Operating Partnership
or other Subsidiary of the Company may sell, transfer, assign or otherwise
dispose of assets owned by such Operating Partnership or other Subsidiary, as
the case may be, except Excluded Dispositions, unless, the then current rating
of the Notes is at least as high as the rating of the Notes on the Issue Date
and, after giving effect to such sale, transfer, assignment or other
disposition, the Rating Agencies confirm that a Rating Downgrade will not
result.
SECTION 1017. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with
any term, provision or condition set forth in Section 801 or Sections 1006
through 1021, inclusive, if before or after the time for such compliance the
Holders of at least a majority in principal amount of the Outstanding Notes, by
Act of such Holders, waive such compliance in such instance with such term,
provision or condition, but no such waiver shall extend to or affect such term,
provision or condition except to the extent so expressly waived, and, until such
waiver shall
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become effective, the obligations of the Company and the duties of the Trustee
in respect of any such term, provision or condition shall remain in full force
and effect.
SECTION 1018. Maintenance of QF Status.
The Company must maintain and must cause each of its
Subsidiaries to maintain all the Facilities in conformity with the requirements
under PURPA necessary to retain QF status, unless the loss of such status would
not have a Material Adverse Effect.
SECTION 1019. Project Documents.
The Company will, and will cause its Subsidiaries to, (i)
perform and observe in all material respects the covenants and agreements
contained in each of the Project Documents, (ii) enforce, defend and protect all
of its material rights contained in any of the Project Documents and (iii) take
all reasonable and necessary actions to prevent the termination or cancellation
of any of the Project Documents unless the Managing Member of the Company
determines in good faith that such failure to perform, observe, enforce, defend,
protect or act is in the best interest of the Company.
In addition, the Company will not, and will cause its
Subsidiaries not to:
(i) breach any obligation under any Project Document to which
it is a party and fail to cure such breach within the applicable cure
period provided for in such Project Document (or, if no cure period is
specified in such Project Document, within 30 days of such breach);
(ii) (x) amend, vary or waive, or consent to any amendment,
variation or waiver of, any terms of any of the Project Documents to
which it is a party, (y) release, surrender, cancel or terminate any
rights or obligations under, or discharge any obligations (other than
by performance) of, the Project Documents to which it is a party or (z)
affirmatively consent to the assignment by any party to certain Project
Documents of such party's right or obligations under such Project
Documents without the consent of Holders holding at least 66 2/3% in
aggregate principal amount of the outstanding Notes; or
(iii) assign, transfer or otherwise dispose of any of its
rights in any of the Project Documents to which it is a party,
unless, in case of each of (i), (ii) or (iii) above, such action would not have
a Material Adverse Effect.
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SECTION 1020. Nature of the Business.
The Company and its Subsidiaries may not engage in any
business other than the Line of Business.
SECTION 1021. Government Approvals; Compliance with Laws.
The Company 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 the Company or such
Subsidiary and the failure of which to seek or maintain could not reasonably be
expected to have a Material Adverse Effect.
The Company 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 noncompliance therewith could not reasonably be expected to have
a Material Adverse Effect.
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. Optional Redemption.
(a) Each series of the Notes may be redeemed at the option of
the Company, at any time as a whole or from time to time in part, on not less
than 30 nor more than 60 days' prior notice to the Holders of such series of
Notes, on a Redemption Date prior to its maturity, at a redemption price (the
"Optional Redemption Price") equal to (i) 100% of the outstanding principal
amount thereof; plus (ii) accrued and unpaid interest thereon to the Redemption
Date; plus (iii) the Make Whole Premium. In no event will the Optional
Redemption Price ever be less than 100% of the principal amount of the Notes (or
portion thereof) being redeemed plus accrued and unpaid interest thereon to the
Redemption Date.
(b) The Company is not required to make sinking funds payments
with respect to the Notes.
SECTION 1102. Mandatory Redemption at Par.
(a) Events of Loss. Upon the occurrence of an Event of Loss,
the Company will be obligated to use the Remaining Net Loss Proceeds received by
the Company to redeem the Notes without any premium at a redemption price (the
"Mandatory Redemption Price") equal
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to 100% of the principal amount of the Notes to be redeemed plus accrued and
unpaid interest thereon to the Redemption Date. The Company will not be
obligated to redeem any Notes upon the occurrence of an Event of Loss if (i) the
aggregate amount of Remaining Net Loss Proceeds from such Event of Loss does not
exceed $5 million or (ii) the then current rating of the Notes is at least as
high as the rating of the Notes on the Issue Date and, after giving effect to
such Event of Loss and the use or contemplated use of the proceeds therefrom as
announced by the Company, the Rating Agencies confirm that a Rating Downgrade
will not result.
(b) Power Contract Buyouts. All of the Notes will be subject
to mandatory redemption without any premium at the Mandatory Redemption Price if
an Operating Partnership receives at any time an aggregate amount of Net Buyout
Proceeds in excess of $25 million from one or more Power Contract Buyouts
related to its Facility, unless the then current rating of the Notes is at least
as high as the rating of the Notes on the Issue Date and, after giving effect to
such buyout and the use or contemplated use of the proceeds therefrom as
announced by the Company, the Rating Agencies confirm that a Rating Downgrade
will not result; provided, however, that in lieu of the foregoing the Company
may redeem a portion of the Notes at the Mandatory Redemption Price if, the then
current rating of the Notes is at least as high as the rating of the Notes on
the Issue Date and, after giving effect to such buyout, the use or contemplated
use of the proceeds therefrom as announced by the Company and any partial
redemption, the Rating Agencies confirm that a Rating Downgrade will not result.
(c) If the Notes are redeemed pursuant to this Section 1102,
the Notes will be redeemed (i) pari passu with any other senior secured debt of
the Company which requires redemption or repayment and (ii) pro rata among each
of the series of the Notes. Notice of redemption will be mailed to each Holder
of the series of Notes being redeemed at such Holder's address of record.
Interest will cease to accrue on any series of Notes on and after the Redemption
Date.
SECTION 1103. Applicability of Article.
Redemption of Notes at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture, shall be
made in accordance with such provision and this Article Eleven.
SECTION 1104. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Notes pursuant to
Section 1101 or 1102(b) shall be evidenced by a Member Resolution. In case of
any redemption pursuant to 1101 or 1102, the Company shall, at least 45 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be satisfactory to the Trustee), notify the Trustee of such Redemption Date and
of the principal amount of Notes to be redeemed and shall deliver to the
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Trustee such documentation and records as shall enable the Trustee to select the
Notes to be redeemed pursuant to Section 1105.
SECTION 1105. Selection by Trustee of Notes to Be Redeemed.
If less than all the Notes are to be redeemed, the particular
Notes to be redeemed shall be selected not more than 45 days prior to the
Redemption Date by the Trustee, from the Outstanding Notes not previously called
for redemption, either by lot, pro-rata or by such method as the Trustee shall
deem fair and appropriate and which may provide for the selection for redemption
of portions of the principal of Notes.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Notes selected for
partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption of Notes shall relate,
in the case of any Note redeemed or to be redeemed only in part, to the portion
of the principal amount of such Note which has been or is to be redeemed.
SECTION 1106. Notice of Redemption.
Notice of redemption shall be given in the manner provided for
in Section 107 not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Notes to be redeemed.
All notices of redemption shall state:
(a) the Redemption Date,
(b) the Redemption Price and the amount of accrued interest to
the Redemption Date payable as provided in Section 1108, if any,
(c) the provisions of this Indenture pursuant to which the
redemption is being made,
(d) if less than all outstanding Notes are to be redeemed, the
identification (and, in the case of a partial redemption, the principal
amounts) of the particular Notes to be redeemed,
(e) in case any Note is to be redeemed in part only, the
notice which relates to such Note shall state that on and after the
Redemption Date, upon surrender of such
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Note, the Holder will receive, without charge, a new Note or Notes of
authorized denominations for the principal amount thereof remaining
unredeemed,
(f) that on the Redemption Date the Redemption Price (and
accrued interest, if any, to the Redemption Date payable as provided in
Section 1108) will become due and payable upon each such Note, or the
portion thereof, to be redeemed, and that interest thereon will cease
to accrue on and after said date,
(g) the place or places where such Notes are to be surrendered
for payment of the Redemption Price and accrued interest, if any, and
(h) the CUSIP number.
Notice of redemption of Notes to be redeemed at the election
of the Company shall be given by the Company or, at the Company's request, by
the Trustee in the name and at the expense of the Company.
SECTION 1107. Deposit of Redemption Price.
Not later than 10:00 a.m. on any Redemption Date, the Company
shall deposit with the Trustee or with a Paying Agent (or, if the Company is
acting as its own Paying Agent, segregate and hold in trust as provided in
Section 1003) an amount of money sufficient to pay the Redemption Price of, and
any accrued interest on, all the Notes which are to be redeemed on that date.
SECTION 1108. Notes Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Notes
so to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued interest, if any, to
the Redemption Date), and from and after such date (unless the Company shall
default in the payment of the Redemption Price or accrued interest, if any) such
Notes shall cease to bear interest. Upon surrender of any such Note for
redemption in accordance with said notice, such Note shall be paid by the
Company at the Redemption Price, together with accrued interest, if any, to the
Redemption Date; provided, however, that installments of interest whose Stated
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Notes, or one or more Predecessor Notes, registered as such at the close
of business on the relevant Regular Record Dates according to their terms and
the provisions of Section 309.
If any Note called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Notes.
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SECTION 1109. Notes Redeemed in Part.
Any Note which is to be redeemed only in part shall be
surrendered at the office or agency of the Company maintained for such purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or such Holders
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Note without
service charge, a new Note or Notes, of any authorized denomination as requested
by such Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Note so surrendered.
ARTICLE TWELVE
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company Option to Effect Legal Defeasance or
Covenant Defeasance.
The Company may, at its option and at any time, with respect
to the Notes, elect to have either Section 1202 or Section 1203 be applied to
all Outstanding Notes upon compliance with the conditions set forth below in
this Article Twelve.
SECTION 1202. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1202, the Company shall be deemed to have been
discharged from its obligations with respect to all Outstanding Notes on the
date the conditions set forth in Section 1204 are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, such defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
Outstanding Notes, which shall thereafter be deemed to be "Outstanding" only for
the purposes of Section 1205 and the other Sections of this Indenture referred
to in (A) and (B) below, and to have satisfied all its other obligations under
such Notes and this Indenture insofar as such Notes are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (A) the rights of Holders of
Outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest on such Notes when such payments are due, (B) the Company's
obligations under Sections 304, 305, 306, 307, 308, 609(e), 1002 and 1003, (C)
the rights, powers, trusts, duties and immunities of the Trustee hereunder and
(D) this Article Twelve. Subject to compliance with this Article Twelve, the
Company may
<PAGE> 91
83
exercise its option under this Section 1202 notwithstanding the prior exercise
of its option under Section 1203 with respect to the Notes.
SECTION 1203. Covenant Defeasance.
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1203, the Company shall be released from its
obligations under any covenant contained in Section 801 and in Sections 1006
through 1016 and Sections 1018 through 1020 with respect to the Outstanding
Notes on and after the date the conditions set forth below are satisfied
(hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed
not to be "Outstanding" for the purposes of any direction, waiver, consent or
declaration or Act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "Outstanding"
for all other purposes hereunder. For this purpose, such Covenant Defeasance
means that, with respect to the Outstanding Notes, the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any other
document and such omission to comply shall not constitute a Default or an Event
of Default under Section 501(c), but, except as specified above, the remainder
of this Indenture and such Notes shall be unaffected thereby.
SECTION 1204. Conditions to Legal Defeasance or Covenant
Defeasance.
The following shall be the conditions to application of either
Section 1202 or Section 1203 to the Outstanding Notes:
(a) the Company must irrevocably deposit or cause to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 608 who shall agree to comply with the
provisions in this Article Twelve applicable to it), as trust funds in
trust, specifically pledged as security for, and dedicated solely to,
the benefit of the Holders, money in an amount, or U.S. Government
Obligations that through the scheduled payment of principal and
interest thereon will provide money in an amount, or a combination
thereof, in each case, sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay and discharge
the principal of, premium, if any, and interest then due or known to be
due on the Outstanding Notes on the Stated Maturity (or Redemption
Date, if applicable) of such principal (and premium, if any) or
installment of interest;
(b) no Default or Event of Default has occurred and is
continuing on the date of such deposit or, insofar as an event of
bankruptcy under Section 501(d) or (e) is concerned, at any time during
the period ending on the 91st day after the date of such deposit;
<PAGE> 92
84
(c) such legal defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a default under, this
Indenture or any other material agreement or instrument to which the
Company is a party or by which it is bound;
(d) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel stating that the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling or, since the date of this Indenture, there has been a
change in applicable federal income tax law, in either case to the
effect that, and based thereon such opinion shall confirm that, the
Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred;
(e) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that the
Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had
not occurred; and
(f) the Company must have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent to either the Legal Defeasance or the Covenant
Defeasance, as the case may be, have been complied with.
SECTION 1205. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Other Miscellaneous
Provisions.
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 1205, the "Trustee") pursuant to Section 1204 in
respect of the Outstanding Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and this Indenture, to
the payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Notes of all sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be segregated from other
funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Governmental
Obligations deposited pursuant to Section 1204 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Outstanding Notes.
<PAGE> 93
85
Anything in this Article Twelve to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or U.S. Government Obligations held by it as
provided in Section 1204 which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance, as applicable, in accordance with this Article Twelve.
SECTION 1206. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any
money in accordance with Section 1205 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to Section 1202 or 1203, as the case may be, until such time as the Trustee or
Paying Agent is permitted to apply all such money in accordance with Section
1205; provided, however, that if the Company makes any payment of principal of,
or premium, if any, or interest on any Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or Paying
Agent.
ARTICLE THIRTEEN
SECURITY
SECTION 1301. Collateral.
(a) As security for the payment and performance by the Company
of its obligations under this Indenture and the Notes, the Company shall, on the
Issue Date, enter into the Common Security Agreement and comply with the terms
and provisions thereof as amended from time to time.
(b) In addition, as security for the payment and performance
by the Company of its obligations under the Indenture and the Notes, ECP Holding
Company, ECT Merchant and CalPERS will, on the Issue Date, enter into each
Security Document to which such Person is a party and comply with the terms and
provisions thereof as amended from time to time.
(c) Each Holder, by its acceptance of a Note, consents and
agrees to the terms of the Security Documents (including, without limitation,
the provisions providing for foreclosure and release of the Collateral) as the
same may be in effect or may be amended from time to time in accordance with its
terms, and authorizes and directs the Trustee to enter into the
<PAGE> 94
86
Security Documents and to perform its respective obligations and exercise its
respective rights thereunder in accordance therewith. Except as permitted under
this Indenture or the Security Documents, the Company will do or cause to be
done all such acts and things as may be necessary and proper, or as may be
required by the provisions of the Security Documents, to assure and confirm to
the Trustee the security interest in the Collateral contemplated hereby, by the
Security Documents or any part thereof, as from time to time constituted, so as
to render the same available for the security and benefit of this Indenture and
of the Notes secured hereby, according to the intent and purposes herein
expressed. Except as permitted under this Indenture or the Security Documents,
the Company shall take, and shall cause to be taken upon request of the Trustee,
any and all actions reasonably required to cause the Security Documents to
create and maintain, as security for the obligation of the Company under this
Indenture and the Notes, valid and enforceable first priority liens in and on
all the Collateral, in favor of the Trustee, superior to and prior to the rights
of third Persons and subject to no other Liens.
(d) Any Additional Notes issued shall share equally and
ratably in the Collateral with the Initial Notes.
SECTION 1302. Recording, Etc.
The Company will cause, at its own expense, this Indenture and
each of the Security Documents, and all amendments or supplements thereto, to be
registered, recorded and filed or re-recorded, re-filed and renewed in such
manner and in such place or places, if any, as may be required by law in order
fully to preserve and protect the security interests created under the Security
Documents and to effectuate and preserve the security therein granted to the
Trustee hereunder for the benefit of the Holders.
The Company will comply with all applicable provisions of the
TIA, including, without limitation, Section 314(b) of the TIA.
SECTION 1303. Debt Service Reserve Account.
(a) The Company will, or will cause the Account Collateral
Securities Intermediary to, establish an account (the "Debt Service Reserve
Account") on or prior to the Issue Date. The Company will (i) on the Issue Date,
cause to be deposited with the Account Collateral Securities Intermediary for
deposit into the Debt Service Reserve Account and (ii) maintain at all times
after the Issue Date, an amount equal to the Debt Service Reserve Requirement.
Notwithstanding the foregoing, the Company may elect not to fund the Debt
Service Reserve Account, in whole or in part, or may withdraw all or any portion
of the amount in the Debt Service Reserve Account, or cancel or reduce the
Available Amount of any Debt Service Credit Support, to the extent that cash on
deposit in the Debt Service Reserve Account, together with any Debt Service
Credit Support, exceeds the Debt Service Reserve Requirement.
<PAGE> 95
87
(b) If the Company has failed to provide to the Paying Agent
on the third Business Day prior to any Payment Date sufficient funds to pay
principal of, premium, if any, and interest due on the Notes on such Payment
Date (each such deficiency, a "Debt Service Deficiency"), then the Trustee shall
(i) to the extent there is insufficient cash in the Debt Service Reserve Account
to pay such Debt Service Deficiency, draw upon first the undertaking and second
any letter of credit, in each case referred to in the definition of Debt Service
Credit Support and (ii) direct the Account Collateral Securities Intermediary to
disburse to the Paying Agent from the Debt Service Reserve Account on such
Payment Date an amount equal to such Debt Service Deficiency.
The Trustee shall direct the Account Collateral Securities
Intermediary to sell or liquidate all or any portion of the Dollar Permitted
Investments held in or in respect of the Debt Service Reserve Account at any
time that the Trustee determines that the proceeds thereof are required for any
release or transfer of available funds from the Debt Service Reserve Account to
any Person (or any account of any Person) pursuant to the terms of the Common
Security Agreement or this Indenture, and neither the Trustee nor the Account
Collateral Securities Intermediary shall have any liability to any of the
Holders, the Company or any other Person for, or as a result of, any losses
suffered from any such sale or liquidation unless such losses result from the
Trustee's or such Account Collateral Security Intermediary's negligence or
wilful misconduct.
(c) If at any time the balance of the Debt Service Reserve
Account (including Available Amounts under Debt Service Credit Support) exceeds
the Debt Service Reserve Requirement, and no Default or Event of Default has
occurred and is continuing, the Trustee, on written request of the Company,
shall direct the Account Collateral Securities Intermediary to pay over to the
Company or its designees any such excess cash or cancel any excess amount of
Debt Service Credit Support, or both, as requested by the Company, to the extent
of such excess.
(d) If at any time the balance of the Debt Service Reserve
Account (including Available Amounts under Debt Service Credit Support) does not
meet the Debt Service Reserve Requirement, the Company shall not pay dividends
or make distributions in respect of its Capital Stock or Subordinated
Indebtedness.
(e) If on the date three Business Days prior to any Payment
Date there shall be a Debt Service Deficiency, then the Paying Agent shall
notify the Trustee in writing on such date.
SECTION 1304. Investment of Funds in Debt Service Reserve
Account.
So long as no Default or Event of Default shall have occurred
and be continuing, the Trustee, at the instruction of the Company, shall direct
the Account Collateral Securities Intermediary to (i) invest and reinvest all
funds in the Debt Service Reserve Account in Dollar Permitted Investments and
(ii) invest interest paid on the Dollar Permitted Investments referred
<PAGE> 96
88
to in clause (i) above, and reinvest other proceeds of any such Dollar Permitted
Investments that may mature or be sold, in each case, in such Dollar Permitted
Investments in the name of the Account Collateral Securities Intermediary (the
Dollar Permitted Investments referred to in clauses (i) and (ii) above being,
collectively, the "Collateral Investments").
If any Default or Event of Default shall have occurred and be
continuing, the Trustee shall direct the Account Collateral Securities
Intermediary to invest and reinvest the funds in the Debt Service Reserve
Account in Dollar Permitted Investments of the type specified in clause (D) of
the definition thereof.
The Trustee shall have no obligation to direct the Account
Collateral Security Intermediary to invest or reinvest any amounts held
hereunder in the absence of written investment direction, and in no event shall
the Trustee or the Account Collateral Security Intermediary be liable for (i)
the selection of Dollar Permitted Investments or for investment losses incurred
thereon or (ii) losses incurred as a result of the liquidation pursuant to
written instructions of any investment prior to its stated maturity.
<PAGE> 97
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
EAST COAST POWER L.L.C.
By: /s/ ROSS D. AIN
---------------------------------------
Name: Ross D. Ain
Title: President
THE BANK OF NEW YORK,
as Trustee
By: /s/ MARY BETH LEWICKI
---------------------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
U
<PAGE> 98
EXHIBIT A
[FACE OF NOTE]
EAST COAST POWER L.L.C.
[__]% Senior Secured Note Due 20[__]*
CUSIP[ _________]
No. [_______] $[_____________]
EAST COAST POWER L.L.C., a Delaware limited liability company
(the "Company", which term includes any successor under the Indenture
hereinafter referred to), for value received, promises to pay to
_________________, or its registered assigns, the outstanding principal sum of
[WRITTEN AMOUNT] ($[amount]), on or prior to [MATURITY DATE]2 or such earlier
date as this Note may be redeemed (the "Maturity Date"), such payment to be made
in quarterly installments on March 31, June 30, September 30 and December 31,
and end on the Maturity Date set forth above, each such installment to be in an
amount equal to the Outstanding principal amount on the Issue Date multiplied by
the percentage set forth opposite the applicable Payment Date on Annex A
attached hereto (provided that the portion of the principal amount remaining
unpaid on the Maturity Date, together with all interest accrued thereon, shall
in any and all cases be due and payable on the Maturity Date), and to pay
interest thereon from April 20, 1999 or from the most recent Payment Date to
which interest has been paid or duly provided for, quarterly on March 31, June
30, September 30 and December 31, in each year, commencing on June 30, 1999, at
a rate of [ ]%*** per annum, until the principal hereof is paid or made
available for payment, plus additional interest (to the extent that the payment
of such interest shall be legally enforceable) at the rate of 1.0% per annum on
any overdue principal and premium and on any overdue installment of interest.
The interest so payable, and punctually paid or duly provided for, on any
Payment Date will, as provided in the Indenture, be paid to the Person in whose
name this Note (or one or more Predecessor Notes) is registered at the close of
business
- --------
* Insert title of relevant series: 6.737% Senior Secured Notes Due 2008, 7.066%
Senior Secured Notes Due 2012 and 7.536% Senior Secured Notes Due 2017.
** Insert applicable Maturity Date for the series: March 31, 2008 for the 2008
Notes, March 31, 2012 for the 2012 Notes and June 30, 2017 for the 2017 Notes.
*** Insert applicable Interest rate for the series: 6.737% for Senior Secured
Notes Due 2008, 7.066% for Senior Secured Notes Due 2012 and 7.536% for Senior
Secured Notes Due 2017.
<PAGE> 99
on the Regular Record Date for such interest, which shall be the March 15, June
15, September 15 or December 15 (whether or not a Business Day), as the case may
be, next preceding such Payment Date. Any such principal or interest not so
punctually paid or duly provided for (collectively, "Defaulted Payments") will
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Note (or one or more Predecessor
Notes) is registered at the close of business on a Special Record Date for the
payment of such Defaulted Payment to be fixed by the Company, notice whereof
shall be given by the Trustee to Holders of Notes not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the Notes
may be listed, and upon such notice as may be required by such exchange, all as
more fully provided in said Indenture.
Interest Rate: [___]% per annum.****
Payment Dates: March 31, June 30, September 30 and
December 31 of each year, commencing
June 30, 1999.
Regular Record Dates: March 15, June 15, September 15 and
December 15 of each year.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Terms used but not otherwise defined herein shall have their
meanings as defined in the Indenture. The provisions of this Note do not purport
to be complete and are subject to, and qualified in their entirety by reference
to, the provisions of the Indenture.
- --------
**** Insert applicable Interest rate for the series: 6.737% for Senior Secured
Notes Due 2008, 7.066% for Senior Secured Notes Due 2012 and 7.536% for Senior
Secured Notes Due 2017.
<PAGE> 100
IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed manually or by facsimile by its duly authorized officers.
Dated: EAST COAST POWER L.L.C.
By: __________________________
Name:
Title:
By: __________________________
Name:
Title:
FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated:
This is one of the [__]% Senior Secured Notes due 20[__]*****
of the Company described in the within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
By: ____________________________
Authorized Signatory
- --------
***** Insert title of relevant series: 6.737% Senior Secured Notes Due 2008,
7.066% Senior Secured Notes Due 2012 and 7.536% Senior Secured Notes Due 2017.
<PAGE> 101
[REVERSE SIDE OF NOTE]
EAST COAST POWER L.L.C.
[__]% Senior Secured Note due 20[__]*
1. Principal and Interest.
The Company will pay the principal of this Note on or prior to
[_________], 20[__]** in the manner set forth on the face of this Note.
The Company promises to pay interest on the principal amount
of this Note on each Payment Date, as set forth below, at the rate per annum
shown above.
Interest will be payable quarterly (to the Holders of record
of the Notes (or any predecessor Notes) at the close of business on the March
15, June 15, September 15 or December 15, immediately preceding the Payment
Date) on each Payment Date, commencing June 30, 1999.
[If (a) the Exchange Offer Registration Statement is not filed
with the Commission on or prior to the 90th calendar day following the Closing
Date, (b) the Exchange Offer Registration Statement is not declared effective on
or prior to the 240th calendar day following the Closing Date or the Exchange
Offer is not consummated on or prior to the 270th calendar day following the
Closing Date or (c) a Shelf Registration Statement is not declared effective
when required, the interest rate borne by the Notes (and on the Exchange Notes)
will increase by 0.5% per annum. Upon the filing of the Exchange Offer
Registration Statement, the effectiveness of the Exchange Offer Registration
Statement, the consummation of the Exchange Offer or the effectiveness of a
Shelf Registration Statement, as the case may be, the interest rate borne by the
Notes from the date of such filing, effectiveness or consummation, as the case
may be, will be reduced to the original interest rate set forth above; provided,
however, that, if after any such reduction in interest rate, a different event
specified in clause (a), (b) or (c) above occurs, the interest rate may again be
increased pursuant to the foregoing provisions.]***
- --------
* Insert title of relevant series: 6.737% Senior Secured Notes Due 2008, 7.066%
Senior Secured Notes Due 2012 and 7.536% Senior Secured Notes Due 2017.
** Insert applicable Maturity Date for the series: March 31, 2008 for the 2008
Notes, March 31, 2012 for the 2012 Notes and June 30, 2017 for the 2017 Notes.
*** Do not include for Exchange Notes.
<PAGE> 102
2
Interest on this Note will accrue from the most recent date to
which interest has been paid [on this Note or the Note surrendered in exchange
herefor]* or, if no interest has been paid, from April 20, 1999; provided that,
if there is no existing default in the payment of interest and if this Note is
authenticated between a Regular Record Date referred to on the face hereof and
the next succeeding Payment Date, interest shall accrue from such Payment Date.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment.
The principal of, premium, if any, and interest on the Notes
shall be payable and the Notes shall be exchangeable and transferable at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, maintained for such purposes (which initially shall be the Corporate Trust
Office of the Trustee) or, at the option of the Company, interest may be paid by
check mailed to the address of the Person entitled thereto as such address shall
appear on the Register.
3. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Security
Registrar. The Company may change any Paying Agent or Security Registrar upon
written notice thereto. The Company, any Subsidiary or any Affiliate of any of
them may act as Paying Agent, Security Registrar or co-registrar.
4. Indenture; Limitations.
The Company issued the Notes under an Indenture dated as of
April 20, 1999 (the "Indenture"), between the Company and The Bank of New York,
as trustee (the "Trustee"). The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act. The Notes are subject to all such terms and Holders are referred
to the Indenture and the Trust Indenture Act for a statement of all such terms.
To the extent permitted by applicable law, in the event of any inconsistency
between the terms of this Note and the terms of the Indenture, the terms of the
Indenture shall control.
The Notes are general obligations of the Company. The
aggregate principal amount of the Notes is unlimited.
- --------
* Include only for Exchange Notes.
<PAGE> 103
3
5. Optional Redemption.
The Notes (or Additional Notes, if any) may be redeemed at the
option of the Company, in whole or in part, at any time and from time to time at
an Optional Redemption Price equal to 100% of the Outstanding principal amount,
plus accrued and unpaid interest, if any, thereon to the Redemption Date, plus a
Make Whole Premium.
Notice of a redemption will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each Holder to be redeemed at
such Holder's last address as it appears in the Register. On and after the
Redemption Date, interest ceases to accrue on Notes or portions of Notes called
for redemption, unless the Company defaults in the payment of the Redemption
Price.
6. Mandatory Redemption at Par.
Upon the occurrence of an Event of Loss, the Company will be
obligated to use the Remaining Net Loss Proceeds received by the Company to
redeem the Notes without any premium at the Mandatory Redemption Price. The
Company will not be obligated to redeem any Note upon the occurrence of an Event
of Loss if the aggregate amount of Remaining Net Loss Proceeds from each Event
of Loss does not exceed $5 million or, if the then current rating of the Notes
is at least as high as the rating of the Notes on the Issue Date and, after
giving effect to such Event of Loss and the use or contemplated use of the
proceeds therefrom as announced by the Company, the Rating Agencies confirm that
a Rating Downgrade will not result.
All of the Notes will be subject to mandatory redemption
without any premium at the Mandatory Redemption Price if an Operating
Partnership receives at any time an aggregate amount of Net Buyout Proceeds in
excess of $25 million from one or more Power Contract Buyouts related to its
Facility, unless the then current rating of the Notes is at least as high as the
rating of the Notes on the Issue Date and, after giving effect to such buyout
and the use or contemplated use of the proceeds therefrom as announced by the
Company, the Rating Agencies confirm that a Rating Downgrade will not result;
provided, however, that in lieu of the foregoing the Company may redeem a
portion of the Notes at the Mandatory Redemption Price if, after giving effect
to the buyout, the partial redemption and the use or contemplated use of the
proceeds therefrom as announced by the Company, the then current rating of the
Notes is at least as high as the rating of the Notes on the Issue Date and the
Rating Agencies confirm that a Rating Downgrade will not result.
If the Notes are redeemed pursuant to any of the foregoing
provisions, the Remaining Net Loss Proceeds will be applied (i) pari passu with
any other senior secured debt of the Company which requires redemption or
repayment and (ii) pro rata among each of the series
<PAGE> 104
4
of the Notes. Notice of redemption will be mailed to each Holder of the series
of Notes being redeemed at such Holder's address of record. Interest will cease
to accrue on any series of Notes on and after the Redemption Date.
7. Repurchase upon a Change in Control.
If a Change of Control occurs at any time, then each Holder of
Notes shall have the right to require that the Company purchase all, but not
less than all, of such Holder's Notes at a purchase price in cash equal to 101%
of the Outstanding principal amount of such Notes or Additional Notes, plus
accrued and unpaid interest, if any, to the date of purchase, pursuant to the
offer described in the Indenture.
8. Denominations; Transfer; Exchange.
The Notes are issued only in registered form without coupons
and initially only in denominations of $1,000 and any integral multiple thereof
and provided that after initial issuance, Notes may be issued upon exchange or
transfer in such amounts as may be necessary to evidence the entire unpaid
principal amount of any Note surrendered or exchanged. A Holder may register the
transfer or exchange of Notes in accordance with the Indenture. The Security
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Security Registrar need not register the
transfer or exchange of any Notes selected for redemption (except the unredeemed
portion of any Note being redeemed in part). Also, it need not register the
transfer or exchange of any Notes for a period of 15 days before a selection of
Notes to be redeemed is made.
9. Persons Deemed Owners.
A Holder may be treated as the owner of a Note for all
purposes.
10. Unclaimed Money.
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company at its request. After that, Holders entitled
to the money must look to the Company for payment, unless an abandoned property
law designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
<PAGE> 105
5
11. Discharge Prior to Redemption or Maturity.
If the Company irrevocably deposits, or causes to be
deposited, with the Trustee money or U.S. Government Obligations sufficient to
pay the then outstanding principal of, premium, if any, and accrued interest on
the Notes to redemption or maturity, the Company will be discharged from the
Indenture and the Notes, except in certain circumstances for certain sections
thereof.
12. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the consent of the Holders of at least a
majority in aggregate principal amount of the Notes then outstanding, and any
existing default or compliance with any provision may be waived with the consent
of the Holders of a majority in aggregate principal amount of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties thereto
may amend or supplement the Indenture or the Notes to, among other things, cure
any ambiguity, defect or inconsistency.
13. Restrictive Covenants.
The Indenture contains certain covenants, including, without
limitation, covenants with respect to the following matters: (i) Indebtedness of
the Company; (ii) Indebtedness of the Company's Subsidiaries; (iii) restricted
payments; (iv) transactions with Affiliates; (v) Liens; (vi) certain asset
sales; and (vii) mergers and certain transfers of assets. The Company must
furnish to the Trustee quarterly statements as to the Company's compliance with
such limitations.
14. Successor Persons.
When a successor person or other entity assumes all the
obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
15. Remedies for Events of Default.
If an Event of Default with respect to a default in payment of
principal, premium, if any, or interest when due occurs and is continuing, the
Trustee or the Holders of not less than 25% in principal amount of the Notes
then outstanding may declare all the Notes to be immediately due and payable. If
any other Event of Default occurs and is continuing, the Trustee
<PAGE> 106
6
or the Holders of not less than 51% in principal amount of the Notes then
outstanding may declare all the Notes to be immediately due and payable. If a
bankruptcy or insolvency default with respect to the Company or any of its
Subsidiaries occurs and is continuing, the Notes automatically become
immediately due and payable. Holders may not enforce the Indenture or the Notes
except as provided in the Indenture. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Notes. Subject to
certain limitations, Holders of at least a majority in principal amount of the
Notes then Outstanding may direct the Trustee in its exercise of any trust or
power.
16. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Notes and may make loans to,
accept deposits from, perform services for, and otherwise deal with, the Company
and its Affiliates as if it were not the Trustee; provided that no conflicting
interest results.
17. No Recourse Against Certain Others.
No director, officer, employee, incorporator or stockholder of
the Company, as such, shall have any liability for any obligations of the
Company under the Notes or the Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes.
18. Authentication.
This Note shall not be valid until the Trustee manually signs
the certificate of authentication on the other side of this Note.
19. Governing Law.
This Note and the Indenture shall be governed by and construed
in accordance with the laws of the State of New York.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to East Coast
Power L.L.C., 711 Louisiana Street, Houston, Texas 77002, Attention: President
<PAGE> 107
ANNEX A to
Form of 2008 Note
REPAYMENT SCHEDULE FOR 2008 NOTE
<TABLE>
<CAPTION>
Percentage of Percentage of
Original Principal Original Principal
Payment Date Amount Payable Payment Date Amount Payable
- ------------ -------------- ------------ --------------
<S> <C> <C> <C>
June 30, 1999 4.098% December 31, 2003 2.710%
September 30, 1999 1.328% March 31, 2004 2.215%
December 31, 1999 1.352% June 30, 2004 2.256%
March 31, 2000 1.051% September 30, 2004 2.297%
June 30, 2000 1.071% December 31, 2004 2.338%
September 30, 2000 1.090% March 31, 2005 3.594%
December 31, 2000 1.110% June 30, 2005 3.659%
March 31, 2001 1.670% September 30, 2005 3.726%
June 30, 2001 1.700% December 31, 2005 3.793%
September 30, 2001 1.732% March 31, 2006 3.742%
December 31, 2001 1.763% June 30, 2006 3.811%
March 31, 2002 2.862% September 30, 2006 3.879%
June 30, 2002 2.914% December 31, 2006 3.950%
September 30, 2002 2.968% March 31, 2007 3.769%
December 31, 2002 3.021% June 30, 2007 3.837%
March 31, 2003 2.567% September 30, 2007 3.907%
June 30, 2003 2.614% December 31, 2007 3.978%
September 30, 2003 2.662% March 31, 2008 4.966%
</TABLE>
<PAGE> 108
ANNEX A to
Form of 2012 Note
REPAYMENT SCHEDULE FOR 2012 NOTE
<TABLE>
<CAPTION>
Percentage of Percentage of
Original Principal Original Principal
Payment Date Amount Payable Payment Date Amount Payable
- ------------ -------------- ------------ --------------
<S> <C> <C> <C>
March 31, 2008 1.861% June 30, 2010 5.178%
June 30, 2008 8.237% September 30, 2010 5.277%
September 30, 2008 8.393% December 31, 2010 5.376%
December 31, 2008 8.552% March 31, 2011 6.947%
March 31, 2009 4.365% June 30, 2011 7.079%
June 30, 2009 4.448% September 30, 2011 7.213%
September 30, 2009 4.532% December 31, 2011 7.350%
December 31, 2009 4.617% March 31, 2012 5.493%
March 31, 2010 5.082%
</TABLE>
<PAGE> 109
ANNEX A to
Form of 2017 Note
REPAYMENT SCHEDULE FOR 2017 NOTE
<TABLE>
<CAPTION>
Percentage of Percentage of
Original Principal Original Principal
Payment Date Amount Payable Payment Date Amount Payable
- ------------ -------------- ------------ --------------
<S> <C> <C> <C>
March 31, 2012 1.339% December 31, 2014 3.845%
June 30, 2012 5.521% March 31, 2015 4.023%
September 30, 2012 5.631% June 30, 2015 4.103%
December 31, 2012 5.744% September 30, 2015 4.186%
March 31, 2013 3.510% December 31, 2015 4.270%
June 30, 2013 3.580% March 31, 2016 5.821%
September 30, 2013 3.652% June 30, 2016 5.938%
December 31, 2013 3.725% September 30, 2016 6.057%
March 31, 2014 3.623% December 31, 2016 6.178%
June 30, 2014 3.696% March 31, 2017 7.047%
September 30, 2014 3.770% June 30, 2017 4.741%
</TABLE>
<PAGE> 110
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered Holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
(Please print or typewrite name and address including zip code of assignee)
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
attorney to transfer such Note on the books of the Company with full power of
substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES
EXCEPT PERMANENT REGULATION S PHYSICAL NOTES]
In connection with any transfer of this Note occurring prior
to the date which is the earlier of the date of an effective Registration
Statement or April 20, 2001 the undersigned confirms that without utilizing any
general solicitation or general advertising that:
[Check One]
[ ](a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act of 1933,
as amended, provided by Rule 144A thereunder.
or
[ ](b) this Note is being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or other Security
Registrar shall not be obligated to register this Note in the name of any Person
other than the Holder hereof unless
<PAGE> 111
and until the conditions to any such transfer of registration set forth herein
and in Section 307 of the Indenture shall have been satisfied.
Date:
---------------------------------------
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or any
change whatsoever.
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
-------------------------------------
NOTICE: To be executed by an
executive officer
<PAGE> 112
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company
pursuant to Section 1015 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 1015 of the Indenture, state the amount (in original
principal amount) below:
$ .
---------------------
Date:
Your Signature:
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
<PAGE> 113
EXHIBIT B
Form of Certificate
On or after [ ], 1999
---------
East Coast Power L.L.C.
711 Louisiana Street
Houston, Texas 77002
Attn: Secretary
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attn: Corporate Trust Trustee Administration
Re: East Coast Power L.L.C. (the "Company")
[ ]% Senior Secured Notes due 20[ ] (the "Notes")
Ladies and Gentlemen:
This letter relates to U.S. $__________ principal amount of
Notes represented by the Offshore Global Note which bears a legend outlining
restrictions upon transfer of such Offshore Global Note. Pursuant to Section 202
of the Indenture (the "Indenture") dated as of April 20, 1999 relating to the
Notes, we hereby certify that we are (or we will hold such Notes on behalf of) a
person outside the United States to whom the Notes could be transferred in
accordance with Rule 904 of Regulation S promulgated under the Securities Act.
Accordingly, you are hereby requested to exchange the legended certificate for
an unlegended certificate representing an identical principal amount at maturity
of Notes, all in the manner provided by the Indenture.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
--------------------------------
Authorized Signature
<PAGE> 114
EXHIBIT C
Form of Certificate to Be Delivered in Connection
with Transfers to Non-QIB Institutional Accredited Investors
[___________________], 1999
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attn: Corporate Trust Trustee Administration
East Coast Power L.L.C.
711 Louisiana Street
Houston, Texas 77002
Attn: Secretary
Re: East Coast Power L.L.C. (the "Company")
[ ]% Senior Secured Notes due 20[ ] (the "Notes")
Ladies and Gentlemen:
In connection with our proposed purchase of $[____________]
aggregate principal amount of the Notes:
1. We understand that the Notes have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), and may
not be sold except as permitted in the following sentence. We agree on
our own behalf and on behalf of any investor account for which we are
purchasing the Notes to offer, sell or otherwise transfer such Notes
prior to the date which is two years after the later of the date of
original issue and the last date on which the Company or any affiliate
of the Company was the owner of such Notes, or any predecessor thereto
(the "Resale Restriction Termination Date") only (a) to the Company,
(b) pursuant to a registration statement which has been declared
effective under the Securities Act, (c) for so long as the Notes are
eligible for resale pursuant to Rule 144A under the Securities Act, to
a person we reasonably believe is a qualified institutional buyer under
Rule 144A (a "QIB") that purchases for its own account or for the
account of a QIB to whom notice is given that the transfer is being
made in reliance on Rule 144A, (d) pursuant to offers and sales to
non-U.S. Persons that
<PAGE> 115
C-2
occur outside the United States within the meaning of Regulations S
under the Securities Act, (e) to an institutional "accredited investor"
within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501
under the Securities Act that is acquiring the Notes for its own
account or for the account of such an institutional "accredited
investor" for investment purposes and not with a view to, or for offer
or sale in connection with, any distribution thereof in violation of
the Securities Act or (f) pursuant to any other available exemption
from the registration requirements of the Securities Act, subject in
each of the foregoing cases to any requirement of law that the
disposition of our property and the property of such investor account
or accounts be at all times within our or their control and to
compliance with any applicable state securities laws. The foregoing
restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date. If any resale or other transfer of the
Notes is proposed to be made pursuant to clause (e) above prior to the
Resale Restriction Termination Date, the transferor shall deliver a
letter from the transferee substantially in the form of this letter to
the Trustee, which shall provide, among other things, that the
transferee is an institutional "accredited investor" within the meaning
of subparagraph (a)(1), (2), (3) or (7) or Rule 501 under the
Securities Act and that it is acquiring such Notes for investment
purposes and not for distribution in violation of the Securities Act.
We acknowledge that the Company and the Trustee reserve the right prior
to any offer, sale or other transfer prior to the Resale Restriction
Termination Date of the Notes pursuant to clauses (d), (e) and (f)
above to require the delivery of an Opinion of Counsel, certifications
and/or other information satisfactory to the Company and the Trustee.
2. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) purchasing for our own account or for the account of such an
institutional "accredited investor," and we are acquiring the Notes for
investment purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities Act
and we have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our
investment in the Notes, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its
investment.
3. We are acquiring the Notes purchased by us for our own
account or for one or more accounts as to each of which we exercise
sole investment discretion.
<PAGE> 116
C-3
4. You are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
[Insert Name of Transferor]
By:
------------------------
Name:
Title:
Dated:
-------------------------
cc: East Coast Power L.L.C
Upon transfer, the Notes should be registered in the name of
the new beneficial owner as follows:
Name:
Address:
Taxpayer ID Number:
<PAGE> 117
EXHIBIT D
Form of Certificate to Be Delivered
in Connection with Transfers Pursuant to Regulation S
[_________________], 1999
East Coast Power L.L.C.
711 Louisiana Street
Houston, Texas 77002
The Bank of New York
101 Barclay Street, Floor 21 West,
New York, NY 10286
Attention: Corporate Trust Administration
Re: East Coast Power, L.L.C. (the "Company")
[ ]% Senior Secured Notes due 20[ ] (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $[_________] aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended, and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the
United States and the proposed transferee is a Non-U.S. Person (as
defined in the Indenture pursuant to which the Notes were issued);
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we
nor any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable; and
<PAGE> 118
D-2
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the U.S. Securities Act of 1933, as
amended.
In addition, if the sale is made during a restricted period
and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are
applicable thereto, we confirm that such sale has been made in accordance with
the applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may
be.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
---------------------------
Name:
Title:
Dated:
cc: East Coast Power L.L.C.
<PAGE> 119
EXHIBIT E
Form of Undertaking
<PAGE> 1
EXHIBIT 4.3
EAST COAST POWER L.L.C.
$850,000,000
$296,000,000 6.737% SENIOR SECURED NOTES DUE 2008
$236,000,000 7.066% SENIOR SECURED NOTES DUE 2012
$318,000,000 7.536% SENIOR SECURED NOTES DUE 2017
REGISTRATION RIGHTS AGREEMENT
April 14, 1999
NationsBanc Montgomery Securities LLC
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255-0001
Credit Suisse First Boston Corporation
11 Madison Avenue
New York, NY 10010
Lehman Brothers Inc.
3 World Financial Center
New York, NY 10285
SG Cowen Securities Corporation
1221 Avenue of the Americas
New York, NY 10020
Ladies and Gentlemen:
East Coast Power L.L.C., a Delaware limited liability company
(the "Company"), proposes to issue and sell (the "Initial Placement") to
NationsBanc Montgomery Securities LLC, Credit Suisse First Boston Corporation,
Lehman Brothers Inc. and SG Cowen Securities Corporation (the "Initial
Purchasers" and, individually, each an "Initial Purchaser") upon terms set forth
in a purchase agreement dated the date hereof (the "Purchase Agreement") among
the Company and the Initial Purchasers, $296,000,000 6.737%, Senior Secured
Notes due 2008 (the "2008 Notes"), $236,000,000 7.066% Senior Secured Notes due
2012 (the "2012 Notes") and $318,000,000 7.536% Senior Secured Notes due 2017
(the "2017 Notes" and, together with the 2008 Notes and the 2012 Notes, the
"Notes"). As an inducement to the Initial Purchasers to enter into the Purchase
Agreement and purchase the Notes and in
<PAGE> 2
2
satisfaction of a condition to your obligations under the Purchase Agreement,
the Company agrees with you for the benefit of the holders from time to time of
the Notes (including the Initial Purchasers) (each of the foregoing a "Holder"
and together the "Holders"), as follows:
1. Definitions. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Registration Rights Agreement (this "Agreement"), the following
capitalized defined terms shall have the following meanings:
"AICPA" has the meaning set forth in Section 4(s)(v) hereto.
"Affiliate" of any specified person means any other person that,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such specified person. For purposes of this
definition, control of a person means the power, direct or indirect, to
direct or cause the direction of the management and policies of such
person whether by contract or otherwise; the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement" has the meaning set forth in the first paragraph of
this Section 1.
"Closing Date" has the meaning set forth in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Company" has the meaning set forth in the preamble hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"Exchange Notes" means with respect to the 2008 Notes, 2012 Notes
or the 2017 Notes, debt securities issued by the Company, identical in
all material respects to such Notes (except that (i) interest thereon
shall accrue from the last date on which interest was paid on such
Notes or, if no such interest has been paid, from April 20, 1999 and
(ii) the interest rate step up provisions and the transfer restrictions
pertaining to such Notes will be modified or eliminated, as
appropriate, in the Exchange Notes), to be issued under the Indenture.
"Exchange Offer" means the offer to the Holders of each series of
Notes to issue and deliver to such Holders, in exchange for the Notes,
a like principal amount of Exchange Notes.
<PAGE> 3
3
"Exchange Offer Registration Period" means the longer of (i) the
period until the consummation of the Exchange Offer and (ii) the first
to occur of 180 days after effectiveness of the Exchange Offer
Registration Statement or such time as all broker-dealers no longer own
any of the Exchange Notes, exclusive of any period during which any
stop order shall be in effect suspending the effectiveness of the
Exchange Offer Registration Statement; provided, however, that in the
event that all resales of Exchange Notes (including, subject to the
time periods set forth herein, any resales by Exchanging Dealers)
covered by such Exchange Offer Registration Statement have been made,
the Exchange Offer Registration Statement need not remain continuously
effective for the period set forth in clause (i) above.
"Exchange Offer Registration Statement" means a registration
statement of the Company on an appropriate form under the Securities
Act with respect to the Exchange Offer, all amendments and supplements
to such registration statement, including post-effective amendments, in
each case including the Prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein.
"Exchanging Dealer" means any Holder (which may include any
Initial Purchaser) that is a broker-dealer, electing to exchange Notes
acquired for its own account as a result of market-making activities or
other trading activities for Exchange Notes.
"Holder" has the meaning set forth in the preamble hereto.
"Indenture" means the indenture relating to the Notes and the
Exchange Notes, dated as of the Closing Date, among the Company and The
Bank of New York, as trustee, as the same may be amended, supplemented,
waived or otherwise modified from time to time in accordance with the
terms thereof.
"Initial Placement" has the meaning set forth in the preamble
hereto.
"Initial Purchasers" has the meaning set forth in the preamble
hereto.
"Losses" has the meaning set forth in Section 6(d) hereto.
"Majority Holders" means the Holders of a majority of the
aggregate principal amount of Notes registered under a Registration
Statement.
"Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten
offering under a Shelf Registration Statement.
<PAGE> 4
4
"Notes" has the meaning set forth in the preamble hereto.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective Registration Statement in reliance upon Rule 430A under the
Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of
the Notes or the Exchange Notes covered by such Registration Statement,
and all amendments and supplements to the Prospectus, including
post-effective amendments.
"Purchase Agreement" has the meaning set forth in the preamble
hereto.
"Registration Statement" means any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Notes
or the Exchange Notes pursuant to the provisions of this Agreement,
amendments and supplements to such Registration Statement, including
post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto, and all material incorporated
by reference therein.
"SAS 72" has the meaning set forth in Section 4(s)(v) hereto.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Shelf Registration" means a registration effected pursuant to
Section 3 hereof.
"Shelf Registration Period" has the meaning set forth in Section
3(b) hereof.
"Shelf Registration Statement" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 3
hereof, which covers some or all of the Notes or Exchange Notes, as
applicable, on an appropriate form under Rule 415 under the Securities
Act, or any similar rule that may be adopted by the Commission,
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Trustee" means the trustee with respect to the Notes or Exchange
Notes, as applicable, under the Indenture.
"underwriter" means any underwriter of Notes in connection with
an offering thereof under a Shelf Registration Statement.
<PAGE> 5
5
2. Exchange Offer; Resales of Exchange Notes by Exchanging
Dealers; Private Exchange.
(a) The Company shall prepare and, on or prior to the 90th
calendar day following the Closing Date, shall file with the Commission the
Exchange Offer Registration Statement with respect to the Exchange Offer. The
Company shall use its reasonable best efforts (i) to cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act on or
prior to the 240th calendar day following the Closing Date and remain effective
until the closing of the Exchange Offer and (ii) to consummate the Exchange
Offer on or prior to the 270th calendar day following the Closing Date.
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Exchange Offer, it being the
objective of such Exchange Offer to enable each Holder electing to exchange
Notes for Exchange Notes (assuming that such Holder (i) is not an "affiliate" of
the Company within the meaning of Rule 405 of the Securities Act, (ii) is not an
Exchanging Dealer, (iii) is not an Initial Purchaser holding Notes that have, or
are reasonably likely to have, the status of an unsold allotment in an initial
distribution and (iv) if such Holder is not a broker-dealer, acquires the
Exchange Notes in the ordinary course of such Holder's business, is not
participating in the distribution of the Exchange Notes and has no arrangements
or understandings with any person to participate in the distribution of the
Exchange Notes) to resell such Exchange Notes from and after their receipt
without any limitations or restrictions under the Securities Act and without
material restrictions under the securities laws of a substantial proportion of
the several states of the United States.
(c) In connection with the Exchange Offer, the Company shall mail
to each Holder a copy of the Prospectus forming part of the Exchange Offer
Registration Statement, together with an appropriate letter of transmittal and
related documents, stating, in addition to such other disclosures as are
required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Agreement and that all Notes validly tendered will be accepted for
exchange;
(ii) the dates of acceptance for exchange;
(iii) that any Note not tendered will remain outstanding and
continue to accrue interest, but will not retain any rights under this
Agreement;
(iv) that Holders electing to have a Note exchanged pursuant to
the Exchange Offer will be required to surrender such Note, together
with the enclosed letters of transmittal, to the institution and at the
address (located in the Borough of Manhattan,
<PAGE> 6
6
The City of New York) specified in the notice prior to 5:00 p.m.
(Eastern time) on the last day of acceptance for exchange;
(v) that Holders will be entitled to withdraw their election, not
later than 5:00 p.m. (Eastern time) on the last day of acceptance for
exchange, by sending to the institution and at the address (located in
the Borough of Manhattan, The City of New York) specified in the notice
a telegram, telex, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Notes delivered for
exchange and a statement that such Holder is withdrawing its election
to have such Notes exchanged; and
(vi) that the Company shall (A) keep the Exchange Offer open for
acceptance for not less than 30 days (or longer if required by
applicable law) after the date notice thereof is mailed to the Holders;
(B) utilize the services of a depositary for the Exchange Offer with an
address in the Borough of Manhattan, The City of New York; and (C)
comply in all respects with all applicable laws relating to the
Exchange Offer.
(d) As soon as practicable after the close of the Exchange Offer,
the Company shall:
(i) accept for exchange all Notes duly tendered and not validly
withdrawn pursuant to the Exchange Offer;
(ii) deliver to the Trustee for cancellation all Notes so
accepted for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver to
each Holder Exchange Notes with respect to the series of Notes held by
such Holder equal in principal amount to the Notes of such Holder so
accepted for exchange.
(e) The Initial Purchasers, each Exchanging Dealer and the
Company acknowledge that, pursuant to interpretations by the staff of the
Commission of Section 5 of the Securities Act, and in the absence of an
applicable exemption therefrom, each Exchanging Dealer is required to deliver a
Prospectus in connection with a sale of any Exchange Notes received by such
Exchanging Dealer pursuant to the Exchange Offer in exchange for Notes acquired
for its own account as a result of market-making activities or other trading
activities. Accordingly, the Company shall:
(i) include the information set forth in Annex A hereto on the
cover of the Exchange Offer Registration Statement, in Annex B hereto
in the forepart of the Exchange Offer Registration Statement in a
section setting forth details of the Exchange
<PAGE> 7
7
Offer, in Annex C hereto in the underwriting or plan of distribution
section of the Prospectus forming a part of the Exchange Offer
Registration Statement, and in Annex D hereto in the letter of
transmittal delivered pursuant to the Exchange Offer; and
(ii) use its reasonable best efforts to keep the Exchange Offer
Registration Statement continuously effective under the Securities Act
during the Exchange Offer Registration Period for delivery of the
prospectus included therein by Exchanging Dealers in connection with
sales of Exchange Notes received pursuant to the Exchange Offer, as
contemplated by Section 4(h) below; provided, however, that the Company
shall not be required to maintain the effectiveness of the Exchange
Offer Registration Statement for more than 60 days following the
consummation of the Exchange Offer unless the Company has been notified
in writing on or prior to the 60th day following the consummation of
the Exchange Offer by one or more Exchanging Dealers that such Holder
has received Exchange Notes as to which it will be required to deliver
a prospectus upon resale.
(f) In the event that the Initial Purchasers determine that they
are not eligible to participate in the Exchange Offer with respect to the
exchange of Notes constituting any portion of an unsold allotment, upon the
effectiveness of the Shelf Registration Statement as contemplated by Section 3
hereof and at the request of the Initial Purchasers, the Company shall issue and
deliver to the Initial Purchasers, or to the party purchasing Exchange Notes
registered under the Shelf Registration Statement from the Initial Purchasers in
exchange for such Notes, a like principal amount of Exchange Notes. The Company
shall use its reasonable best efforts to cause the CUSIP Service Bureau to issue
the same CUSIP number for such Exchange Notes as for Exchange Notes issued
pursuant to the Exchange Offer. The Company shall not have any liability under
this Agreement solely as a result of such Exchange Notes not bearing the same
CUSIP number as the Exchange Notes.
(g) The Company shall use its reasonable best efforts to complete
the Exchange Offer as provided above and shall comply with the applicable
requirements of the Securities Act, the Exchange Act and other applicable laws
and regulations in connection with the Exchange Offer. The Exchange Offer shall
not be subject to any conditions, other than that (i) the Exchange Offer does
not violate applicable law or any applicable interpretation of the staff of the
Commission, (ii) no action or proceeding shall have been instituted or
threatened in any court or by any governmental agency which in the Company's
judgment, would reasonably be expected to materially impair the ability of the
Company to proceed with the Exchange Offer and no material adverse development
shall have occurred in any existing action or proceeding with respect to the
Company and (iii) all governmental approvals shall have been obtained, which
approvals the Company deems necessary for the consummation of the Exchange
Offer. Each Holder of Notes who wishes to exchange Notes in the Exchange Offer
shall represent that all Exchange Notes to be received by it shall be acquired
in the
<PAGE> 8
8
ordinary course of its business and that at the time of consummation of the
Exchange Offer it shall have no arrangement or understanding with any person
participating in the distribution (within the meaning of the Securities Act) of
the Exchange Notes and shall have made such other representations as may be
reasonably necessary under the Securities Act to render use of Form S-4 or other
appropriate form available. The Company shall inform the Initial Purchasers of
the names and addresses of the Holders to whom the Exchange Offer is made, and
the Initial Purchasers shall have the right, subject to applicable law, to
contact such Holders and otherwise facilitate the tender of Notes in the
Exchange Offer.
3. Shelf Registration. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Company
determines upon advice of its outside counsel that it is not permitted to effect
the Exchange Offer as contemplated by Section 2 hereof or (ii) for any reason
other than those specified in clause (i) above, the Exchange Offer is not
consummated within 270 days of the Closing Date unless the Exchange Offer has
commenced, in which case, the Exchange Offer is not consummated within 90 days
after the date on which the Exchange Offer was commenced, or (iii) any Initial
Purchaser so requests with respect to Notes held by it within 150 days following
consummation of the Exchange Offer, or (iv) any Holder (other than an Initial
Purchaser) is not eligible to participate in the Exchange Offer or has
participated in the Exchange Offer and has received Exchange Notes that are not
freely tradeable (for reasons other than outlined in Section 2(e)), or (v) in
the case where the Initial Purchasers participate in the Exchange Offer or
acquire Exchange Notes pursuant to Section 2(f) hereof, the Initial Purchasers
do not receive freely tradeable Exchange Notes in exchange for Notes
constituting any portion of an unsold allotment (it being understood that, for
purposes of this Section 3, (x) the requirement that the Initial Purchaser
deliver a Prospectus containing the information required by Items 507 and/or 508
of Regulation S-K under the Securities Act in connection with sales of Exchange
Notes acquired in exchange for such Notes shall result in such Exchange Notes
being not "freely tradeable" and (y) the requirement that an Exchanging Dealer
deliver a Prospectus in connection with sales of Exchange Notes acquired in the
Exchange Offer in exchange for Notes acquired as a result of market-making
activities or other trading activities shall not result in such Exchange Notes
being not "freely tradeable"), the following provisions shall apply:
(a) The Company shall use its reasonable best efforts to, as
promptly as practicable, and in any event on or prior to 30 days after
such filing obligation arises, file with the Commission a Shelf
Registration Statement relating to the offer and sale of the Notes by
the Holders from time to time in accordance with the methods of
distribution elected by the Majority Holders participating in the Shelf
Registration and set forth in such Shelf Registration Statement and
Rule 415 under the Securities Act, provided that, with respect to
Exchange Notes received by the Initial Purchasers in exchange for Notes
constituting any portion of an unsold allotment, the Company may, if
permitted by current interpretations by the Commission's staff, file a
post-effective
<PAGE> 9
9
amendment to the Exchange Offer Registration Statement containing the
information required by Regulation S-K Items 507 and/or 508, as
applicable, in satisfaction of its obligations under this paragraph (a)
with respect thereto and any such Exchange Offer Registration
Statement, as so amended, shall be referred to herein as, and governed
by the provisions herein applicable to, a Shelf Registration Statement.
(b) The Company shall use its reasonable best efforts to cause
the Shelf Registration Statement to be declared effective under the
Securities Act as promptly as practicable on or prior to 60 days after
filing such Shelf Registration Statement pursuant to this Section 3 and
to keep such Shelf Registration Statement continuously effective in
order to permit the Prospectus contained therein to be usable by
Holders for a period of two years from the date the Shelf Registration
Statement is declared effective by the Commission or such shorter
period that will terminate when all the Notes or Exchange Notes, as
applicable, covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement or become eligible for
resale without volume restrictions pursuant to Rule 144 under the
Securities Act (in any such case, such period being called the "Shelf
Registration Period"). The Company may suspend the availability of the
Shelf Registration Statement for no more than 45 consecutive days or no
more than an aggregate of 90 days during any calendar year if it
determines, in its reasonable judgment, upon advice of counsel, that
the continued effectiveness and use of the Shelf Registration Statement
would (x) require the disclosure of material information which the
Company has a bona fide business reason for preserving as confidential
or (y) interfere with any financing, acquisition, corporate
reorganization or other material transaction involving the Company or
its affiliates (a "Suspension Period"). A Suspension Period shall
commence on and include the date the Company gives notice that the
Shelf Registration is no longer effective or the Prospectus included
therein is no longer usable for offers and sales of the Notes or the
Exchange Notes covered by the Shelf Registration Statement and shall
end on the date when each Holder of the Notes or Exchange Notes covered
by the Shelf Registration Statement either receives copies of the
supplement or an amended Prospectus contemplated by Section 4(l) hereof
or is advised in writing by the Company that use of such Prospectus may
be reserved. The Company shall be deemed not to have used its best
efforts to keep the Shelf Registration Statement effective during the
requisite period if it voluntarily takes any action that would result
in Holders of Notes covered thereby not being able to offer and sell
such Notes during that period, unless (i) such action is required by
applicable law, (ii) the Company complies with this Agreement or (iii)
such action is taken by the Company in good faith and for valid
business reasons (not including avoidance of the Company's obligations
hereunder), including the acquisition or divestiture of assets, so long
as the Company promptly thereafter complies with the requirements of
Section 4(l) hereof, if applicable.
<PAGE> 10
10
4. Registration Procedures. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Company shall, within a reasonable time prior to the
filing of any Registration Statement, any Prospectus, any amendment to
a Registration Statement or amendment or supplement to a Prospectus or
any document which is to be incorporated by reference into a
Registration Statement or a Prospectus after initial filing of a
Registration Statement, provide copies of such document to the Initial
Purchasers and their Counsel (and, in the case of a Shelf Registration
Statement, the Holders and Holders' Counsel) and make such
representatives of the Company as shall be reasonably requested by the
Initial Purchasers or their counsel (and, in the case of a Shelf
Registration Statement, the Majority Holders or Holders' Counsel)
available for discussion of such document, and shall not at any time
file or make any amendment to the Registration Statement, any
Prospectus or any amendment of or supplement to a Registration
Statement or a Prospectus or any document which is to be incorporated
by reference into a Registration Statement or a Prospectus, of which
the Initial Purchasers and their counsel (and, in the case of a Shelf
Registration Statement, the Holders and Holders' Counsel) shall not
have previously been advised and furnished a copy or to which the
Initial Purchaser or its counsel (and, in the case of a Shelf
Registration Statement, the Holders or Holders' counsel) shall
reasonably object, except for any amendment or supplement or document
(a copy of which has been previously furnished to the Initial
Purchasers and their counsel (and, in the case of a Shelf Registration
Statement, the Majority Holders and Holders' Counsel)) which counsel to
the Company shall advise the Company, in the form of a written opinion,
is required in order to comply with applicable law. Each of the Initial
Purchasers agrees that, if it receives timely notice and drafts under
this clause (a), it will not take actions or make objections pursuant
to this clause (a) such that the Company is unable to comply with its
obligations under Section 2.
(b) The Company shall:
(i) use its reasonable best efforts to prepare any
Registration Statement and any amendment thereto and any
Prospectus contained therein and any amendment or supplement
thereto to comply in all material respects with the Securities
Act and the rules and regulations thereunder;
(ii) use its reasonable best efforts to prepare any
Registration Statement and any amendment thereto such that it
does not, when it becomes effective, contain an untrue statement
of a material fact or omit to state a
<PAGE> 11
11
material fact required to be stated therein or necessary to make
the statements therein not misleading; and
(iii) use its reasonable best efforts to prepare any
Prospectus forming part of any Registration Statement, including
any amendment or supplement to such Prospectus, such that it does
not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
(c) (i) The Company shall advise the Initial Purchasers and, in
the case of a Shelf Registration Statement, the Holders of Notes
covered thereby, and, if requested by the Initial Purchasers or any
such Holder, confirm such advice in writing:
(A) when a Registration Statement and any amendment
thereto has been filed with the Commission and when the
Registration Statement or any post-effective amendment thereto
has become effective; and
(B) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus
included therein or for additional information (which advice
shall be accompanied by an instruction to suspend the use of the
Prospectus until the requisite changes have been made).
(ii) During the Shelf Registration Period or the Exchange Offer
Registration Period, as applicable, the Company shall advise the
Initial Purchasers and, in the case of a Shelf Registration Statement,
the Holders of Notes covered thereby, and, in the case of an Exchange
Offer Registration Statement, any Exchanging Dealer that has provided
in writing to the Company a telephone or facsimile number and address
for notices, and, if requested by the Initial Purchasers or any such
Holder or Exchanging Dealer, confirm such advice in writing (which
advice shall be accompanied by an instruction to suspend the use of the
Prospectus until the requisite changes have been made).
(A) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(B) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Notes
included therein for sale in any
<PAGE> 12
12
jurisdiction or the initiation or threatening of any proceeding
for such purpose; and
(C) of the happening of any event that requires the making
of any changes in the Registration Statement or the Prospectus so
that, as of such date, the Registration Statement or the
Prospectus does not include an untrue statement of a material
fact or omit to state a material fact necessary to make the
statements therein (in the case of the Prospectus, in light of
the circumstances under which they were made) not misleading
(which advice shall be accompanied by an instruction to suspend
the use of the Prospectus until the requisite changes have been
made).
(d) The Company shall use its reasonable best efforts to obtain
the withdrawal of any order suspending the effectiveness of any
Registration Statement at the earliest possible time.
(e) The Company shall furnish to each Holder of Notes covered by
any Shelf Registration Statement, without charge, at least one copy of
such Shelf Registration Statement and any post-effective amendment
thereto, including financial statements and schedules and, if the
Holder so requests in writing, all exhibits thereto.
(f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of Notes covered by any Shelf Registration
Statement, without charge, as many copies of the Prospectus (including
each preliminary Prospectus) included in such Shelf Registration
Statement and any amendment or supplement thereto as such Holder may
reasonably request. The Company consents to the use of the Prospectus
or any amendment or supplement thereto by each of the selling Holders
in connection with the offering and sale of the Notes covered by the
Prospectus or any amendment or supplement thereto.
(g) The Company shall furnish to each Exchanging Dealer that so
requests, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, any documents
incorporated by reference therein and, if the Exchanging Dealer so
requests in writing, all exhibits thereto.
(h) The Company shall, during the Exchange Offer Registration
Period, promptly deliver to each Exchanging Dealer, without charge, as
many copies of the Prospectus included in such Exchange Offer
Registration Statement and any amendment or supplement thereto as such
Exchanging Dealer may reasonably request for delivery by such
Exchanging Dealer in connection with a sale of Exchange Notes received
by it
<PAGE> 13
13
pursuant to the Exchange Offer. The Company consents to the use of the
Prospectus or any amendment or supplement thereto by any such
Exchanging Dealer, as provided in Section 2(e) above.
(i) Each Holder of Notes and each Exchanging Dealer agrees by its
acquisition of such Notes or Exchange Notes to be sold by such Holder
of Notes or Exchanging Dealer, as the case may be, that, upon actual
receipt of any notice from the Company of the happening of any event of
the kind described in paragraphs (c)(ii)(A), (c)(ii)(B), or (c)(ii)(C)
of this Section 4, such Holder will forthwith discontinue disposition
of such Notes covered by such Registration Statement or Prospectus or
Exchange Notes to be sold by such Holder or Exchanging Dealer, as the
case may be, until such Holder's or Exchanging Dealer's receipt of the
copies of the supplemented or amended Prospectus contemplated by
Section 4(l) hereof, or until it is advised in writing by the Company
that the use of the applicable Prospectus may be resumed. In the event
that the Company shall give any such notice, the Exchange Offer
Registration Period shall be extended by the number of days during such
periods from and including the date of the giving of such notice to and
including the date when each seller of Exchange Notes covered by such
Registration Statement or Exchange Notes to be sold by such Exchanging
Dealer, as the case may be, shall have received (i) the copies of the
supplemented or amended Prospectus contemplated by Section 4(l) hereof
or (ii) the advice in writing.
(j) Prior to the Exchange Offer or any other offering of Notes
pursuant to any Registration Statement, the Company shall register or
qualify or cooperate with the Holders of Notes included therein and
Holders' Counsel in connection with the registration or qualification
of such Notes for offer and sale under the securities or blue sky laws
of such states as any such Holders reasonably request in writing and do
any and all other acts or things necessary or advisable to enable the
offer and sale in such states of the Notes covered by such Registration
Statement; provided, however, that the Company will not be required to
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not then so qualified, to file any general
consent to service of process or to take any action that would subject
it to general service of process in any such jurisdiction where it is
not then so subject or to subject itself to taxation in respect of
doing business in any jurisdiction in which it is not otherwise so
subject.
(k) The Company shall cooperate with the Holders to facilitate
the timely preparation and delivery of certificates representing Notes
to be sold pursuant to any Registration Statement free of any
restrictive legends and in denominations of $1,000 or an integral
multiple thereof and registered in such names as Holders may request
prior to sales of Notes pursuant to such Registration Statement.
<PAGE> 14
14
(l) Upon the occurrence of (i) any event contemplated by
paragraph (c)(ii)(C) of this Section 4 during the period for which the
Company is required to maintain an effective Registration Statement or
(ii) any Suspension Period that remains in effect more than 45
consecutive or more than 90 days in any calendar year, the Company
shall promptly prepare and file a post-effective amendment to any
Registration Statement or an amendment or supplement to the related
Prospectus or any other required document so that, as thereafter
delivered to purchasers of the Notes included therein, the Prospectus
will not include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading
and, in the case of a Shelf Registration Statement, notify the Holders
to suspend use of the Prospectus as promptly as practicable after the
occurrence of such an event.
(m) Not later than the effective date of any such Registration
Statement hereunder, the Company shall provide a CUSIP number for the
Notes or Exchange Notes, as the case may be, registered under such
Registration Statement and provide the Trustee with certificates for
such Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company.
(n) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make
generally available to its security holders as soon as practicable
after the effective date of the applicable Registration Statement an
earnings statement meeting the requirements of Rule 158 under the
Securities Act.
(o) The Company shall cause the Indenture to be qualified under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), in a timely manner.
(p) The Company may require each Holder of Notes to be sold
pursuant to any Shelf Registration Statement to furnish to the Company
such information regarding the Holder and the distribution of such
Notes or Exchange Notes as the Company may from time to time reasonably
require for inclusion in such Registration Statement, and the Company
may exclude from such registration the Notes of any Holder that fails
to furnish such information within a reasonable time after receiving
such request.
(q) The Company shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf
Registration Statement, such information as the Managing Underwriters,
if any, and Majority Holders reasonably agree should be included
therein, and shall make all required filings of such Prospectus
supplement or post-effective amendment promptly upon notification of
the matters to be incorporated in such Prospectus supplement or
post-effective amendment.
<PAGE> 15
15
(r) In the case of any Shelf Registration Statement, the Company
shall enter into such customary agreements (including underwriting
agreements) and take all other actions, if any, as the Majority Holders
or the Managing Underwriter, if any, shall reasonably request in order
to expedite or to facilitate the registration or the disposition of any
Notes included therein and, in connection therewith, if an underwriting
agreement is entered into, cause the same to contain indemnification
provisions and procedures no less favorable than those set forth in
Section 6 (or such other provisions and procedures acceptable to the
Majority Holders and the Managing Underwriters, if any) with respect to
all parties to be indemnified pursuant to Section 6.
(s) In the case of any Shelf Registration Statement, the Company
shall:
(i) make reasonably available for inspection by
representatives of the Majority Holders to be registered
thereunder, any underwriter participating in any disposition
pursuant to such Shelf Registration Statement and any attorney,
accountant or other agent retained by the Majority Holders or any
such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and
any of its subsidiaries;
(ii) cause the Company's officers, directors and employees
to supply all relevant information reasonably requested by the
Majority Holders or any such underwriter, attorney, accountant or
agent in connection with any such Registration Statement as is
customary for similar due diligence examinations and make such
representatives of the Company as shall be reasonably requested
by the Initial Purchasers or Managing Underwriters, if any,
available for discussion of any such Registration Statement;
provided, however, that all such non-public information shall be
kept confidential by the Holders or any such underwriter,
attorney, accountant or agent unless such disclosure is made in
connection with a court proceeding or required by law or such
information becomes available to the public generally or through
a third party without an accompanying obligation of
confidentiality other than as a result of a disclosure of such
information by any such Holder, underwriter, attorney, accountant
or agent;
(iii) make such representations and warranties to the
Holders of Notes registered thereunder and the underwriters, if
any, in form, substance and scope as are customarily made by
issuers to underwriters in similar underwritten offerings as may
be reasonably requested by them;
(iv) use its reasonable best efforts to obtain opinions of
counsel to the Company and updates thereof in customary form
consistent with opinions
<PAGE> 16
16
rendered at the Closing of the initial issuance of the Notes and
otherwise in form, scope and substance reasonably satisfactory to
the Managing Underwriters, if any and addressed to each selling
Holder and the underwriters, if any;
(v) use its reasonable best efforts to obtain "cold
comfort" letters and updates thereof from the independent
certified public accountants of the Company (and, if necessary,
any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data are, or
are required to be, included in the Registration Statement),
addressed to the underwriters, if any, and use reasonable efforts
to have such letter addressed to the selling Holders of Notes
registered thereunder (to the extent consistent with Statement on
Auditing Standards No. 72 of the American Institute of Certified
Public Accountants ("AICPA") ("SAS 72")), in customary form and
covering matters of the type customarily covered in "cold
comfort" letters in connection with similar underwritten
offerings or, if the provision of such "cold comfort" letters is
not permitted by SAS 72 or if requested by the Initial Purchasers
or their counsel in lieu of a "cold comfort" letter, an
agreed-upon procedures letter under Statement on Auditing
Standards No. 35 of the AICPA, covering matters requested by the
Initial Purchasers or their counsel; and
(vi) deliver such documents and certificates as may be
reasonably requested by the Majority Holders and the Managing
Underwriters, if any, and customarily delivered in similar
offerings, including those to evidence compliance with Section
4(k) and with any conditions contained in the underwriting
agreement or other agreement entered into by the Company.
The foregoing actions set forth in clauses (iii), (iv), (v) and
(vi) of this Section 4(s) shall be performed at (A) the effectiveness
of such Shelf Registration Statement and each post-effective amendment
thereto and (B) each closing under any underwriting or similar
agreement as and to the extent required thereunder.
(t) The Company shall, in the case of a Shelf Registration, use
its reasonable best efforts to cause all Notes and Exchange Notes to be
listed on any securities exchange or any automated quotation system on
which similar securities issued by the Company are then listed if
requested by the Majority Holders, to the extent such Notes satisfy
applicable listing requirements.
(u) The Company shall use its reasonable best efforts to cause
the Exchange Notes or Notes, as the case may be, to be rated by two
nationally recognized statistical
<PAGE> 17
17
rating organizations (as such term is defined in Rule 436(g)(2) under
the Securities Act).
5. Registration Expenses; Remedies. (a) The Company shall bear
all expenses incurred in connection with the performance of its obligations
under Sections 2, 3 and 4 hereof, including without limitation: (i) all
Commission, stock exchange or National Association of Securities Dealers, Inc.
registration and filing fees, (ii) all fees and expenses incurred in connection
with compliance with state securities or blue sky laws (including reasonable
fees and disbursements of one firm of attorneys (in addition to local counsel)
for any underwriters or Holders in connection with blue sky qualification of any
of the Exchange Notes or Notes, (iii) all expenses of any persons in preparing
or assisting in preparing, word processing, printing and distributing any
Registration Statement, any Prospectus, any amendments or supplements thereto,
any underwriting agreements, securities sales agreements and other documents
relating to the performance of and compliance with this Agreement, (iv) all
rating agency fees, if any, (v) all fees and disbursements relating to the
qualification of the Indenture under applicable securities laws, (vi) the
reasonable fees and disbursements of the Trustee and its counsel, (vii) the fees
and disbursements of counsel for the Company and, in the case of a Shelf
Registration Statement, the reasonable fees and disbursements of one counsel for
the Holders (which counsel shall be selected by the Majority Holders and which
counsel may also be counsel for the Initial Purchasers) ("Holders Counsel") and
in the case of any Exchange Offer Registration Statement, the reasonable fees
and expenses of one firm of attorneys (in addition to local counsel) for the
Initial Purchasers acting in connection therewith and (viii) the fees and
disbursements of the independent public accountants of the Company, including
the expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance, but excluding fees and expenses of
counsel to the underwriters (other than fees and expenses set forth in clause
(ii) above) or the Holders and underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of Notes by a
Holder.
(b) The Notes provide that if (i) the Exchange Offer Registration
Statement is not filed with the Commission on or prior to the 90th calendar day
following the Closing Date, (ii) the Exchange Offer Registration Statement is
not declared effective on or prior to the 240th calendar day following the
Closing Date or the Exchange Offer is not consummated on or prior to the 270th
calendar day following the Closing Date or (iii) a Shelf Registration Statement
is not declared effective when required, then, as liquidated damages for such
default, which the parties agree constitutes a reasonable estimate of the
damages, subject to the provisions of paragraph (c) below, the interest rate
borne by the Notes (and on the Exchange Notes) will increase by 0.5% per annum.
Upon the filing of the Exchange Offer Registration Statement, the effectiveness
of the Exchange Offer Registration Statement, the consummation of the Exchange
Offer or the effectiveness of a Shelf Registration Statement, as the case may
be, the interest rate borne by the Notes from the date of such filing,
effectiveness or consummation, as
<PAGE> 18
18
the case may be, will be reduced to the original interest rate set forth on the
cover of the Final Memorandum; provided, however, that, if after any such
reduction in interest rate, a different event specified in clause (i), (ii) or
(iii) above occurs, the interest rate may again be increased pursuant to the
foregoing provisions.
(c) Without limiting the remedies available to the Initial
Purchasers and the Holders, the Company acknowledges that any failure by the
Company to comply with its obligations under Sections 2 and 3 hereof may result
in material irreparable injury to the Initial Purchasers or the Holders for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Sections 2 and
3 hereof.
6. Indemnification and Contribution. (a) In connection with any
Registration Statement, the Company agrees to indemnify and hold harmless each
Holder of Notes covered thereby (including the Initial Purchasers and, with
respect to any Prospectus delivery as contemplated by Sections 2(e) and 4(h)
hereof, each Exchanging Dealer), the directors, officers, employees and agents
of such Holder and each person who controls such Holder within the meaning of
either the Securities Act or the Exchange Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act, the Exchange Act, or other federal
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in such Registration Statement as originally filed,
or in any amendment thereof, or in any preliminary Prospectus or Prospectus, or
in any amendment thereof or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein (in the case of
the Prospectus, in light of the circumstances under which they were made) not
misleading, and agrees to reimburse each such indemnified party, as incurred,
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage or liability (or action
in respect thereof); provided, however, that the Company will not be liable in
any case to the extent that any such loss, claim, damage or liability arises out
of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of any such
indemnified party specifically for inclusion therein; provided further, however,
that the Company will not be liable in any case with respect to any untrue
statement or omission or alleged untrue statement or omission made in any
preliminary Prospectus or Prospectus, or in any amendment thereof or supplement
thereto, to the extent that any such loss, claim, damage or liability (or action
in respect thereof) resulted from the fact that any indemnified party sold Notes
or Exchange Notes to a person to whom there was not sent or
<PAGE> 19
19
given, at or prior to the written confirmation of such sale, a copy of the
Prospectus as then amended or supplemented, if the Company had previously
complied with the provisions of Section 4(c)(ii) and 4(f) or 4(h) hereof and if
the untrue statement contained in or omission from such preliminary Prospectus
or Prospectus was corrected in the Prospectus as then amended or supplemented.
This indemnity agreement will be in addition to any liability that the Company
may otherwise have.
The Company also agrees to indemnify or contribute to Losses (as
defined below) of, as provided in Section 6(d) hereof, any underwriters of Notes
registered under a Shelf Registration Statement, their employees, officers,
directors and agents and each person who controls such underwriters on the same
basis as that of the indemnification of the Initial Purchasers and the selling
Holders provided in this Section 6(a) and shall, if requested by any Holder,
enter into an underwriting agreement reflecting such agreement, as provided in
Section 4(q) hereof.
(b) Each Holder of Notes covered by a Registration Statement
(including each Initial Purchaser and, with respect to any Prospectus delivery
as contemplated by Sections 2(e) and 4(h) hereof, each Exchanging Dealer)
severally (with respect to each of the Holders (other than the Initial
Purchasers)) and jointly and severally (with respect to the Initial Purchasers)
agrees to indemnify and hold harmless (i) the Company, (ii) each of the
directors of the Company, (iii) each of the officers of the Company who signs
such Registration Statement, (iv) each Person who controls the Company within
the meaning of either the Securities Act or the Exchange Act and (v) each other
Holder of Notes to the same extent as the foregoing indemnity from the Company
to each such Holder, but only with respect to written information furnished to
the Company by or on behalf of such Holder specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability that any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 6, notify the indemnifying party in writing of the
commencement thereof, but the failure so to notify the indemnifying party (i)
will not relieve the indemnifying party from liability under paragraph (a) or
(b) above unless and to the extent it did not otherwise learn of such action and
such failure results in the forfeiture by the indemnifying party of substantive
rights and defenses, and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel (including local
counsel) of the indemnifying party's choice at the indemnifying party's expense
to represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be responsible
for the fees and expenses of any separate
<PAGE> 20
20
counsel retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel (and local counsel) if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants in,
or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of such action or
(iv) the indemnifying party shall authorize the indemnified party to employ
separate counsel at the expense of the indemnifying party. It is understood that
the indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed as
they are incurred. Each indemnified party, as a condition to its rights to
indemnity, shall use all reasonable efforts to cooperate with the indemnifying
party in the defense of any such actions or claim. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or
(b) of this Section 6 is unavailable to or insufficient to hold harmless an
indemnified party in respect of Losses for any reason, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall have a
joint and several obligation to contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably incurred
in connection with investigating or defending the same) (collectively "Losses")
to which such indemnified party may be subject in such proportion as is
appropriate to reflect the relative benefits received by such indemnifying
party, on the one hand, and such indemnified party, on the other hand, from the
Initial Placement and the Registration Statement that resulted in such Losses;
provided, however, that in no case shall any Initial Purchaser or any subsequent
Holder of any Note or Exchange Note be responsible, in the aggregate, for any
amount in excess of the purchase discount or commission applicable to such Note,
or in the case of an Exchange Note, applicable to the Note that was exchangeable
into such Exchange Note, as set
<PAGE> 21
21
forth on the cover page of the Final Memorandum, nor shall any underwriter be
responsible for any amount in excess of the underwriting discount or commission
applicable to the Notes purchased by such underwriter under the Registration
Statement that resulted in such Losses. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the indemnifying
party and the indemnified party shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of such indemnifying party, on the one hand, and such indemnified party,
on the other hand, in connection with the statements or omissions that resulted
in such Losses as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the sum of (x) the total
net proceeds from the Initial Placement (before deducting expenses) as set forth
on the cover page of the Final Memorandum and (y) the total amount of additional
interest (such interest accruing 180 days following the Closing Date) that the
Company was not required to pay as a result of registering the Notes covered by
the Registration Statement that resulted in such losses. Benefits received by
the Initial Purchasers shall be deemed to be equal to the total purchase
discounts and commissions as set forth on the cover page of the Final
Memorandum, and benefits received by any other Holders shall be deemed to be
equal to the value of receiving Notes or Exchange Notes, as applicable,
registered under the Securities Act. Benefits received by any underwriter shall
be deemed to be equal to the total underwriting discounts and commissions as set
forth on the cover page of the Prospectus forming a part of the Registration
Statement that resulted in such Losses. Relative fault shall be determined by
reference to, among other things, whether any alleged untrue statement or
omission relates to information provided by the indemnifying party, on the one
hand, or by the indemnified party, on the other hand. The parties agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation that did not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 6, each person who controls a
Holder within the meaning of either the Securities Act or the Exchange Act and
each director, officer, employee and agent of such Holder shall have the same
rights to contribution as such Holder, and each person who controls the Company
within the meaning of either the Securities Act or the Exchange Act, each
officer of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of this
paragraph (d).
(e) The provisions of this Section 6 will remain in full force
and effect, regardless of any investigation made by or on behalf of any Holder
or the Company or any of the officers, directors or controlling persons referred
to in Section 6 hereof and will survive the sale by a Holder of Notes covered by
a Registration Statement.
<PAGE> 22
22
7. Miscellaneous.
(a) No Inconsistent Agreement. The Company has not, as of the
date hereof, entered into, nor shall it, on or after the date hereof, enter
into, any agreement that conflicts with the rights granted to the Holders herein
or otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Holders of at least a majority of the then outstanding aggregate
principal amount of Notes (or, after the consummation of any Exchange Offer in
accordance with Section 2 hereof, of Exchange Notes); provided that, with
respect to any matter that directly or indirectly affects the rights of the
Initial Purchasers hereunder, the Company shall obtain the written consent of
the Initial Purchasers. Notwithstanding the foregoing (except the foregoing
proviso), a waiver or consent to departure from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders whose
Notes are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other Holders may be given by the
Majority Holders, determined on the basis of Notes being sold rather than
registered under such Registration Statement.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section
7(c), which address initially is, with respect to each Holder, the
address of such Holder maintained by the Registrar under the Indenture,
with a copy in like manner to NationsBanc Montgomery Securities LLC;
(ii) if to the Initial Purchasers, at NationsBanc Montgomery
Securities LLC, 767 Fifth Avenue, Floor 12A, New York, New York 10153,
Attention: Thomas Mooney, Syndicate Desk; and
(iii) if to the Company, East Coast Power L.L.C., 711 Louisiana
Street, Houston, Texas 77002, Attention: Secretary.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; one business day
after being delivered to a next-day air courier; three business days after being
deposited in mails; and when receipt is
<PAGE> 23
23
acknowledged by recipient's telecopier machine, if sent by telecopier. The
Initial Purchasers, on the one hand, or the Company, on the other, by notice to
the other party or parties may designate additional or different addresses for
subsequent notices or communications.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Company thereto, subsequent Holders of Notes and/or Exchange Notes. The
Company hereby agrees to extend the benefits of this Agreement to any Holder of
Notes and/or Exchange Notes and any such Holder may specifically enforce the
provisions of this Agreement as if an original party hereto.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(i) Notes Held by the Company, Etc. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Notes or
Exchange Notes is required hereunder, Notes or Exchange Notes, as applicable,
held by the Company or its Affiliates (other than subsequent Holders of Notes or
Exchange Notes if such subsequent Holders are deemed to be Affiliates solely by
reason of their holdings of such Notes or Exchange Notes) shall not be counted
in determining whether such consent or approval was given by the Holders of such
required percentage.
(j) Entire Agreement. This Agreement and the other written
documents referred to herein (including the Indenture) or delivered pursuant
hereto contain the entire understanding of the parties with respect to its
subject matter and this Agreement supercedes all prior agreement and
understandings among the parties with respect to its subject matter.
<PAGE> 24
Please confirm that the foregoing correctly sets forth the
agreement among the Company and you.
Very truly yours,
EAST COAST POWER L.L.C.
By: /s/ ROSS D. AIN
----------------------------------------
Name: Ross D. Ain
Title: President
ECP Registration Rights Agreement
<PAGE> 25
The foregoing Agreement is hereby
accepted as of the date first above written.
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ PHILLIP R. BENNETT
--------------------------------------
Name: Phillip R. Bennett
Title: Vice President
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ ABUBAYO OGUNLESI
--------------------------------------
Name: Abubayo Ogunlesi
Title: Managing Director
LEHMAN BROTHERS INC.
By: /s/ JAMES W. MERLI
--------------------------------------
Name: James W. Merli
Title: Managing Director
SG COWEN SECURITIES CORPORATION
By: /s/ DONALD B. KYLE
--------------------------------------
Name: Donald B. Kyle
Title: Managing Partner
ECP Registration Rights Agreement
<PAGE> 26
ANNEX A
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Notes where such Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Company has agreed that, starting on the
Expiration Date (as defined herein) and ending on the close of business 180 days
after the Expiration Date, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
ECP Registration Rights Agreement
<PAGE> 27
ANNEX B
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."
ECP Registration Rights Agreement
<PAGE> 28
ANNEX C
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Notes where such Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that, starting on
the Expiration Date and ending on the close of business 180 days after the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until such date all dealers effecting transactions in the Exchange
Notes may be required to deliver a prospectus.
ECP Registration Rights Agreement
<PAGE> 29
ANNEX D
If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes, it represents that the Notes to be
exchanged for the Exchange Notes were acquired by it as a result of
market-making activities or other trading activities and acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
ECP Registration Rights Agreement
<PAGE> 1
EXHIBIT 4.4
CALPERS SECURITY AGREEMENT
Dated as of April 20, 1999
made by
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM,
as Grantor,
to
THE BANK OF NEW YORK,
as Trustee
CalPERS Security Agreement
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
SECTION 1. Certain Defined Terms.................................................................................1
SECTION 2. Grant of Security.....................................................................................4
SECTION 3. Security for Obligations..............................................................................5
SECTION 4. Delivery of Collateral................................................................................5
SECTION 5. Representations and Warranties........................................................................6
SECTION 6. Further Assurances; Place of Perfection...............................................................8
SECTION 7. Covenant to Give Further Security.....................................................................8
SECTION 8. Trustee Appointed Attorney-in-Fact....................................................................9
SECTION 9. Trustee May Perform..................................................................................10
SECTION 10. No Assumption of Duties; Reasonable Care............................................................10
SECTION 11. Voting Rights; Dividends; Etc.......................................................................10
SECTION 12. Transfers and Other Liens; Additional Shares........................................................11
SECTION 13. Security Interest Absolute..........................................................................11
SECTION 14. Remedies............................................................................................12
SECTION 15. Amendments, Waivers and Consents.....................................................................13
SECTION 16. Notices; Etc........................................................................................14
SECTION 17. Continuing Security Interest........................................................................14
SECTION 18. Waivers and Acknowledgments.........................................................................14
SECTION 19. Subrogation.........................................................................................15
</TABLE>
CalPERS Security Agreement
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 20. Release and Termination.............................................................................15
SECTION 21. Authority of the Trustee............................................................................15
SECTION 22. Execution in Counterparts...........................................................................16
SECTION 23. Reinstatement.......................................................................................16
SECTION 24. Severability........................................................................................16
SECTION 25. Nonrecourse.........................................................................................16
SECTION 26. Governing Law; Entire Agreement.....................................................................16
</TABLE>
Schedule I - Pledged Interests
CalPERS Security Agreement
<PAGE> 4
EXHIBIT 4.4
CALPERS SECURITY AGREEMENT
SECURITY AGREEMENT dated April 20, 1999, made by CALIFORNIA
PUBLIC EMPLOYEES' RETIREMENT SYSTEM, a unit of the State and Consumer Services
Agency of the State of California (the "Grantor"), to THE BANK OF NEW YORK, a
New York banking corporation, in its capacity as trustee (the "Trustee") for the
holders from time to time (the "Holders") of the Notes (as defined in the
Indenture referred to below), issued by East Coast Power L.L.C., a Delaware
limited liability company (the "Company") under the Indenture referred to below.
PRELIMINARY STATEMENTS.
(1) The Company and the Trustee have entered into an indenture
dated as of April 20, 1999 (as amended, restated, supplemented or otherwise
modified from time to time, the "Indenture"), pursuant to which the Company is
issuing Notes on the date hereof in an aggregate principal amount of
$850,000,000.
(2) It is a condition precedent to the initial purchase of the
Notes by the initial Holders thereof that the Grantor shall have granted the
security interest and made the pledge contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order
to induce the initial Holders to purchase the Initial Notes, the Grantor hereby
agrees with the Trustee, for the benefit of the Trustee and for the ratable
benefit of the Holders of the Notes, as follows:
SECTION 1. Certain Defined Terms. Unless otherwise defined in
this Section 1, (a) capitalized terms used in this Agreement have the meanings
specified in the Indenture and (b) terms used in Article 8 or 9 of the Uniform
Commercial Code from time to time in effect in the State of New York (the
"NYUCC") are used herein as therein defined. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and the plural forms of the terms defined):
"Bridge Loan" means the $831,000,000 loan from NationsBank,
N.A. and certain others to the Company pursuant to the $831,000,000 Credit
Agreement dated as of February 4, 1999 in connection with the acquisition of the
Facilities.
"Collateral" has the meaning specified in Section 2.
"Default" means an event or condition that, with giving of
notice or lapse of time or both, would become an Event of Default.
CalPERS Security Agreement
<PAGE> 5
2
"Equity Interests" means, with respect to any Person, shares
of capital stock of (or other ownership or profit interests in) such Person,
warrants, options or other rights for the purchase or other acquisition from
such Person of shares of capital stock of (or other ownership or profit
interests in) such Person, securities convertible into or exchangeable for
shares of capital stock of (or other ownership or profit interests in) such
Person or warrants, rights or options for the purchase or other acquisition from
such Person of such shares (or such other interests), and other ownership or
profit interests in such Person (including, without limitation, partnership,
member or trust interests therein), whether voting or nonvoting, and whether or
not such shares, warrants, options, rights or other interests are authorized or
otherwise existing on any date of determination.
"Event of Default" has the meaning specified in Section 501 of
the Indenture.
"Governmental Authorization" means any authorization,
approval, consent, franchise, license, covenant, order, ruling, permit,
certification, exemption or similar right or action of or by, or filing or
registration with or notice to, any Governmental Authority.
"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.
"Grantor Material Adverse Effect" means a material adverse
effect on (a) the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Grantor, (b) the rights and remedies
of the Trustee under this Agreement or (c) the ability of the Grantor to perform
any of its obligations under this Agreement.
"Initial Notes" has the meaning set forth in the first recital
of the Indenture.
"Issue Date" means the date on which the Notes are originally
issued under the Indenture.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation, assignment for
security, claim, or preference or priority or other encumbrance upon, or with
respect to, any property of any kind, real or personal, movable or immovable,
now owned or hereafter acquired. A Person will be deemed to own subject to a
Lien any property that such Person has acquired or holds subject to the interest
of a vendor or lessor under any conditional sale agreement, capital lease or
other title retention agreement.
"Material Adverse Effect" means a material adverse effect on
(i) the financial position or results of operation of the Company and its
Subsidiaries, taken as a whole, (ii) the
CalPERS Security Agreement
<PAGE> 6
3
ability of the Company to perform its obligations under the Notes or (iii) the
ability of a Facility Owner to perform any obligation under a Project Document
that is material to the Company and its Subsidiaries taken as a whole.
"Notes" has the meaning stated in the first recital of the
Indenture and more particularly means any Notes authenticated and delivered
under the Indenture. For all purposes of the Indenture, the term "Notes" shall
include any Additional Notes and any Exchange Notes to be issued and exchanged
for any Notes pursuant to the Registration Rights Agreement and the Indenture
and, for purposes of the Indenture, all Initial Notes, Additional Notes and
Exchange Notes shall vote together as one series of Notes under the Indenture.
"NYUCC" has the meaning specified above in this Section 1.
"Outstanding", when used with respect to Notes, means, as of
the date of determination, all Notes theretofore authenticated and delivered
under the Indenture, except:
(a) Notes theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(b) Notes, or portions thereof, for which payment or
redemption money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company) in trust
or set aside and segregated in trust by the Company (if the Company
shall act as its own Paying Agent) for the Holders of such Notes;
provided that, if such Notes are to be redeemed, notice of such
redemption has been duly given pursuant to the Indenture or provision
therefor satisfactory to the Trustee has been made;
(c) Notes, except to the extent provided in Sections 1202 and
1203 of the Indenture, with respect to which the Company has effected
legal defeasance and/or covenant defeasance as provided in Article
Twelve of the Indenture; and
(d) Notes which have been paid pursuant to Section 308 of the
Indenture or in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to Section 303 of the Indenture;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Notes have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by Trustee Indenture Act of 1939
Section 313, Notes owned by the Company or any other obligor upon the Notes or
any Affiliate of the Company or any other obligor shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Trustee
shall be protected in making such calculation or in relying upon any such
request, demand, authorization, direction, notice, consent
CalPERS Security Agreement
<PAGE> 7
4
or waiver, only Notes which a Responsible Officer of the Trustee knows to be so
owned shall be so disregarded. Notes so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Notes and that the pledgee is not the Company or any other obligor upon the
Notes or any Affiliate of the Company or such other obligor.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, limited liability company, trust,
unincorporated organization or Governmental Authority.
"Pledged Interests" has the meaning specified in Section 2(a).
"Project Documents" includes all Power Purchase Agreements,
steam contracts, operating and maintenance agreements, administrative services
contracts, construction contracts (other than purchase orders), transmission
agreements, fuel supply contracts and partnership agreements that relate to a
Facility, other than any such agreement that has a term of one year or less or
that may be canceled or terminated by a party thereto on less than one year's
notice without substantial economic detriment.
"Requirements of Law" means, with respect to any Person, all
laws, statutes, treaties, rules, regulations, determinations, orders, writs,
decrees, injunctions, judgments, determinations or awards of an arbitrator, a
court or any other Governmental Authority, and all Governmental Authorizations,
binding upon or applicable to such Person or to any of its properties or assets.
"Secured Obligations" has the meaning specified in Section 3.
"Security Documents" means the ECT Security Agreement, the
CalPERS Security Agreement, the ECP Holding Company Security Agreement and the
Common Security Agreement.
"Security Collateral" has the meaning specified in Section
2(a).
"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.
CalPERS Security Agreement
<PAGE> 8
5
SECTION 2. Grant of Security. The Grantor hereby pledges and
assigns to the Trustee, for its benefit and the ratable benefit of the Holders
of the Notes, and hereby grants to the Trustee, for its benefit and for the
ratable benefit of the Holders of the Notes, a continuing security interest in
and to all of the Grantor's right, title and interest in and to, the following
(whether consisting of investment securities, book-entry securities or other
securities, security entitlements, financial assets or other investment
property, accounts, general intangibles, instruments or documents, securities
accounts, deposit accounts or other bank, trust or cash collateral accounts, or
other property, assets or rights), whether now owned or hereafter acquired,
wherever located and whether now or hereafter existing (collectively, the
"Collateral"):
(a) all of the membership interests in the Company described
on Schedule I hereto and any and all additional membership interests or
other Equity Interests in the Company, now owned or hereafter acquired,
or now or hereafter issued or existing, whether or not evidenced by
certificates (collectively, the "Pledged Interests"), and the
certificates, if any, representing such shares or other Equity
Interests, all security therefor and all dividends, distributions,
profits, bonuses, premiums, income, cash, instruments and other
property and assets from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
interests (all such Collateral being, the "Security Collateral"); and
(b) all proceeds (including cash proceeds) of any and all of
the foregoing Collateral (including, without limitation, proceeds that
constitute property of the types described in clause (a) of this
Section 2) and, to the extent not otherwise included, all (i) payments
under insurance (whether or not the Trustee is the loss payee thereof),
or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral
and (ii) payments and distributions made with respect to the foregoing
Collateral.
SECTION 3. Security for Obligations. This Agreement secures
the payment of all obligations, now or hereafter existing, of the Company under
the Indenture and the Notes and of the Grantor under this Agreement (including,
without limitation, any extensions, modifications, substitutions, amendments and
renewals thereof), in each case whether direct or indirect, absolute or
contingent, and whether for principal, interest, fees, indemnification payments,
contract causes of action, costs, expenses or otherwise (all such obligations
being the "Secured Obligations"). Without limiting the generality of the
foregoing, this Agreement secures, to the fullest extent permitted by applicable
law, the payment of all amounts that constitute part of the Secured Obligations
and would be owed by the Company to the Trustee or the Holders under the
Indenture, the Notes or the Security Documents but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Company.
CalPERS Security Agreement
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SECTION 4. Delivery of Collateral. (a) The Grantor shall
ensure that all certificates or instruments representing or evidencing Security
Collateral, if any, are delivered to and be held by or on behalf of the Trustee
pursuant hereto and are in suitable form for transfer by delivery or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance reasonably satisfactory to the Trustee. The Trustee shall
have the right, at any time and without notice to the Grantor, to transfer to or
register in the name of the Trustee or any of its nominees any or all of the
Security Collateral, subject only to the revocable rights specified in Section
11(b). In addition, the Trustee shall have the right at any time and from time
to time to exchange certificates or instruments representing or evidencing
Security Collateral held by them for certificates or instruments of smaller or
larger denominations.
(b) Concurrently with the execution and delivery of this
Agreement, the Grantor shall cause to be filed proper financing statements in
all jurisdictions necessary or prudent to perfect and protect the liens and
security interests created hereunder, covering the Collateral described herein.
SECTION 5. Representations and Warranties. The Grantor
represents and warrants as of the date of this agreement as follows:
(a) The Grantor (i) is a duly formed and validly existing unit
of the State Consumer Services Agency of the State of California, (ii)
is a governmental plan (as such term is defined in Section 3(32) of the
Employee Retirement Income Act of 1974, as amended), (iii) does not
treat itself as subject to the Department of Labor Regulations
Section 2510.3-101 or interpret applicable state law as incorporating
similar rules and (iv) has all requisite power to enter into and to
perform its obligations under this Agreement.
(b) The execution, delivery and performance by the Grantor of
this Agreement are within the Grantor's powers, have been duly
authorized by all necessary and appropriate action, and do not (i)
violate its organizational or governing documents, (ii) conflict with,
result in a breach of any of the terms, conditions or provisions of, or
constitute a default under, any other agreement or arrangement to which
it is a party or by which it or any of its assets or property is bound
that, individually or in the aggregate, would be reasonably expected to
have a Grantor Material Adverse Effect, (iii) violate any Requirement
of Law binding on or applicable to the Grantor or any Governmental
Authorization that it has been granted, or result in or require the
creation or imposition of any Lien upon or with respect to any of the
Collateral pledged by the Grantor in this Agreement.
(c) This Agreement has been duly executed and delivered by the
Grantor. This Agreement is the legal, valid and binding obligation of
the Grantor, enforceable against the Grantor in accordance with its
terms.
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(d) There is no action, suit, investigation, litigation or
proceeding of any kind pending against the Grantor or, to the best of
its knowledge, threatened before any court, Governmental Authority or
arbitrator that (i) would reasonably be expected to have a Grantor
Material Adverse Effect or (ii) purports to affect the legality,
validity or enforceability of this Agreement or the consummation of any
of the transactions contemplated hereby or thereby.
(e) The chief place of business and chief executive office of
the Grantor are located at the address specified in Section 16. The
Grantor has no trade names.
(f) The Grantor is the legal and beneficial owner of the
Collateral free and clear of any Lien (other than Liens not prohibited
by the Indenture), except for the security interest created by this
Agreement and the Liens created under the Bridge Loan which will
terminate upon the filing of termination financing statements on the
Issue Date. Except as set forth in the preceding sentence, no effective
financing statement or other instrument similar in effect covering all
or any part of the Collateral is on file in any recording office, and
the Grantor has not entered into any security control agreement or
other agreement similar in effect, in each case covering all or any
part of the Collateral, except such as may have been filed in favor of
the Trustee relating to this Agreement or the other Security Documents.
(g) There are no existing options, warrants, calls or
commitments of any character whatsoever relating to any of the Pledged
Interests except as provided in this Agreement and the limited
liability company agreement of the Company. There are no shareholder
agreements, voting trust agreements or other agreements or
understandings to which the Grantor is a party or by which the Grantor
may otherwise be bound that affect the voting or other rights of a
holder of any Equity Interest in the Company (including, without
limitation, the ability to transfer any such Equity Interest), except
for this Agreement and the limited liability company agreement of the
Company.
(h) This Agreement, the pledge of the Collateral pursuant
hereto and the pledge, assignment and delivery to the Trustee of the
certificates representing the Security Collateral pursuant hereto,
together with stock or other transfer powers duly executed in blank,
create a valid and perfected first priority security interest in the
Security Collateral, securing the payment of the Secured Obligations,
and all filings and other actions necessary to perfect and protect such
security interest have been duly taken, assuming that all financing
statements referred to in Section 4(b) have been filed.
(i) No consent of any other Person and no authorization,
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body
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or other third party is required either (i) for the grant by the
Grantor of the assignment and security interest granted hereby, for the
pledge by the Grantor of any of the Collateral pursuant hereto or for
the execution, delivery or performance of this Agreement by the
Grantor, (ii) for the perfection or continuation of perfection of the
pledge, assignment and security interest created hereby (including the
priority of such pledge, assignment or security interest), except for
the filing of financing and continuation statements under the Uniform
Commercial Code, of which financing statements shall be caused to be
duly filed by the Grantor pursuant to Section 4(b), (iii) for the
exercise by the Trustee of its voting or other rights provided for in
this Agreement or the remedies in respect of the Collateral pursuant to
this Agreement, except as may be required in connection with the
disposition of any portion of the Security Collateral by laws affecting
the offering and sale of securities generally or (iv) consents,
authorizations, approvals or other actions or filings that have been
made or obtained.
SECTION 6. Further Assurances; Place of Perfection. (a) The
Grantor agrees that from time to time, at the expense of the Company, the
Grantor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or prudent, or that the
Trustee may reasonably request, in order to perfect and protect any pledge,
assignment or security interest granted or purported to be granted hereunder
(including, without limitation, the priority thereof) or to enable the Trustee
to exercise and enforce its rights and remedies hereunder. Without limiting the
generality of the foregoing, the Grantor will:
(i) if any Collateral shall be evidenced by a certificate,
promissory note or other instrument or by chattel paper, deliver and
pledge to the Trustee hereunder such certificate, note or other
instrument or such chattel paper duly endorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and
substance reasonably satisfactory to the Trustee; and
(ii) execute such financing statements, continuation
statements or other similar documents, or amendments thereto, and such
other instruments or notices, as may be necessary or as the Trustee may
deem reasonably prudent and may request, in order to perfect and
preserve the pledge, assignment and security interest granted or
purported to be granted under this Agreement.
(b) The Grantor hereby authorizes the Trustee to cause the
filing of one or more continuation statements or other similar documents, and
amendments thereto, relating to all or any part of the Collateral without the
signature of the Grantor where permitted by applicable law. A photocopy or other
reproduction of this Agreement or any financing statement or other similar
document covering the Collateral or any part thereof shall be sufficient as a
financing statement or other similar document where permitted by applicable law.
CalPERS Security Agreement
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(c) The Grantor shall furnish to the Trustee from time to time
statements and schedules further identifying and describing the Collateral as
the Trustee may reasonably request, all in reasonable detail.
SECTION 7. Covenant to Give Further Security. The Grantor
hereby agrees that, if, and at such time as, it acquires title to, or any other
ownership interest in, any additional Equity Interests in any issuer of the
Pledged Interests, it will, at the expense of the Company:
(a) as promptly as practicable and in any event within thirty
(30) days after such acquisition, notify the Trustee of its acquisition
of title thereto or such other ownership interest therein; and
(b) as promptly as practicable and in any event within 30 days
after such acquisition, (i) duly execute and deliver such pledges,
assignments and/or other security agreements as are necessary to create
a valid lien thereon and security interest therein in favor of the
Trustee, for its benefit and the benefit of the Holders of the Notes,
in each case in form and substance satisfactory to the Trustee, and
(ii) make all filings and take all other actions that are necessary or
that the Trustee may deem reasonably prudent and may request to perfect
and protect a valid and perfected first priority lien thereon and
security interest therein in favor of the Trustee, for its benefit and
the benefit of the Holders of the Notes.
SECTION 8. Trustee Appointed Attorney-in-Fact. The Grantor
hereby irrevocably appoints the Trustee its attorney-in-fact (which appointment
is coupled with an interest and is irrevocable), with full authority in the
place and stead of the Grantor and in the name of the Grantor or otherwise and
with full power of substitution, from time to time upon the occurrence and
during the continuation of an Event of Default, to take any action and to
execute any instrument to accomplish the purposes of this Agreement (it being
understood that the Trustee will not be required to act unless otherwise set
forth herein or in the Indenture), including, without limitation:
(a) to ask for, demand, collect, sue for, recover, compromise,
receive, and give acquittance and receipts for, moneys due and to
become due under or in respect of any of the Collateral;
(b) to receive, endorse and collect any drafts, instruments or
other documents or any chattel paper in connection with this Agreement
(including, without limitation, all instruments representing or
evidencing any interest payment or other distribution in respect of the
Security Collateral or any part thereof) and to give full discharge for
the same;
CalPERS Security Agreement
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10
(c) to sell, transfer, assign or otherwise deal with the
Collateral or any part thereof under, and in accordance with, the terms
of the Indenture or Section 14 in the same manner and to the same
extent as if the Trustee was the absolute owner thereof; and
(d) upon the occurrence and during the continuation of any
Event of Default, to file any claims or take any action or institute
any proceedings that may be necessary or that the Trustee may deem
prudent for the collection of any of the Collateral or otherwise to
enforce the rights of the Trustee with respect to any of the
Collateral.
SECTION 9. Trustee May Perform. If the Grantor fails to
perform any act or agreement required to be performed by it under this
Agreement, the Trustee, without waiving or releasing any obligation or default,
may (but shall not be obligated to), upon prior written notice to the Grantor,
perform such other act, or cause the performance thereof, for the account and at
the sole expense of the Company. The Trustee shall not be liable for any damages
resulting from any such performance.
SECTION 10. No Assumption of Duties; Reasonable Care. The
rights and powers conferred on the Trustee hereunder are solely to preserve and
protect the security interest of the Trustee and the Holders of the Notes in and
to the Collateral granted hereby and shall not be interpreted to, and shall not
impose any duties on the Trustee in connection therewith other than those
expressly provided herein or imposed under applicable law. Except as provided by
applicable law or by the Indenture, the Trustee shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which the Trustee accords similar property held by the Trustee for its own
account, it being understood that the Trustee in its capacity as such shall not
have any responsibility for (a) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities or other matters relative to any
Collateral, whether or not the Trustee has or is deemed to have knowledge of
such matters or (b) taking any necessary steps to preserve rights against any
parties with respect to any Collateral. The Trustee shall be entitled to all the
rights, benefits, privileges and immunities accorded to it under the Indenture
solely as it relates to the Collateral and subject to Section 25.
SECTION 11. Voting Rights; Dividends; Etc. (a) So long as no
Event of Default shall have occurred and be continuing:
(i) The Grantor shall be entitled to exercise or refrain from
exercising any and all voting and other consensual rights pertaining to
the Security Collateral pledged and assigned by it hereunder, or any
part thereof, for any purpose not inconsistent with the terms of this
Agreement.
CalPERS Security Agreement
<PAGE> 14
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(ii) The Grantor shall be entitled to receive, retain, and
distribute any and all dividends, interest and other distributions paid
or distributed in respect of the Security Collateral.
(iii) The Trustee shall execute and deliver (or cause to be
executed and delivered) to the Grantor all such proxies and other
instruments as the Grantor may reasonably request for the purpose of
enabling the Grantor to exercise the voting and other rights that it is
entitled to exercise pursuant to paragraph (i) above and to receive the
dividends or payments that it is authorized to receive, retain, and
distribute pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event
of Default:
(i) All rights of the Grantor (A) to exercise or refrain from
exercising the voting and other consensual rights that it would
otherwise be entitled to exercise pursuant to Section 11(a)(i) shall,
upon notice to the Grantor by the Trustee acting at the discretion of
the Holders of a majority interest of Outstanding Notes, cease and (B)
to receive the dividends, payments, and other distributions that it
would otherwise be authorized to receive, retain, and distribute
pursuant to Section 11(a)(ii) shall automatically cease, and all such
rights shall thereupon become vested in the Trustee, which shall
thereupon have the sole right to exercise or refrain from exercising
such voting and other consensual rights and to receive and hold as
Collateral such dividends, payments and other distributions as the
Holders of a majority in interest of Outstanding Notes shall direct.
(ii) All dividends and payments that are received by the
Grantor contrary to the provisions of paragraph (i) of this Section
11(b) shall be received in trust for the benefit of the Trustee, shall
be segregated from other funds of the Grantor and shall be forthwith
paid over to the Trustee as Collateral in the same form as so received
(with any necessary indorsement).
SECTION 12. Transfers and Other Liens; Additional Shares. (a)
The Grantor agrees that it will not (i) sell, assign or otherwise dispose of, or
grant any option with respect to, any of the Collateral of the Grantor if such
sale, assignment, disposition or grant of option would be reasonably expected to
cause or result in a Default or an Event of Default or (ii) create or suffer to
exist any Lien except for Liens created hereunder.
(b) The Grantor agrees that it shall pledge hereunder,
immediately upon its acquisition (directly or indirectly) thereof, any and all
additional Equity Interests in the Company or any of its Subsidiaries.
CalPERS Security Agreement
<PAGE> 15
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(c) Any sale, assignment or other disposition of any of the
Collateral shall be subject to the Lien and security interest in favor of the
Trustee (on its behalf and on behalf of the Holders of the Notes) created
hereunder continuing in such Collateral.
SECTION 13. Security Interest Absolute. The obligations of the
Grantor under this Agreement are independent of the Secured Obligations, and a
separate action or actions may be brought and prosecuted against the Grantor to
enforce this Agreement, irrespective of whether any action is brought against
the Company or whether the Company is joined in any such action or actions. All
rights of the Trustee and the pledge, assignment and security interest
hereunder, and all obligations of the Grantor hereunder, shall be irrevocable,
absolute and unconditional, irrespective of, and the Grantor hereby irrevocably
waives (to the maximum extent permitted by applicable law) any defenses it may
now have or may hereafter acquire in any way relating to, any or all of the
following:
(a) any lack of validity or enforceability of the Indenture,
the Notes or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of all
or any of the Secured Obligations or any other obligations of the
Company under the Indenture, the Notes, or any other amendment or
waiver of or any consent to any departure from the Indenture or the
Notes, including, without limitation, any increase in the Secured
Obligations resulting from the extension of additional credit to the
Company, any of its Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of any
other collateral, or any taking, release or amendment or waiver of or
consent to departure from any guaranty, for all or any of the Secured
Obligations;
(d) any manner of application of Collateral, or proceeds
thereof, to all or any of the Secured Obligations, or any manner of
sale or other disposition of any Collateral for all or any of the
Secured Obligations or any other obligations of the Company under or in
respect of the Indenture, the Notes and Security Documents or any other
assets of the Company or any of its Subsidiaries;
(e) any change, restructuring or termination of the corporate,
partnership or other structure or existence of the Company or any of
its Subsidiaries; and
(f) any other circumstance (including without limitation any
statute of limitations) that might otherwise constitute a defense
available to, or a discharge of, the Grantor or a third party grantor
of a security interest.
CalPERS Security Agreement
<PAGE> 16
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SECTION 14. Remedies. If an Event of Default shall have
occurred and be continuing:
(a) The Trustee or the majority of the Holders of the Notes
may, or in the event of an acceleration under Section 502 of the
Indenture then the Trustee shall, exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein or in the Indenture or otherwise available to it, all the rights
and remedies of a secured party upon default under the NYUCC (whether
or not the NYUCC applies to the affected Collateral) and also may (i)
require the Grantor to, assemble all or part of the Collateral as
directed by the Trustee and make it available to the Trustee at a place
to be designated by the Trustee that is reasonably convenient to both
parties and (ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Trustee's offices or elsewhere, for cash,
on credit or for future delivery, and upon such other terms as
commercially reasonable. The Grantor agrees that, to the extent notice
of sale shall be required by law, at least ten days' notice to the
Grantor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. The Trustee shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Trustee
may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was
so adjourned.
(b) All cash proceeds received by the Trustee in respect of
any sale of, collection from, or other realization upon all or any part
of the Collateral be held by the Trustee as collateral for, and/or then
or at any time thereafter applied (after payment of any amounts payable
to the Trustee in whole or in part by the Trustee for the ratable
benefit of the Holders of the Notes against, all or any part of the
Secured Obligations in such order as the Trustee shall elect. Any
surplus of such cash or cash proceeds held by the Trustee and remaining
after payment in full of all the Secured Obligations shall be paid over
to the Grantor or to whomsoever else may be lawfully entitled to
receive such surplus.
SECTION 15. Amendments, Waivers and Consents. Any amendment or
waiver of any provision of this Agreement and any consent to any departure by
the Grantor from any provision of this Agreement shall be effective only if in
writing, signed by the Trustee and the Grantor, and made or duly given in
compliance with all of the terms and provisions of the Indenture, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. Neither the Trustee nor any Holder of Notes
shall be deemed, by any act, delay, indulgence, omission or otherwise, 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.
Failure of the Trustee or any Holder of Notes to exercise, or delay in
exercising, any right, power or privilege hereunder shall not preclude any other
or further
CalPERS Security Agreement
<PAGE> 17
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exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Trustee or any Holder of Notes of any right or remedy hereunder on
any one occasion shall not be construed as a bar to any right or remedy that the
Trustee or such Holder of Notes 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.
SECTION 16. Notices; Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telecopied, cabled or delivered to it:
(a) if to the Grantor, at its address at Lincoln Plaza, 400
"P" Street, Sacramento, California 92814-2749, Attention: Senior
Investment Officer, Facsimile: (916) 558-4058, with copies to Jones,
Day, Reavis & Pogue, 555 Fifth Street, Suite 4600, Los Angeles,
California 90013-1025, Attention: Dulcie D. Brand, Esq., Facsimile:
(213) 243-2359; and
(b) if to the Trustee, at 101 Barclay Street, Floor 21 West,
New York, NY 10286, attention: Corporate Trust Trustee Administration;
or, as to any such party, at such other address as shall be designated by such
party in a written notice to each other party complying as to delivery with the
terms of this Section. All such notices and communications shall, when mailed or
telecopied, be effective when received
SECTION 17. Continuing Security Interest. This Agreement shall
create a continuing security interest in and to the Collateral and shall (a)
remain in full force and effect until the payment in full in cash of the Secured
Obligations, (b) be binding upon the Grantor and its successors and permitted
assigns and (c) inure, together with the rights and remedies of the Trustee
hereunder, to the benefit of, and be enforceable by, the Trustee, the Holders of
the Notes and their respective successors, transferees and assigns. Without
limiting the generality of the foregoing clause (c), the Trustee may assign or
otherwise transfer all or any portion of its rights and obligations under the
Indenture and the Notes to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to the
Trustee, as the case may be, herein or otherwise, in each case as and to the
extent provided in Section 6.10 of the Indenture.
SECTION 18. Waivers and Acknowledgments. (a) The Grantor
hereby waives promptness, diligence, notice of acceptance and any other notice
(except any notice expressly required hereunder) with respect to any of the
Secured Obligations and this Agreement and any requirement that the Trustee or
any Holder of a Note protect, secure, perfect or insure any Lien
CalPERS Security Agreement
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15
or any property subject thereto or exhaust any right or take any action against
the Company or any other Person or any Collateral.
(b) The Grantor hereby waives any right to revoke this
Agreement, and acknowledges that this Agreement is continuing in nature and
applies to all Secured Obligations, whether existing now or in the future.
(c) The Grantor acknowledges that it will receive substantial
direct and indirect benefits from the financing arrangements contemplated by the
Indenture, the Notes and this Agreement and that the waivers set forth in this
Section 18 are knowingly made in contemplation of such benefits.
SECTION 19. Subrogation. The Grantor will not exercise any
rights that it may now or hereafter acquire against the Company or any of its
Subsidiaries that arise from the existence, payment, performance or enforcement
of the Grantor's obligations under this Agreement, including, without
limitation, any right of subrogation, reimbursement, exoneration, contribution
or indemnification and any right to participate in any claim or remedy of the
Trustee or any Holders of the Notes against the Company or of its Subsidiaries
or any Collateral, whether or not such claim, remedy or right arises in equity
or under contract, statute or common law, including, without limitation, the
right to take or receive from the Company or any of its Subsidiaries, directly
or indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right, unless and until
all of the Secured Obligations and all other amounts payable under this
Agreement shall have been paid in full in cash. If any amount shall be paid to
the Grantor in violation of the preceding sentence at any time prior to the
later of the payment in full in cash of the Secured Obligations and all other
amounts payable under this Agreement, such amount shall be held in trust for the
benefit of the Trustee and the other Holders of the Notes and shall forthwith be
paid to the Trustee to be credited and applied to the Secured Obligations and
all other amounts payable under this Agreement.
SECTION 20. Release and Termination. Upon the payment in full
in cash of the Secured Obligations, the pledge, assignment and security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
the Grantor. Upon any such termination, the Trustee will, execute and deliver to
the Grantor all Security Collateral delivered hereunder and such documents as
the Grantor shall reasonably request to evidence such termination.
SECTION 21. Authority of the Trustee. (a) The Trustee shall
have and be entitled to exercise all powers hereunder that are specifically
granted to the Trustee by the terms hereof, together with such powers as are
reasonably incident thereto. The Trustee may perform any of its duties hereunder
or in connection with the Collateral by or through agents or employees and shall
be entitled to retain counsel and to act in reliance upon the advice of counsel
concerning all such matters. Except as otherwise expressly provided in this
Agreement or the Indenture, neither
CalPERS Security Agreement
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the Trustee nor any director, officer, employee, attorney or agent of the
Trustee shall be liable to the Grantor for any action taken or omitted to be
taken by the Trustee, in its capacity as Trustee, hereunder, except for its own
negligence or willful misconduct, and the Trustee shall not be responsible for
the validity, effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The Trustee and its directors, officers, employees,
attorneys and agents shall be entitled to rely on any communication, instrument
or document believed by it or them to be genuine and correct and to have been
signed or sent by the proper person or persons.
(b) The Grantor acknowledges that the rights and
responsibilities of the Trustee under this Agreement with respect to any action
taken by the Trustee or the exercise or non-exercise by the Trustee 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 Trustee and the
Holders of the Notes, be governed by the Indenture and by such other agreements
with respect thereto as may exist from time to time among them, but, as between
the Trustee and the Grantor, the Trustee shall be conclusively presumed to be
acting as agent for the Holders of the Notes with full and valid authority so to
act or refrain from acting, and the Grantor shall not be obligated or entitled
to make any inquiry respecting such authority.
SECTION 22. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 23. Reinstatement. This Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Secured Obligations is rescinded or must otherwise be returned by the
Trustee, any Holder of the Notes or by any other Person upon the insolvency,
bankruptcy or reorganization of the Company or otherwise, all as though such
payment had not been made.
SECTION 24. 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 any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 25. Nonrecourse. The Trustee and the Holders of the
Notes acknowledge and agree that neither the Trustee nor any Holder of the Notes
shall have the right to proceed directly against the Grantor or against any of
its properties or assets (other than the
CalPERS Security Agreement
<PAGE> 20
17
Collateral) for the satisfaction of any obligation under this Agreement or the
enforcement of any claim hereunder.
SECTION 26. Governing Law; Entire Agreement. This Agreement
shall be governed by, and construed in accordance with, the laws of the State of
New York. This Agreement constitutes the entire understanding among the Grantor,
the Trustee and the Holders of the Notes with respect to the subject matter
hereof and supercede any prior agreements, written or oral, with respect
thereto.
CalPERS Security Agreement
<PAGE> 21
18
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
CALIFORNIA PUBLIC EMPLOYEES'
RETIREMENT SYSTEM
By: /s/ RICHARD J. HAYES
-----------------------------------
Name: Richard J. Hayes
Title: Principal Investment Officer
THE BANK OF NEW YORK, as Trustee
By: /s/ MARY BETH LEWICK
-----------------------------------
Name: Mary Beth Lewick
Title: Assistant Vice President
CalPERS Security Agreement
<PAGE> 22
SCHEDULE I
EQUITY INTERESTS
<TABLE>
<CAPTION>
===========================================================================================
PERCENTAGE OF
OUTSTANDING
ISSUER TYPE OF INTEREST EQUITY INTEREST
===========================================================================================
<S> <C> <C>
50% of
East Coast Power L.L.C. Class B Membership Interest Class B Membership Interests
===========================================================================================
</TABLE>
CalPERS Security Agreement
<PAGE> 1
EXHIBIT 4.5
EXECUTION COPY
04/2099
COMMON SECURITY AGREEMENT
Dated as of April 20, 1999
made by
THE PERSONS LISTED ON THE SIGNATURE PAGES HEREOF,
as Grantors,
to
THE BANK OF NEW YORK,
as Trustee,
and
THE BANK OF NEW YORK,
as Account Collateral Securities Intermediary
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
SECTION 1. Certain Defined Terms.........................................................................................2
SECTION 2. Grant of Security.............................................................................................3
SECTION 3. Security for Obligations; Limitation of Liability.............................................................5
SECTION 4. Delivery of Collateral........................................................................................5
SECTION 5. Debt Service Reserve Account..................................................................................6
SECTION 6. Investments of Amounts in Debt Service Reserve Account........................................................8
SECTION 7. Representations and Warranties................................................................................8
SECTION 8. Further Assurances; Place of Perfection......................................................................11
SECTION 9. Covenant to Give Further Security............................................................................12
SECTION 10. The Trustee Appointed Attorney-in-Fact......................................................................12
SECTION 11. The Trustee May Perform.....................................................................................13
SECTION 12. No Assumption of Duties; Reasonable Care....................................................................13
SECTION 13. Voting Rights; Dividends; Etc...............................................................................14
SECTION 14. Transfers and Other Liens; Additional Equity Interests......................................................14
SECTION 15. Security Interest Absolute..................................................................................15
SECTION 16. Remedies....................................................................................................16
SECTION 17. Expenses....................................................................................................17
SECTION 18. Amendments, Waivers and Consents.............................................................................18
SECTION 19. Notices; Etc................................................................................................19
</TABLE>
<PAGE> 3
ii
<TABLE>
<S> <C> <C>
SECTION 20. Continuing Security Interest................................................................................19
SECTION 21. Waivers and Acknowledgments.................................................................................20
SECTION 22. Subrogation.................................................................................................20
SECTION 23. Release and Termination.....................................................................................21
SECTION 24. Authority of the Trustee....................................................................................21
SECTION 25. Execution in Counterparts...................................................................................21
SECTION 26. Reinstatement...............................................................................................22
SECTION 27. Severability................................................................................................22
SECTION 28. Governing Law; Entire Agreement.............................................................................22
</TABLE>
Schedule I - Pledged Interests
Schedule II - Pledged Debt
Schedule III - Partnership Collateral
Schedule IV - Chief Places of Business and Chief Executive Offices
<PAGE> 4
EXHIBIT 4.5
COMMON SECURITY AGREEMENT
COMMON SECURITY AGREEMENT dated April 20, 1999, made and
entered into by and among (a) EAST COAST POWER L.L.C., a Delaware limited
liability company (the "Company"), (b) JEDI LINDEN LP, L.L.C., JEDI LINDEN NB,
L.L.C., and JEDI CAMDEN LP, L.L.C., each a Delaware limited liability company
(collectively, the "Subsidiary Grantors" and, together with the Company, the
"Grantors"), (c) THE BANK OF NEW YORK, a New York banking corporation, in its
capacity as trustee (together with any successor Trustee under the Indenture,
the "Trustee") for the holders from time to time (the "Holders") of the Notes
(as defined in the Indenture referred to below), issued by the Company under the
Indenture referred to below and (d) The Bank of New York in its capacity as
Account Collateral Securities Intermediary (together with any successor in such
capacity permitted hereunder, the "Account Collateral Securities Intermediary").
PRELIMINARY STATEMENTS.
(1) The Company and the Trustee have entered into an indenture
dated as of April 20, 1999 (as amended, restated, supplemented or otherwise
modified from time to time, the "Indenture"), pursuant to which the Company is
issuing Notes on the date hereof in an aggregate principal amount of
$850,000,000.
(2) The Company has caused the Account Collateral Securities
Intermediary to establish an account (the "Debt Service Reserve Account") at its
offices at 101 Barclay Street, Floor 21 West, New York, NY 10286, Administrative
Account No.103348, in the name of "The Bank of New York, as Trustee for the
benefit of the holders of the Senior Secured Notes of East Coast Power L.L.C.:
Debt Service Reserve Account."
(3) The Holders and the Trustee have appointed the Account
Collateral Securities Intermediary as their Securities Intermediary for purposes
of maintaining the Debt Service Reserve Account and performing certain actions
with respect thereto in accordance with the terms of this Agreement.
(4) Each of the Subsidiary Grantors will derive substantial
direct and indirect benefits from the transactions contemplated by the
Indenture.
(5) It is a condition precedent to the initial purchase of the
Notes by the initial Holders thereof that each of the Grantors shall have
granted the security interest and made the pledge and assignment contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and in order
to induce the initial Holders to purchase the Initial Notes (as defined in the
Indenture), each Grantor hereby
<PAGE> 5
2
agrees with the Trustee and the Account Collateral Securities Intermediary, for
the benefit of the Trustee and for the ratable benefit of the Holders of the
Notes, as follows:
SECTION 1. Certain Defined Terms. Unless otherwise defined in
this Section 1, (a) capitalized terms used in this Agreement (including the
schedules and exhibits hereto) have the meanings specified in the Indenture, and
(b) terms used in Article 8 or 9 of the Uniform Commercial Code from time to
time in effect in the State of New York (the "NYUCC") are used herein as therein
defined. As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and the
plural forms of the terms defined):
"Account Collateral" has the meaning specified in Section
2(a).
"Book-Entry Security" means a security maintained in the form
of entries (including, without limitation the Security Entitlements in,
and the financial assets based on, such security) in the commercial
book-entry system of the Federal Reserve System.
"Collateral" has the meaning specified in Section 2.
"Entitlement Holder" means a Person that (i) is an
"entitlement holder" as defined in Section 8-102(a)(7) of the NYUCC
(except in respect of a Book-Entry Security); and (ii) in respect of
any Book-Entry Security, is an "entitlement holder" as defined in 31
C.F.R. Section 357.2 (or, as applicable to such Book-Entry Security,
the corresponding Federal Book-Entry Regulations governing such
Book-Entry Security) which, to the extent required or permitted by the
Federal Book-Entry Regulations, is also an "entitlement holder" as
defined in Section 8-102(a)(7) of the NYUCC.
"Federal Book-Entry Regulations" means (a) the federal
regulations contained in Subpart B ("Treasury/Reserve Automated Debt
Entry System (TRADES)" governing Book-Entry Securities consisting of
U.S. Treasury bonds, notes and bills) and Subpart D ("Additional
Provisions") of 31 C.F.R. Part 357, 31 C.F.R. Sections 357.10 through
Sections 357.14 and Sections 357.41 through Sections 357.44 (including
related defined terms in 31 C.F.R. Sections 357.2); and (b) to the
extent substantially identical to the federal regulations referred to
in clause (a) above (as in effect from time to time), the federal
regulations governing other Book-Entry Securities.
"Partnership Collateral" has the meaning specified in Section
2(c).
"Pledged Debt" has the meaning specified in Section 2(b)(ii).
"Pledged Interests" has the meaning specified in Section
2(b)(i).
<PAGE> 6
3
"Secured Obligations" has the meaning specified in Section 3.
"Securities Intermediary" means a Person that (a) is a
"securities intermediary" as defined in Section 8-102(a)(14) of the
NYUCC and (b) in respect of any Book-Entry Security, is also a
"securities intermediary" as defined in 31 C.F.R. Section 357.2 (or, as
applicable to such Book-Entry Security, the corresponding Federal
Book-Entry Regulations governing such Book-Entry Security).
"Security Collateral" has the meaning specified in Section
2(b).
"Security Entitlement" means (a) "security entitlement" as
defined in Section 8-102(a)(17) of the NYUCC (except in respect of a
Book-Entry Security); and (b) in respect of any Book-Entry Security, a
"security entitlement" as defined in 31 C.F.R. Section 357.2 (or, as
applicable to such Book-Entry Security, the corresponding Federal Book-
Entry Regulations governing such Book-Entry Security) which, to the
extent required or permitted by the Federal Book-Entry Regulations, is
also a "security entitlement" as defined in Section 8-102(a)(17) of the
NYUCC.
SECTION 2. Grant of Security. Each Grantor hereby pledges and
assigns to the Trustee, for its benefit and for the ratable benefit of the
Holders of the Notes, and hereby grants to the Trustee, for its benefit and the
ratable benefit of the Holders of the Notes, a continuing security interest in
and to all of such Grantor's right, title and interest in and to the following
(whether consisting of investment securities, Book-Entry Securities or other
securities, Security Entitlements, financial assets or other investment
property, accounts, general intangibles, instruments or documents, chattel
paper, securities accounts, deposit accounts or other bank, trust or cash
collateral accounts, or other property, assets or rights), whether now owned or
hereafter acquired, wherever located and whether now or hereafter existing
(collectively, the "Collateral"):
(a) all of the following (collectively, the "Account
Collateral"):
(i) the Debt Service Reserve Account, all funds held
therein and all certificates and instruments, if any, from
time to time representing or evidencing the Debt Service
Reserve Account, and all Securities Entitlements from time to
time maintained or carried in the Debt Service Reserve Account
and all financial assets held in or credited to the Debt
Service Reserve Account;
(ii) all Dollar Permitted Investments held, carried
in or credited to the Debt Service Reserve Account from time
to time and all certificates and instruments, if any, from
time to time representing or evidencing any such Dollar
Permitted Investments;
<PAGE> 7
4
(iii) all notes, certificates of deposit, deposit
accounts, checks and other instruments from time to time
hereafter delivered to or otherwise possessed, maintained or
held by the Trustee or the Account Collateral Securities
Intermediary for or on behalf of such Grantor in respect of
any of the then existing Account Collateral, including,
without limitation, those delivered to or possessed in
substitution for or in addition to any or all of the then
existing Account Collateral; and
(iv) all interest, dividends, cash, instruments and
other property and assets from time to time received,
receivable or otherwise distributed in respect of or in
exchange for any or all of the then existing Account
Collateral;
(b) all of the following (collectively, the "Security
Collateral"):
(i) the shares of capital stock, membership interests
and other Equity Interests set forth opposite such Grantor's
name in Schedule I hereto and issued by the Persons indicated
therein, whether or not evidenced by certificates, and the
certificates, if any, representing such shares or other Equity
Interests, all security therefor and all dividends,
distributions, profits, bonuses, premiums, income, cash,
instruments and other property and assets from time to time
received, receivable or otherwise distributed in respect of or
in exchange for any or all of such shares or other interests
(collectively, the "Pledged Interests"); and
(ii) the indebtedness set forth opposite such
Grantor's name in Schedule II hereto and issued by the Persons
indicated therein, and the instruments, if any, evidencing
such indebtedness, all security therefor and all interest,
cash, instruments and other property and assets from time to
time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such indebtedness
(collectively, the "Pledged Debt");
(c) each partnership interest set forth opposite such
Grantor's name in Schedule III hereto, and all distributions, cash,
instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of
such Grantor's right, title and interest in and to each such
partnership interest, including, but not limited to (i) the
certificates, if any, representing such partnership interests and (ii)
all instruments representing such additional interests, and all
distributions, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such interests) (any and all such
right, title and interest, distributions, cash, instruments and other
property of each Grantor being, such Grantor's "Partnership
Collateral"); and
<PAGE> 8
5
(d) all proceeds (including cash proceeds) of any and all of
the foregoing Collateral (including, without limitation, proceeds that
constitute property of the types described in clauses (a) - (c) of this
Section 2) and, to the extent not otherwise included, all (i) payments
under insurance (whether or not the Trustee is the loss payee thereof),
or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral,
and (ii) payments and distributions made with respect to the foregoing.
SECTION 3. Security for Obligations; Limitation of Liability.
(a) This Agreement secures the payment of all obligations of the Grantors, now
or hereafter existing, under the Indenture, the Notes and this Agreement
(including, without limitation, any extensions, modifications, substitutions,
amendments and renewals hereof or thereof), in each case whether direct or
indirect, absolute or contingent, and whether for principal, interest, fees,
indemnification payments, contract causes of action, costs, expenses or
otherwise (all such Obligations being the "Secured Obligations"). Without
limiting the generality of the foregoing, this Agreement secures, as to each
Grantor to the fullest extent permitted by applicable law, the payment of all
amounts that constitute part of the Secured Obligations and would be owed by
such Grantor to the Trustee or any Holders under the Indenture, the Notes or the
Security Documents but for the fact that they are unenforceable or not allowable
due to the existence of a bankruptcy, reorganization or similar proceeding
involving any Grantor.
(b) The liability of each Subsidiary Grantor under this
Agreement shall not exceed the greater of (i) the net benefit realized by such
Subsidiary Grantor from the proceeds of the issuance of the Notes made available
from time to time by the Company to such Subsidiary Grantor or any Subsidiary of
such Subsidiary Grantor and (ii) the greater of (A) 95% of the Adjusted Net
Assets of such Subsidiary Grantor on the date of delivery hereof and (B) 95% of
the Adjusted Net Assets of such Subsidiary Grantor on the date of any payment
hereunder. "Adjusted Net Assets" of any Subsidiary Grantor at any date means the
lesser of (I) the amount by which the fair value of the property of such
Subsidiary Grantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities, but excluding liabilities under this
Agreement, of such Subsidiary Grantor at such date and (II) the amount by which
the present fair salable value of the assets of such Subsidiary Grantor at such
date exceeds the amount that will be required to pay the probable liability of
such Subsidiary Grantor on its debts, excluding debt in respect of this
Agreement, as they become absolute and matured.
SECTION 4. Delivery of Collateral. (a) The Grantors shall
ensure that all certificates or instruments representing or evidencing Security
Collateral, if any, shall be delivered to and be held by or on behalf of the
Trustee, pursuant hereto and shall be in suitable form for transfer by delivery
or shall be accompanied by duly executed instruments of transfer or assignment
in blank, duly notarized, all in form and substance reasonably satisfactory to
the Trustee. The Trustee shall have the right, at any time and without notice to
any Grantor, to
<PAGE> 9
6
transfer to or register in the name of the Trustee (or any of its nominees) any
or all of the Security Collateral, respectively, subject only to the revocable
rights specified in Section 13(b). In addition, the Trustee shall have the right
at any time and from time to time to exchange certificates or instruments
representing or evidencing Security Collateral held by it for certificates or
instruments of smaller or larger denominations.
(b) Concurrently with the execution and delivery of this
Agreement, the Grantors will file proper financing statements in all
jurisdictions necessary or prudent to perfect and protect the liens and security
interests created hereunder, covering the Collateral described herein.
SECTION 5. Debt Service Reserve Account. (a) The Account
Collateral Securities Intermediary shall cause the Debt Service Reserve Account
to be, and the Debt Service Reserve Account shall be, separate from all other
accounts held by or under the control and dominion of The Bank of New York, the
Account Collateral Securities Intermediary or the Trustee.
(b) The Account Collateral Securities Intermediary represents,
warrants and agrees as follows:
(i) The Bank of New York acting as Account Collateral
Securities Intermediary (A) is a Securities Intermediary on the date
hereof and (B) so long as this Agreement remains in effect and The Bank
of New York remains the Account Collateral Securities Intermediary,
shall remain a Securities Intermediary, and shall act as such with
respect to the Trustee, the Debt Service Reserve Account and all of the
assets, property and items (including all Security Entitlements
maintained or carried in the Debt Service Reserve Account) from time to
time transferred, credited or deposited to or maintained or carried in
the Debt Service Reserve Account.
(ii) The Debt Service Reserve Account is, and shall remain, a
securities account, with the Trustee as the sole Entitlement Holder of
such account (and all Security Entitlements from time to time
maintained or carried therein) and the sole Person having "control"
(within the meaning of Section 8-106 and Section 9-115(1)(e) of the
NYUCC) over such account and such Security Entitlements.
(iii) In furtherance of clause (ii) above, the Account
Collateral Securities Intermediary has credited and will continue to
credit such assets, property and items to the Debt Service Reserve
Account in accordance with this Agreement; provided that in no
event shall any amounts or Dollar Permitted Investments deposited in or
credited to the Debt Service Reserve Account be registered in the name
of any Grantor, payable to the order of any Grantor or specially
indorsed to any Grantor except to the extent that the
<PAGE> 10
7
foregoing have been specially indorsed to the Account Collateral
Securities Intermediary or in blank.
(iv) To the maximum extent permitted by applicable law, all
assets, property and items from time to time carried in the Debt
Service Reserve Account shall constitute financial assets, and the
Account Collateral Securities Intermediary shall treat all such assets,
property and items as financial assets.
(v) The Account Collateral Securities Intermediary (A) shall
comply with any and all entitlement orders received by it from the
Trustee in respect of the Account Collateral or any assets, property or
items from time to time carried in the Debt Service Reserve Account, in
each case without the consent of any Grantor or any other Person, and
(B) shall not comply with the entitlement orders of any other Person.
(vi) The "securities intermediary's jurisdiction" (within the
meaning of Section 8-110(e) of the NYUCC) of the Account Collateral
Securities Intermediary is and will continue to be the State of New
York.
(vii) Except for the rights of the Trustee under paragraph (v)
above, the Account Collateral Securities Intermediary knows of no right
or claim to or interest in the Account Collateral (including any
"adverse claim" within the meaning of Section 8-102(a)(1) of the NYUCC)
by any Person other than the Company; it being understood that the
Account Collateral Securities Intermediary has not conducted an
independent investigation.
(viii) The Account Collateral Securities Intermediary solely
in its individual capacity has not entered into and will not enter into
any agreement with any other Person relating to Debt Service Reserve
Account and/or any financial assets from time to time credited thereto,
or Securities Entitlements carried therein, pursuant to which it has
agreed to comply with entitlement orders of such Person or any other
Person. The Account Collateral Securities Intermediary has not entered
into and will not enter into any other agreement with any of the
Grantors or any other Person purporting to limit or condition the
obligation of the Account Collateral Securities Intermediary to comply
with entitlement orders originated by the Trustee as set forth in
paragraph (v) above.
(ix) The Account Collateral Securities Intermediary hereby
waives and releases any lien, encumbrance, claim, right of set-off or
other right it may have against the Debt Service Reserve Account or any
financial asset carried in the Debt Service Reserve Account or any
credit balance in the Debt Service Reserve Account, or Securities
Entitlements carried therein (except that the Account Collateral
Securities Intermediary may set off the face amount of any checks which
have been credited to the Debt Service Reserve Account but are
subsequently returned unpaid because of uncollected or
<PAGE> 11
8
insufficient funds) and agrees that it will not assert any such lien,
encumbrance, claim or right against the Debt Service Reserve Account or
any financial asset carried in the Debt Service Reserve Account or any
credit balance in the Debt Service Reserve Account, or Securities
Entitlements carried therein.
(x) Anything herein to the contrary notwithstanding, the
Account Collateral Securities Intermediary will not be required to
follow any instruction that would violate any applicable law, decree,
regulation or order of any government or governmental body (including
any court or tribunal).
(c) The Debt Service Reserve Account shall be subject to such
applicable laws, and such applicable regulations of the Board of Governors of
the Federal Reserve System and of any other appropriate banking or governmental
authority having jurisdiction over the Debt Service Reserve Account, as may now
or hereafter be in effect.
SECTION 6. Investments of Amounts in Debt Service Reserve
Account. (a) So long as no Event of Default shall have occurred and be
continuing, the Trustee shall direct the Account Collateral Securities
Intermediary to invest and disburse amounts in the Debt Service Reserve Account,
and shall direct the Account Collateral Securities Intermediary to liquidate
Dollar Permitted Investments in accordance with the Indenture; provided that the
Account Collateral Securities Intermediary shall only be obligated to, and shall
be fully protected by, following entitlement orders given by the Trustee. All
securities and financial assets credited to the Debt Service Reserve Account
shall be registered in the name of the Account Collateral Securities
Intermediary, endorsed to the Account Collateral Securities Intermediary or in
blank or credited to another securities account maintained in the name of the
Account Collateral Securities Intermediary and in no case will any financial
asset credited to the Debt Service Reserve Account be registered in the name of
any Grantor, payable to the order of any Grantor or specially endorsed to any
Grantor except to the extent the foregoing have been specially endorsed to the
Account Collateral Securities Intermediary or in blank.
(b) All Dollar Permitted Investments made by the Account
Collateral Securities Intermediary in respect of the Debt Service Reserve
Account, and the net proceeds of the sale, liquidation or payment thereof, all
interest thereon and all other income received or otherwise realized with
respect thereto, shall be held in the Debt Service Reserve Account, as Account
Collateral until distributed pursuant to the Indenture, Sections 16 or 23, or
transferred pursuant to entitlement orders given by the Trustee.
SECTION 7. Representations and Warranties. Each Grantor
represents and warrants as of the date of this Agreement as follows as to itself
and as to the Collateral owned by it:
<PAGE> 12
9
(a) Such Grantor is a limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Such Grantor has all power and
authority and all governmental licenses, authorizations, consents and
approvals required in each case to carry on its business as now
conducted, except to the extent that the failure to have such power,
authority, licenses, authorizations, consents and approvals could not
reasonably be expected to have a Material Adverse Effect.
(b) The execution, delivery and performance by such Grantor of
this Agreement are within such Grantor's powers, have been duly
authorized by all necessary action of such Grantor, require, in respect
of such Grantor, no action by or in respect of, or filing with, any
governmental body, agency or official, except for the filing of
financing statements in favor of the Trustee on or prior to the date
hereof as may be required for the perfection of the Security Interest
herein granted in the Collateral and do not contravene, or constitute a
default under, any provision of law or regulation (including Regulation
X of the Board of Governors of the Federal Reserve System) applicable
to such Grantor or Regulation U of the Board of Governors of the
Federal Reserve System or the certificate of formation or the limited
liability company agreement of such Grantor or any judgment,
injunction, order, decree or material agreement binding upon such
Grantor or result in or require the creation or imposition of any Lien
on any of the Collateral e.
(c) This Agreement has been duly executed and delivered by
such Grantor. This Agreement is the legal, valid and binding obligation
of such Grantor, enforceable against such Grantor in accordance with
its terms, except as the enforceability thereof may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and by general
principles of equity.
(d) There is no pending, or to such Grantor's knowledge,
threatened action, suit or proceeding against such Grantor before any
court or arbitrator or any governmental body, agency or official in
which there is a reasonable possibility of an adverse decision which
could reasonably be expected to have Material Adverse Effect or which
in any manner draws into question the legality, validity, binding
effect or enforceability of this Agreement.
(e) The chief place of business and chief executive office of
such Grantor are located at the address specified for such Grantor on
Schedule IV to this Agreement. Such Grantor has no trade names.
(f) Such Grantor is the legal and beneficial owner of the
Collateral, which is in existence as of the date hereof, of such
Grantor free and clear of any Lien (other than Liens not prohibited by
the Indenture), except for the security interest created by this
Agreement and the Liens created under the Bridge Loan which will
terminate upon the
<PAGE> 13
10
filing of termination financing statements on the Issue Date. No
effective financing statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any recording
office, and such Grantor has not entered into any security control
agreement or other agreement similar in effect, in each case covering
all or any part of the Collateral, except such as may have been filed
in favor of the Trustee relating to this Agreement or the other
Security Documents.
(g) The Pledged Interests pledged by such Grantor (i) have
been duly authorized and validly issued and (ii) constitute the
percentage of the issued and outstanding Equity Interests in the
issuers thereof indicated on Schedule I hereto. There are no existing
options, warrants, calls or commitments of any character whatsoever
relating to any Equity Interests in such Grantor or such issuer except
as set forth in the limited liability company agreement of the issuers.
There are no shareholder agreements, voting trust agreements or other
agreements or understandings to which such Grantor is a party or by
which such Grantor may otherwise be bound that affect the voting or
other rights of a holder of any Equity Interest in the Company or any
of the Pledged Interests (including, without limitation, the ability to
transfer any such Equity Interest), except for this Agreement and the
limited liability company agreements of the issuers of such Pledged
Interests. None of the Pledged Interests pledged by such Grantor is
evidenced by a security certificate, other certificate or instrument
that has not been delivered to the Trustee in its original form.
(h) All of the Pledged Debt pledged by it (i) has been duly
authorized, authenticated or issued and delivered, (ii) is the legal,
valid and binding obligation of the Person that incurred such Debt and
(iii) is evidenced by one or more promissory notes, which notes have
been delivered to the Trustee. No party to any of such Pledged Debt is
in default thereunder.
(i) This Agreement, the pledge of the Collateral pursuant
hereto and the pledge, assignment and delivery to the Trustee of the
certificates representing the Security Collateral pursuant hereto,
together with stock or other transfer powers duly executed in blank,
create a valid and perfected first priority security interest in the
Collateral, securing the payment of the Secured Obligations, and all
filings and other actions necessary to perfect and protect such
security interest have been duly taken.
(j) No consent of any other Person and no authorization,
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body
or other third party is required either (i) for the grant by such
Grantor of the assignment and security interest granted hereby, for the
pledge by such Grantor of any of the Collateral pursuant hereto or for
the execution, delivery or performance of this Agreement by such
Grantor, (ii) for the perfection or continuation of perfection of the
pledge,
<PAGE> 14
11
assignment and security interest created hereby (including the priority
of such pledge, assignment or security interest), except for the filing
of financing and continuation statements under the Uniform Commercial
Code, which financing statements have been duly filed, (iii) for the
exercise by the Trustee of its voting or other rights provided for in
this Agreement or the remedies in respect of the Collateral pursuant to
this Agreement, except as may be required in connection with the
disposition of any portion of the Security Collateral by laws affecting
the offering and sale of securities generally or (iv) consents,
authorizations, approvals or other actions or filings that have been
made or obtained on or prior to the date hereof.
SECTION 8. Further Assurances; Place of Perfection. (a) Each
Grantor agrees that from time to time, at its sole expense, such Grantor will
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary or prudent or that the Trustee may
reasonably request, in order to perfect and protect any pledge, assignment or
security interest granted or purported to be granted by it hereunder (including,
without limitation, the priority thereof) or to enable the Trustee to exercise
and enforce its rights and remedies hereunder and under any of the other
Collateral Documents with respect to any of the Collateral. Without limiting the
generality of the foregoing, each Grantor will with respect to all Collateral
owned by it:
(i) if any Collateral shall be evidenced by a certificate,
promissory note or other instrument or by chattel paper, deliver and
pledge to the Trustee hereunder such certificate, note or other
instrument or such chattel paper duly endorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and
substance reasonably satisfactory to the Trustee, and
(ii) execute and file such financing statements, continuation
statements or other similar documents, or amendments thereto, and such
other instruments or notices, as may be necessary or required or as the
Trustee may deem reasonably prudent and may request, in order to
perfect and preserve the pledge, assignment and security interest
granted or purported to be granted under this Agreement.
(b) Each Grantor hereby authorizes the Trustee to cause the
filing of one or more financing statements, continuation statements or other
similar documents, and amendments thereto, relating to all or any part of the
Collateral owned by it without the signature of such Grantor where permitted by
applicable law. A photocopy or other reproduction of this Agreement or any
financing statement or other similar document covering the Collateral owned by
it or any part thereof shall be sufficient as a financing statement or other
similar document where permitted by applicable law.
<PAGE> 15
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(c) Each Grantor shall furnish to the Trustee from time to
time statements and schedules further identifying and describing the Collateral
owned by it and such other reports in connection with such Collateral as the
Trustee may reasonably request, all in reasonable detail.
SECTION 9. Covenant to Give Further Security. Each Grantor
hereby agrees that, if, and at such time as, it acquires title to, or any other
ownership interest in, any additional Equity Interests in any issuer of the
Pledged Interests or Partnership Collateral (excluding any such Equity Interest
issued in exchange or substitution for (i) JEDI Linden GP L.L.C's general
partnership interest in Linden Ltd., (ii) JEDI Camden LP L.L.C's general
partnership interest in Camden GP or (iii) Jedi Linden Inc's one percent
interest in JEDI Linden GP L.L.C.) it will, at its sole expense:
(a) as promptly as practicable and in any event within five
(5) days after such acquisition, notify the Trustee of its acquisition
of title thereto or such other ownership interest therein;
(b) as promptly as practicable and in any event within 30 days
after such acquisition, (i) duly execute and deliver such mortgages,
pledges, assignments and/or other security agreements as are necessary
to create a valid lien thereon and security interest therein in favor
of the Trustee, for its benefit and the benefit of the Holders of the
Notes, in each case in form and substance satisfactory to the Trustee,
and (ii) make all filings and take all other actions that are necessary
or that the Trustee may deem reasonably prudent and may request to
perfect and protect a valid and perfected first priority lien thereon
and security interest therein in favor of the Trustee, for its benefit
and the benefit of the Holders of the Notes.
SECTION 10. The Trustee Appointed Attorney-in-Fact. In
addition to all of the powers granted to the Trustee pursuant to the Indenture,
each Grantor hereby irrevocably appoints the Trustee its attorney-in-fact (which
appointment is coupled with an interest and is irrevocable), with full authority
in the place and stead of such Grantor and in the name of such Grantor or
otherwise and with full power of substitution, from time to time, to take any
action and to execute any instrument to accomplish the purposes of this
Agreement (it being understood that the Trustee will not be required to act
unless otherwise set forth herein or in the Indenture) including, without
limitation:
(a) upon the occurrence and during the continuance of an Event
of Default, to ask for, demand, collect, sue for, recover, compromise,
receive, and give acquittance and receipts for, moneys due and to
become due under or in respect of any of the Collateral;
(b) to receive, endorse and collect any drafts, instruments or
other documents or any chattel paper in connection with this Agreement
(including, without limitation, all
<PAGE> 16
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instruments representing or evidencing any interest payment or other
distribution in respect of the Security Collateral or Partnership
Collateral or any part thereof) and to give full discharge for the
same;
(c) to withdraw or order the release or transfer of funds from
the Debt Service Reserve Account in accordance with the terms of this
Agreement or the Indenture;
(d) to sell, transfer, assign or otherwise deal with the
Collateral or any part thereof under, and in accordance with, the terms
of the Indenture or Section 16 in the same manner and to the same
extent as if the Trustee was the absolute owner thereof; and
(e) upon the occurrence and during the continuation of any
Event of Default, to file any claims or take any action or institute
any proceedings that may be necessary or that the Trustee may deem
reasonably prudent for the collection of any of the Collateral or
otherwise to enforce the rights of the Trustee with respect to any of
the Collateral.
SECTION 11. The Trustee May Perform. If any Grantor fails to
make any payment required to be made by it, or to perform any other act or
agreement required to be performed by it, in each case under this Agreement, the
Trustee, without waiving or releasing any obligation or default, may (but shall
not be obligated to) make such payment or perform such other act, or cause the
payment or performance thereof, for the account and at the sole expense of such
Grantor. All amounts so paid by the Trustee and all costs and expenses so
incurred shall constitute obligations of such Grantor secured hereunder and
shall be payable under Section 17(b). The Trustee shall not be liable for any
damages resulting from any such payment or performance.
SECTION 12. No Assumption of Duties; Reasonable Care. The
rights and powers conferred on the Trustee hereunder are solely to preserve and
protect the security interest of the Trustee and the Holders of the Notes in and
to the Collateral granted hereby and shall not be interpreted to, and shall not
impose any duties on the Trustee in connection therewith other than those
expressly provided herein or imposed under applicable law. Except as provided by
applicable law or by the Indenture, the Trustee shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which the Trustee accords similar property held by the Trustee for its own
account, it being understood that the Trustee in its capacity as such shall not
have any responsibility for (a) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities or other matters relative to any
Collateral, whether or not the Trustee has or is deemed to have knowledge of
such matters, (b) taking any necessary steps to preserve rights against any
parties with respect to any Collateral or (c) subject to Section 1304 of the
Indenture, investing or reinvesting any of the Collateral or any loss on any
investment. The Trustee shall be entitled to all the rights, benefits,
privileges and immunities accorded to it under the Indenture.
<PAGE> 17
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SECTION 13. Voting Rights; Dividends; Etc. (a) So long as no
Event of Default shall have occurred and be continuing:
(i) Each Grantor shall be entitled to exercise or refrain from
exercising any and all voting and other consensual rights pertaining to
the Security Collateral or Partnership Collateral pledged and assigned
by it hereunder, or any part thereof, for any purpose not inconsistent
with the terms of this Agreement, the Indenture and the Notes;
(ii) Each Grantor shall be entitled to receive, retain, and
distribute any and all dividends, interest and other distributions paid
or distributed in respect of the Security Collateral of such Grantor if
and to the extent that the payment thereof is not otherwise prohibited
by the terms of the Indenture or the Notes.
(iii) The Trustee shall execute and deliver (or cause to be
executed and delivered) to such Grantor all such proxies and other
instruments as any Grantor may reasonably request for the purpose of
enabling such Grantor to exercise the voting and other rights that it
is entitled to exercise pursuant to paragraph (i) above and to receive
the dividends or interest payments that it is authorized to receive,
retain, and distribute pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event
of Default:
(i) All rights of any Grantor (A) to exercise or refrain from
exercising the voting and other consensual rights that it would
otherwise be entitled to exercise pursuant to Section 13(a)(i) shall,
upon notice to such Grantor by the Trustee, cease and (B) to receive
the dividends, payments and other distributions that it would otherwise
be authorized to receive, retain, and distribute pursuant to Section
13(a)(ii) shall automatically cease, and all such rights shall
thereupon become vested in the Trustee, which shall thereupon have the
sole right to exercise or refrain from exercising such voting and other
consensual rights and to receive and hold as Collateral such dividends,
payments, and other distributions as the Holders of a majority in
interest of outstanding Notes shall direct.
(ii) All dividends, payments, and other distributions that are
received by any Grantor contrary to the provisions of paragraph (i) of
this Section 13(b) shall be received in trust for the benefit of the
Trustee, shall be segregated from other funds of such Grantor and shall
be forthwith paid over to the Trustee as Collateral in the same form as
so received (with any necessary indorsement).
SECTION 14. Transfers and Other Liens; Additional Equity
Interests; Release of Collateral. (a) Each Grantor agrees that it will not (i)
sell, assign or otherwise dispose of, or grant any option with respect to, any
of the Collateral of such Grantor except as permitted under
<PAGE> 18
15
the terms of the Indenture, or (ii) create or suffer to exist any Lien on any of
its assets or properties except for Liens created hereunder and Liens not
prohibited under Section 1014 of the Indenture.
(b) Each Grantor agrees that it shall cause each issuer of the
Pledged Interests or Partnership Collateral owned by such Grantor not to issue
any Equity Interests or Pledged Interests, unless immediately upon such
issuance, such Equity Interests or Pledged Interests are pledged to the Trustee
for the benefit of the Holders; provided that any such Equity Interest issued in
exchange or substitution for (i) JEDI Linden GP L.L.C's general partnership
interest in Linden Ltd., (ii) JEDI Camden LP L.L.C's general partnership
interest in Camden GP or (iii) on JEDI Linden Inc's one percent interest in JEDI
Linden GP L.L.C shall not be required to be pledged.
(c) Each Grantor agrees that it shall cause Linden Venture,
Camden Venture, and Bayonne Venture not to issue any Equity Interests other than
those existing on the date of this Agreement, unless such Equity Interests or
Pledged Interests are (i) issued to an issuer of a pledged interest or any
Partnership Collateral hereunder or (ii) the issuer of any Pledged Interest
under any other Security Document.
(d) Any sale, assignment or other disposition of any of the
Collateral shall be subject to the Lien created hereunder in favor of the
Trustee (on its behalf and on behalf of the Holders of the Notes) continuing in
such Collateral; provided that if such Collateral is sold, transferred, assigned
or otherwise disposed of pursuant to Section 1016 of the Indenture, then the
Collateral so sold, transferred, assigned or disposed of shall, at the request
of the Company, be released from the security interest granted herein.
SECTION 15. Security Interest Absolute. The obligations of
each Grantor under this Agreement are independent of the Secured Obligations or
any other obligations of any other Grantor under or in respect of the Indenture,
the Notes or this Agreement, and a separate action or actions may be brought and
prosecuted against each Grantor to enforce this Agreement, irrespective of
whether any action is brought against the Company, such Grantor or any other
Grantor or whether the Company, such Grantor or any other Grantor is joined in
any such action or actions. All rights of the Trustee and the pledge, assignment
and security interest hereunder, and all obligations of each Grantor hereunder,
shall be irrevocable, absolute and unconditional, irrespective of, and such
Grantor hereby irrevocably waives (to the maximum extent permitted by applicable
law) any defenses it may now have or may hereafter acquire in any way relating
to, any or all of the following:
(a) any lack of validity or enforceability of the Indenture,
the Notes, any Security Document or any other agreement or instrument
relating thereto;
<PAGE> 19
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(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Secured Obligations or any
other obligations under the Indenture, the Notes or any Security
Document, or any other amendment or waiver of or any consent to any
departure from the Indenture, the Notes or any Security Document,
including, without limitation, any increase in the Secured Obligations
resulting from the extension of additional credit to the Company, any
of its Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of any
other collateral, or any taking, release or amendment or waiver of or
consent to departure from any guaranty, for all or any of the Secured
Obligations;
(d) any manner of application of Collateral or any other
collateral, or proceeds thereof, to all or any of the Secured
Obligations, or any manner of sale or other disposition of any
Collateral for all or any of the Secured Obligations or any other
obligations of the Company or any of the Grantors under the Indenture,
the Notes or the Security Documents or any other assets of any Company
or any of its Subsidiaries;
(e) any change, restructuring or termination of the corporate,
partnership or other structure or existence of the Company or any of
its Subsidiaries; and
(f) any other circumstance (including, without limitation, any
statute of limitations) that might otherwise constitute a defense
available to, or a discharge of, such Grantor or a third party grantor
of a security interest other than payment in full of the Secured
Obligations).
SECTION 16. Remedies. If an Event of Default shall have
occurred and be continuing:
(a) The Trustee or a majority of the Holders of the Notes may,
or in the event of an acceleration under Section 502 of the Indenture
then the Trustee shall, exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or in the
Indenture or otherwise available to it, all the rights and remedies of
a secured party upon default under the NYUCC (whether or not the NYUCC
applies to the affected Collateral) and also may (i) require any
Grantor to, and each Grantor hereby agrees that it will at its expense
and upon request of the Trustee forthwith, assemble all or part of the
Collateral as directed by the Trustee and make it available to the
Trustee at a place to be designated by the Trustee that is reasonably
convenient to both parties and (ii) without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any of the Trustee's offices or
elsewhere, for cash, on credit or for future delivery, and upon such
other terms as are deemed commercially reasonable. Each Grantor agrees
that, to the extent notice of sale shall be required by law, at least
ten days' notice to such Grantor of the time and place of any public
sale or the time
<PAGE> 20
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after which any private sale is to be made shall constitute reasonable
notification. The Trustee shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Trustee
may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was
so adjourned.
(b) All cash proceeds received by the Trustee in respect of
any sale of, collection from, or other realization upon all or any part
of the Collateral shall be held by the Trustee as collateral for,
and/or then or at any time thereafter applied (after payment of any
amounts payable to the Trustee pursuant to Section 17(b)) in whole or
in part by the Trustee for the ratable benefit of the Holders of the
Notes against, all or any part of the Secured Obligations in such order
as the Trustee shall elect. Any surplus of such cash or cash proceeds
held by the Trustee and remaining after payment in full of all the
Secured Obligations shall be paid over to the Grantors or to whomsoever
else may be lawfully entitled to receive such surplus.
(c) Notwithstanding the foregoing, each Grantor and the
Trustee recognize that any disposition of Collateral must be made in
accordance with any applicable federal or state securities laws. Each
Grantor recognizes that the Trustee may deem it impracticable to effect
a public sale of all or any part of the Collateral subject to such
securities laws and that the Trustee may, therefore, determine to make
one or more private sales of any such Collateral to a restricted group
of purchasers who will be obligated to agree, among other things, to
acquire such Collateral for their own account, for investment and not
with a view to the distribution or resale thereof. Each Grantor
acknowledges that any such private sale may be at prices and on terms
less favorable than the prices and other terms which might have been
obtained at a public sale and, notwithstanding the foregoing, agrees
that such private sale shall be deemed to have been made in a
commercially reasonable manner and that the Trustee shall have no
obligation to delay sale of any such securities for the period of time
necessary to permit such Grantor to register such Collateral for public
sale under the Securities Act of 1933, as amended.
SECTION 17. Expenses. (a) Each Grantor will upon demand
jointly and severally pay to the Trustee (i) the amount of any and all
reasonable out-of-pocket costs and expenses of such Trustee, including the
reasonable fees and disbursements of counsel to such Trustee and of any experts
and trustee, that such Trustee may incur in connection with (x) the
administration of this Agreement and the Indenture, (y) the custody,
preservation, use or operation of, or the sale of, collection from or other
realization upon, any of the Collateral or (z) the failure by any Grantor to
perform or observe any of the provisions hereof; and (ii) all costs and expenses
of the Trustee in connection with the exercise of any of their rights hereunder
or the enforcement of this Agreement (including, without limitation, the
reasonable fees and expenses of counsel for each Trustee and each Lender with
respect thereto), whether in any action, suit or litigation, any
<PAGE> 21
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bankruptcy, insolvency or other similar proceeding affecting creditors' rights
generally or in any negotiated settlement or workout, except in the case of
clauses (i) and (ii), any such cost, expense or disbursement as may be
attributable to the Trustee's negligence or willful misconduct.
(b) Without prejudice to the survival of any other agreement
of any Grantor hereunder or under the Indenture, the agreements and obligations
of the Grantors contained in this Section 19 shall survive the payment in full
of the Secured Obligations and the resignation or removal of the Trustee.
SECTION 18. Amendments, Waivers and Consents. (a) Any
amendment or waiver of any provision of this Agreement and any consent to any
departure by any Grantor from any provision of this Agreement shall be effective
only if in writing, signed by the Trustee, the Account Collateral Securities
Intermediary, and the Grantors and made or duly given in compliance with all of
the terms and provisions of the Indenture, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given. Neither the Trustee nor any Holder of Notes shall be deemed, by any
act, delay, indulgence, omission or otherwise, 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. Failure of the Trustee or
any Holder of Notes to exercise, or delay in exercising, any right, power or
privilege hereunder shall not preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by the Trustee or
any Holder of Notes of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy that the Trustee or such Holder
of Notes 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) Without the consent of any Holders of the Notes, the
Grantors, the Account Collateral Securities Intermediary, and the Trustee may
amend or waive any provision of this Agreement or consent to any departure by
any Grantor from any provision hereof, for any of the following purposes:
(i) to evidence the succession of another Person to the
Company, or any other Grantor, and the assumption by any such successor
of the obligations of the Company or such other Grantor contained
herein;
(ii) to evidence and provide for the appointment of a
successor Trustee or Account Collateral Securities Intermediary
hereunder;
(iii) to cure any ambiguity, to correct or supplement any
provision in this Agreement that may defective or inconsistent with any
other provision of this Agreement or the Indenture, or to make any
other provisions with respect to matters or questions
<PAGE> 22
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arising under this Agreement with shall not be inconsistent with the
provisions of this Agreement or the Indenture; provided that, in each
case, such actions pursuant to this clause shall not materially
adversely affect the interests of the Holders;
(iv) to mortgage, pledge, hypothecate or grant of security
interest in additional collateral in favor of the Trustee for the
benefit of the Holders; or
(v) to evidence and provide for the release of any Collateral
pursuant to Section 14(d).
SECTION 19. Notices; Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and, mailed, telecopied, cabled or delivered:
(a) if to any Grantor, to it at its address specified in
Schedule IV hereto;
(b) if to the Trustee, to it at 101 Barclay Street, Floor 21
West, New York, New York 10286, Attention: Corporate Trust Trustee
Administration; and
(c) if to the Account Collateral Securities Intermediary, to
it at 101 Barclay Street, Floor 21 West, New York, New York 10286,
Attention: Corporate Trust Trustee Administration;
or, as to any such party, at such other address as shall be designated by such
party in a written notice to each other party complying as to delivery with the
terms of this Section. All such notices and communications shall, when mailed,
telecopied, telegraphed or telexed, be effective when deposited in the mails,
telecopied, or confirmed by telex answerback, respectively, except that notices
and communications to the Trustee shall not be effective until received by the
Trustee. Delivery by telecopier of an executed counterpart of any amendment or
waiver of any provision of this Agreement to be executed and delivered hereunder
shall be effective as delivery of a manually executed counterpart thereof.
SECTION 20. Continuing Security Interest. Subject to any
Collateral released under Section 18, this Agreement shall create a continuing
security interest in and to the Collateral and shall (a) remain in full force
and effect until the payment in full in cash of the Secured Obligations, (b) be
binding upon each Grantor and its successors and assigns and (c) be binding upon
and inure, together with the rights and remedies of the Trustee hereunder, to
the benefit of, and be enforceable by, the Trustee, the Holders of the Notes,
the Account Collateral Securities Intermediary, and their respective successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(c), the Trustee may assign or otherwise transfer all or any portion of its
rights and obligations under the Indenture and the Notes to any other Person,
and
<PAGE> 23
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such other Person shall thereupon become vested with all the benefits in respect
thereof granted to the Trustee herein or otherwise, in each case as and to the
extent provided in Section 610 of the Indenture.
SECTION 21. Waivers and Acknowledgments. (a) Each Grantor
hereby waives promptness, diligence, notice of acceptance and any other notice
with respect to any of the Secured Obligations and this Agreement and any
requirement that the Trustee or any Holder of the Notes protect, secure, perfect
or insure any Lien or any property subject thereto or exhaust any right or take
any action against the Company or any other Person or any Collateral.
(b) Each Grantor hereby waives any right to revoke this
Agreement, and acknowledges that this Agreement is continuing in nature and
applies to all Secured Obligations, whether existing now or in the future.
(c) Each Grantor acknowledges that it will receive substantial
direct and indirect benefits from the financing arrangements contemplated by the
Indenture, the Notes and the Security Documents and that the waivers set forth
in this Section 21 are knowingly made in contemplation of such benefits.
SECTION 22. Subrogation. None of the Grantors will exercise
any rights that it may now or hereafter acquire against the Company, any of its
Subsidiaries or any other insider grantor that arise from the existence,
payment, performance or enforcement of such Grantor's obligations under this
Agreement, the Indenture or the Notes, including, without limitation, any right
of subrogation, reimbursement, exoneration, contribution or indemnification and
any right to participate in any claim or remedy of any Trustee or any Holders of
the Notes against the Company, any of its Subsidiaries or any other insider
grantor or any Collateral, whether or not such claim, remedy or right arises in
equity or under contract, statute or common law, including, without limitation,
the right to take or receive from the Company, any of its Subsidiaries or any
other insider grantor, directly or indirectly, in cash or other property or by
set-off or in any other manner, payment or security on account of such claim,
remedy or right, unless and until all of the Secured Obligations and all other
amounts payable under this Agreement shall have been paid in full in cash
(except that each Grantor may exercise any such claim, right or remedy solely
against, and such Grantor may take and receive any such amount solely from,
amounts permitted to be distributed or paid on account of Subordinated
Indebtedness in accordance with and subject to the restrictions set forth in
Section 1012 of the Indenture). If any amount shall be paid to such Grantor in
violation of the preceding sentence at any time prior to the later of the
payment in full in cash of the Secured Obligations and all other amounts payable
under this Agreement, such amount shall be held in trust for the benefit of the
Trustee and shall forthwith be paid to the Trustee to be credited and applied to
the Secured Obligations and all other amounts payable under this Agreement,
whether matured or unmatured, in accordance with the terms of the Indenture,
<PAGE> 24
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or to be held as Collateral for any Secured Obligations or other amounts payable
under this Agreement thereafter arising.
SECTION 23. Release and Termination. Upon the payment in full
in cash of the Secured Obligations, the pledge, assignment and security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
the Grantors. Upon any such termination, the Trustee will, at the Grantors'
expense, execute and deliver to the Grantors such documents as the Grantors
shall reasonably request to evidence such termination.
SECTION 24. Authority of the Trustee. (a) The Trustee shall
have and be entitled to exercise all powers hereunder that are specifically
granted to the Trustee by the terms hereof, together with such powers as are
reasonably incident thereto. The Trustee may perform any of its duties hereunder
or in connection with the Collateral by or through agents or employees and shall
be entitled to retain counsel and to act in reliance upon the advice of counsel
concerning all such matters. Except as otherwise expressly provided in this
Agreement or the Indenture, neither the Trustee nor any director, officer,
employee, attorney or agent of the Trustee shall be liable to the Grantors for
any action taken or omitted to be taken by the Trustee, in its capacity as
Trustee, hereunder, except for its own negligence or willful misconduct, and the
Trustee shall not be responsible for the validity, effectiveness or sufficiency
hereof or of any document or security furnished pursuant hereto. The Trustee and
its directors, officers, employees, attorneys and agents shall be entitled to
rely on any communication, instrument or document believed by it or them to be
genuine and correct and to have been signed or sent by the proper person or
persons.
(b) Each Grantor acknowledges that the rights and
responsibilities of the Trustee under this Agreement with respect to any action
taken by the Trustee or the exercise or non-exercise by the Trustee 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 Trustee and the
Holders of the Notes, be governed by the Indenture and by such other agreements
with respect thereto as may exist from time to time among them, but, as between
the Trustee and the Grantors, the Trustee shall be conclusively presumed to be
acting as agent for the Holders of the Notes with full and valid authority so to
act or refrain from acting, and such Grantor shall not be obligated or entitled
to make any inquiry respecting such authority.
SECTION 25. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
<PAGE> 25
22
SECTION 26. Reinstatement. This Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Secured Obligations is rescinded or must otherwise be returned by any
Trustee or any of the Holders of Notes or by any other Person upon the
insolvency, bankruptcy or reorganization of the Company or any other Grantor or
otherwise, all as though such payment had not been made.
SECTION 27. 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 any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 28. Governing Law; Entire Agreement. This Agreement
shall be governed by, and construed in accordance with, the laws of the State of
New York. This Agreement constitutes the entire understanding among the
Grantors, the Trustee and the Holders of the Notes with respect to the subject
matter hereof and supercede any prior agreements, written or oral, with respect
thereto.
SECTION 29. Resignation and Removal of the Account Collateral
Securities Intermediary. The Trustee may remove the Account Collateral
Securities Intermediary upon 30 days' prior written notice to the Grantor and
the Account Collateral Securities Intermediary. The Account Collateral
Securities Intermediary shall have the right to resign upon 30 days' prior
written notice to the Grantors and the Trustee. Upon any such removal or
resignation of the Account Collateral Securities Intermediary to act hereunder,
the Trustee shall appoint a successor Account Collateral Securities Intermediary
which successor shall be a Securities Intermediary having a combined capital and
surplus of at least $50,000,000. Notwithstanding the foregoing, no resignation,
removal or replacement of the Account Collateral Securities Intermediary shall
be effective until a successor Account Collateral Securities Intermediary has
been appointed and has agreed in a manner reasonably satisfactory to the Trustee
to act as Account Collateral Securities Intermediary hereunder.
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
THE GRANTORS:
EAST COAST POWER L.L.C.
By: /s/ ROSS D. AIN
---------------------------
Name: Ross D. Ain
Title: President
JEDI LINDEN LP, L.L.C.
By: JEDI LINDEN NB, L.L.C., its
sole member
By: EAST COAST POWER L.L.C., its
sole member
By: /s/ ROSS D. AIN
---------------------------
Name: Ross D. Ain
Title: President
<PAGE> 27
JEDI LINDEN NB, L.L.C.
By: EAST COAST POWER L.L.C., its
sole member
By: /s/ ROSS D. AIN
---------------------------
Name: Ross D. Ain
Title: President
JEDI CAMDEN LP, L.L.C.
By: EAST COAST POWER L.L.C., its
sole member
By: /s/ ROSS D. AIN
---------------------------
Name: Ross D. Ain
Title: President
<PAGE> 28
THE TRUSTEE:
THE BANK OF NEW YORK, AS TRUSTEE
By: /s/ MARY BETH LEWICKI
---------------------------
Name: Mary Beth Lewicki
Title: Assistant
Vice-President
THE ACCOUNT COLLATERAL
SECURITIES INTERMEDIARY:
THE BANK OF NEW YORK, AS ACCOUNT
COLLATERAL SECURITIES
INTERMEDIARY
By: /s/ MARY BETH LEWICKI
-----------------------------
Name: Mary Beth Lewicki
Title: Assistant
Vice-President
<PAGE> 29
SCHEDULE I
PLEDGED INTERESTS
<TABLE>
<CAPTION>
===========================================================================================================================
PERCENTAGE
OF OUTSTANDING
GRANTOR ISSUER TYPE OF INTEREST EQUITY INTERESTS
===========================================================================================================================
<S> <C> <C> <C>
East Coast Power L.L.C. JEDI Camden LP, L.L.C. Limited Liability Company 100%
Membership Interest
-------------------------------------------------------------------------------------------
JEDI Camden GP, L.L.C. Limited Liability Company 100%
Membership Interest
-------------------------------------------------------------------------------------------
JEDI Linden NB, L.L.C. Limited Liability Company 100%
Membership Interest
-------------------------------------------------------------------------------------------
JEDI Bayonne GP, L.L.C. Limited Liability Company 100%
Membership Interest
===========================================================================================================================
JEDI Linden NB, L.L.C. JEDI Linden LP, L.L.C. Limited Liability Company 100%
Membership Interest
-------------------------------------------------------------------------------------------
JEDI Linden GP, L.L.C. Limited Liability Company 99%
Membership Interest
-------------------------------------------------------------------------------------------
JEDI Linden, Inc. Capital Stock 100%
===========================================================================================================================
</TABLE>
<PAGE> 30
SCHEDULE II
PLEDGED DEBT
<TABLE>
<CAPTION>
============================================================================================================================
MAXIMUM
GRANTOR DEBT ISSUER DESCRIPTION PRINCIPAL
ACCOUNT
============================================================================================================================
<S> <C> <C> <C>
East Coast Power L.L.C. Cogen Technologies Linden, Ltd. $289,581,328.07 $289,581,328.07
Subordinated Note
============================================================================================================================
</TABLE>
<PAGE> 31
SCHEDULE III
PARTNERSHIP COLLATERAL
<TABLE>
<CAPTION>
================================================================================
GRANTOR PARTNERSHIP INTEREST
================================================================================
<S> <C> <C>
JEDI Linden LP, L.L.C. Cogen Technologies 100% of the limited
Linden, Ltd. partnership interest
- --------------------------------------------------------------------------------
JEDI Camden LP, L.L.C. Cogen Technologies 100% of the limited
Camden GP, L.P. partnership interest
================================================================================
</TABLE>
<PAGE> 32
SCHEDULE IV
ADDRESSES OF CHIEF PLACES OF
BUSINESS AND CHIEF EXECUTIVE OFFICES
<TABLE>
<CAPTION>
====================================================================================================
ADDRESS OF CHIEF PLACE OF ADDRESS OF CHIEF EXECUTIVE
GRANTOR BUSINESS OFFICE
====================================================================================================
<S> <C> <C>
East Coast Power L.L.C. 1400 Smith Street, 1400 Smith Street,
Houston, Texas 77002 Houston, Texas 77002
- ----------------------------------------------------------------------------------------------------
JEDI Linden NB, L.L.C. 1400 Smith Street, 1400 Smith Street,
Houston, Texas 77002 Houston, Texas 77002
- ----------------------------------------------------------------------------------------------------
JEDI Linden LP, L.L.C. 1400 Smith Street, 1400 Smith Street,
Houston, Texas 77002 Houston, Texas 77002
- ----------------------------------------------------------------------------------------------------
JEDI Camden LP, L.L.C. 1400 Smith Street, 1400 Smith Street,
Houston, Texas 77002 Houston, Texas 77002
====================================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 4.6
EXECUTION COPY
04/20/99
EAST COAST POWER HOLDING COMPANY
SECURITY AGREEMENT
Dated as of April 20, 1999
made by
EAST COAST POWER HOLDING COMPANY L.L.C.
as Grantor,
to
THE BANK OF NEW YORK
as Trustee
<PAGE> 2
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
SECTION 1. Certain Defined Terms.............................................1
SECTION 2. Grant of Security.................................................2
SECTION 4. Delivery of Collateral............................................2
SECTION 5. Representations and Warranties....................................3
SECTION 6. Further Assurances; Place of Perfection...........................5
SECTION 7. Covenant to Give Further Security.................................6
SECTION 8. Trustee Appointed Attorney-in-Fact................................6
SECTION 9. Trustee May Perform...............................................7
SECTION 10. No Assumption of Duties; Reasonable Care..........................7
SECTION 11. Voting Rights; Dividends; Etc.....................................7
SECTION 12. Transfers and Other Liens; Additional Equity Interests............8
SECTION 13. Security Interest Absolute........................................9
SECTION 14. Remedies.........................................................10
SECTION 15. Indemnity and Expenses...........................................11
SECTION 16. Amendments, Waivers and Consents.................................12
SECTION 17. Notices; Etc.....................................................12
SECTION 18. Continuing Security Interest.....................................13
SECTION 19. Waivers and Acknowledgments......................................13
SECTION 20. Subrogation......................................................14
<PAGE> 3
ii
SECTION 21. Release and Termination.......................................14
SECTION 22. Authority of the Trustee......................................14
SECTION 23. Execution in Counterparts.....................................15
SECTION 24. Reinstatement.................................................15
SECTION 25. Severability..................................................15
SECTION 26. Governing Law; Entire Agreement...............................15
Schedule I.................................................................17
<PAGE> 4
EXHIBIT 4.6
EAST COAST POWER HOLDING COMPANY
SECURITY AGREEMENT
SECURITY AGREEMENT dated April 20, 1999, made by EAST COAST POWER
HOLDING COMPANY L.L.C., a Delaware limited liability company (the "Grantor"),
to THE BANK OF NEW YORK, a New York banking corporation, in its capacity as
trustee (the "Trustee") for the holders from time to time (the "Holders") of
the Notes (as defined in the Indenture referred to below), issued by East Coast
Power L.L.C., a Delaware limited liability company (the "Company") under the
Indenture referred to below.
PRELIMINARY STATEMENTS.
(1) The Company and the Trustee have entered into an indenture dated
as of April 20, 1999 (as amended, restated, supplemented or otherwise modified
from time to time, the "Indenture"), pursuant to which the Company is issuing
Notes on the date hereof in an aggregate principal amount of $850,000,000.
(2) It is a condition precedent to the initial purchase of the Notes
by the initial Holders thereof that the Grantor shall have granted the security
interest and made the pledge and assignment contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the initial Holders to purchase the Initial Notes (as defined in the
Indenture), the Grantor hereby agrees with the Trustee, for the benefit of the
Trustee and for the ratable benefit of the Holders of the Notes, as follows:
SECTION 1. Certain Defined Terms. Unless otherwise defined in this
Section 1, (a) capitalized terms used in this Agreement have the meanings
specified in the Indenture and (b) terms used in Article 8 or 9 of the Uniform
Commercial Code from time to time in effect in the State of New York (the
"NYUCC") are used herein as therein defined. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and the plural forms of the terms defined):
"Collateral" has the meaning specified in Section 2.
"NYUCC" has the meaning specified above in this Section 1.
"Pledged Interests" has the meaning specified in Section 2(a).
"Secured Obligations" has the meaning specified in Section 3.
"Security Collateral" has the meaning specified in Section 2(a).
<PAGE> 5
2
SECTION 2. Grant of Security. The Grantor hereby pledges and assigns
to the Trustee, for its benefit and the ratable benefit of the Holders of the
Notes, and hereby grants to the Trustee, for its benefit and for the ratable
benefit of the Holders of the Notes, a continuing security interest in and to
all of the Grantor's right, title and interest in and to, the following
(whether consisting of investment securities, book-entry securities or other
securities, security entitlements, financial assets or other investment
property, accounts, general intangibles, instruments or documents, securities
accounts, deposit accounts or other bank, trust or cash collateral accounts, or
other property, assets or rights), whether now owned or hereafter acquired,
wherever located and whether now or hereafter existing (collectively, the
"Collateral"):
(a) all of the membership interests in the Company described on
Schedule I hereto whether or not evidenced by certificates (collectively,
the "Pledged Interests"), and the certificates, if any, representing such
interests, any security therefor and all dividends, distributions, profits,
bonuses, premiums, income, cash, instruments and other property and assets
from time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such membership interests (all such
Collateral being, the "Security Collateral"); and
(b) all proceeds (including cash proceeds) of any and all of the
foregoing Collateral (including, without limitation, proceeds that
constitute property of the types described in clause (a) of this Section 2)
and, to the extent not otherwise included, all (i) payments under insurance
(whether or not the Trustee is the loss payee thereof), or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or otherwise
with respect to any of the foregoing Collateral and (ii) payments and
distributions made with respect to the foregoing Collateral.
SECTION 3. Security for Obligations. This Agreement secures the
payment of all obligations, now or hereafter existing, of the Company under the
Indenture and the Notes and of the Grantor under this Agreement (including,
without limitation, any extensions, modifications, substitutions, amendments
and renewals thereof), in each case whether direct or indirect, absolute or
contingent, and whether for principal, interest, fees, indemnification
payments, contract causes of action, costs, expenses or otherwise (all such
obligations being the "Secured Obligations"). Without limiting the generality
of the foregoing, this Agreement secures, to the fullest extent permitted by
applicable law, the payment of all amounts that constitute part of the Secured
Obligations and would be owed by the Company to the Trustee or the Holders
under the Indenture, the Notes or the Security Documents but for the fact that
they are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Company.
SECTION 4. Delivery of Collateral. (a) The Grantor shall ensure that
all certificates or instruments representing or evidencing Security Collateral,
if any, are delivered to
<PAGE> 6
3
and be held by or on behalf of the Trustee pursuant hereto and are in suitable
form for transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
reasonably satisfactory to the Trustee. The Trustee shall have the right, at
any time and without notice to the Grantor, to transfer to or register in the
name of the Trustee or any of its nominees any or all of the Security
Collateral, subject only to the revocable rights specified in Section 11(b). In
addition, the Trustee shall have the right at any time and from time to time to
exchange certificates or instruments representing or evidencing Security
Collateral held by them for certificates or instruments of smaller or larger
denominations.
(b) Concurrently with the execution and delivery of this Agreement,
the Grantor shall cause to be filed proper financing statements in all
jurisdictions necessary or prudent to perfect and protect the liens and
security interests created hereunder, covering the Collateral described herein.
SECTION 5. Representations and Warranties. The Grantor represents and
warrants as of the date of this Agreement as follows:
(a) The Grantor is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Grantor has all power and authority and all governmental licenses,
authorizations, consents and approvals required in each case to carry on
its business as now conducted, except to the extent that the failure to
have such power, authority, licenses, authorizations, consents and
approvals could not reasonably be expected to have a material adverse
effect on the Grantor's ability to perform any of its obligations hereunder
or a material adverse effect on the business, operations, assets or
financial condition of the Grantor and its Subsidiaries taken as a whole (a
"Grantor Material Adverse Effect").
(b) The execution, delivery and performance by the Grantor of this
Agreement are within the Grantor's powers, have been duly authorized by all
necessary action of the Grantor, require, in respect of the Grantor, no
action by or in respect of, or filing with, any governmental body, agency
or official (other than the filing of financing statements in favor of the
Trustee on or prior to the date hereof as may be required for the
perfection of the Security Interest herein granted in the Collateral) and
do not contravene, or constitute a default under, any provision of law or
regulation (including Regulation X of the Board of Governors of the Federal
Reserve System) applicable to the Grantor or Regulation U of the Board of
Governors of the Federal Reserve System or the certificate of formation or
limited liability company agreement of the Grantor or any judgment,
injunction, order, decree or material agreement binding upon the Grantor or
result in or require the creation or imposition of any Lien on any of the
Collateral.
<PAGE> 7
4
(c) This Agreement has been duly executed and delivered by the
Grantor. This Agreement is the legal, valid and binding obligation of the
Grantor, enforceable against the Grantor in accordance with its terms,
except as the enforceability thereof may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and by general principles of equity.
(d) There is no pending, or to the Grantor's knowledge, threatened
action, suit or proceeding against the Grantor before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could reasonably be
expected to have a Grantor Material Adverse Effect or which in any manner
draws into question the legality, validity, binding effect or
enforceability of this Agreement.
(e) The chief place of business and chief executive office of the
Grantor are located at the address specified in Section 17. The Grantor has
no trade names.
(f) The Grantor is the legal and beneficial owner of the Collateral
which is in existence on the date hereof free and clear of any Lien (other
than Liens not prohibited by the Indentures), except for the security
interest created by this Agreement and the Liens created under the Bridge
Loan which will terminate upon the filing of termination financing
statements on the Issue Date. No effective financing statement or other
instrument similar in effect covering all or any part of the Collateral is
on file in any recording office, and the Grantor has not entered into any
security control agreement or other agreement similar in effect, in each
case covering all or any part of the Collateral, except such as may have
been filed in favor of the Trustee relating to this Agreement or the other
Security Documents.
(g) There are no existing options, warrants, calls or commitments of
any character whatsoever relating to any Equity Interests in the Company
owned by the Grantor except for this Agreement and the limited liability
company agreement of the Company. There are no shareholder agreements,
voting trust agreements or other agreements or understandings to which the
Grantor is a party or by which the Grantor may otherwise be bound that
affect the voting or other rights of a holder of any Equity Interest in the
Company (including, without limitation, the ability to transfer any such
Equity Interest), except for this Agreement and the limited liability
company agreement of the Company.
(h) This Agreement, the pledge of the Collateral pursuant hereto and
the pledge, assignment and delivery to the Trustee of the certificates
representing the Security Collateral pursuant hereto, together with stock
or other transfer powers duly executed in blank, create a valid and
perfected first priority security interest in the Collateral, securing
<PAGE> 8
5
the payment of the Secured Obligations, and all filings and other actions
necessary to perfect and protect such security interest have been duly
taken.
(i) No consent of any other Person and no authorization, approval or
other action by, and no notice to or filing with, any governmental
authority or regulatory body or other third party is required either (i)
for the grant by the Grantor of the assignment and security interest
granted hereby, for the pledge by the Grantor of any of the Collateral
pursuant hereto or for the execution, delivery or performance of this
Agreement by the Grantor, (ii) for the perfection or continuation of
perfection of the pledge, assignment and security interest created hereby
(including the priority of such pledge, assignment or security interest),
except for the filing of financing and continuation statements under the
Uniform Commercial Code, which financing statements have been duly filed,
(iii) for the exercise by the Trustee of its voting or other rights
provided for in this Agreement or the remedies in respect of the Collateral
pursuant to this Agreement, except as may be required in connection with
the disposition of any portion of the Security Collateral by laws affecting
the offering and sale of securities generally or (iv) consents,
authorizations, approvals or other actions or filings that have been made
or obtained on or prior to the date hereof.
SECTION 6. Further Assurances; Place of Perfection. (a) The Grantor
agrees that from time to time, at its sole expense, the Grantor will promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or prudent, or that the Trustee may reasonably
request, in order to perfect and protect any pledge, assignment or security
interest granted or purported to be granted hereunder (including, without
limitation, the priority thereof) or to enable the Trustee to exercise and
enforce its rights and remedies hereunder. Without limiting the generality of
the foregoing, the Grantor will:
(i) if any Collateral shall be evidenced by a certificate, promissory
note or other instrument or by chattel paper, deliver and pledge to the
Trustee hereunder such certificate, note or other instrument or such
chattel paper duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance reasonably satisfactory
to the Trustee; and
(ii) execute and file such financing statements, continuation
statements or other similar documents, or amendments thereto, and such
other instruments or notices, as may be necessary or as the Trustee may
deem reasonably prudent and may request, in order to perfect and preserve
the pledge, assignment and security interest granted or purported to be
granted under this Agreement.
(b) The Grantor hereby authorizes the Trustee to cause the filing of
one or more financing statements, continuation statements or other similar
documents, and amendments thereto,
<PAGE> 9
6
relating to all or any part of the Collateral without the signature of the
Grantor where permitted by applicable law. A photocopy or other reproduction of
this Agreement or any financing statement or other similar document covering
the Collateral or any part thereof shall be sufficient as a financing statement
or other similar document where permitted by applicable law.
(c) The Grantor shall furnish to the Trustee from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Trustee may
reasonably request, all in reasonable detail.
SECTION 7. Covenant to Give Further Security. The Grantor hereby
agrees that, if, and at such time as, it acquires title to, or any other
ownership interest in, any additional Equity Interests in any issuer of the
Pledged Interests, it will, at its sole expense:
(a) as promptly as practicable and in any event within five (5) days
after such acquisition, notify the Trustee of its acquisition of title
thereto or such other ownership interest therein; and
(b) as promptly as practicable and in any event within 30 days after
such acquisition, (i) duly execute and deliver such mortgages, pledges,
assignments and/or other security agreements as are necessary to create a
valid lien thereon and security interest therein in favor of the Trustee,
for its benefit and the benefit of the Holders of the Notes, in each case
in form and substance satisfactory to the Trustee, and (ii) make all
filings and take all other actions that are necessary or that the Trustee
may deem reasonably prudent and may request to perfect and protect a valid
and perfected first priority lien thereon and security interest therein in
favor of the Trustee, for its benefit and the benefit of the Holders of the
Notes.
SECTION 8. Trustee Appointed Attorney-in-Fact. In addition to all of
the powers granted to the Trustee pursuant to the Indenture, the Grantor hereby
irrevocably appoints the Trustee its attorney-in-fact (which appointment is
coupled with an interest and is irrevocable), with full authority in the place
and stead of the Grantor and in the name of the Grantor or otherwise and with
full power of substitution, from time to time upon the occurrence and during
the continuation of an Event of Default, to take any action and to execute any
instrument to accomplish the purposes of this Agreement (it being understood
that the Trustee will not be required to act unless otherwise set forth herein
or in the Indenture), including, without limitation:
(a) upon the occurrence and during the continuation of an Event of
Default, to ask for, demand, collect, sue for, recover, compromise,
receive, and give acquittance and receipts for, moneys due and to become
due under or in respect of any of the Collateral;
<PAGE> 10
7
(b) to receive, endorse and collect any drafts, instruments or other
documents or any chattel paper in connection with this Agreement
(including, without limitation, all instruments representing or evidencing
any interest payment or other distribution in respect of the Security
Collateral or any part thereof) and to give full discharge for the same;
(c) to sell, transfer, assign or otherwise deal with the Collateral or
any part thereof under, and in accordance with, the terms of the Indenture
or Section 14 in the same manner and to the same extent as if the Trustee
was the absolute owner thereof; and
(d) upon the occurrence and during the continuation of any Event of
Default, to file any claims or take any action or institute any proceedings
that may be necessary or that the Trustee may deem desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Trustee with respect to any of the Collateral.
SECTION 9. Trustee May Perform. If the Grantor fails to make any
payment required to be made by it, or to perform any other act or agreement
required to be performed by it, in each case under this Agreement, the Trustee,
without waiving or releasing any obligation or default, may (but shall not be
obligated to) make such payment or perform such other act, or cause the payment
or performance thereof, for the account and at the sole expense of the Grantor.
All amounts so paid by the Trustee and all costs and expenses so incurred shall
constitute obligations of the Grantor secured hereunder and shall be payable
under Section 15(b). The Trustee shall not be liable for any damages resulting
from any such payment or performance.
SECTION 10. No Assumption of Duties; Reasonable Care. The rights and
powers conferred on the Trustee hereunder are solely to preserve and protect
the security interest of the Trustee and the Holders of the Notes in and to the
Collateral granted hereby and shall not be interpreted to, and shall not impose
any duties on the Trustee in connection therewith other than those expressly
provided herein or imposed under applicable law. Except as provided by
applicable law or by the Indenture, the Trustee shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which the Trustee accords similar property held by the Trustee for its own
account, it being understood that the Trustee in its capacity as such shall not
have any responsibility for (a) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities or other matters relative to any
Collateral, whether or not the Trustee has or is deemed to have knowledge of
such matters or (b) taking any necessary steps to preserve rights against any
parties with respect to any Collateral. The Trustee shall be entitled to all
the rights, benefits, privileges and immunities accorded to it under the
Indenture.
SECTION 11. Voting Rights; Dividends; Etc. (a) So long as no Event of
Default shall have occurred and be continuing:
<PAGE> 11
8
(i) The Grantor shall be entitled to exercise or refrain from
exercising any and all voting and other consensual rights pertaining to the
Security Collateral pledged and assigned by it hereunder, or any part
thereof, for any purpose not inconsistent with the terms of this Agreement,
the Indenture and the Notes.
(ii) The Grantor shall be entitled to receive, retain, and distribute
any and all dividends, interest and other distributions paid or distributed
in respect of the Security Collateral if and to the extent that the payment
thereof is not otherwise prohibited by the terms of the Indenture or the
Notes.
(iii) The Trustee shall execute and deliver (or cause to be executed
and delivered) to the Grantor all such proxies and other instruments as the
Grantor may reasonably request for the purpose of enabling the Grantor to
exercise the voting and other rights that it is entitled to exercise
pursuant to paragraph (i) above and to receive the dividends or payments
that it is authorized to receive, retain, and distribute pursuant to
paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event of
Default:
(i) All rights of the Grantor (A) to exercise or refrain from
exercising the voting and other consensual rights that it would otherwise
be entitled to exercise pursuant to Section 11(a)(i) shall, upon notice to
the Grantor by the Trustee acting at the direction of the Holders of a
majority interest of Outstanding Notes, cease and (B) to receive the
dividends, payments, and other distributions that it would otherwise be
authorized to receive, retain, and distribute pursuant to Section 11(a)(ii)
shall automatically cease, and all such rights shall thereupon become
vested in the Trustee, which shall thereupon have the sole right to
exercise or refrain from exercising such voting and other consensual rights
and to receive and hold as Collateral such dividends, payments, and other
distributions as the Holders of a majority in interest of Outstanding Notes
shall direct.
(ii) All dividends, payments, and other distributions that are
received by the Grantor contrary to the provisions of paragraph (i) of this
Section 11(b) shall be received in trust for the benefit of the Trustee,
shall be segregated from other funds of the Grantor and shall be forthwith
paid over to the Trustee as Collateral in the same form as so received
(with any necessary indorsement).
SECTION 12. Transfers and Other Liens; Additional Equity Interests.
(a) The Grantor agrees that it will not (i) sell, assign or otherwise dispose
of, or grant any option with respect to, any of the Collateral of the Grantor
if such sale, assignment, disposition or grant of option would cause or result
in a Default or an Event of Default or (ii) create or suffer to exist any Lien
on any of the Collateral except for Liens created hereunder.
<PAGE> 12
9
(b) The Grantor agrees that it shall cause the Company not to issue
any Equity Interests in addition to or in substitution for the Pledged
Interests, unless immediately upon such issuance, such Equity Interests is
pledged to the Trustee for the benefit of the Holders.
(c) Any sale, assignment or other disposition of any of the Collateral
shall be subject to the Lien created hereunder in favor of the Trustee (on its
behalf and on behalf of the Holders of the Notes) continuing in such
Collateral.
SECTION 13. Security Interest Absolute. The obligations of the Grantor
under this Agreement are independent of the Secured Obligations, and a separate
action or actions may be brought and prosecuted against the Grantor to enforce
this Agreement, irrespective of whether any action is brought against the
Company or whether the Company is joined in any such action or actions. All
rights of the Trustee and the pledge, assignment and security interest
hereunder, and all obligations of the Grantor hereunder, shall be irrevocable,
absolute and unconditional, irrespective of, and the Grantor hereby irrevocably
waives (to the maximum extent permitted by applicable law) any defenses it may
now have or may hereafter acquire in any way relating to, any or all of the
following:
(a) any lack of validity or enforceability of the Indenture, the
Notes, any Security Document or any other agreement or instrument relating
thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
obligations under the Indenture, the Notes or any Security Document, or any
other amendment or waiver of or any consent to any departure from the
Indenture, the Notes or any Security Document, including, without
limitation, any increase in the Secured Obligations resulting from the
extension of additional credit to the Company, any of its Subsidiaries or
otherwise;
(c) any taking, exchange, release or non-perfection of any other
collateral, or any taking, release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Secured Obligations;
(d) any manner of application of Collateral, or proceeds thereof, to
all or any of the Secured Obligations, or any manner of sale or other
disposition of any Collateral for all or any of the Secured Obligations or
any other obligations of the Company under or in respect of the Indenture,
the Notes and the Security Documents or any other assets of the Company or
any of its Subsidiaries;
(e) any change, restructuring or termination of the corporate,
partnership or other structure or existence of the Company or any of its
Subsidiaries; and
<PAGE> 13
10
(f) any other circumstance (including without limitation any statute
of limitations) that might otherwise constitute a defense available to, or
a discharge of, the Grantor or a third party grantor of a security interest
other than payment in full of the Secured Obligations.
SECTION 14. Remedies. If an Event of Default shall have occurred and
be continuing:
(a) The Trustee or the majority of the Holders of the Notes may, or in
the event of an acceleration under Section 502 of the Indenture then the
Trustee shall, exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein or in the Indenture or otherwise
available to it, all the rights and remedies of a secured party upon
default under the NYUCC (whether or not the NYUCC applies to the affected
Collateral) and also may (i) require the Grantor to, and the Grantor hereby
agrees that it will at its expense and upon request of the Trustee
forthwith, assemble all or part of the Collateral as directed by the
Trustee and make it available to the Trustee at a place to be designated by
the Trustee that is reasonably convenient to both parties and (ii) without
notice except as specified below, sell the Collateral or any part thereof
in one or more parcels at public or private sale, at any of the Trustee's
offices or elsewhere, for cash, on credit or for future delivery, and upon
such other terms as commercially reasonable. The Grantor agrees that, to
the extent notice of sale shall be required by law, at least ten days'
notice to the Grantor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Trustee shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Trustee may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
(b) All cash proceeds received by the Trustee in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral be held by the Trustee as collateral for, and/or then or at any
time thereafter applied (after payment of any amounts payable to the
Trustee pursuant to Section 15(b)) in whole or in part by the Trustee for
the ratable benefit of the Holders of the Notes against, all or any part of
the Secured Obligations in such order as the Trustee shall elect. Any
surplus of such cash or cash proceeds held by the Trustee and remaining
after payment in full of all the Secured Obligations shall be paid over to
the Grantor or to whomsoever else may be lawfully entitled to receive such
surplus.
(c) Notwithstanding the foregoing, the Grantor and the Trustee
recognize that any disposition of Collateral mut be made in accordance with
any applicable federal or state securities laws. The Grantor recognizes
that the Trustee may deem it impracticable
<PAGE> 14
11
to effect a public sale of all or any part of the Collateral subject to
such securities laws and that the Trustee may, therefore, determine to make
one or more private sales of any such Collateral to a restricted group of
purchasers who will be obligated to agree, among other things, to acquire
such Collateral for their own account, for investment and not with a view
to the distribution or resale thereof. The Grantor acknowledges that any
such private sale may be at prices and on terms less favorable than the
prices and other terms which might have been obtained at a public sale and,
notwithstanding the foregoing, agrees that such private sale shall be
deemed to have been made in a commercially reasonable manner and that the
Trustee shall have no obligation to delay sale of any such securities for
the period of time necessary to permit the Grantor to register such
Collateral for public sale under the Securities Act of 1933, as amended.
SECTION 15. Indemnity and Expenses. (a) The Grantor agrees to
indemnify, defend and save and hold harmless the Trustee and each of its
officers, directors, employees, agents and advisors (each, an "Indemnified
Party") from and against, and shall pay on demand, any and all claims, damages,
losses, liabilities and expenses (including, without limitation, reasonable
fees and expenses of counsel) that may be incurred by or asserted or awarded
against any Indemnified Party, in each case arising out of or in connection
with or resulting from the Trustee's performance as Trustee under this
Agreement (including, without limitation, enforcement of this Agreement),
except any such claim, damage, loss, liability or expense as may be
attributable to its negligence or willful misconduct.
(b) The Grantor will upon demand pay to the Trustee (i) the amount of
any and all reasonable out-of-pocket costs and expenses of the Trustee,
including the reasonable fees, expenses, and disbursements of counsel to the
Trustee and of any experts and agents, that the Trustee may incur in connection
with (A) the custody, preservation, use or operation of, or the sale of,
collection from or other realization upon, any of the Collateral or (B) the
failure by the Grantor to perform or observe any of the provisions hereof; and
(ii) all costs and expenses of the Trustee and each of the Holders of the Notes
in connection with the exercise of any of their rights hereunder or the
enforcement of this Agreement (including, without limitation, the reasonable
fees and expenses of counsel for the Trustee and each of the Holders of the
Notes with respect thereto), whether in any action, suit or litigation, any
bankruptcy, insolvency or other similar proceeding affecting creditors' rights
generally or in any negotiated settlement or workout, except in the case of
clauses (i) and (ii), any such cost, expense, or disbursement as may be
attributable to the Trustee's negligence or willful misconduct.
(c) Without prejudice to the survival of any other agreement of the
Grantor hereunder, the agreements and obligations of the Grantor contained in
this Section 16 shall survive the termination of this Agreement and the
resignation or removal of the Trustee.
<PAGE> 15
12
SECTION 16. Amendments, Waivers and Consents. Any amendment or waiver
of any provision of this Agreement and any consent to any departure by the
Grantor from any provision of this Agreement shall be effective only if in
writing, signed by the Trustee and made or duly given in compliance with all of
the terms and provisions of the Indenture, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. Neither the Trustee nor any Holder of Notes shall be deemed,
by any act, delay, indulgence, omission or otherwise, 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. Failure of the Trustee
or any Holder of Notes to exercise, or delay in exercising, any right, power or
privilege hereunder shall not preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by the Trustee or
any Holder of Notes of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy that the Trustee or such
Holder of Notes 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) Without the consent of any Holders of the Notes and the Grantors,
the Trustee may amend or waive any provision of this Agreement or consent to
any departure by any Grantor from any provision hereof, for any of the
following purposes:
(i) to evidence the succession of another Person to the Company, or
any other Grantor, and the assumption by any such successor of the
obligations of the Company or such other Grantor contained herein;
(ii) to evidence and provide for the appointment of a successor
Trustee;
(iii) to cure any ambiguity, to correct or supplement any provision in
this Agreement that may defective or inconsistent with any other provision
of this Agreement or the Indenture, or to make any other provisions with
respect to matters or questions arising under this Agreement with shall not
be inconsistent with the provisions of this Agreement or the Indenture;
provided that, in each case, such actions pursuant to this clause shall not
materially adversely affect the interests of the Holders;
(iv) to mortgage, pledge, hypothecate or grant of security interest in
additional collateral in favor of the Trustee for the benefit of the
Holders; or
SECTION 17. Notices; Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and, mailed, telecopied, cabled or delivered:
<PAGE> 16
13
(a) if to the Grantor, at its address at 1400 Smith Street, EB 2407,
Houston, Texas 77002, Telecopy: (713) 646-4039, Telephone: (713) 853-1939,
Attention: Donna W. Lowry, Compliance; and
(b) if to the Trustee, at its Corporate Trust Office referred to in
the Indenture;
or, as to any such party, at such other address as shall be designated by such
party in a written notice to each other party complying as to delivery with the
terms of this Section. All such notices and communications shall, when mailed,
telecopied, telegraphed or telexed, be effective when deposited in the mails,
telecopied, or confirmed by telex answerback, respectively, except that notices
and communications to the Trustee shall not be effective until received by the
Trustee. Delivery by telecopier of an executed counterpart of any amendment or
waiver of any provision of this Agreement to be executed and delivered
hereunder shall be effective as delivery of a manually executed counterpart
thereof.
SECTION 18. Continuing Security Interest. Subject to any collateral
released in Section 16, this Agreement shall create a continuing security
interest in and to the Collateral and shall (a) remain in full force and effect
until the payment in full in cash of the Secured Obligations, (b) be binding
upon the Grantor and its successors and permitted assigns and (c) inure,
together with the rights and remedies of the Trustee hereunder, to the benefit
of, and be enforceable by, the Trustee, the Holders of the Notes and their
respective successors, transferees and assigns. Without limiting the generality
of the foregoing clause (c), the Trustee may assign or otherwise transfer all
or any portion of its rights and obligations under the Indenture and the Notes
to any other Person, and such other Person shall thereupon become vested with
all the benefits in respect thereof granted to the Trustee, as the case may be,
herein or otherwise, in each case as and to the extent provided in Section 610
of the Indenture.
SECTION 19. Waivers and Acknowledgments. (a) The Grantor hereby waives
promptness, diligence, notice of acceptance and any other notice with respect
to any of the Secured Obligations and this Agreement and any requirement that
the Trustee or any Holder of a Note protect, secure, perfect or insure any Lien
or any property subject thereto or exhaust any right or take any action against
the Company or any other Person or any Collateral.
(b) The Grantor hereby waives any right to revoke this Agreement, and
acknowledges that this Agreement is continuing in nature and applies to all
Secured Obligations, whether existing now or in the future.
(c) The Grantor acknowledges that it will receive substantial direct
and indirect benefits from the financing arrangements contemplated by the
Indenture, the Notes and the Security Documents and that the waivers set forth
in this Section 19 are knowingly made in contemplation of such benefits.
<PAGE> 17
14
SECTION 20. Subrogation. The Grantor will not exercise any rights that
it may now or hereafter acquire against the Company or any of its Subsidiaries
that arise from the existence, payment, performance or enforcement of the
Grantor's obligations under this Agreement, including, without limitation, any
right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of the
Trustee or any Holders of the Notes against the Company or of its Subsidiaries
or any Collateral, whether or not such claim, remedy or right arises in equity
or under contract, statute or common law, including, without limitation, the
right to take or receive from the Company or any of its Subsidiaries, directly
or indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right, unless and until
all of the Secured Obligations and all other amounts payable under this
Agreement shall have been paid in full in cash (except that the Grantor may
exercise any such claim, right or remedy solely against, and the Grantor may
take and receive any such amount solely from, amounts permitted to be
distributed or paid on account of Subordinated Indebtedness in accordance with
and subject to the restrictions set forth in Section 1012 of the Indenture). If
any amount shall be paid to the Grantor in violation of the preceding sentence
at any time prior to the later of the payment in full in cash of the Secured
Obligations and all other amounts payable under this Agreement, such amount
shall be held in trust for the benefit of the Trustee and the other Holders of
the Notes and shall forthwith be paid to the Trustee to be credited and applied
to the Secured Obligations and all other amounts payable under this Agreement,
whether matured or unmatured, in accordance with the terms of the Indenture, or
to be held as Collateral for any Secured Obligations or other amounts payable
under this Agreement thereafter arising.
SECTION 21. Release and Termination. Upon the payment in full in cash
of the Secured Obligations, the pledge, assignment and security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
the Grantor. Upon any such termination, the Trustee will, at the Grantor's
expense, execute and deliver to the Grantor such documents as the Grantor shall
reasonably request to evidence such termination.
SECTION 22. Authority of the Trustee. (a) The Trustee shall have and
be entitled to exercise all powers hereunder that are specifically granted to
the Trustee by the terms hereof, together with such powers as are reasonably
incident thereto. The Trustee may perform any of its duties hereunder or in
connection with the Collateral by or through agents or employees and shall be
entitled to retain counsel and to act in reliance upon the advice of counsel
concerning all such matters. Except as otherwise expressly provided in this
Agreement or the Indenture, neither the Trustee nor any director, officer,
employee, attorney or agent of the Trustee shall be liable to the Grantor for
any action taken or omitted to be taken by the Trustee, in its capacity as
Trustee, hereunder, except for its own negligence or willful misconduct, and
the Trustee shall not be responsible for the validity, effectiveness or
sufficiency hereof or of any document or security furnished pursuant hereto.
The Trustee and its directors, officers, employees, attorneys and agents
<PAGE> 18
15
shall be entitled to rely on any communication, instrument or document believed
by it or them to be genuine and correct and to have been signed or sent by the
proper person or persons.
(b) The Grantor acknowledges that the rights and responsibilities of
the Trustee under this Agreement with respect to any action taken by the
Trustee or the exercise or non-exercise by the Trustee 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 Trustee and the Holders of
the Notes, be governed by the Indenture and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Trustee and the Grantor, the Trustee shall be conclusively presumed to be
acting as agent for the Holders of the Notes with full and valid authority so
to act or refrain from acting, and the Grantor shall not be obligated or
entitled to make any inquiry respecting such authority.
SECTION 23. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement.
SECTION 24. Reinstatement. This Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Secured Obligations is rescinded or must otherwise be returned by
the Trustee, any Holder of the Notes or by any other Person upon the
insolvency, bankruptcy or reorganization of the Company or otherwise, all as
though such payment had not been made.
SECTION 25. 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 any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 26. Governing Law; Entire Agreement. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York. This Agreement constitutes the entire understanding among the Grantor,
the Trustee and the Holders of the Notes with respect to the subject matter
hereof and supercede any prior agreements, written or oral, with respect
thereto.
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
EAST COAST POWER HOLDING
COMPANY L.L.C.
By: JOINT ENERGY DEVELOPMENT
INVESTMENTS II LIMITED
PARTNERSHIP, its Sole Member
By: ENRON CAPITAL MANAGEMENT
II LIMITED PARTNERSHIP,
its General Partner
By: ENRON CAPITAL II CORP.,
its General Partner
By: /s/ CHERYL LIPSHUTZ
------------------------
Name: Cheryl Lipshutz
Title: Vice-President
THE BANK OF NEW YORK, as Trustee
By: /s/ MARY BETH LEWICKI
-------------------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
<PAGE> 20
SCHEDULE I
EQUITY INTERESTS
<TABLE>
<CAPTION>
================================================================================
PERCENTAGE OF
OUTSTANDING
ISSUER TYPE OF INTEREST EQUITY INTEREST
------ ---------------- ---------------
================================================================================
<S> <C> <C>
East Coast Power L.L.C. Class A Limited Liability 100% of
Company Membership Interest Class A Limited Liability
Company Membership
Interests
================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 4.7
EXECUTION COPY
4/20/99
ECT MERCHANT INVESTMENTS CORP.
SECURITY AGREEMENT
Dated as of April 20, 1999
made by
ECT MERCHANT INVESTMENTS CORP.,
as Grantor,
to
THE BANK OF NEW YORK,
as Trustee
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
SECTION 1. Certain Defined Terms.................................................................................1
SECTION 2. Grant of Security.....................................................................................2
SECTION 3. Security for Obligations..............................................................................2
SECTION 4. Delivery of Collateral................................................................................2
SECTION 5. Representations and Warranties........................................................................3
SECTION 6. Further Assurances; Place of Perfection...............................................................5
SECTION 7. Covenant to Give Further Security.....................................................................6
SECTION 8. Trustee Appointed Attorney-in-Fact....................................................................6
SECTION 9. Trustee May Perform...................................................................................7
SECTION 10. No Assumption of Duties; Reasonable Care..............................................................7
SECTION 11. Voting Rights; Dividends; Etc.........................................................................7
SECTION 12. Transfers and Other Liens; Additional Equity Interests................................................8
SECTION 13. Security Interest Absolute............................................................................9
SECTION 14. Remedies.............................................................................................10
SECTION 15. Indemnity and Expenses...............................................................................11
SECTION 16. Amendments, Waivers and Consents.....................................................................11
SECTION 17. Notices; Etc.........................................................................................12
SECTION 18. Continuing Security Interest.........................................................................13
SECTION 19. Waivers and Acknowledgments..........................................................................13
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 20. Subrogation.........................................................................................13
SECTION 21. Release and Termination.............................................................................14
SECTION 22. Authority of the Trustee............................................................................14
SECTION 23. Execution in Counterparts...........................................................................15
SECTION 24. Reinstatement.......................................................................................15
SECTION 25. Severability........................................................................................15
SECTION 26. Governing Law; Entire Agreement.....................................................................15
Schedule I.......................................................................................................17
</TABLE>
<PAGE> 4
ECT MERCHANT INVESTMENTS CORP. SECURITY AGREEMENT
SECURITY AGREEMENT dated April 20, 1999, made by ECT MERCHANT
INVESTMENTS CORP., a Delaware corporation (the "Grantor"), to THE BANK OF NEW
YORK, a New York banking corporation, in its capacity as trustee (the
"Trustee") for the holders from time to time (the "Holders") of the Notes (as
defined in the Indenture referred to below), issued by East Coast Power L.L.C.,
a Delaware limited liability company (the "Company") under the Indenture
referred to below.
PRELIMINARY STATEMENTS.
(1) The Company and the Trustee have entered into an
indenture dated as of April 20, 1999 (as amended, restated, supplemented or
otherwise modified from time to time, the "Indenture"), pursuant to which the
Company is issuing Notes on the date hereof in an aggregate principal amount of
$850,000,000.
(2) It is a condition precedent to the initial purchase of
the Notes by the initial Holders thereof that the Grantor shall have granted
the security interest and made the pledge and assignment contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order
to induce the initial Holders to purchase the Initial Notes (as defined in the
Indenture), the Grantor hereby agrees with the Trustee, for the benefit of the
Trustee and for the ratable benefit of the Holders of the Notes, as follows:
SECTION 1. Certain Defined Terms. Unless otherwise defined in
this Section 1, (a) capitalized terms used in this Agreement have the meanings
specified in the Indenture and (b) terms used in Article 8 or 9 of the Uniform
Commercial Code from time to time in effect in the State of New York (the
"NYUCC") are used herein as therein defined. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and the plural forms of the terms defined):
"Collateral" has the meaning specified in Section 2.
"NYUCC" has the meaning specified above in this Section 1.
"Pledged Interests" has the meaning specified in Section 2(a).
"Secured Obligations" has the meaning specified in Section 3.
"Security Collateral" has the meaning specified in Section
2(a).
<PAGE> 5
2
SECTION 2. Grant of Security. The Grantor hereby pledges and
assigns to the Trustee, for its benefit and the ratable benefit of the Holders
of the Notes, and hereby grants to the Trustee, for its benefit and for the
ratable benefit of the Holders of the Notes, a continuing security interest in
and to all of the Grantor's right, title and interest in and to, the following
(whether consisting of investment securities, book-entry securities or other
securities, security entitlements, financial assets or other investment
property, accounts, general intangibles, instruments or documents, securities
accounts, deposit accounts or other bank, trust or cash collateral accounts, or
other property, assets or rights), whether now owned or hereafter acquired,
wherever located and whether now or hereafter existing (collectively, the
"Collateral"):
(a) all of the membership interests in the Company described
on Schedule I hereto whether or not evidenced by certificates
(collectively, the "Pledged Interests"), and the certificates, if any,
representing such interests, any security therefor and all dividends,
distributions, profits, bonuses, premiums, income, cash, instruments
and other property and assets from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all
of such membership interests (all such Collateral being, the "Security
Collateral"); and
(b) all proceeds (including cash proceeds) of any and all of
the foregoing Collateral (including, without limitation, proceeds that
constitute property of the types described in clause (a) of this
Section 2) and, to the extent not otherwise included, all (i) payments
under insurance (whether or not the Trustee is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the foregoing
Collateral and (ii) payments and distributions made with respect to
the foregoing Collateral.
SECTION 3. Security for Obligations. This Agreement secures
the payment of all obligations, now or hereafter existing, of the Company under
the Indenture and the Notes and of the Grantor under this Agreement (including,
without limitation, any extensions, modifications, substitutions, amendments
and renewals thereof), in each case whether direct or indirect, absolute or
contingent, and whether for principal, interest, fees, indemnification
payments, contract causes of action, costs, expenses or otherwise (all such
obligations being the "Secured Obligations"). Without limiting the generality
of the foregoing, this Agreement secures, to the fullest extent permitted by
applicable law, the payment of all amounts that constitute part of the Secured
Obligations and would be owed by the Company to the Trustee or the Holders
under the Indenture, the Notes or the Security Documents but for the fact that
they are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Company.
SECTION 4. Delivery of Collateral. (a) The Grantor shall
ensure that all certificates or instruments representing or evidencing Security
Collateral, if any, are delivered to and be held by or on behalf of the Trustee
pursuant hereto and are in suitable form for transfer by delivery or
<PAGE> 6
3
shall be accompanied by duly executed instruments of transfer or assignment in
blank, all in form and substance reasonably satisfactory to the Trustee. The
Trustee shall have the right, at any time and without notice to the Grantor, to
transfer to or register in the name of the Trustee or any of its nominees any
or all of the Security Collateral, subject only to the revocable rights
specified in Section 11(b). In addition, the Trustee shall have the right at
any time and from time to time to exchange certificates or instruments
representing or evidencing Security Collateral held by them for certificates or
instruments of smaller or larger denominations.
(b) Concurrently with the execution and delivery of this
Agreement, the Grantor shall cause to be filed proper financing statements in
all jurisdictions necessary or prudent to perfect and protect the liens and
security interests created hereunder, covering the Collateral described herein.
SECTION 5. Representations and Warranties. The Grantor
represents and warrants as of the date of this Agreement as follows:
(a) The Grantor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
The Grantor has all corporate power and authority and all governmental
licenses, authorizations, consents and approvals required in each case
to carry on its business as now conducted, except to the extent that
the failure to have such power, authority, licenses, authorizations,
consents and approvals could not reasonably be expected to have a
material adverse effect on the Grantor's ability to perform any of its
obligations hereunder or a material adverse effect on the business,
operations, assets or financial condition of the Grantor and its
Subsidiaries taken as a whole (a "Grantor Material Adverse Effect").
(b) The execution, delivery and performance by the Grantor of
this Agreement are within the Grantor's corporate powers, have been
duly authorized by all necessary action of the Grantor, require, in
respect of the Grantor, no action by or in respect of, or filing with,
any governmental body, agency or official (other than the filing of
financing statements in favor of the Trustee on or prior to the date
hereof as may be required for the perfection of the Security Interest
herein granted in the Collateral) and do not contravene, or constitute
a default under, any provision of law or regulation (including
Regulation X of the Board of Governors of the Federal Reserve System)
applicable to the Grantor or Regulation U of the Board of Governors of
the Federal Reserve System or the certificate of incorporation or
bylaws of the Grantor or any judgment, injunction, order, decree or
material agreement binding upon the Grantor or result in or require
the creation or imposition of any Lien on any of the Collateral.
(c) This Agreement has been duly executed and delivered by
the Grantor. This Agreement is the legal, valid and binding obligation
of the Grantor, enforceable against the
<PAGE> 7
4
Grantor in accordance with its terms, except as the enforceability
thereof may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and by general principles of equity.
(d) There is no pending, or to the Grantor's knowledge,
threatened action, suit or proceeding against the Grantor before any
court or arbitrator or any governmental body, agency or official in
which there is a reasonable possibility of an adverse decision which
could reasonably be expected to have a Grantor Material Adverse Effect
or which in any manner draws into question the legality, validity,
binding effect or enforceability of this Agreement.
(e) The chief place of business and chief executive office of
the Grantor are located at the address specified in Section 17. The
Grantor has no trade names.
(f) The Grantor is the legal and beneficial owner of the
Collateral which is in existence on the date hereof free and clear of
any Lien (other than Liens not prohibited by the Indenture), except
for the security interest created by this Agreement and the Liens
created under the Bridge Loan which will terminate upon the filing of
termination financing statements on the Issue Date. No effective
financing statement or other instrument similar in effect covering all
or any part of the Collateral is on file in any recording office, and
the Grantor has not entered into any security control agreement or
other agreement similar in effect, in each case covering all or any
part of the Collateral, except such as may have been filed in favor of
the Trustee relating to this Agreement or the other Security
Documents.
(g) There are no existing options, warrants, calls or
commitments of any character whatsoever relating to any Equity
Interests in the Company owned by the Grantor except for this
Agreement and the limited liability company agreement of the Company.
There are no shareholder agreements, voting trust agreements or other
agreements or understandings to which the Grantor is a party or by
which the Grantor may otherwise be bound that affect the voting or
other rights of a holder of any Equity Interest in the Company
(including, without limitation, the ability to transfer any such
Equity Interest), except for this Agreement and the limited liability
company agreement of the Company.
(h) This Agreement, the pledge of the Collateral pursuant
hereto and the pledge, assignment and delivery to the Trustee of the
certificates representing the Security Collateral pursuant hereto,
together with stock or other transfer powers duly executed in blank,
create a valid and perfected first priority security interest in the
Collateral, securing the payment of the Secured Obligations, and all
filings and other actions necessary to perfect and protect such
security interest have been duly taken.
<PAGE> 8
5
(i) No consent of any other Person and no authorization,
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body or other third party is
required either (i) for the grant by the Grantor of the assignment and
security interest granted hereby, for the pledge by the Grantor of any
of the Collateral pursuant hereto or for the execution, delivery or
performance of this Agreement by the Grantor, (ii) for the perfection
or continuation of perfection of the pledge, assignment and security
interest created hereby (including the priority of such pledge,
assignment or security interest), except for the filing of financing
and continuation statements under the Uniform Commercial Code, which
financing statements have been duly filed, (iii) for the exercise by
the Trustee of its voting or other rights provided for in this
Agreement or the remedies in respect of the Collateral pursuant to
this Agreement, except as may be required in connection with the
disposition of any portion of the Security Collateral by laws
affecting the offering and sale of securities generally or (iv)
consents, authorizations, approvals or other actions or filings that
have been made or obtained on or prior to the date hereof.
SECTION 6. Further Assurances; Place of Perfection. (a) The
Grantor agrees that from time to time, at its sole expense, the Grantor will
promptly execute and deliver all further instruments and documents, and take
all further action, that may be necessary or prudent, or that the Trustee may
reasonably request, in order to perfect and protect any pledge, assignment or
security interest granted or purported to be granted hereunder (including,
without limitation, the priority thereof) or to enable the Trustee to exercise
and enforce its rights and remedies hereunder. Without limiting the generality
of the foregoing, the Grantor will:
(i) if any Collateral shall be evidenced by a certificate,
promissory note or other instrument or by chattel paper, deliver and
pledge to the Trustee hereunder such certificate, note or other
instrument or such chattel paper duly endorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and
substance reasonably satisfactory to the Trustee; and
(ii) execute and file such financing statements, continuation
statements or other similar documents, or amendments thereto, and such
other instruments or notices, as may be necessary or as the Trustee
may deem reasonably prudent and may request, in order to perfect and
preserve the pledge, assignment and security interest granted or
purported to be granted under this Agreement.
(b) The Grantor hereby authorizes the Trustee to cause the
filing of one or more financing statements, continuation statements or other
similar documents, and amendments thereto, relating to all or any part of the
Collateral without the signature of the Grantor where permitted by applicable
law. A photocopy or other reproduction of this Agreement or any financing
statement or other similar document covering the Collateral or any part thereof
shall be sufficient as a financing statement or other similar document where
permitted by applicable law.
<PAGE> 9
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(c) The Grantor shall furnish to the Trustee from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the Trustee may
reasonably request, all in reasonable detail.
SECTION 7. Covenant to Give Further Security. The Grantor
hereby agrees that, if, and at such time as, it acquires title to, or any other
ownership interest in, any additional Equity Interests in any issuer of the
Pledged Interests, it will, at its sole expense:
(a) as promptly as practicable and in any event within five
(5) days after such acquisition, notify the Trustee of its acquisition
of title thereto or such other ownership interest therein; and
(b) as promptly as practicable and in any event within 30
days after such acquisition, (i) duly execute and deliver such
mortgages, pledges, assignments and/or other security agreements as
are necessary to create a valid lien thereon and security interest
therein in favor of the Trustee, for its benefit and the benefit of
the Holders of the Notes, in each case in form and substance
satisfactory to the Trustee, and (ii) make all filings and take all
other actions that are necessary or that the Trustee may deem
reasonably prudent and may request to perfect and protect a valid and
perfected first priority lien thereon and security interest therein in
favor of the Trustee, for its benefit and the benefit of the Holders
of the Notes.
SECTION 8. Trustee Appointed Attorney-in-Fact. In addition to
all of the powers granted to the Trustee pursuant to the Indenture, the Grantor
hereby irrevocably appoints the Trustee its attorney-in-fact (which appointment
is coupled with an interest and is irrevocable), with full authority in the
place and stead of the Grantor and in the name of the Grantor or otherwise and
with full power of substitution, from time to time upon the occurrence and
during the continuation of an Event of Default, to take any action and to
execute any instrument to accomplish the purposes of this Agreement (it being
understood that the Trustee will not be required to act unless otherwise set
forth herein or in the Indenture), including, without limitation:
(a) after the occurrence and during the continuation of an
Event of Default, to ask for, demand, collect, sue for, recover,
compromise, receive, and give acquittance and receipts for, moneys due
and to become due under or in respect of any of the Collateral;
(b) to receive, endorse and collect any drafts, instruments
or other documents or any chattel paper in connection with this
Agreement (including, without limitation, all instruments representing
or evidencing any interest payment or other distribution in respect of
the Security Collateral or any part thereof) and to give full
discharge for the same;
<PAGE> 10
7
(c) to sell, transfer, assign or otherwise deal with the
Collateral or any part thereof under, and in accordance with, the
terms of the Indenture or Section 14 in the same manner and to the
same extent as if the Trustee was the absolute owner thereof; and
(d) upon the occurrence and during the continuation of any
Event of Default, to file any claims or take any action or institute
any proceedings that may be necessary or that the Trustee may deem
desirable for the collection of any of the Collateral or otherwise to
enforce the rights of the Trustee with respect to any of the
Collateral.
SECTION 9. Trustee May Perform. If the Grantor fails to make
any payment required to be made by it, or to perform any other act or agreement
required to be performed by it, in each case under this Agreement, the Trustee,
without waiving or releasing any obligation or default, may (but shall not be
obligated to) make such payment or perform such other act, or cause the payment
or performance thereof, for the account and at the sole expense of the Grantor.
All amounts so paid by the Trustee and all costs and expenses so incurred shall
constitute obligations of the Grantor secured hereunder and shall be payable
under Section 15(b). The Trustee shall not be liable for any damages resulting
from any such payment or performance.
SECTION 10. No Assumption of Duties; Reasonable Care. The
rights and powers conferred on the Trustee hereunder are solely to preserve and
protect the security interest of the Trustee and the Holders of the Notes in
and to the Collateral granted hereby and shall not be interpreted to, and shall
not impose any duties on the Trustee in connection therewith other than those
expressly provided herein or imposed under applicable law. Except as provided
by applicable law or by the Indenture, the Trustee shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which the Trustee accords similar property held by the Trustee for its own
account, it being understood that the Trustee in its capacity as such shall not
have any responsibility for (a) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities or other matters relative to any
Collateral, whether or not the Trustee has or is deemed to have knowledge of
such matters or (b) taking any necessary steps to preserve rights against any
parties with respect to any Collateral. The Trustee shall be entitled to all
the rights, benefits, privileges and immunities accorded to it under the
Indenture.
SECTION 11. Voting Rights; Dividends; Etc. (a) So long as no
Event of Default shall have occurred and be continuing:
(i) The Grantor shall be entitled to exercise or refrain from
exercising any and all voting and other consensual rights pertaining
to the Security Collateral pledged and assigned by it hereunder, or
any part thereof, for any purpose not inconsistent with the terms of
this Agreement, the Indenture and the Notes.
<PAGE> 11
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(ii) The Grantor shall be entitled to receive, retain, and
distribute any and all dividends, interest and other distributions
paid or distributed in respect of the Security Collateral if and to
the extent that the payment thereof is not otherwise prohibited by the
terms of the Indenture or the Notes.
(iii) The Trustee shall execute and deliver (or cause to be
executed and delivered) to the Grantor all such proxies and other
instruments as the Grantor may reasonably request for the purpose of
enabling the Grantor to exercise the voting and other rights that it
is entitled to exercise pursuant to paragraph (i) above and to receive
the dividends or interest payments that it is authorized to receive,
retain, and distribute pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an
Event of Default:
(i) All rights of the Grantor (A) to exercise or refrain from
exercising the voting and other consensual rights that it would
otherwise be entitled to exercise pursuant to Section 11(a)(i) shall,
upon notice to the Grantor by the Trustee acting at the direction of
the Holders of a majority interest of Outstanding Notes, cease and (B)
to receive, the dividends, interest payments, and other distributions
that it would otherwise be authorized to receive, retain, and
distribute pursuant to Section 11(a)(ii) shall automatically cease,
and all such rights shall thereupon become vested in the Trustee,
which shall thereupon have the sole right to exercise or refrain from
exercising such voting and other consensual rights and to receive and
hold as Collateral such dividends, interest payments and other
distributions as the Holders of a majority in interest of Outstanding
Notes shall direct.
(ii) All dividends, interest payments, and other
distributions that are received by the Grantor contrary to the
provisions of paragraph (i) of this Section 11(b) shall be received in
trust for the benefit of the Trustee, shall be segregated from other
funds of the Grantor and shall be forthwith paid over to the Trustee
as Collateral in the same form as so received (with any necessary
indorsement).
SECTION 12. Transfers and Other Liens; Additional Equity
Interests. (a) The Grantor agrees that it will not (i) sell, assign or
otherwise dispose of, or grant any option with respect to, any of the
Collateral of the Grantor if such sale, assignment, disposition or grant of
option would cause or result in a Default or an Event of Default or (ii) create
or suffer to exist any Lien on any of the Collateral except for Liens created
hereunder.
(b) The Grantor agrees that it shall cause the Company not to
issue any Equity Interests in addition to or in substitution for the Pledged
Interests, unless immediately upon such issuance, such Equity Interests is
pledged to the Trustee for the benefit of the Holders.
<PAGE> 12
9
(c) Any sale, assignment or other disposition of any of the
Collateral shall be subject to the Lien created hereunder in favor of the
Trustee (on its behalf and on behalf of the Holders of the Notes) continuing in
such Collateral.
SECTION 13. Security Interest Absolute. The obligations of
the Grantor under this Agreement are independent of the Secured Obligations,
and a separate action or actions may be brought and prosecuted against the
Grantor to enforce this Agreement, irrespective of whether any action is
brought against the Company or whether the Company is joined in any such action
or actions. All rights of the Trustee and the pledge, assignment and security
interest hereunder, and all obligations of the Grantor hereunder, shall be
irrevocable, absolute and unconditional, irrespective of, and the Grantor
hereby irrevocably waives (to the maximum extent permitted by applicable law)
any defenses it may now have or may hereafter acquire in any way relating to,
any or all of the following:
(a) any lack of validity or enforceability of the Indenture,
the Notes, any Security Document or any other agreement or instrument
relating thereto;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Secured Obligations or any
other obligations under the Indenture, the Notes or any Security
Document, or any other amendment or waiver of or any consent to any
departure from the Indenture, the Notes or any Security Document,
including, without limitation, any increase in the Secured Obligations
resulting from the extension of additional credit to the Company, any
of its Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of any
other collateral, or any taking, release or amendment or waiver of or
consent to departure from any guaranty, for all or any of the Secured
Obligations;
(d) any manner of application of Collateral, or proceeds
thereof, to all or any of the Secured Obligations, or any manner of
sale or other disposition of any Collateral for all or any of the
Secured Obligations or any other obligations of the Company under or
in respect of the Indenture, the Notes, and the Security Documents or
any other assets of the Company or any of its Subsidiaries;
(e) any change, restructuring or termination of the
corporate, partnership or other structure or existence of the Company
or any of its Subsidiaries; and
(f) any other circumstance (including without limitation any
statute of limitations) that might otherwise constitute a defense
available to, or a discharge of, the Grantor or a third party grantor
of a security interest other than the payment in full of the Secured
Obligations.
<PAGE> 13
10
SECTION 14. Remedies. If an Event of Default shall have
occurred and be continuing:
(a) The Trustee or the majority of the Holders of the Notes
may, or in the event of an acceleration under Section 502 of the
Indenture then the Trustee shall, exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein or in the Indenture or otherwise available to it, all the
rights and remedies of a secured party upon default under the NYUCC
(whether or not the NYUCC applies to the affected Collateral) and also
may (i) require the Grantor to, and the Grantor hereby agrees that it
will at its expense and upon request of the Trustee forthwith,
assemble all or part of the Collateral as directed by the Trustee and
make it available to the Trustee at a place to be designated by the
Trustee that is reasonably convenient to both parties and (ii) without
notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of
the Trustee's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as commercially reasonable. The
Grantor agrees that, to the extent notice of sale shall be required by
law, at least ten days' notice to the Grantor of the time and place of
any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Trustee shall not be
obligated to make any sale of Collateral regardless of notice of sale
having been given. The Trustee may adjourn any public or private sale
from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
(b) All cash proceeds received by the Trustee in respect of
any sale of, collection from, or other realization upon all or any
part of the Collateral be held by the Trustee as collateral for,
and/or then or at any time thereafter applied (after payment of any
amounts payable to the Trustee pursuant to Section 15(b)) in whole or
in part by the Trustee for the ratable benefit of the Holders of the
Notes against, all or any part of the Secured Obligations in such
order as the Trustee shall elect. Any surplus of such cash or cash
proceeds held by the Trustee and remaining after payment in full of
all the Secured Obligations shall be paid over to the Grantor or to
whomsoever else may be lawfully entitled to receive such surplus.
(c) Notwithstanding the foregoing, the Grantor and the
Trustee recognize that any disposition of Collateral mut be made in
accordance with any applicable federal or state securities laws. The
Grantor recognizes that the Trustee may deem it impracticable to
effect a public sale of all or any part of the Collateral subject to
such securities laws and that the Trustee may, therefore, determine to
make one or more private sales of any such Collateral to a restricted
group of purchasers who will be obligated to agree, among other
things, to acquire such Collateral for their own account, for
investment and not with a view to the distribution or resale thereof.
The Grantor acknowledges that any such private sale may be at prices
and on terms less favorable than the prices and other terms which
might
<PAGE> 14
11
have been obtained at a public sale and, notwithstanding the
foregoing, agrees that such private sale shall be deemed to have been
made in a commercially reasonable manner and that the Trustee shall
have no obligation to delay sale of any such securities for the period
of time necessary to permit the Grantor to register such Collateral
for public sale under the Securities Act of 1933, as amended.
SECTION 15. Indemnity and Expenses. (a) The Grantor agrees to
indemnify, defend and save and hold harmless the Trustee and each of its
officers, directors, employees, agents and advisors (each, an "Indemnified
Party") from and against, and shall pay on demand, any and all claims, damages,
losses, liabilities and expenses (including, without limitation, reasonable
fees and expenses of counsel) that may be incurred by or asserted or awarded
against any Indemnified Party, in each case arising out of or in connection
with or resulting from the Trustee's performance as Trustee under this
Agreement (including, without limitation, enforcement of this Agreement),
except any such claim, damage, loss, liability or expense as may be
attributable to its negligence or willful misconduct.
(b) The Grantor will upon demand pay to the Trustee (i) the
amount of any and all reasonable out-of-pocket costs and expenses of the
Trustee, including the reasonable fees, expenses, and disbursements of counsel
to the Trustee and of any experts and agents, that the Trustee may incur in
connection with (A) the custody, preservation, use or operation of, or the sale
of, collection from or other realization upon, any of the Collateral or (B) the
failure by the Grantor to perform or observe any of the provisions hereof; and
(ii) all costs and expenses of the Trustee and each of the Holders of the Notes
in connection with the exercise of any of their rights hereunder or the
enforcement of this Agreement (including, without limitation, the reasonable
fees and expenses of counsel for the Trustee and each of the Holders of the
Notes with respect thereto), whether in any action, suit or litigation, any
bankruptcy, insolvency or other similar proceeding affecting creditors' rights
generally or in any negotiated settlement or workout, except in the case of
clauses (i) and (ii), any such cost, expense, or disbursement as may be
attributable to the Trustee's negligence or willful misconduct.
(c) Without prejudice to the survival of any other agreement
of the Grantor hereunder, the agreements and obligations of the Grantor
contained in this Section 16 shall survive the termination of this Agreement
and the resignation or removal of the Trustee.
SECTION 16. Amendments, Waivers and Consents. Any amendment
or waiver of any provision of this Agreement and any consent to any departure
by the Grantor from any provision of this Agreement shall be effective only if
in writing, signed by the Trustee and made or duly given in compliance with all
of the terms and provisions of the Indenture, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. Neither the Trustee nor any Holder of Notes shall be deemed,
by any act, delay, indulgence, omission or otherwise, to have waived any right
or remedy hereunder or to have acquiesced in any Default or
<PAGE> 15
12
Event of Default or in any breach of any of the terms and conditions hereof.
Failure of the Trustee or any Holder of Notes to exercise, or delay in
exercising, any right, power or privilege hereunder shall not preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Trustee or any Holder of Notes of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy that the Trustee or such Holder of Notes 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) Without the consent of any Holders of the Notes and the
Grantors, the Trustee may amend or waive any provision of this Agreement or
consent to any departure by any Grantor from any provision hereof, for any of
the following purposes:
(i) to evidence the succession of another Person to the
Company, or any other Grantor, and the assumption by any such
successor of the obligations of the Company or such other Grantor
contained herein;
(ii) to evidence and provide for the appointment of a
successor Trustee;
(iii) to cure any ambiguity, to correct or supplement any
provision in this Agreement that may defective or inconsistent with
any other provision of this Agreement or the Indenture, or to make any
other provisions with respect to matters or questions arising under
this Agreement with shall not be inconsistent with the provisions of
this Agreement or the Indenture; provided that, in each case, such
actions pursuant to this clause shall not materially adversely affect
the interests of the Holders;
(iv) to mortgage, pledge, hypothecate or grant of security
interest in additional collateral in favor of the Trustee for the
benefit of the Holders; or
SECTION 17. Notices; Etc. All notices and other
communications provided for hereunder shall be in writing (including
telecopier, telegraphic, telex or cable communication) and, mailed, telecopied,
cabled or delivered:
(a) if to the Grantor, at its address at 1400 Smith Street,
EB 2407, Houston, Texas 77002, Telecopy: (713) 646-4039, Telephone:
(713) 853-1939, Attention: Donna W. Lowry, Compliance; and
(b) if to the Trustee, at its Corporate Trust Office referred
to in the Indenture;
or, as to any such party, at such other address as shall be designated by such
party in a written notice to each other party complying as to delivery with the
terms of this Section. All such notices and
<PAGE> 16
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communications shall, when mailed, telecopied, telegraphed or telexed, be
effective when deposited in the mails, telecopied, or confirmed by telex
answerback, respectively, except that notices and communications to the Trustee
shall not be effective until received by the Trustee. Delivery by telecopier of
an executed counterpart of any amendment or waiver of any provision of this
Agreement to be executed and delivered hereunder shall be effective as delivery
of a manually executed counterpart thereof.
SECTION 18. Continuing Security Interest. Subject to any
collateral released under Section 16, this Agreement shall create a continuing
security interest in and to the Collateral and shall (a) remain in full force
and effect until the payment in full in cash of the Secured Obligations, (b) be
binding upon the Grantor and its successors and permitted assigns and (c)
inure, together with the rights and remedies of the Trustee hereunder, to the
benefit of, and be enforceable by, the Trustee, the Holders of the Notes and
their respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), the Trustee may assign or otherwise
transfer all or any portion of its rights and obligations under the Indenture
and the Notes to any other Person, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to the Trustee, as the
case may be, herein or otherwise, in each case as and to the extent provided in
Section 610 of the Indenture.
SECTION 19. Waivers and Acknowledgments. (a) The Grantor
hereby waives promptness, diligence, notice of acceptance and any other notice
with respect to any of the Secured Obligations and this Agreement and any
requirement that the Trustee or any Holder of a Note protect, secure, perfect
or insure any Lien or any property subject thereto or exhaust any right or take
any action against the Company or any other Person or any Collateral.
(b) The Grantor hereby waives any right to revoke this
Agreement, and acknowledges that this Agreement is continuing in nature and
applies to all Secured Obligations, whether existing now or in the future.
(c) The Grantor acknowledges that it will receive substantial
direct and indirect benefits from the financing arrangements contemplated by
the Indenture, the Notes and the Security Documents and that the waivers set
forth in this Section 19 are knowingly made in contemplation of such benefits.
SECTION 20. Subrogation. The Grantor will not exercise any
rights that it may now or hereafter acquire against the Company or any of its
Subsidiaries that arise from the existence, payment, performance or enforcement
of the Grantor's obligations under this Agreement, including, without
limitation, any right of subrogation, reimbursement, exoneration, contribution
or indemnification and any right to participate in any claim or remedy of the
Trustee or any Holders of the Notes against the Company or of its Subsidiaries
or any Collateral, whether or not such claim, remedy or right arises in equity
or under contract, statute or common law, including, without
<PAGE> 17
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limitation, the right to take or receive from the Company or any of its
Subsidiaries, directly or indirectly, in cash or other property or by set-off
or in any other manner, payment or security on account of such claim, remedy or
right, unless and until all of the Secured Obligations and all other amounts
payable under this Agreement shall have been paid in full in cash (except that
the Grantor may exercise any such claim, right or remedy solely against, and
the Grantor may take and receive any such amount solely from, amounts permitted
to be distributed or paid on account of Subordinated Indebtedness in accordance
with and subject to the restrictions set forth in Section 1012 of the
Indenture). If any amount shall be paid to the Grantor in violation of the
preceding sentence at any time prior to the later of the payment in full in
cash of the Secured Obligations and all other amounts payable under this
Agreement, such amount shall be held in trust for the benefit of the Trustee
and the other Holders of the Notes and shall forthwith be paid to the Trustee
to be credited and applied to the Secured Obligations and all other amounts
payable under this Agreement, whether matured or unmatured, in accordance with
the terms of the Indenture, or to be held as Collateral for any Secured
Obligations or other amounts payable under this Agreement thereafter arising.
SECTION 21. Release and Termination. Upon the payment in full
in cash of the Secured Obligations, the pledge, assignment and security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to the Grantor. Upon any such termination, the Trustee will, at the
Grantor's expense, execute and deliver to the Grantor such documents as the
Grantor shall reasonably request to evidence such termination.
SECTION 22. Authority of the Trustee. (a) The Trustee shall
have and be entitled to exercise all powers hereunder that are specifically
granted to the Trustee by the terms hereof, together with such powers as are
reasonably incident thereto. The Trustee may perform any of its duties
hereunder or in connection with the Collateral by or through agents or
employees and shall be entitled to retain counsel and to act in reliance upon
the advice of counsel concerning all such matters. Except as otherwise
expressly provided in this Agreement or the Indenture, neither the Trustee nor
any director, officer, employee, attorney or agent of the Trustee shall be
liable to the Grantor for any action taken or omitted to be taken by the
Trustee, in its capacity as Trustee, hereunder, except for its own negligence
or willful misconduct, and the Trustee shall not be responsible for the
validity, effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The Trustee and its directors, officers, employees,
attorneys and agents shall be entitled to rely on any communication, instrument
or document believed by it or them to be genuine and correct and to have been
signed or sent by the proper person or persons.
(b) The Grantor acknowledges that the rights and
responsibilities of the Trustee under this Agreement with respect to any action
taken by the Trustee or the exercise or non-exercise by the Trustee 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 Trustee and
the Holders of the Notes, be governed by the Indenture and by such other
agreements with respect
<PAGE> 18
15
thereto as may exist from time to time among them, but, as between the Trustee
and the Grantor, the Trustee shall be conclusively presumed to be acting as
agent for the Holders of the Notes with full and valid authority so to act or
refrain from acting, and the Grantor shall not be obligated or entitled to make
any inquiry respecting such authority.
SECTION 23. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 24. Reinstatement. This Agreement shall continue to
be effective or be reinstated, as the case may be, if at any time any payment
of any of the Secured Obligations is rescinded or must otherwise be returned by
the Trustee, any Holder of the Notes or by any other Person upon the
insolvency, bankruptcy or reorganization of the Company or otherwise, all as
though such payment had not been made.
SECTION 25. 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 any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
SECTION 26. Governing Law; Entire Agreement. This Agreement
shall be governed by, and construed in accordance with, the laws of the State
of New York. This Agreement constitutes the entire understanding among the
Grantor, the Trustee and the Holders of the Notes with respect to the subject
matter hereof and supercede any prior agreements, written or oral, with respect
thereto.
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
ECT MERCHANT INVESTMENTS CORP.,
By: /s/ CHERYL LIPSHUTZ
---------------------------------
Name: Cheryl Lipshutz
Title: Vice-President
THE BANK OF NEW YORK, as Trustee
By: /s/ MARY BETH LEWICKI
---------------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice-President
<PAGE> 20
Schedule I
EQUITY INTERESTS
<TABLE>
<S> <C> <C>
================================ ================================== ===================================
Percentage of
Outstanding
Issuer Type of Interest Equity Interest
================================ ================================== ===================================
East Coast Power L.L.C. Class B Limited Liability 50% of
Company Membership Interest Class B Limited Liability
Company Membership
Interests
================================ ================================== ===================================
</TABLE>
<PAGE> 1
- --------------------------------------------------------------------------------
TRANSACTION AGREEMENT
among
ENRON CORP.
ENRON CAPITAL & TRADE RESOURCES CORP.
and
RCM HOLDINGS, INC.
COGEN TECHNOLOGIES CAMDEN, INC.
COGEN TECHNOLOGIES CAPITAL COMPANY, L.P.
COGEN TECHNOLOGIES LIMITED PARTNERS JOINT VENTURE
THE PARTNERS OF COGEN TECHNOLOGIES LIMITED PARTNERS
JOINT VENTURE
THE SHAREHOLDERS OF MCNAIR ENERGY SERVICES CORPORATION
OCTOBER 25, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 1
Definitions
Section 1.01. Definitions........................................................................................1
ARTICLE 2
Transactions and Closing
Section 2.01. Acquisition of Interests...........................................................................1
Section 2.02. Linden Acquisition.................................................................................2
Section 2.03. Bayonne Acquisition. ..............................................................................3
Section 2.04. Camden Acquisition.................................................................................5
Section 2.05. Closing............................................................................................5
Section 2.06. Closing Balance Sheets.............................................................................6
Section 2.07. Adjustment of Consideration........................................................................7
Section 2.08. Other Transactions.................................................................................8
Section 2.09. Reimbursement for Certain Tax Payments.............................................................9
ARTICLE 3
Representations and Warranties of Sellers
Section 3.01. Representations and Warranties of McNair...........................................................9
Section 3.02. Representations and Warranties of the McNair Group Sellers and the
Minority Group Sellers..................................................................................10
ARTICLE 4
Representations and Warranties of Buyer Entities
ARTICLE 5
Covenants of the Sellers
Section 5.01 Conduct of Business................................................................................10
Section 5.02 Access to Information; Confidentiality.............................................................12
Section 5.03. Enjoyment of Benefits.............................................................................14
Section 5.04. Notices of Certain Events.........................................................................14
Section 5.05. Maintenance and Enforcement of Insurance Policies.................................................15
Section 5.06. Certain Contracts.................................................................................16
Section 5.07. Non-Solicitation..................................................................................16
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 5.08. Dividends and Distributions.......................................................................16
ARTICLE 6
Agreements Related to Parent Shares
Section 6.01. Agreements Related to Parent Shares...............................................................16
ARTICLE 7
Covenants of the Parties
Section 7.01. Further Assurances.................................................................................16
Section 7.02 Public Announcements...............................................................................17
Section 7.03 Indemnification of Directors, Officers, Etc........................................................18
Section 7.04 Amendments of Partnership Agreements; Termination of Management Fee
Agreements; Consents....................................................................................19
Section 7.06 Bayonne Management Services Agreement..............................................................21
Section 7.07 Withdrawal of Registration Statement...............................................................21
Section 7.08 Intercompany Accounts..............................................................................21
Section 7.09 Assigned Contracts.................................................................................21
Section 7.10 Letters of Credit..................................................................................22
ARTICLE 8
Tax Matters
Section 8.01 Tax Matters........................................................................................22
ARTICLE 9
Employment and Employee Benefit Matters
Section 9.01. Employment and Employee Benefit Matters...........................................................22
ARTICLE 10
Conditions to Closing
Section 10.01. Conditions to the Obligations of Each Party......................................................25
Section 10.02. Conditions to Obligations of the Buyer Entities..................................................26
Section 10.03. Conditions to Obligations of Sellers.............................................................27
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 11
Survival; Indemnification
Section 11.01. Survival.........................................................................................28
Section 11.02. Indemnification..................................................................................29
Section 11.03. Procedures for Third Party Claims................................................................31
Section 11.04. Exclusive Remedy; No Waiver Relating to Claims for Fraud. ......................................32
ARTICLE 12
Termination
Section 12.01. Grounds for Termination..........................................................................32
Section 12.02. Effect of Termination............................................................................33
ARTICLE 13
Miscellaneous
Section 13.01. Notices..........................................................................................34
Section 13.02. Amendments; No Waivers...........................................................................36
Section 13.03. Parties in Interest..............................................................................37
Section 13.04. Expenses.........................................................................................37
Section 13.05. Successors and Assigns...........................................................................37
Section 13.06. Governing Law....................................................................................37
Section 13.07. Counterparts; Effectiveness......................................................................38
Section 13.08. Entire Agreement.................................................................................39
Section 13.09. Captions.........................................................................................39
Section 13.10. Conflicts........................................................................................39
Section 13.11. Sellers' Representatives.........................................................................39
Section 13.12. Certain Agreements of Parent.....................................................................40
EXHIBIT I
DEFINITIONS
EXHIBIT II
REPRESENTATIONS AND WARRANTIES OF MCNAIR
II.01. Corporate Existence and Power..........................................................................II-1
II.02. Authorization..........................................................................................II-1
II.03. [Intentionally Omitted]................................................................................II-2
II.04. Noncontravention.......................................................................................II-2
II.05. Capitalization; Etc....................................................................................II-2
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
II.06. Consents................................................................................................II-4
II.07 Financial Statements....................................................................................II-4
II.08. Absence of Certain Changes.............................................................................II-5
II.09. No Undisclosed Material Liabilities....................................................................II-6
II.10. Material Contracts or Indebtedness.....................................................................II-6
II.11. Litigation.............................................................................................II-9
II.12. Compliance with Laws...................................................................................II-9
II.13. Properties.............................................................................................II-9
II.14. [Intentionally Omitted]...............................................................................II-10
II.15. Employee Benefit Matters..............................................................................II-10
II.16. Intellectual Property.................................................................................II-12
II.17. Insurance Coverage....................................................................................II-13
II.18. Licenses and Permits..................................................................................II-13
II.19 Certain Regulatory Matters.............................................................................II-13
II.20. Finders' Fees.........................................................................................II-14
II.21. [Intentionally Omitted]...............................................................................II-15
II.22. Environmental Compliance..............................................................................II-15
II.23. Bank Accounts.........................................................................................II-16
EXHIBIT III
REPRESENTATIONS AND WARRANTIES OF THE MCNAIR GROUP SELLERS
AND THE MINORITY GROUP SELLERS
III.01. Corporate Existence and Power........................................................................III-1
III.02. Authorization........................................................................................III-1
III.03. Investment Representations...........................................................................III-1
III.04. Noncontravention.....................................................................................III-2
III.05. Capitalization; Etc. ................................................................................III-2
III.06. Consents.............................................................................................III-3
III.07. Finders' Fees........................................................................................III-3
EXHIBIT IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
IV.01. Corporate Existence and Power; Ownership..............................................................IV- 1
IV.02. Authorization.........................................................................................IV- 1
IV.03. Noncontravention......................................................................................IV- 1
IV.04. Litigation............................................................................................IV- 2
IV.05. Finders' Fees.........................................................................................IV- 2
IV.06. Parent Shares.........................................................................................IV- 2
IV.07 Parent SEC Reports.....................................................................................IV- 2
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C>
EXHIBIT V
PROVISIONS REGARDING PARENT COMMON STOCK
TO BE RECEIVED BY SELLERS
V.01 Definitions...........................................................................................V- 1
V.02 Issuance of Shares; Restrictions and Restrictive Legend...............................................V- 1
V.03 Plan of Distribution..................................................................................V- 2
V.04 Registration Procedures...............................................................................V- 2
V.05 Conditions and Limitations............................................................................V- 4
V.06 Information from and Certain Covenants of Parent Stock Recipients.....................................V- 5
V.07 Registration Expenses.................................................................................V- 5
V.08 Indemnification.......................................................................................V- 5
EXHIBIT VI
TAX MATTERS
VI.01. Tax Definitions.......................................................................................VI- 1
VI.02. Tax Matters...........................................................................................VI- 2
VI.03 Tax Returns, Access to Information and Pre-Closing Acts..............................................VI- 3
</TABLE>
ANNEXES:
Annex 2.02-A - Linden Ltd. GP Interest Assignment
Annex 2.02-B - Linden Ltd. LP Interest Assignment
Annex 2.02-C - Form of Morgan Stanley Note
Annex 2.02-D1 - Assignment of Linden Receivable (RCM Holdings)
Annex 2.02-D2 - Assignment of Linden Receivable (CTLPJV)
Annex 2.02-E1- Consent to Assignment of Partnership Interests
and Admission of Partners (Linden Ltd.)
Annex 2.02-E2 - Partnership Amendment and Redemption Agreement (Linden Ltd.)
Annex 2.03 - Form of Bayonne Seller Note
Annex 2.04-A - CT Camden GP Interest Assignment
Annex 2.04-B - CT Camden LP Interest Assignment
Annex 7.04-A - Amendment to Linden Ltd. Partnership Agreement
Annex 7.04-B - Amendment to Linden Venture Partnership Agreement
Annex 7.04-C1 - Amendment to Camden Cogen Partnership Agreement
Annex 7.04-C2 - Amendment to CT Camden Partnership Agreement
Annex 7.04-D1 - Linden Ltd. Management Fee Termination Agreement
Annex 7.04-D2 - Linden Venture Management Fee Termination Agreement
Annex 7.04-E1 - Camden Cogen Management Fee Termination Agreement
Annex 7.04-E2 - CT Camden Management Fee Termination Agreement
Annex 7.04-F - Consent under NJ Venture Partnership Agreement
Annex 7.04-G - Bayonne Consent
Annex 7.04-H - Linden GE Consent
Annex 7.04-I - Camden GE Consent
v
<PAGE> 7
Annex 7.04-J - Linden Bank Consent
Annex 7.04-K - Camden Bank Consent
Annex 7.10 - Letters of Credit
Annex 9.01 - Employee Benefits Matters
Annex 10.02-A - Opinion of Fulbright & Jaworski
Annex 10.02-B- Opinion of Counsel to Minority Group Sellers
Annex 10.02-C- Opinion of Regulatory Counsel
Annex 10.03-A - Property to be Leased by Buyer
Annex 10.03B - Opinion of Counsel to Buyer Entities
Annex 12.01(g) - Linden Plant Matters
vi
<PAGE> 8
TRANSACTION AGREEMENT
This Transaction Agreement ("AGREEMENT") is made this 25th day of
October, 1998 between Enron Corp., an Oregon corporation ("PARENT"), Enron
Capital & Trade Resources Corp., a Delaware corporation ("BUYER" and, together
with Buyer Acquisition, Buyer Camden GP, Buyer Camden LP, Buyer Linden GP and
Buyer Linden LP (each as defined herein), the "BUYER ENTITIES"), RCM Holdings,
Inc., a Texas corporation (formerly Cogen Technologies, Inc.) ("RCM HOLDINGS"),
Cogen Technologies Camden, Inc., a Texas corporation ("CTCI"), Cogen
Technologies Capital Company, L.P. ("CT CAPITAL") and the McNair Group Sellers
and Minority Group Sellers (each as defined herein) (RCM Holdings, CTCI, CT
Capital, the McNair Group Sellers and the Minority Group Sellers are
collectively referred to herein as the "SELLERS") with reference to the
following background.
A. The Sellers (other than CT Capital) collectively own the Interests
(as defined herein).
B. The Buyer Entities desire to acquire the Interests from the Sellers,
and the Sellers collectively desire to sell the Interests to the Buyer Entities,
in exchange for the Consideration set forth herein in and accordance with the
terms and provisions set forth in this Agreement.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. Defined terms used in this Agreement shall
have the meanings specified in this Agreement or in EXHIBIT I. Unless the
context otherwise requires, as used in this Agreement: (a) a term has the
meaning ascribed to it; (b) an accounting term not otherwise defined has the
meaning ascribed to it in accordance with generally accepted accounting
principles, (c) "or" is not exclusive; (d) "including" means "including, without
limitation;" (e) words in the singular include the plural; (f) words in the
plural include the singular; (g) words applicable to one gender shall be
construed to apply to each gender; (h) the terms "hereof," "herein," "hereby,"
"hereto" and derivative or similar words refer to this entire Agreement, which
shall include Exhibits I - VI hereto; and (i) the terms "Article" or "Section"
shall refer to the specified Article or Section of this Agreement, including
Exhibits I - VI hereto.
ARTICLE 2
TRANSACTIONS AND CLOSING
SECTION 2.01. Acquisition of Interests. Upon the terms and subject to
the conditions set forth herein and in the other Transaction Documents, the
parties agree that on the Closing Date, the Buyer Entities and the Sellers will
consummate the transactions described in Sections 2.02, 2.03 and 2.04, as a
result of which the Buyer Entities will acquire the Interests. Subject to the
provisions of Section 10.01(d), the aggregate consideration (the
"CONSIDERATION") for the Interests will be $1,066,000,000 consisting of
$816,000,000 in cash and Bayonne Seller Notes (as defined herein)
<PAGE> 9
and a number of shares of Parent Common Stock having an aggregate value of
$250,000,000, based on the Parent Stock Value (the "PARENT SHARES"). The
Consideration shall be allocated among the Sellers and the various Interests in
the manner set forth in Sections 2.02, 2.03 and 2.04. The aggregate
Consideration shall be delivered to the Sellers as provided in Section 2.05 and
shall be subject to adjustment as provided in Sections 2.05(b) and 2.07.
SECTION 2.02. Linden Acquisition. At the Closing, subject to the terms
and conditions of this Agreement, the following transactions will occur (for the
purposes of the following the "LINDEN VALUE" shall mean the sum of $686,000,000
plus the "RECEIVABLE AMOUNT", which shall mean the outstanding amount of the
Linden Receivable as of December 31, 1998):
(a) Purchase of Initial Interests.
(i) RCM Holdings will sell, assign, transfer and
convey to Buyer Linden GP the RCM Holdings Initial Linden
Interest, free and clear of all Liens, in exchange for the
delivery by Buyer Linden GP to RCM Holdings of (i) an amount
in cash equal to 0.81945 multiplied by the result of (A) 0.475
multiplied by the Linden Value, minus (B) $250,000,000, and
(ii) a number of shares of Parent Common Stock equal to
$204,862,500 divided by the Parent Stock Value. The foregoing
assignment shall be evidenced by an assignment in
substantially the form attached hereto as ANNEX 2.02-A.
(ii) CTLPJV will sell, assign, transfer and convey to
Buyer Linden LP the CTLPJV Initial Linden Interest, free and
clear of all Liens, in exchange for the delivery by Buyer
Linden LP to CTLPJV of (i) an amount in cash equal to 0.18055
multiplied by the result of (A) 0.475 multiplied by the Linden
Value, minus (B) $250,000,000, and (ii) a number of shares of
Parent Common Stock equal to $45,137,500 divided by the Parent
Stock Value. The foregoing assignment shall be evidenced by an
assignment in substantially the form attached hereto as ANNEX
2.02-B.
(iii) RCM Holdings and CTLPJV will execute such other
instruments and take all such further action as shall be
required to cause Buyer Linden GP and Buyer Linden LP to be
admitted as partners in Linden Ltd. in respect of the RCM
Holdings Initial Interest and the CTLPJV Initial Interest
purchased hereunder.
(iv) Notwithstanding the foregoing, no fractional
shares of Parent Common Stock shall be issued in connection
with the transactions contemplated by this Section 2.02. To
the extent the application of the conversion rate specified in
paragraphs (a) and (b) above would result in a fractional
number of shares of Parent Common Stock being issued to RCM
Holdings or CTLPJV, in lieu of issuing fractional shares, the
number of shares of Parent Common Stock issuable to such
entity shall be rounded up to the next whole number of shares
of Parent Common Stock.
2
<PAGE> 10
(b) Redemption of Remaining Interests. Immediately following
the transactions contemplated in subsection 2.02 (a) above:
(i) Linden Ltd. will borrow an amount in cash equal
to the result of (A) 0.525 multiplied by the Linden Value,
minus (B) the Receivable Amount, from Morgan Stanley & Co.
Incorporated (or another third party lender reasonably
acceptable to the parties) to be used to effect the redemption
of the RCM Holdings Remaining Linden Interest and the CTLPJV
Remaining Linden Interest as set forth below, pursuant to a
promissory note substantially in the form attached hereto as
ANNEX 2.02-C. In the event that Sellers are unable to cause
Morgan Stanley & Co. Incorporated or another reasonably
acceptable lender to make such loan to Linden Ltd., Buyer
shall have the right to obtain such funds through a lender of
its own selection.
(ii) Immediately following the transactions
contemplated by the foregoing paragraph, the parties shall
cause Linden Ltd. to redeem:
(A) the RCM Holdings Remaining Linden
Interest in exchange for (1) the payment by Linden
Ltd. to RCM Holdings of an amount in cash equal to
0.81945 multiplied by the result of (x) 0.525
multiplied by the Linden Value, minus (y) the
Receivable Amount, and (2) the assignment by Linden
Ltd. of an 81.945% interest in the Linden Receivable
as evidenced by an assignment substantially in the
form of ANNEX 2.02-D1 hereto; and
(B) the CTLPJV Remaining Linden Interest in
exchange for (1) the payment by Linden Ltd. to CTLPJV
of an amount in cash equal to 0.18055 multiplied by
the result of (x) 0.525 multiplied by the Linden
Value, minus (y) the Receivable Amount, and (2) the
assignment by Linden Ltd. of an 18.055% interest in
the Linden Receivable as evidenced by an assignment
substantially in the form of ANNEX 2.02-D2 hereto,
in each case in full satisfaction of all amounts owed by
Linden Ltd. in respect of such interests.
(iii) To effect the foregoing redemptions, RCM
Holdings, CTLPJV, Buyer Linden GP and Buyer Linden LP will
execute and deliver the Partnership Amendment and Redemption
Agreement in substantially the form set forth as ANNEX 2.02-E
hereto.
SECTION 2.03. Bayonne Acquisition. At the Closing, subject to the terms
and conditions of this Agreement, the following transactions will occur:
(a) Merger of MESC and NJ Inc. Effective immediately prior to
the Closing, the Bayonne Sellers shall take such actions as shall be
required to cause NJ Inc. to be merged
3
<PAGE> 11
with and into MESC (the "MESC/NJ MERGER") in accordance with the
applicable provisions of the TBCA and the DGCL, upon the following
terms:
(i) MESC will be the surviving corporation in such
merger and will succeed to and possess all the rights and
assets of NJ Inc. and MESC and be subject to all of the
liabilities and obligations of NJ Inc. and MESC, all in
accordance with the TBCA.
(ii) The articles of incorporation and bylaws of MESC
will be the articles of incorporation and bylaws of the
surviving corporation until thereafter properly amended.
(iii) Each share of NJ Inc. Common Stock issued and
outstanding immediately prior to the effective time of the
MESC/NJ Merger (the "EFFECTIVE TIME") will be canceled without
payment therefor.
(iv) Each share of MESC Common Stock issued and
outstanding immediately prior to the Effective Time shall
remain outstanding and shall not be affected by the MESC/NJ
Merger.
(b) Redemption of Shares. Immediately following the Effective
Time, MESC will redeem from each Bayonne Seller the Initial MESC Shares
owned by such Bayonne Seller in exchange for the delivery by MESC to
such Bayonne Seller of a promissory note having a principal amount
equal to $1,209.3909 for each Initial MESC Share so redeemed (each, a
"BAYONNE SELLER NOTE"), which Bayonne Seller Notes shall be in
substantially the form set forth as ANNEX 2.03 hereto and shall (i) be
secured pro rata with the other Bayonne Seller Notes by a pledge of
MESC's general partner interest in NJ Venture, which pledge shall be
pursuant to documentation in form and substance reasonably acceptable
to Sellers' Representatives but shall provide for the immediate release
of such pledge upon repayment in full of all obligations under such
Bayonne Seller Note, (ii) bear interest as specified therein, and (iii)
be payable in full upon demand at any time on or after the Business Day
following the Closing Date. Each Bayonne Seller will deliver to MESC in
exchange for such Bayonne Seller Note, a certificate or certificates
representing such Bayonne Seller's Initial MESC Shares, accompanied by
a duly executed stock power and such other documents as Buyer may
reasonably request to evidence the transfer of such shares to MESC.
Upon issuance of such Bayonne Seller Note, each Bayonne Seller will
cease to have any rights with respect to the Initial MESC Shares so
redeemed.
(c) Purchase of Remaining Shares. Following the redemption of
the Initial MESC Shares pursuant to Section 2.03(b), each Bayonne
Seller will sell to Buyer (or its designee) all Remaining MESC Shares
owned by such Bayonne Seller, free and clear of all Liens, in exchange
for a cash payment to such Bayonne Seller of $1,209.3909 for each
Remaining MESC Share. Each Bayonne Seller will deliver to Buyer in
exchange for such cash payment a certificate or certificates
representing such Bayonne Seller's Remaining
4
<PAGE> 12
MESC Shares, accompanied by a duly executed stock power and such other
documents as Buyer may reasonably request to evidence the transfer of
such shares to Buyer.
(d) Repayment of Bayonne Seller Notes. Buyer will cause the
Bayonne Seller Notes to be repaid in full upon presentation and
surrender thereof in accordance with their terms.
(e) Other Actions. Upon consummation of the transactions set
forth in Sections 2.03(a), (b) and (c), the Bayonne Sellers will
deliver to Buyer the minute books, stock books, stock ledgers and
corporate seal of MESC and NJ Inc., together with duly executed
resignations, effective as of the Closing, of all officers and
directors of MESC.
SECTION 2.04. Camden Acquisition. At the Closing, subject to the terms
and conditions of this Agreement, the following transactions will occur:
(a) Purchase of CT Camden LP Interest. CTLPJV will sell,
assign, transfer and convey to Buyer Camden LP all of its limited
partnership interest in CT Camden, free and clear of all Liens in
exchange for the payment by Buyer Camden LP to CTLPJV of $25,277,000 in
cash. The foregoing assignment shall be evidenced by an assignment in
substantially the form attached hereto as ANNEX 2.04-A.
(b) Purchase of CT Camden GP Interest. CTCI will sell, assign,
transfer and convey to Buyer Camden GP all of its general partnership
interest in CT Camden, free and clear of all Liens, in exchange for the
payment by Buyer Camden GP to CTCI of $114,723,000 in cash. The
foregoing assignment shall be evidenced by an assignment in
substantially the form attached hereto as ANNEX 2.04-B.
(c) Other. CTCI and CTLPJV will execute such other instruments
and take all such further action as shall be required to cause Buyer
Camden GP and Buyer Camden LP to be admitted as partners in CT Camden
in respect of the partnership interests purchased hereunder.
SECTION 2.05. Closing.
(a) The closing (the "CLOSING") of the transactions
contemplated by this Agreement shall take place at the offices of
Vinson & Elkins L.L.P., Suite 2300, 1001 Fannin, Houston, Texas 77002,
on January 4, 1999 (or, at Buyer's option, on December 31, 1998 with
respect to the Closing of the Linden Acquisition and the Camden
Acquisition, provided that the terms of such Closing shall be
reasonably agreeable to each of the parties hereto), or, if any
conditions to the Closing set forth in Article 10 have not been
satisfied by such date, then as soon as possible thereafter, but in no
event later than three Business Days after satisfaction of the
conditions set forth in Article 10, or at such other time or place as
Buyer and the Sellers Representatives may agree; provided that if all
of such conditions are satisfied other than the condition to Closing
set forth in Section 10.03(b), the parties agree
5
<PAGE> 13
that Buyer or Parent shall have the right to delay the Closing for up
to 15 days in order to make the disclosures required to satisfy such
condition.
(b) If the Closing occurs after January 15, 1999, then the
Buyer Entities, in addition to the Consideration specified in Sections
2.02, 2.03 and 2.04, will pay to the Sellers at the Closing, as
additional Consideration, for each day from January 15, 1999 through
the day prior to the Closing, a daily amount calculated by multiplying
the value of the Consideration (i.e. $1,066,000,000) by a percentage
equal to the Base Rate plus 1%, divided by 365; provided, however, that
if the Closing has not occurred but all of the conditions to Closing
set forth in Sections 10.01 and 10.02 have been satisfied (or are
immediately capable of being satisfied), then from and after the
satisfaction of such conditions the percentage referred to above shall
be (A) the Base Rate plus 1%, divided by 365, for the period from
January 16, 1999 through February 15, 1999, (B) the Base Rate plus 2%,
divided by 365, for the period from February 16, 1999 through March 15,
1999, and (C) the Base Rate plus 3%, divided by 365, for the period
from March 16, 1999 through April 15, 1999. For purposes of this
Section 2.05(b), the Base Rate shall be determined on January 15, 1999
for the period from January 16, 1999 through February 15, 1999, on
February 15, 1999 for the period from February 16, 1999 through March
15, 1999, and on March 15, 1999 for the period from March 16, 1999
through April 15, 1999.
(c) The parties agree that at the Closing, the applicable
Buyer Entities shall pay to the Sellers the cash portion of the
Consideration (as set forth in Sections 2.02, 2.03, 2.04 and 2.05(b)),
in immediately available funds by wire transfer to one or more accounts
designated by the Sellers, by notice to Buyer, not later than two
Business Days prior to the Closing Date, and shall deliver to the
Sellers certificates representing Parent Shares as set forth in
Sections 2.02 and Exhibit V hereto.
SECTION 2.06. Closing Balance Sheets.
(a) Attached hereto as Section 2.06 of the Disclosure Schedule
is an adjusted combined balance sheet dated June 30, 1998 that reflects
the Latest Balance Sheets on a combined basis, as adjusted to reflect
(i) the acquisition of PSEG Bayonne, Inc. and (ii) the elimination of
prepaid insurance premiums attributable to CT Global (the "ADJUSTED
COMBINED BALANCE SHEET").
(b) As promptly as practicable, but no later than 90 days
after the Closing Date, Buyer (with the assistance of the Sellers to
the extent requested by Buyer) will cause to be prepared and delivered
to Sellers' Representatives the Year-End Balance Sheets (as defined
below), together with unqualified opinions of Arthur Andersen LLP
thereon, the Adjusted Combined Year-End Balance Sheet (as defined
below), and a certificate based on such Adjusted Combined Year-End
Balance Sheet setting forth Buyer's calculation of Year-End Working
Capital (as defined below). The "ADJUSTED COMBINED YEAR-END BALANCE
SHEET" shall be prepared on a combined basis from the audited balance
sheet of MESC as of December 31, 1998, the audited balance sheet of CT
Camden as of December 31, 1998 and the audited balance sheet of Linden
Ltd. as of December 31, 1998 (collectively, the "YEAR-
6
<PAGE> 14
END BALANCE SHEETS"), as adjusted to reflect the adjustment events
described in clause (ii) of Section 2.06(a). The Adjusted Combined
Year-End Balance Sheet shall not reflect any assets or liabilities
associated with the Turbine Order or the Real Estate Option. The Year-
End Balance Sheets shall (x) present fairly, in conformity with
generally accepted accounting principles, the assets and liabilities of
such respective entities, determined at the close of business on
December 31, 1998 and (y) be prepared, subject to compliance with
generally accepted accounting principles, in the same manner and format
as the Latest Balance Sheets. The excess of the amount of the current
assets over the amount of current liabilities (excluding current
maturities of long term debt) reflected on the Adjusted Combined Year-
End Balance Sheet, determined in accordance with this Section, is
referred to as "YEAR-END WORKING CAPITAL".
(c) If the Sellers' Representatives disagree with Buyer's
calculation of Year-End Working Capital delivered pursuant to Section
2.06(b), the Sellers' Representatives may, within 30 days after
delivery of the Adjusted Combined Year-End Balance Sheet, deliver a
notice to Buyer disagreeing with Buyer's calculation of Year-End
Working Capital and setting forth Sellers' Representatives' calculation
of Year-End Working Capital. Any such notice of disagreement shall
specify those items or amounts as to which the Sellers' Representatives
disagree, and the Sellers shall be deemed to have agreed with all other
items and amounts contained in the Adjusted Combined Year-End Balance
Sheet and the calculations of Year-End Working Capital delivered
pursuant to Section 2.06(b).
(d) If a notice of disagreement shall be duly delivered
pursuant to Section 2.06(c), Buyer and the Sellers' Representatives'
shall, during the 30 days following such delivery, use their reasonable
efforts to reach agreement on the disputed items or amounts in order to
determine Year-End Working Capital. If, during such period, Buyer and
Sellers' Representatives are unable to reach such agreement, they shall
promptly thereafter retain KPMG Peat Marwick LLP or such other
nationally recognized accounting firm as they may agree in the event
KPMG Peat Marwick LLP is unwilling to accept such engagement (the
"ACCOUNTING REFEREE") to promptly review this Agreement and the
disputed items or amounts for the purpose of calculating Year-End
Working Capital. In making any such calculation, the Accounting Referee
shall consider only those items or amounts in the Adjusted Combined
Year-End Balance Sheet or Buyer's calculation of Year-End Working
Capital as to which Sellers' Representatives have disagreed. The
Accounting Referee shall deliver to Buyer and the Sellers'
Representatives, as promptly as practicable, a report setting forth
each such calculation. Such report shall be final and binding upon
Buyer and Sellers. The cost of such review and report shall be borne
equally by the Buyer Entities and Sellers.
(e) The Buyer Entities and Sellers agree that they will, and
agree to cause their respective independent accountants to, cooperate
and assist in the preparation of the Year- End Balance Sheets and the
calculation of Year-End Working Capital and in the conduct of the
audits and reviews referred to in this Section 2.06, including, without
limitation, making available to the extent reasonably required books,
records, work papers and personnel.
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SECTION 2.07. Adjustment of Consideration.
(a) If Final Working Capital (as defined below) is less than
negative $4,932,952, Sellers shall pay to Buyer, as an adjustment to
the Consideration, in the manner and with interest as provided in
Section 2.07(b), an amount in cash equal to such difference. If Final
Working Capital is greater than negative $4,932,952, Buyer shall pay to
Sellers, as an adjustment to the Consideration, in the manner and with
interest as provided in Section 2.07(b), an amount in cash equal to
such difference. "FINAL WORKING CAPITAL" means Year- End Working
Capital (i) as shown in Buyer's calculation delivered pursuant to
Section 2.06(b) if no notice of disagreement with respect to Buyer's
calculation is duly delivered pursuant to Section 2.06(c), or (ii) if
such a notice of disagreement is delivered, as agreed by Buyer and the
Sellers' Representatives pursuant to Section 2.06(d) or in the absence
of such agreement, as shown in the Accounting Referee's calculation
delivered pursuant to Section 2.06(d).
(b) Any payment pursuant to Section 2.07(a) shall be made
within ten days after Final Working Capital has been determined, by
delivery by Sellers or Buyer, as the case may be, of immediately
available funds by wire transfer to an account of Sellers or Buyer, as
the case may be, designated by the Seller' Representatives or Buyer, as
the case may be, by notice to the Seller' Representatives or Buyer, as
the case may be, not later than two Business Days prior to the payment
date. The amount of any payment to be made pursuant to this Section
2.07 shall bear interest from and including the Closing Date to but
excluding the date of payment at a rate per annum (based on a 365-day
year) equal to the Specified Rate. Such interest shall be payable at
the same time as the payment to which it relates and shall be
calculated on March 31, June 30, September 30 and December 31 (each, a
"QUARTERLY DATE") of each year (with the rate determined on such date
to be the rate for the three months or portion thereof following such
date). The interest rate for the quarter in which the Closing occurs
will be the interest rate determined by reference to the Quarterly Date
immediately preceding the Closing Date. McNair will be liable to Buyer
for all amounts owed to Buyer by any of the Sellers pursuant to Section
2.07.
SECTION 2.08. Other Transactions.
(a) Turbine Order. Subject to the terms set forth herein, at
the Closing, the Sellers will cause CT Generating to assign to Buyer
(or its designee) all of its rights to purchase from GE Power Systems
three Model 7241FA Packaged Power Plants on the terms indicated in the
letter dated August 12, 1998 from GE Power Systems to Cogen
Technologies bearing the reference "GE IPS #80518" (the "TURBINE
ORDER"), including the benefit of the $1 million purchase price credit
referenced in the letter dated June 10, 1997 from Raymond F. Bossotti
of GE Power Systems to B. Ligato, and including CT Generating's rights
(and the rights of any of its Affiliates) under any definitive
agreements entered into in connection with the Turbine Order. Sellers
will cause CT Generating not to enter into any such definitive
agreements without Buyer's prior written consent. Such assignment shall
be subject to Buyer receiving a consent satisfactory to it from GE
Power Systems consenting to the transfer of such Turbine Order and
purchase price credit to Buyer or its designee.
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Sellers agree to use their reasonable efforts to obtain such consent.
Subject to obtaining such consent, at the Closing, Buyer (or its
designee) will (i) pay to CT Generating an amount in cash equal to any
cash deposits or installments paid by or on behalf of CT Generating to
GE Power Systems that are credited to the purchase price pursuant to
the Turbine Order, and (ii) assume the obligations of CT Generating
under the Turbine Order.
(b) Real Estate Option. Subject to the terms set forth herein,
at the Closing, Sellers will cause to be assigned to Buyer or its
designee all rights under the option to purchase certain real property
set forth in the Contract of Sale dated as of September 1, 1998 between
Baldwin Transportation Company and Orange Service Company, L.L.C. (the
"REAL ESTATE OPTION"), subject to any consents required in connection
with such assignment, in exchange for the payment by Buyer or its
designee to a Person designated by the Sellers' Representatives of an
amount in cash equal to the $285,318 deposit thereunder; provided,
however, that:
(i) if the Real Estate Option shall have expired
unexercised prior to the Closing, it shall not be so assigned
and no payment shall be made therefor; and
(ii) if Sellers shall have exercised the Real Estate
Option prior to the Closing with Buyer's consent, the Real
Estate Option shall not be assigned but in lieu thereof the
Sellers shall cause to be sold and conveyed to Buyer or its
designee at Closing the real property covered by the Real
Estate Option in exchange for the payment by Buyer or its
designee to a Person designated by the Sellers'
Representatives of an amount in cash equal to the aggregate
purchase price paid pursuant to such Real Estate Option in
accordance with the terms thereof.
Sellers further agree that they will not permit the Real Estate Option
to be exercised without Buyer's consent and that they will cause the
Real Estate Option to be exercised if Buyer so requests prior to the
Closing.
SECTION 2.09. Reimbursement for Certain Tax Payments. At the Closing,
CTLPJV and CTCI shall pay to Buyer an amount equal to the distribution to be
made pursuant to Section 4.6 of the Camden Cogen Partnership Agreement as a
result of the termination of Camden Cogen under section 708 of the Code caused
by the Contemplated Transactions. Such payment shall be made 81.945% by CTCI and
18.055% by CTLPJV. McNair shall reimburse Buyer for any reduction in future
distributions incurred as a result of the amount paid to Buyer pursuant to this
Section 2.09 being less than the amount of the distributions required to be made
pursuant to Section 4.6 of the Camden Cogen Partnership Agreement as a result of
the termination of Camden Cogen under section 708 of the Code caused by the
Contemplated Transactions.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
SECTION 3.01. Representations and Warranties of McNair. McNair
represents and warrants to the Buyer Entities and Parent as set forth in EXHIBIT
II.
SECTION 3.02. Representations and Warranties of the McNair Group
Sellers and the Minority Group Sellers. The McNair Group Sellers and the
Minority Group Sellers represent and warrant to the Buyer Entities and Parent as
set forth in EXHIBIT III.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER ENTITIES
SECTION 4.01. Representations and Warranties of Buyer Entities. The
Buyer Entities represent and warrant to the Sellers as set forth in EXHIBIT IV.
ARTICLE 5
COVENANTS OF THE SELLERS
SECTION 5.01 Conduct of Business. Except as contemplated by the
Transaction Documents, from the date of this Agreement until the Closing Date,
the Sellers will (in connection with their ownership of the Acquired Entities),
and will cause the Acquired Entities to, conduct their respective businesses in
the ordinary course consistent with past practices, use their reasonable efforts
to preserve intact, in all material respects, the business organizations and
relationships with third parties and keep available the services of the present
employees of the Acquired Entities. In addition, Sellers will not, and will
cause the Acquired Entities not to, willfully take any action that would make
any representation or warranty of any Seller under this Agreement inaccurate in
any material respect at the Closing Date. Without limiting the generality of the
foregoing, except as contemplated by the Transaction Documents, from the date of
this Agreement until the Closing Date, without the prior written consent of
Buyer (which, in the case of clauses (ii) or (iii) of paragraph (c) below will
not be unreasonably withheld), the Sellers will not (in connection with their
ownership of the Acquired Entities) and will cause each Acquired Entity not to:
(a) amend the partnership agreement, charter or bylaws of any
Acquired Entity, or fail to maintain the books and records of any
Acquired Entity in the ordinary course of business consistent with past
practices;
(b) sell, lease, license, create any Lien upon or otherwise
dispose of, or enter into any contract or option to sell, lease,
license, create any Lien upon or otherwise dispose of, any assets that
are material to an Acquired Entity, except in the ordinary course of
business
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consistent with past practices or in compliance with any Material
Contract listed on Section II.10(a) of the Disclosure Schedule;
(c) (i) amend, modify, terminate or restructure, or waive any
material rights, obligations, claims or defaults under, any Material
Contract, or (ii) approve the annual operating plan or the annual
operating budget under the partnership agreements and Operation and
Maintenance Agreements relating to any of the Operating Facilities, or
(iii) approve any modifications or revisions thereto, or any
expenditures not provided for in such operating plans or budgets that
exceed $250,000 individually or $1,000,000 in the aggregate for all
Acquired Entities;
(d) issue, sell, pledge or purchase, or agree to issue, sell,
pledge or purchase, any partnership interest, capital stock or other
equity interest in any Acquired Entity, or any options, rights, or
warrants to acquire, or securities convertible into, any partnership
interest, capital stock or other equity interest in any Acquired
Entity, or split, combine or reclassify or pay any stock dividend in
respect of the shares of capital stock of any Acquired Entity or take
any similar action in connection with the partnership interests of any
Acquired Entity;
(e) change any significant accounting policy of any Acquired
Entity or make or rescind any express or deemed election relating to
Taxes by any Acquired Entity or settle or compromise any claim, action,
litigation, arbitration or investigation that would be material to any
Acquired Entity;
(f) incur any Indebtedness for Borrowed Money in excess of
currently available credit facilities, or guarantee or agree to act as
surety with respect to any obligation of any Seller or any Affiliate of
a Seller, or guarantee or agree to act as surety with respect to any
obligation of any person other than a Seller or Affiliate of a Seller
that exceeds $250,000 in the aggregate;
(g) except as disclosed in Section 5.01(g) of the Disclosure
Schedule, enter into any agreement or arrangement with any Affiliate of
any Seller that would survive or create any obligation on the part of
an Acquired Entity after the Closing;
(h) enter into any agreement, arrangement or understanding
involving a commitment on the part of any Acquired Entity to expend in
excess of $250,000 individually or $1,000,000 in the aggregate for all
Acquired Entities;
(i) fail to take any commercially reasonable action necessary
to maintain the status of any Operating Facility as a "qualifying
cogeneration facility" under the PURPA Requirements or any applicable
state law;
(j) except as disclosed in Section 5.01(j) of the Disclosure
Schedule, increase the compensation payable to or to become payable to
any director or officer of any Acquired Entity, except for increases in
salary or wages payable or to become payable upon promotion to an
office having greater operational responsibilities or otherwise in the
ordinary course of
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business and consistent with past practice; grant any severance or
termination pay (other than pursuant to the severance policies of such
Acquired Entity as in effect on the date of this Agreement) to, or
enter into any employment or severance agreement with, any director,
officer, or employee of any Acquired Entity, either individually or as
part of a class of similarly situated persons; establish, adopt or
enter into any Benefit Plan; or, except as required by applicable law,
amend or take any other actions, including, but not limited to,
acceleration of vesting and waiver of performance criteria, with
respect to any Benefit Plan; or
(k) enter into any contract, agreement or commitment with
respect to any of the foregoing.
The parties further agree that no payments of principal or
interest on, or additional borrowings shall be made under, the Linden
Receivable from December 31, 1998 through the Closing Date, and that
from and after such date through the Closing, Sellers will not permit
any of the Acquired Entities to make or guarantee any loans to any
party.
SECTION 5.02 Access to Information; Confidentiality.
(a) From the date of this Agreement until the Closing Date,
the Sellers will, and will cause each Acquired Entity to, (i) give the
Buyer Entities and their Representatives (which, for purposes of this
Section 5.02(a) shall be deemed to include proposed lenders to the
Buyer Entities) full access, to the extent reasonably requested
thereby, to each Acquired Entity's offices, properties, books, records
and employees, and those of its Affiliates to the extent related to the
Acquired Entities, and to use their reasonable efforts to provide the
Buyer Entities and their Representatives promptly after the date hereof
access to each Acquired Entity's lenders, customers and service
providers, each during normal business hours and upon reasonable prior
notice; provided that any such access by any Buyer Entity or its
Representatives shall not unreasonably interfere with the conduct of
business by such Acquired Entity or Affiliate thereof, and provided,
further, that the Buyer Entities agree that all discussions between the
Buyer Entities and any Acquired Entity's lenders, customers and service
providers (to the extent such discussions relate to the Acquired
Entities) shall be limited to matters reasonably related to continuing
due diligence with respect to the Contemplated Transactions and matters
reasonably related to the satisfaction of any conditions to the
Closing, (ii) permit the Buyer Entities and their Representatives to
conduct non-invasive environmental and other inspections and
investigations with respect to the Real Property and the Operating
Facilities during normal business hours and upon reasonable prior
notice, (iii) furnish to the Buyer Entities and their Representatives
such financial and operating data and other information regarding such
Acquired Entity and such Affiliates (to the extent related to the
Acquired Entities) as such Buyer Entity or Representative may
reasonably request and (iv) instruct its employees and Representatives
to cooperate with the Buyer Entities in connection with such
activities. The parties agree that the Sellers or their Representatives
will initiate the initial contact with lenders, customers and service
providers of the Acquired Entities pursuant to clause (i) above and
that a Representative of the Sellers shall have the opportunity to
participate in such initial discussions. Thereafter, the Buyer
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Entities agree to keep a Representative of the Sellers reasonably
apprised of the progress of any discussions with such entities in
connection with the Contemplated Transactions.
(b) On and after the Closing Date, Sellers will, and will
cause their respective Affiliates to, afford promptly to the Buyer
Entities and their Representatives, as reasonably requested thereby,
reasonable access to their books and records during normal business
hours and upon reasonable prior notice to permit the Buyer Entities and
their Representatives to review the accounting, regulatory,
environmental or tax records relating to any Acquired Entity so that
the Buyer Entities may determine any such issue relevant to them in
connection with the Contemplated Transactions; provided that any such
access by the Buyer Entities or their Representatives shall not
unreasonably interfere with the conduct of the business of such Seller
or Affiliate. For a period of seven (7) years following the Closing
Date, the Sellers will not, without first having offered to deliver the
same to the Buyer Entities, destroy or permit the destruction of any of
such books and records in the possession of the Sellers or their
Affiliates.
(c) On and after the Closing Date, the Buyer Entities will,
and will cause their respective Affiliates to, afford promptly to the
Sellers and their Representatives, as reasonably requested thereby,
reasonable access to the books and records of the Acquired Entities
during normal business hours and upon reasonable prior notice to permit
the Sellers and their Representatives to review the accounting,
regulatory, environmental or tax records relating to any Acquired
Entity on or before the Closing Date so that the Sellers may determine
any such issue relevant to them in connection with the Contemplated
Transactions; provided that any such access by the Sellers or their
Representatives shall not unreasonably interfere with the conduct of
the business of such Buyer Entity, the Acquired Entities or their
Affiliates. For a period of seven (7) years following the Closing Date,
the Buyer Entities will not, without first having offered to deliver
the same to the Sellers, destroy or permit the destruction of any of
such books and records in the possession of the Buyer Entities or their
Affiliates.
(d) Prior to the Closing, any information obtained by either
party pursuant to this Section 5.02 shall be subject to the provisions
of the Confidentiality Agreement. The parties agree that the
Confidentiality Agreement shall terminate upon the Closing.
(e) On and after the Closing Date, the Sellers will hold and
will use their reasonable efforts to cause their respective Affiliates
and Representatives to hold, in confidence, unless compelled to
disclose by Applicable Law, all confidential information concerning any
Buyer Entity or the Acquired Entities, except to the extent that such
information can be shown to have been (i) in the public domain through
no fault of any Seller, its Affiliates or any of its Representatives or
(ii) later lawfully acquired by any Seller on a non-confidential basis
from sources other than a Buyer Entity or Acquired Entity, but only to
the extent that any such source is not bound by a confidentiality
agreement with any Buyer Entity, any Acquired Entity, any Seller or any
Affiliate of a Seller.
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(f) On and after the Closing Date, the Buyer Entities will
hold and will use their reasonable efforts to cause their respective
Affiliates and Representatives to hold, in confidence, unless compelled
to disclose by Applicable Law, all confidential information concerning
any Seller or Affiliate of a Seller (other than any Acquired Entity),
except to the extent that such information can be shown to have been
(i) in the public domain through no fault of any Buyer Entity or any of
its Representatives or (ii) later lawfully acquired by any Buyer Entity
on a non-confidential basis from sources other than the Sellers, but
only to the extent that any such source is not bound by a
confidentiality agreement with any Seller, any Acquired Entity or any
Affiliate of a Seller.
SECTION 5.03. Enjoyment of Benefits.
(a) Except as set forth in this Section 5.03(a), nothing in
this Agreement shall restrict any Seller's right to engage in any
business (whether through ownership, management, consulting or
otherwise) in any location that engages in the development or ownership
of electric power generation facilities or the acquisition or sale or
marketing of electric power. Notwithstanding the foregoing, McNair
agrees that until the fifth anniversary of the Closing Date, he will
not undertake any activities that would directly adversely affect in
any material way the enjoyment by the Buyer Entities of the economic
benefits of the operation of the Operating Facilities and any
Contemplated Expansion, as such plants are being operated or power is
being sold on the Closing Date or as such facilities are operated or
power is sold following any such Contemplated Expansion.
(b) McNair agrees that until the third anniversary of the
Closing Date, he will not, and will cause each of his Affiliates not
to, directly or indirectly, employ, receive or solicit the performance
of services by any Transferred Employee; provided that this Section
5.03(b) shall not prohibit McNair from employing, receiving or
soliciting the performance of services by any Transferred Employee
whose employment relationship with Buyer is terminated by Buyer during
the three-year period without Cause.
(c) McNair acknowledges that the Buyer Entities would be
irreparably harmed by any breach of this Section 5.03 and that there
would be no adequate remedy at law or in damages to compensate the
Buyer Entities for any such breach. McNair agrees that the Buyer
Entities shall be entitled to injunctive relief requiring specific
performance by him of this Section 5.03, and McNair consents to the
entry of such injunctive relief.
SECTION 5.04. Notices of Certain Events. Each Seller shall notify Buyer
as promptly as practicable upon becoming aware of:
(a) any changes or events which, individually or in the
aggregate, have had or could reasonably be expected to have a Material
Adverse Effect;
(b) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection
with the transactions contemplated hereby, other than consents
disclosed in Section II.06 of the Disclosure Schedule;
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(c) any notice or other communication (i) from any
Governmental Authority in connection with the Contemplated
Transactions, (ii) from any party to a Material Contract in connection
with the Contemplated Transactions or in which such party asserts in
writing a breach, default or event of default or other non-performance
by or in respect of any Acquired Entity pursuant to a Material Contract
(whether or not in connection with the Contemplated Transactions) or
(iii) with respect to the status of any Operating Facility as a
"qualifying cogeneration facility" under the PURPA Requirements or any
applicable state law;
(d) any actions, suits, claims, investigations, arbitration or
proceedings commenced or threatened against, relating to or involving
or otherwise affecting the Acquired Entities that, if pending on the
date of this Agreement, would have been required to have been disclosed
pursuant to Section II.11 of Exhibit II or that relate to the
Contemplated Transactions;
(e) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the Acquired Entities in any
material respect;
(f) any notice from the operator under the Operation and
Maintenance Agreements relating to any of the Operating Facilities of
any change in operating procedures with respect to such Operating
Facilities; and
(g) any action or event that constitutes a breach by any such
Seller under this Agreement.
SECTION 5.05. Maintenance and Enforcement of Insurance Policies.
(a) From and after the date of this Agreement (including after
the Closing Date), Sellers shall not, and McNair, RCM Holdings and CTCI
shall cause each of the Acquired Entities not to, take or fail to take
any action if such action or inaction, as the case may be, would
adversely affect the applicability of any insurance in effect on the
date of this Agreement that covers all or any part of the Acquired
Entities with respect to events occurring prior to the Closing
("APPLICABLE INSURANCE").
(b) McNair, RCM Holdings and CTCI agree that, from and after
the Closing Date, except as disclosed in Section 5.05(b) of the
Disclosure Schedule, all Applicable Insurance directly or indirectly
applicable to the Acquired Entities shall be for the benefit of the
Buyer Entities. Without limiting the generality of the foregoing, from
and after the Closing Date and in any manner requested by Buyer,
McNair, RCM Holdings and CTCI shall use their reasonable efforts to
ensure that all Applicable Insurance policies and arrangements are
modified, amended or assigned so that, except as disclosed in Section
5.05(b) of the Disclosure Schedule, the Buyer Entities are the direct
beneficiary of such Applicable Insurance with all rights to enforce,
obtain the benefit of and take all other action in respect of such
Applicable Insurance; provided that, if the modifications, amendments
or assignments contemplated by this Section 5.05(b) are not
permissible, McNair, RCM
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Holdings and CTCI shall enter into such other arrangements as Buyer may
reasonably request to ensure that the Buyer Entities are entitled to
the benefit (to the fullest extent set forth in the relevant policies
and arrangements) of any Applicable Insurance.
(c) Notwithstanding anything to the contrary in this Section
5.05, the term Applicable Insurance shall not include any insurance
provided by CT Global, it being acknowledged and understood by the
parties to this Agreement that immediately following the Closing, all
insurance provided by CT Global and all reinsurance by CT Global to
other carriers covering the Acquired Entities will be terminated.
SECTION 5.06. Certain Contracts. McNair, RCM Holdings and CTCI shall
take all actions reasonably practicable to ensure that all Material Contracts
entered into by any Acquired Entity on or after the date of this Agreement do
not require a consent or other action by any Person as a result of the
execution, delivery or performance of the Transaction Documents or the
consummation of the Contemplated Transactions.
SECTION 5.07. Non-Solicitation. The Sellers agree that neither they nor
any of their respective Representatives, nor any of their respective Affiliates
or any Representatives of their respective Affiliates, will, directly or
indirectly, (i) initiate, solicit, encourage or otherwise facilitate (including
by way of furnishing information or assistance) any Competing Proposal or any
inquiries that may reasonably be expected to lead to a Competing Proposal, or
(ii) engage in any discussion with or provide any confidential information or
data to any Person that may reasonably be expected to lead to a Competing
Proposal or engage in any negotiations concerning, or otherwise facilitate any
effort or attempt to make or implement, a Competing Proposal. The Sellers agree
that they will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Competing Proposal.
SECTION 5.08. Dividends and Distributions. Except as expressly
contemplated by this Agreement, during the period from December 31, 1998 through
the Closing Date, McNair, RCM Holdings and CTCI shall cause MESC, Linden Ltd.
and CT Camden not to declare, make or pay any dividends or distributions to
their respective shareholders or partners.
ARTICLE 6
AGREEMENTS RELATED TO PARENT SHARES
SECTION 6.01. Agreements Related to Parent Shares. The Parent Stock
Recipients will be entitled to the benefit of the registration rights with
respect to the Parent Shares issued in connection with this Agreement, and agree
to the restrictions on transfer and certain other matters concerning the Parent
Shares, all as set forth in EXHIBIT V.
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ARTICLE 7
Covenants of the Parties
SECTION 7.01. Further Assurances.
(a) The Buyer Entities and McNair, RCM Holdings and CTCI shall
use their reasonable efforts to (i) take, or cause to be taken, all
appropriate action and do, or cause to be done, all things necessary,
proper or advisable under Applicable Law or otherwise to consummate the
Contemplated Transactions as promptly as practicable, (ii) obtain
expeditiously from any Governmental Authorities any consents, licenses,
permits, waivers, approvals, authorizations or orders required to be
obtained or made in connection with the consummation of the
Contemplated Transactions, and (iii) as promptly as practicable, (but
within five Business Days after the expiration of the termination
rights set forth in Sections 12.01(f) and 12.01(h) hereof with respect
to the initial filings under clauses (A) or (B) below) make all
necessary filings and give all required notices, and promptly
thereafter make any other required submissions, with respect to this
Agreement and the Contemplated Transactions required under (A) the HSR
Act and any related governmental request thereunder, (B) ISRA and (C)
any other Applicable Law or agreement with any Governmental Authority;
provided that Buyer and the Sellers shall cooperate with each other,
and furnish to each other all information reasonably required in
connection with the making of all such filings and the giving of all
such notices, including, unless prohibited by Applicable Law, providing
copies of all such documents to the non-filing party and its advisors
prior to filing and, if requested, accepting all reasonable additions,
deletions or changes suggested by the other party in connection
therewith. The Sellers, other than McNair, RCM Holdings and CTCI, shall
use their reasonable efforts to take, or cause to be taken, all
appropriate action and do, or cause to be done, all things necessary,
proper or advisable on their part, under Applicable Law or otherwise,
to consummate the Contemplated Transactions as promptly as practicable.
From the date of this Agreement until the Closing Date, each party
shall promptly notify the other party in writing of any pending or, to
the knowledge of the first party, threatened action, proceeding or
investigation by any Governmental Authority or any other Person (i)
challenging or seeking material damages in connection with consummation
of the Contemplated Transactions or (ii) seeking to restrain or
prohibit the consummation of the Contemplated Transactions or otherwise
limit the right of the Buyer Entities to own or operate all or any
portion of the Acquired Entities.
(b) (i) McNair, RCM Holdings and CTCI shall give (or cause to
be given) any notices to third parties and use, and cause the
Acquired Entities to use, reasonable efforts to obtain any
third party consents (A) necessary, proper or advisable to
consummate the Contemplated Transactions, (B) disclosed or
required to be disclosed in Section II.06 of the Disclosure
Schedule or (C) required to prevent a Material Adverse Effect
from occurring prior to or after the Closing.
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(ii) In the event that McNair, RCM Holdings or CTCI
fail to obtain any third party consent described in subsection
(b)(i) above, they shall use their reasonable efforts, and
shall take any such actions reasonably requested by the Buyer
Entities, to minimize any adverse effect upon the Buyer
Entities, their Subsidiaries, and their respective businesses
resulting, or which could reasonably be expected to result
after the Closing, from the failure to obtain such consent.
SECTION 7.02 Public Announcements. Subject to applicable securities
laws or stock exchange requirements, neither Buyer nor any Seller shall, without
the prior approval of the other parties, issue or permit any of their respective
partners, directors, officers, employees, agents or Affiliates to issue, any
press release or other public announcement with respect to this Agreement or the
transactions contemplated hereby. If a party is required to disclose information
with respect to this Agreement or the transactions contemplated hereby under
applicable securities laws or stock exchange requirements, to the extent
reasonably practicable under the circumstances, such party shall provide the
other party with prior notice of its intent to make the disclosure and the
general content of the disclosure.
SECTION 7.03 Indemnification of Directors, Officers, Etc.
(a) Survival of Indemnity Provisions. The Buyer Entities agree
that, to the fullest extent permitted by Applicable Law, all rights to
indemnification and exculpation now existing or hereafter arising in
favor of the directors, officers, general partners or directors or
officers of the general partners of any Acquired Entity (the "COVERED
PARTIES") with respect to acts or omissions occurring prior to the
Closing that are based on or arise out of such Covered Party's service
to the Acquired Entity in his capacity as such, pursuant to the
articles or certificates of incorporation, bylaws or partnership
agreements of such entities as in effect on the date hereof, shall
survive the Closing and shall continue in full force and effect
thereafter. The provisions of the articles or certificates of
incorporation, bylaws and partnership agreements of the Acquired
Entities that provide for indemnification of the Covered Parties shall
not be amended, repealed or otherwise modified in any manner that would
adversely affect the rights thereunder of the Covered Parties with
respect to acts or omissions occurring on or before the Closing Date.
(b) Buyer Indemnity. To the fullest extent permitted by
Applicable Law, from and after the Closing, Buyer will indemnify and
hold harmless each Covered Party with respect to acts and omissions
occurring prior to the Closing that are based on or arise out of the
Covered Party's service to such Acquired Entity in his capacity as
such, to the extent provided by whichever of the following is most
favorable to the Covered Party: (i) any indemnification provision that
such Acquired Entity has in its articles or certificate of
incorporation, bylaws or partnership agreement for the benefit of such
Covered Party in his capacity as such at the date of this Agreement and
(ii) indemnification to the same extent as would be permitted by
Applicable Law with respect to the directors and officers of Buyer
pursuant to the provisions in Buyer's then-existing certificate of
incorporation or bylaws.
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(c) Insurance. For a period of six years after the Closing
Date, Buyer shall cause to be maintained in effect the policies of
directors' and officers' liability insurance maintained by or on behalf
of the Acquired Entities or their Affiliates as of the date of this
Agreement covering those persons who are currently covered by such
policies in connection with their service to the Acquired Entities with
respect to actions taken or omissions occurring prior to the Closing
(or, at Buyer's option, substitute policies of at least the same
coverage containing terms that are in the aggregate no less favorable
to such insured persons) to the extent such liability insurance can be
obtained at a cost not greater than 200 percent of the current annual
premiums for the policies (or portions thereof) currently maintained by
the Acquired Entities or their Affiliates as of the date of this
Agreement for such insured persons; provided, that if such insurance
coverage cannot be so maintained or obtained at such cost, Buyer shall
maintain or obtain a policy providing the best coverage available, as
determined by the Board of Directors of Buyer, for a premium not
exceeding 200 percent of the current annual premiums for such
insurance.
(d) Disputes Relating to the Contemplated Transactions and
Related Matters. Notwithstanding the other provisions of this Section
7.03 or the provisions of the articles or certificate of incorporation,
bylaws or partnership agreements of the Acquired Entities, no Covered
Party shall have any right to indemnification, and no Covered Party
that is a party to this Agreement will make any claim for or assert his
right to indemnification, from any Acquired Entity or any Buyer Entity
from and after the Closing Date in respect of any litigation, suit,
claim, proceeding or other dispute arising in whole or in part out of
the Contemplated Transactions or under this Agreement (except as
expressly provided in Section 11.02(c) hereof), or in any litigation,
suit, claim, proceeding or other dispute between an Acquired Entity,
Buyer, any Affiliate of any Acquired Entity or Buyer, a partner in any
Acquired Entity or any other Seller or other Covered Party against such
Covered Party.
(e) Benefit of Provisions. The provisions of this Section 7.03
are expressly for the benefit of the Covered Parties, shall be
enforceable by each of them, and shall survive the Closing. If Buyer or
any of its successors or assigns (i) consolidates with or merges into
any other person and shall not be the continuing or surviving entity of
such consolidation or merger, or (ii) transfers all or substantially
all of its properties and assets to any person, then, and in each such
case, proper provision shall be made so that the successors and assigns
of Buyer assume the obligations of Buyer set forth in this Section
7.03.
SECTION 7.04 Amendments of Partnership Agreements; Termination of
Management Fee Agreements; Consents.
(a) McNair, RCM Holdings and CTCI agree to use their
reasonable efforts to cause the following to occur, each effective
immediately prior to the Closing and, subject to Section 7.04(c), each
at the expense of the Sellers and without recourse to any Buyer Entity
or Acquired Entity:
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(i) the Linden Ltd. Partnership Agreement shall be
amended by execution and delivery by the parties thereto of an
amendment to such agreement in substantially the form of ANNEX
7.04-A hereto;
(ii) the Linden Venture Partnership Agreement shall
be amended by execution and delivery by the parties thereto of
an amendment to such agreement in substantially the form of
ANNEX 7.04-B hereto;
(iii) the Camden Cogen Partnership Agreement and the
CT Camden partnership agreement shall be amended by execution
and delivery by the parties thereto of amendments to such
agreements in substantially the form of ANNEXES 7.04-C1 AND
7.04-C2 hereto;
(iv) Linden Ltd. and Linden Venture shall enter into
the Management Fee Termination Agreements with the other
parties thereto in substantially the form of ANNEXES 7.04-D1
AND 7.04-D2 hereto, and the transactions contemplated thereby
shall be completed;
(v) CT Camden and Camden Cogen shall enter into the
Management Fee Termination Agreements with the other parties
thereto in substantially the form of ANNEXES 7.04-E1 AND
7.04-E2 hereto, and the transactions contemplated thereby
shall be completed; and
(vi) the parties to the NJ Venture Partnership
Agreement shall execute and deliver a consent to the
transactions contemplated by this Agreement and certain other
matters in substantially the form of ANNEX 7.04-F hereto.
The partnership agreement amendments, consents and Management
Fee Termination Agreements described in this Section 7.04(a)
are referred to herein as the "PARTNERSHIP CONSENTS".
(b) McNair, RCM Holdings and CTCI agree to use their
reasonable efforts to obtain prior to the Closing, each at the expense
of the Sellers and not any Buyer Entity or Acquired Entity, the
following consents:
(i) the Bayonne Consent in substantially the form of
ANNEX 7.04-G hereto (the "BAYONNE CONSENT");
(ii) the consent in substantially the form of ANNEX
7.04-H hereto together with the execution and delivery of all
documents referred to therein by GE or the Owner Trustee and
any consent or agreement of GE or the Owner Trustee required
in Annex 7.04-J (collectively, the "LINDEN GE CONSENT"); and
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(iii) the consent in substantially the form of ANNEX
7.04-I hereto together with any consent or agreement of GE
required in Annex 7.04-K (collectively, the "CAMDEN GE
CONSENT").
provided, however, that the provisions of this Section 7.04(b) do not
impose any obligation on the part of McNair, RCM Holdings or CTCI in
respect of obtaining the consents described in Section 7.04(c) below.
(c) The Buyer Entities agree to use their reasonable efforts
to obtain prior to the Closing the following consents:
(i) the consent in substantially the form of ANNEX
7.04-J hereto other than any consent or agreement of GE or the
Owner Trustee contemplated therein (the "LINDEN BANK
CONSENT"); and
(ii) the consent in substantially the form of ANNEX
7.04-K hereto other than any consent or agreement of GE
contemplated therein (the "CAMDEN BANK CONSENT").
The Buyer Entities will pay all fees and expenses payable to
such lenders in connection with obtaining the Linden Bank Consent and
the Camden Bank Consent in excess of the $540,000 of fees that have
been paid or have been previously agreed to be paid by CT Capital with
respect to consents as of the date of this Agreement.
(d) The Buyer Entities and the Sellers acknowledge and agree
that the forms of amendments, agreements, waivers and consents referred
in this Section 7.04 are in form and substance satisfactory to Buyer
and the Sellers. Any amendments or modifications to such documents
shall be approved by Buyer and the Sellers' Representatives, which
approval shall not be unreasonably withheld.
SECTION 7.05 Buyer Insurance. The Buyer Entities shall cause to be put
in place as of the Closing Date insurance policies covering the Acquired
Entities with coverage amounts and containing terms and conditions that are
sufficient to meet the obligations of the Acquired Entities under their
respective partnership agreements and loan agreements.
SECTION 7.06 Bayonne Management Services Agreement. The Buyer Entities
acknowledge and agree that the Management Services Agreement, dated September 1,
1989, among Cogen Technologies Management Company, NJ Inc. and McNair, as
assigned pursuant to the Assignment and Assumption Agreement, dated January 1,
1994, among Cogen Technologies Management Company, Cogen Technologies Management
Services, L.P. (now known as RCM Management Services L.P. ("RCM MANAGEMENT")),
NJ Inc. and McNair, will continue in effect after the Closing and that MESC (as
successor to NJ Inc. in the MESC/NJ Merger) will continue to perform the
services required under such agreement in accordance with its terms and RCM
Management shall have no further obligations thereunder but shall be entitled to
receive from MESC the fees set forth in accordance with the terms and conditions
of such agreement. Buyer agrees not to take any action
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that would cause NJ Venture to be terminated prior to the scheduled expiration
of the NJ Venture Partnership Agreement, without either making provision for the
continuation of the payment of such fees to RCM Management through such
scheduled expiration or otherwise reaching a mutually agreeable settlement with
respect to such fees with RCM Management.
SECTION 7.07 Withdrawal of Registration Statement. At or prior to
Closing, Sellers shall cause to be filed with the SEC a request to withdraw the
S-1 Registration Statement under the Securities Act in accordance with the rules
and regulations of the SEC thereunder.
SECTION 7.08 Intercompany Accounts. The parties agree to cause the
intercompany balances owed between the Sellers and their Affiliates (other than
the Acquired Entities) on the one hand, and the Acquired Entities, on the other
hand, to the extent they are reflected on the Year-End Balance Sheets, to be
paid promptly after the Closing.
SECTION 7.09 Assigned Contracts. In the event that Buyer reasonably
determines that there are any Material Contracts or other contracts or
agreements relating to the Acquired Entities or their businesses to which any
Seller or any Seller's Affiliate (other than an Acquired Entity) is a party and
to which the Acquired Entities are not a party or pursuant to which there are
rights or benefits that should be assigned to an Acquired Entity in order for
Buyer and its Affiliates to acquire the full benefits of ownership of the
Interests and the other Contemplated Transactions (an "ASSIGNED CONTRACT"),
McNair, RCM Holdings and CTCI will use their reasonable efforts to cause such
contracts or agreements to be assigned to Buyer or its designee at Closing. Each
such assignment will be subject to Buyer receiving evidence satisfactory to it
of the consents necessary to effect such an assignment without conflict with,
violation or default under the terms of such Assigned Contract and of the
absence of any defaults under such Assigned Contract. If a consent necessary to
transfer an Assigned Contract has not been obtained prior to Closing, McNair,
RCM Holdings and CTCI agree to continue to use their reasonable efforts to
obtain such consent after the Closing and to assign such Assigned Contract to
Buyer or its designee promptly after the receipt of such consent.
SECTION 7.10 Letters of Credit.
(a) Buyer will take such actions as shall be required to cause
Old Cogen Technologies Financial Services, L.P. to be released from any
obligations under the letters of credit included in ANNEX 7.10, or
shall indemnify and hold harmless Old Cogen Technologies Financial
Services, L.P. in connection therewith pursuant to documentation
reasonably acceptable to the Sellers' Representatives, in each case
effective as of the Closing.
(b) Prior to Closing, Sellers will obtain any necessary
consents, waivers and amendments, and provide any necessary notices,
under the Letter of Credit and Reimbursement Agreement dated as of
September 17, 1992, as amended, between Linden Venture and GE in order
to permit the Closing of the Contemplated Transactions on the terms and
conditions contemplated herein.
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ARTICLE 8
TAX MATTERS
SECTION 8.01 Tax Matters. The parties agree as to Tax matters as set
forth in EXHIBIT VI.
ARTICLE 9
EMPLOYMENT AND EMPLOYEE BENEFIT MATTERS
SECTION 9.01. Employment and Employee Benefit Matters.
(a) Immediately prior to the Closing Date, each individual
identified in ANNEX 9.01 will be transferred to the employ of NJ Inc.
at the rate of base annual salary and bonuses described with respect to
such individual in a schedule previously provided to Buyer and in a
position commensurate with such individual's experience and abilities.
Those individuals and the individuals who are currently employed by NJ
Inc. and are listed in ANNEX 9.01 who accept such employment offers are
hereinafter referred to jointly as the "TRANSFERRED EMPLOYEES" and
singly as a "TRANSFERRED EMPLOYEE." For a period of one year following
the Closing Date, the sum of the cash base annual salary and cash bonus
amounts of the individuals identified in ANNEX 9.01, other than the
individuals whose post- Closing employment is referred to in Section
9.01(c) below, shall not be reduced below the sum of such amounts as
specified in the schedule referred to in the first sentence of this
paragraph.
(b) With respect to the Transferred Employees, Buyer or
Parent, as appropriate, agrees as follows:
(i) except as specifically provided herein, they
shall be eligible to participate in Buyer's employee benefit
plans and programs, including but not limited to vacation and
sick time policies, on the same basis as similarly situated
employees of Buyer and their service with the Acquired
Entities shall be considered as service with Buyer for all
purposes of such employee benefit plans and programs save and
except for pension plan benefit accrual purposes and retiree
medical coverage eligibility purposes;
(ii) Buyer shall permit each of them and his or her
eligible dependents to be covered under Buyer's group health
plan as modified as necessary to provide medical and dental
coverage to each of them and their eligible dependents
effective on the Closing Date to the extent that they were
covered under a group health plan maintained by RCM Holdings,
NJ Inc., MESC or one of their Affiliates immediately prior to
the Closing Date provided that they complete and submit
application for coverage forms; and for purposes of Buyer's
welfare benefit plans, Buyer shall waive any waiting periods
and limitations regarding pre-existing conditions and cause
such plans to recognize any out-of-pocket expenses incurred by
them or their eligible
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dependents during the portion of the plan year prior to
Closing Date for purposes of determining their annual
deductible and out-of-pocket maximums and ceilings or
limitations on benefits;
(iii) as soon as reasonably practicable after the
Closing Date, Buyer will take such actions as are necessary to
cause the Enron Corp. Savings Plan to accept a transfer of
Cogen Technologies 401(k) Savings Plan assets attributable to
the Transferred Employees who elect such transfer with such
election to be a one-time election, including outstanding
loans to participants, in a direct trustee-to-trustee transfer
that is subject to the requirements of section 414(1) of the
Code; provided, however, that Buyer shall have no obligation
to cause the Enron Corp. Savings Plan to accept such transfer
if Buyer does not receive from CT Capital proof which is
satisfactory to Buyer that the Cogen Technologies 401(k)
Savings Plan will be fully qualified under Code Section 401 at
the time of such transfer.
(c) Buyer and CT Capital have agreed by separate documentation
with respect to certain employment matters pertaining to Messrs. Joseph
Bollinger, Ross Ain and Colin Harper. Buyer and CT Capital have also
agreed by separate documentation with respect to certain employment
matters pertaining to John Jeffery Guise. In addition, Buyer and CT
Capital have entered into a Consulting Services Agreement, subject to
the Closing.
(d) Buyer shall assume the consulting agreement with Phillips
Associates, Inc. subject to its consent and agreement in substitution
for CT Capital.
(e) With respect to the Transferred Employees, the Sellers
and/or CT Capital, as appropriate, agree as follows:
(i) their participation in all Benefit Plans shall
terminate as of Closing Date, the Sellers and/or CT Capital,
as appropriate, shall retain all responsibilities, rights,
liabilities and obligations with respect to such Benefit Plans
and such Benefit Plans shall be fully responsible for benefits
earned, accrued or incurred by the Transferred Employees prior
to Closing Date (including specifically but not by way of
limitation welfare plan and educational plan benefits
resulting from expenses incurred and events occurring prior to
the Closing Date but not submitted for payment until after the
Closing Date);
(ii) for the portion of the calendar year following
the Closing Date in which the Closing Date occurs, the
vacation and sick pay provided by Buyer to the Transferred
Employees shall be determined with appropriate debits for
vacation and sick pay days taken by such Transferred Employees
for the portion of such calendar year preceding the Closing
Date under the vacation and sick pay programs of Sellers
and/or CT Capital;
(iii) from and after Closing Date, they shall no
longer be permitted to make pre-tax contributions to their
flexible spending accounts under the Cogen
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Technologies, Inc. Cafeteria Plan but shall be permitted to
submit claims against such accounts through the remainder of
the calendar year including the Closing Date for qualifying
expenses incurred prior to the end of such calendar year to
the extent that such expenses, when added to the aggregate
expenses previously reimbursed from their accounts during the
calendar year, do not exceed the amount of their pre-tax
contributions to their accounts during the calendar year;
(iv) to the extent that they qualify for or
potentially could qualify for incentive payments under the
Cogen Technologies, Inc. Development Program Bonus Plan, the
Sellers and/or CT Capital, as appropriate, shall make cash
payments to them so as to satisfy in full any liabilities for
such payments and shall obtain from them releases in the form
included in ANNEX 9.01;
(v) the Sellers and/or CT Capital, as appropriate,
shall be solely responsible and liable for any payments owed
or potentially owed to them pursuant to any agreements,
contracts or other arrangements providing for the payment of
amounts contingent upon or conditioned upon a "change of
control" of or other corporate event or restructure affecting
Cogen Technologies, Inc. or any owner of such entity;
(vi) their rights to use club memberships owned by
the Sellers and/or CT Capital, as appropriate, shall terminate
as of the Closing Date and the Sellers and/or CT Capital, as
appropriate, shall retain sole ownership of all such club
memberships;
(vii) the Sellers and/or CT Capital, as appropriate,
shall cause their accounts under the Cogen Technologies 401(k)
Savings Plan to become fully vested and nonforfeitable and as
soon as reasonably practicable after the Closing Date and
provided such transfer is to be effected, Sellers and/or CT
Capital, as appropriate will take such actions as are
necessary to cause the trustee of the Cogen Technologies
401(k) Savings Plan to transfer to the trustee of the Enron
Corp. Savings Plan the transfer described in Section
9.01(b)(iii); and
(viii) for all Transferred Employees other than the
individuals whose post-Closing employment is addressed in
paragraph (c) above, for a period of eighteen months following
the Closing Date, Buyer shall provide them with the protection
of severance benefits that are not less in amount than the
amount described in ANNEX 9.01, or, if greater, the amount
which would be payable pursuant to the Enron Corp. Severance
Pay Plan, such severance benefits to be payable to a
Transferred Employee if his employment with Buyer is
terminated by Buyer during such eighteen month period unless
such employment relationship is terminated by Buyer for Cause.
(f) Buyer and the Sellers and CT Capital shall cooperate with
each other to effectuate the provisions of this Section 9.01. Prior to
or promptly after the Closing Date, as appropriate, the Sellers shall
furnish to Buyer and Buyer shall furnish to the Sellers any and
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all data, information and records as are reasonably necessary to enable
such parties to fulfill their obligations under the provisions of this
Section 9.01.
ARTICLE 10
CONDITIONS TO CLOSING
SECTION 10.01. Conditions to the Obligations of Each Party. The
obligations of the parties to consummate the Contemplated Transactions are
subject to the satisfaction of the following conditions:
(a) There shall be no provision of Applicable Law that
prohibits the consummation of the Contemplated Transactions.
(b) The Parent Shares shall have been authorized for listing
on the New York Stock Exchange, subject to notice of issuance.
(c) There shall not be pending any action, proceeding or
investigation before any Governmental Authority or pursuant to any
arbitration agreement (i) challenging, or seeking material damages in
connection with, the Contemplated Transactions, or (ii) seeking to
restrain, prohibit or limit the exercise of full rights of ownership or
operation by the Buyer Entities or their Affiliates of all or any
portion of the Acquired Entities.
(d) Any right of first refusal arising in connection with the
Bayonne Acquisition pursuant to Article 12 of the Amended and Restated
Joint Venture Agreement of NJ Venture (the "BAYONNE RIGHT OF FIRST
REFUSAL") shall have either expired in accordance with its terms or
been waived in form reasonably satisfactory to Buyer and the Sellers'
Representatives; provided, however, that if any holder of such right of
first refusal properly elects to exercise its right to acquire MESC in
accordance with such right, then the parties agree that (i) the Bayonne
Acquisition shall not occur and all of Section 2.03 of this Agreement
shall be disregarded, (ii) all references in this Agreement to the
Bayonne Acquisition, the Bayonne Plant, MESC or any matter or provision
directly related to any of the foregoing shall be disregarded (to the
extent so related), but (iii) the condition set forth in this Section
10.01(d) shall be deemed waived and, subject to the other conditions
set forth in this Agreement, the parties shall nonetheless consummate
the Camden Acquisition and the Linden Acquisition in accordance with
their terms.
(e) The Bayonne Consents, the Linden GE Consent, the Camden GE
Consent and the Partnership Consents shall have been obtained, each in
the manner contemplated by Section 7.04 with such changes thereto as
may be reasonably proposed by Buyer based upon requirements of the
parties to the Linden Bank Consent or the Camden Bank Consent;
provided, however that no such proposed change shall be deemed to be
reasonably proposed by Buyer if the effect thereof is to adversely
affect, in other than a de minimus manner, the rights of the Owner
Trustee or GE under, and benefits to the Owner Trustee or GE of, the
Camden Cogen Partnership Agreement, the Linden Venture Partnership
Agreement or the
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Linden GP Term Loan; and provided, further that Buyer shall have the
right to waive, without the consent of the Sellers, the conditions to
Closing relating to any provision in such consents related to obtaining
liens on partnership interests in favor of the Buyer Entities' lenders
and related intercreditor matters.
SECTION 10.02. Conditions to Obligations of the Buyer Entities. The
obligations of the Buyer Entities to consummate the Contemplated Transactions
are subject to the satisfaction of the following further conditions:
(a) (i) Each Seller shall have performed in all material
respects all of its obligations under this Agreement required to be
performed by it on or prior to the Closing Date, (ii) the
representations and warranties of Sellers contained in this Agreement
and in any certificate or other writing delivered by Sellers pursuant
to this Agreement, disregarding all qualifications and exceptions
contained in such representations and warranties relating to
materiality or Material Adverse Effect, shall be true in all respects
at and as of the Closing Date, as if made at and as of such date, it
being understood and agreed (x) that the condition set forth in clause
(ii) of this Section 10.02(a) shall be deemed to have been satisfied
unless any failure to be true has had, or reasonably could be expected
to have, individually or in the aggregate with all other failures
relating to various representations and warranties, a Material Adverse
Effect, and (y) that representations and warranties made as of a
specific date need be true only as of that date, and (iii) the Buyer
Entities shall have received certificates signed by executive officers
of RCM Holdings, CT Capital and CTCI on behalf of such entities and by
each of the other Sellers to the foregoing effect.
(b) There shall not have occurred a Material Adverse Effect.
(c) Either (i) Linden Venture, with the consent of all limited
partners and lenders whose consent is required in connection therewith,
shall have entered into an amended steam agreement with Exxon
Corporation and a steam agreement with Bayway Refining Company, in each
case on terms that are not materially less favorable to Linden Venture
than the terms set forth in the drafts of such agreements dated August
14, 1998 and August 12, 1998, respectively, true and complete copies of
which have been provided to Buyer, pursuant to which steam from the
Linden Plant will be purchased and used in aggregate amounts sufficient
for the continued qualification of the Linden Plant as a qualifying
cogeneration facility under the PURPA Requirements, or (ii) the lenders
to Linden Ltd. and the partners in Linden Venture shall have agreed in
writing, in form reasonably satisfactory to Buyer, not to assert any
claim of past, present or future defaults (or similar events) or
breaches of fiduciary duty relating to the steam sale arrangements for
Linden Venture.
(d) The Buyer Entities shall have received written
confirmation (in the form of a reasonably acceptable letter from the
NJDEP to the counsel to the Acquired Entities or other reasonably
acceptable written evidence) that the NJDEP will require no further
action to be taken pursuant to ISRA in connection with or arising out
of the Contemplated Transactions. With respect to the Linden Plant,
such "no further action" letter or other written evidence reasonably
acceptable to the Buyer Entities shall be based upon a negative
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declaration, a preliminary assessment report and other information
submitted by the Sellers to the NJDEP that does not subject to review
under ISRA or otherwise make the provisions of ISRA applicable to any
of "Exxon's Property other than the Demised Premises (and perhaps a
butane supply line extending to the Demised Premises and the electrical
interconnect lines from the Cogeneration Facility and the ground
underlying those lines)" within the meaning of the Linden Ground Lease.
(e) The Sellers shall have caused to be repaid in full the CT
Camden Term Loan.
(f) Any applicable waiting period under the HSR Act relating
to the Contemplated Transactions shall have expired or been terminated
without the imposition of any material requirements or restraints on
the ability of the Buyer Entities to conduct the business of the
Acquired Entities after the Closing.
(g) The Buyer Entities shall have received (i) the opinion of
Fulbright & Jaworski L.L.P., as counsel to the McNair Group Sellers,
CTCI and RCM Holdings, in substantially the form set forth on ANNEX
10.02-A hereto, (ii) one or more opinions of counsel to the Minority
Group Sellers reasonably satisfactory to Buyer, in substantially the
form set forth on ANNEX 10.02-B hereto, and (iii) the opinion of one or
more regulatory counsel to the Sellers reasonably acceptable to Buyer,
in substantially the form set forth on ANNEX 10.02-C hereto.
SECTION 10.03. Conditions to Obligations of Sellers. The obligations of
the Sellers to consummate the Contemplated Transactions are subject to the
satisfaction of the following further conditions:
(a) (i) The Buyer Entities shall have performed in all
material respects all of their obligations under this Agreement
required to be performed by them on or prior to the Closing Date, (ii)
the representations and warranties of the Buyer Entities contained in
this Agreement and in any certificate or other writing delivered by the
Buyer Entities pursuant to this Agreement shall be true in all material
respects at and as of the Closing Date, as if made at and as of such
date, it being understood and agreed that representations and
warranties made as of a specific date need be true only as of that
date, and (iii) the Sellers shall have received certificates signed by
executive officers of Buyer to the foregoing effect.
(b) There shall not be any matter that would be materially
adverse to the business, results of operations, conditions (financial
or otherwise), assets or liabilities of Parent and its subsidiaries,
taken as a whole, that has not been publicly disclosed for ten Business
Days or more prior to the Closing Date.
(c) Subject to Sellers having obtained any necessary consents,
Buyer or an Affiliate thereof shall have entered into a new lease,
sublease or lease assignment with respect to each leased property
described on ANNEX 10.03A, which new lease, sublease or lease
assignment shall provide to Buyer or its Affiliate terms similar to
those enjoyed by the current lessee thereof and shall otherwise be on
terms reasonably satisfactory to Buyer.
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(d) Any applicable waiting period under the HSR Act relating
to the Contemplated Transactions shall have expired or been terminated.
(e) The Sellers shall have received written confirmation (in
the form of a reasonably acceptable letter from the NJDEP to the
counsel to the Acquired Entities or other reasonably acceptable written
evidence) that the NJDEP will require no further action to be taken
pursuant to ISRA in connection with or arising out of the Contemplated
Transactions.
(f) The Sellers shall have received the opinions of the
respective general counsels of Parent and Buyer or Vinson & Elkins
L.L.P., substantially to the effect set forth on ANNEX 10.03B hereto.
ARTICLE 11
SURVIVAL; INDEMNIFICATION
SECTION 11.01. Survival. The representations and warranties of the
parties contained in this Agreement or in any other Transaction Document or in
any certificate or other writing delivered pursuant to any Transaction Document
shall terminate at and not survive the Closing; provided that (a) the
representations and warranties contained in Sections II.01, II.02 and II.20 of
Exhibit II, Exhibit III and Exhibit IV shall each survive the Closing
indefinitely, and (b) the representations and warranties contained in Sections
II.05, II.06, II.10(a), (b) and (c), II.11(a), II.13(b) and II.22(e) of Exhibit
II shall survive the Closing for eighteen months following the Closing Date.
Notwithstanding the preceding sentence, with respect to any representation or
warranty that survives the Closing in respect of which indemnity may be sought
under this Agreement, such representation or warranty shall survive the time at
which it would otherwise terminate pursuant to the preceding sentence, if
written notice of the inaccuracy of such representation or warranty giving rise
to such right of indemnity (including the specific nature of such inaccuracy)
shall have been given to the party against whom such indemnity may be sought
prior to such time. The covenants and agreements of the parties (including,
without limitation, the covenants and agreements of the parties set forth in
this Article 11) contained in this Agreement or in any other Transaction
Document shall survive the Closing.
SECTION 11.02. Indemnification.
(a) McNair hereby agrees to defend, indemnify and hold
harmless each of the Buyer Entities and Parent, their Affiliates and
their respective Representatives against any and all damages, losses,
liabilities and expenses (including, without limitation, reasonable
expenses of investigation and reasonable attorneys' fees and expenses
in connection with any action, suit or proceeding) ("DAMAGES") incurred
or suffered by them arising out of:
(i) any misrepresentation or breach of a
representation or warranty in Exhibit II (provided that, from
and after the Closing, such representations and warranties
shall be interpreted disregarding all qualifications and
exceptions contained in such representations and warranties
relating to materiality or Material
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Adverse Effect) or any covenant or agreement made or to be
performed by RCM Holdings, CT Capital or CTCI pursuant to any
of the Transaction Documents;
(ii) any Environmental Liabilities of MESC not
directly related to the Bayonne Plant, including liabilities
relating to the lawsuit styled Carlton Gene Rineheart, et al.
v. Ciba Geigy Corporation, et al. pending in the United States
District Court for the Middle District of Louisiana and any
other liabilities relating to the facts or circumstances that
gave rise to such litigation;
(iii) any MESC Pre-Closing Taxes;
(iv) any operations, liabilities or activities of
MESC (other than Environmental Liabilities or MESC Pre-Closing
Taxes) not directly related to the Operating Facilities; or
(v) the enforcement of their rights under this
Section 11.02;
provided that, no claim for indemnification pursuant to Section
11.02(a)(i) may be made after Closing with respect to any
misrepresentation or breach of any representation or warranty that does
not survive Closing pursuant to Section 11.01 or with respect to any
misrepresentation or breach of any other representation or warranty
unless written notice of the inaccuracy or breach of such
representation or warranty giving rise to such right of indemnity shall
have been given to McNair prior to the time that such representation or
warranty terminates in accordance with Section 11.01; and provided
further that (A) no claim for indemnification pursuant to Section
11.02(a)(i) or 11.02(a)(iv) may be made after Closing with respect to
any misrepresentation or breach of any representation or warranty or
any matter referred to in Section 11.02(a)(iv) unless the aggregate
amount of Damages with respect to all such misrepresentations or
breaches referred to in Section 11.02(a)(i) and matters referred to in
Section 11.02(a)(iv) exceeds $10,000,000 and then only to the extent of
such excess and (B) McNair's maximum liability for indemnification with
respect to misrepresentations or breaches of any representations or
warranties pursuant to an indemnification claim under Section
11.02(a)(i) or with respect to matters referred to in Section
11.02(a)(iv) shall be $150,000,000 in the aggregate (except that the
limitations on liability set forth in clauses (A) and (B) of this
proviso shall not apply to indemnification claims based upon
misrepresentations or breaches of any representation or warranty set
forth in Section II.01, II.02 or II.20 of Exhibit II); and provided
further that no claim for indemnification pursuant to Section
11.02(a)(i) may be made with respect to any breach of a covenant or
agreement by RCM Holdings, CT Capital or CTCI pursuant to any of the
Transaction Documents (other than under the covenants set forth in
Sections 2.09, 5.02(b)-(f) and Articles IX, XI and XIII of this
Agreement) unless written notice of the breach giving rise to such
right of indemnity shall have been given to McNair prior to the date
which is eighteen months after the Closing Date; and provided further
that McNair's maximum liability for indemnification pursuant to an
indemnification claim under Section 11.02(a)(ii) shall be $100,000,000
and such $100,000,000 limit shall be reduced by $10,000,000 on each
anniversary of the Closing Date (until it reaches $0), such reduction
being effective only with
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respect to any claims written notice of which is given to McNair after
such anniversary; and provided further that no claim for
indemnification pursuant to Section 11.02(a)(iii) may be made unless
written notice of the breach giving rise to such right of indemnity
shall have been given to McNair prior to December 31, 1999, which
notice may not be delivered unless MESC has received written notice
from the Internal Revenue Service of its intention to conduct a Tax
Audit (as defined in Exhibit VI); and provided further, that no claim
for indemnification pursuant to Section 11.02(a)(iv) may be made unless
written notice of the claim giving rise to such right of indemnity
shall have been given to McNair prior to the date which is eighteen
months after the Closing Date.
(b) Each McNair Group Seller and each Minority Group Seller
hereby severally, and not jointly, agrees to defend, indemnify and hold
harmless each of the Buyer Entities, their Affiliates and their
respective Representatives against any and all Damages incurred or
suffered by them arising out of:
(i) any misrepresentation or breach of a
representation or warranty in Exhibit III or any covenant or
agreement made or to be performed by such McNair Group Seller
or Minority Group Seller pursuant to any of the Transaction
Documents; or
(ii) the enforcement of their rights under this
Section 11.02;
provided that no claim for indemnification pursuant to Section
11.02(b)(i) may be made with respect to any breach of a covenant or
agreement by such McNair Group Seller or Minority Group Seller pursuant
to any of the Transaction Documents (other than under the covenants set
forth in Sections 5.02, 5.03 and Articles IX, XI and XIII of this
Agreement) unless notice of the breach giving rise to such right of
indemnity shall have been given to such McNair Group Seller or Minority
Group Seller prior to the date which is eighteen months after the
Closing Date; and provided further that for the purposes of this
Section 11.02 (b), each Minority Group Seller other than CTLPJV shall
only be liable with respect to liabilities of CTLPJV severally in
proportion to such Minority Group Seller's proportionate ownership
interest in CTLPJV.
(c) The Buyer Entities hereby agree to defend, indemnify and
hold harmless each of the Sellers, their Affiliates and their
respective Representatives against any and all Damages incurred or
suffered by them arising out of:
(i) any misrepresentation or breach of a
representation or warranty in Exhibit IV or any covenant or
agreement made or to be performed by the Buyer Entities
pursuant to this Agreement; or
(ii) the enforcement of their rights under this
Section 11.02;
provided that no claim for indemnification pursuant to Section
11.02(c)(i) may be made with respect to any breach of a covenant or
agreement by the Buyer Entities pursuant to any of the
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Transaction Documents (other than under the covenants set forth in
Sections 5.02 and 7.03 and Articles IX, XI and XIII of this Agreement)
unless notice of the breach giving rise to such right of indemnity
shall have been given to Buyer prior to the date which is eighteen
months after the Closing Date.
SECTION 11.03. Procedures for Third Party Claims.
(a) The parties seeking indemnification under Section 11.02
(the "INDEMNIFIED PARTIES") agree to give prompt notice to the parties
against whom indemnity is sought (the "INDEMNIFYING PARTIES") of the
assertion of any claim, or the commencement of any suit, action or
proceeding in respect of which indemnity may be sought under Section
11.02 (the "THIRD PARTY CLAIMS"). The failure by any Indemnified Party
so to notify the Indemnifying Parties shall not relieve any
Indemnifying Party from any liability which it may have to such
Indemnified Party with respect to any claim made pursuant to this
Section 11.03, except to the extent such failure shall actually
prejudice an Indemnifying Party.
(b) Upon receipt of notice from the Indemnified Parties
pursuant to Section 11.03(a), the Indemnifying Parties will, subject to
the provisions of Section 11.03(c), assume the defense and control of
such Third Party Claims but shall allow the Indemnified Parties a
reasonable opportunity to participate in the defense of such Third
Party Claims with their own counsel and at their own expense (except as
provided in Section 11.03(c)). The Indemnifying Parties shall select
counsel, contractors and consultants of recognized standing and
competence after consultation with the Indemnified Parties; shall take
all steps necessary in the defense or settlement of such Third Party
Claims; and shall at all times diligently and promptly pursue the
resolution of such Third Party Claims. The Indemnified Parties shall,
and shall cause each of their Affiliates and Representatives to,
cooperate fully with the Indemnifying Parties in the defense of any
Third Party Claim defended by the Indemnifying Parties.
(c) The Indemnifying Parties shall be authorized to consent to
a settlement of, or the entry of any judgment arising from, any Third
Party Claim, without the consent of any Indemnified Party, but only if
the Indemnifying Parties shall pay or cause to be paid all amounts
arising out of such settlement or judgment concurrently with the
effectiveness of such settlement; not encumber any of the assets of any
Indemnified Party or agree to any restriction or condition that would
apply or adversely affect any Indemnified Party or to the conduct of
any Indemnified Party's business; and obtain, as a condition of any
settlement or other resolution, a complete release of any Indemnified
Party potentially affected by such Third Party Claim.
(d) The Indemnifying Parties shall also be liable for the
reasonable fees and expenses of counsel incurred by each Indemnified
Party in defending any Third Party Claim if such Third Party Claim, if
successful, is likely to result in a judgment, decree or order of
injunction or other equitable relief or relief for other than money
Damages against such Indemnified Party.
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SECTION 11.04. Exclusive Remedy; No Waiver Relating to Claims for
Fraud.
(a) Each party hereto acknowledges and agrees that, except as
set forth in Section 11.04(b), the provisions of this Article 11 shall
be the exclusive remedy of such party with respect to any matter
arising under this Agreement or any other Transaction Document;
provided, however, that the foregoing shall not limit the right of any
such party to seek any equitable remedy available to enforce the rights
of such party under this Agreement or any other Transaction Document in
accordance with the terms of this Agreement.
(b) Notwithstanding any other provision of this Agreement, the
liability of any party under Article 11 of this Agreement shall be in
addition to, and not exclusive of any other liability that such party
may have at law or equity based on such party's fraudulent acts or
omissions. Notwithstanding any other provision of this Agreement, none
of the provisions set forth in this Agreement, including the provisions
set forth in Section 11.02 relating to limitations on amounts
recoverable under indemnity provisions or limitations on periods of
time during which a claim for indemnification may be brought, shall be
deemed a waiver by any party to this Agreement of any right or remedy
that such party may have at law or equity, based on any other party's
fraudulent acts or omissions, nor shall any such provisions limit, or
be deemed to limit, (i) the amounts of recovery sought or awarded in
any such claim for fraud, (ii) the time period during which a claim for
fraud may be brought, or (iii) the recourse which any such party may
seek against another party with respect to a claim for fraud.
ARTICLE 12
TERMINATION
SECTION 12.01. Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual written agreement of Buyer and the Sellers'
Representatives;
(b) by either Buyer or the Sellers' Representatives if the
Closing shall not have been consummated by April 15, 1999 (the "END
DATE"); provided, however, that Sellers' Representatives may not
terminate this Agreement pursuant to this Section 12.01(b) if the
Closing shall not have been consummated by the End Date by reason of
any Seller's failure to perform in all material respects any of its
respective covenants or agreements contained in this Agreement; and
provided, further, that Buyer may not terminate this Agreement pursuant
to this Section 12.01(b) if the Closing shall not have been consummated
by the End Date by reason of any Buyer Entity's failure to perform in
all material respects any of its respective covenants or agreements
contained in this Agreement;
(c) by Buyer, if a breach of any representation, warranty,
covenant or agreement on the part of the Sellers set forth in this
Agreement shall have occurred which would cause any of the conditions
set forth in Sections 10.01 or 10.02 not to be satisfied, and such
breach is incapable of being cured or, if capable of being cured, shall
not have been cured within 30
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Business Days following receipt by the Sellers' Representatives of
notice of such breach from Buyer;
(d) by the Sellers, if a breach of any representation,
warranty, covenant or agreement on the part of the Buyer Entities set
forth in this Agreement shall have occurred which would cause any of
the conditions set forth in Sections 10.01 or 10.03 not to be
satisfied, and such breach is incapable of being cured or, if capable
of being cured, shall not have been cured within 30 Business Days
following receipt by Buyer of notice of such breach from Sellers;
(e) by either Buyer or the Sellers if there shall be any
Applicable Law that makes consummation of the Transactions contemplated
hereby illegal or otherwise prohibited or if consummation of the
Transactions contemplated hereby would violate any nonappealable final
order, decree or judgment of any Governmental Authority having
competent jurisdiction;
(f) by Buyer at any time prior to 5:00 p.m. Central Time on
the tenth Business Day after the date of this Agreement if Buyer
determines, in its sole discretion, that it is unlikely to be able to
obtain the Linden Bank Consent or the Camden Bank Consent or any other
consents or arrangements necessary to satisfy Buyer's lenders in
connection with the Contemplated Transactions, or that the Sellers will
be unable to obtain the Bayonne Consents or the Partnership Consent
referred to in Annex 7.04F hereto, all on terms reasonably acceptable
to Buyer;
(g) by Buyer at any time prior to 5:00 p.m. Central Time on
the fifth Business Day after the date of this Agreement if either (i)
the matters addressed in paragraph 1 of ANNEX 12.01(G) were not
included in the 1999 capital budget and operating forecasts previously
provided to Buyer or (ii) Buyer determines, in its sole discretion,
that the estimated costs set forth in paragraph 2 of ANNEX 12.01 (G)
are not maintenance expenses arising in the ordinary course of business
of the Linden Plant; provided, however, in the event Buyer notifies the
Sellers of its intention to terminate this Agreement pursuant to this
Section 12.01(g), the Sellers shall have the option to either (i)
covenant to make the necessary repairs and improvements needed to
resolve the matters described on ANNEX 12.01(G), at the Seller's
expense, the satisfaction of which covenant would itself be a condition
to the obligations of the Buyer Entities to close the Contemplated
Transactions or (ii) amend this Agreement to provide that the cost of
such repairs and improvements, as reasonably determined by Buyer, would
be added to the negative $4,932,952 in Section 2.07(a) for purposes of
calculating the adjustment to the Consideration provided for therein;
or
(h) by McNair, on behalf of all of the Sellers, at any time
prior to 5:00 p.m. Central Time on the tenth Business Day after the
date of this Agreement if McNair determines, in his sole discretion,
that the Sellers will be unlikely to be able to obtain the Linden GE
Consents or the Camden GE Consents on terms reasonably acceptable to
Sellers.
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The party desiring to terminate this Agreement pursuant to Sections
12.01(b)-(h) shall give notice of such termination to the other parties.
SECTION 12.02. Effect of Termination.
(a) Except as set forth in Section 12.02(b), if this Agreement
is terminated as permitted by Section 12.01, such termination shall be
without liability of any party (or any Affiliate or Representative of
such party) to any other party to this Agreement, except that if such
termination shall result from (i) the willful failure of any party to
this Agreement to fulfill a condition to the performance of the
obligations of the other parties that is within the control of such
party, (ii) the willful failure of any party to this Agreement to
perform a covenant or agreement contained in this Agreement or (iii)
the willful breach by any party to this Agreement of any representation
or warranty contained in this Agreement, such party shall be fully
liable for any and all Damages incurred or suffered by any other party
as a result of such failure or breach. The provisions of Sections
11.02, 13.01, 13.04, and 13.06 and this Section 12.02 shall survive any
termination of this Agreement pursuant to Section 12.01.
(b) If this Agreement is terminated as a result of the failure
of the Sellers to have obtained the Linden GE Consent, the Camden GE
Consent or any of the Partnership Consents to which GE or the Owner
Trustee is a party on or prior to the End Date (and all other
conditions to the Closing have been satisfied or are immediately
capable of being satisfied), then the Sellers shall, promptly following
such termination, pay to Buyer in cash an amount sufficient to
reimburse the Buyer Entities in full for any bank commitment fees
incurred in connection with this Agreement and the Contemplated
Transactions and any other fees and expenses incurred in connection
therewith after the expiration of the provisions set forth in Sections
12.01 (f) and (h), provided that the maximum liability of Sellers to
Buyer pursuant to this Section 12.02(b) shall be $2,500,000; and
provided further that the Sellers shall not owe any expense
reimbursement pursuant to this Section 12.02(b) if the failure to
obtain the consents referred to herein is solely the result of either
the Owner Trustee or GE being required to obtain any required consents
of lenders.
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. Notices. All notices, requests and other communications
to any party under this Agreement shall be in writing (including telecopy or
similar writing) and shall be given,
if to RCM Holdings, CT Capital, CTCI or any McNair Group Seller:
c/o Cogen Technologies Capital Company, L.P.
711 Louisiana, 33rd Floor
Houston, Texas 77002
Attention: Richard A. Lydecker, Jr.
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Telecopy: (713) 336-7715
with a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attention: Charles H. Still
Telecopy: (713) 651-5246
if to any Minority Group Seller:
H. Fred Levine
2925 Briarpark, Suite 1160
Houston, Texas 77042
and
John P. Hansen
10110 Pebble Park Lane
Houston, Texas 77036-7021
with copies to:
Marc E. Grossberg
Schlanger, Mills, Mayer & Grossberg, L.L.P.
5847 San Felipe, Suite 1700
Houston, Texas 77057
Telecopy: (713) 785-2091
and
Jeff C. Dodd
Mayor, Day, Caldwell & Keeton, L.L.P.
1600 NationsBank Center
700 Louisiana
Houston, Texas 77002
Telecopy: (713) 225-7047
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if to Parent or any Buyer Entity:
c/o Enron Capital & Trade Resources Corp.
1400 Smith Street
Houston, Texas 77002-7361
Attention: W. David Duran and Sheila R. Tweed
Telecopy: (713) 646-3490
with a copy to:
Vinson & Elkins L.L.P.
1001 Fannin, Suite 2300
Houston, Texas 77002
Attention: Keith R. Fullenweider
Telecopy: (713) 758-2346
or to such other address or telecopy number and with such other copies, as such
party may hereafter specify for the purpose by notice to the other parties. Each
such notice, request or other communication shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified in
this Section and evidence of receipt is received or (ii) if given by any other
means, upon delivery or refusal of delivery at the address specified in this
Section.
SECTION 13.02. Amendments; No Waivers.
(a) Except as set forth in Section 13.11, any provision of
this Agreement may be amended or waived if, and only if, such amendment
or waiver is in writing and signed, in the case of an amendment, by
each party to this Agreement, or in the case of a waiver, by the party
against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right,
power or privilege under this Agreement shall operate as a waiver of
such right, power or privilege nor shall any single or partial exercise
of any right, power or privilege preclude any other or further exercise
of such right, power or privilege or the exercise of any other right,
power or privilege. No waiver by any party of any condition to its
obligations to consummate the Contemplated Transactions shall operate
as a waiver of such party's rights to indemnification under Article 11
with respect to the same or any other matter, and no investigation by
the Buyer Entities or their Representatives pursuant to Section 5.02 or
otherwise shall operate as a waiver or otherwise affect any
representation, warranty, covenant or agreement given or made by
Sellers in this Agreement, the right of the Buyer Entities not to
consummate the transactions contemplated hereby pursuant to Section
10.02 or the rights of any party to indemnification under Article 11;
provided, however, that if the Sellers' Representatives give written
notice to the Buyer Entities at the Closing of a breach of a
representation or warranty (including the specific nature of the breach
and the basis therefor), other than a willful breach, and such breach
would cause the closing condition in Section 10.02(a) not to be capable
of being satisfied, then if the Buyer Entities elect to waive the
condition to Closing
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related to such breach (which waiver shall be conclusively evidenced by
the Closing) and Closing occurs, the Buyer Entities shall not be
entitled to make an indemnification claim under Article 11 for such
breach. The rights and remedies provided under this Agreement shall be
cumulative and not exclusive of any rights or remedies provided by law.
(c) The parties acknowledge that the Sellers intend to seek a
waiver of the Bayonne Right of First Refusal. If the Sellers'
Representatives notify the Buyer that Sellers have been unsuccessful in
obtaining such waiver and so request, the parties agree to amend this
Agreement to provide for the Bayonne Acquisition in a separate
agreement, it being understood that the closing of the Bayonne
Acquisition would be subject to the closing of the other Contemplated
Transactions, the closing of the other Contemplated Transactions would
be subject to the closing of the Bayonne Acquisition (other than as
provided in Section 10.01(d)) and such amendment would be in form and
substance reasonably acceptable to the Buyer Entities and the Sellers'
Representatives.
SECTION 13.03. Parties in Interest. Except as set forth in Section 7.03
and Article 11, nothing in this Agreement or in any other Transaction Document
is intended to confer any rights or remedies under or by reason of this
Agreement on any Persons other than the Buyer Entities, Parent or the Sellers
and their respective successors and permitted assigns. Nothing in this Agreement
is intended to relieve or discharge the obligations or liability of any such
third Persons to the Buyer Entities or the Sellers. No provision of this
Agreement or any other Transaction Document shall give any such third Persons
any right of subrogation or action over or against the Buyer Entities or the
Sellers.
SECTION 13.04. Expenses. Except as otherwise provided in this
Agreement, all costs and expenses incurred in connection with the Contemplated
Transactions shall be paid by the party incurring such cost or expense. Without
limiting the foregoing, Sellers agree that they (and not the Acquired Entities)
will be responsible for the fees and expenses of any financial advisor, lawyers,
accountants or other consultants or advisors retained by either the Sellers or
the Acquired Entities in connection with the Contemplated Transactions as well
as any fees and expenses associated with obtaining on behalf of Linden Ltd. the
loan referred to in Section 2.02(b)(i).
SECTION 13.05. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party, except that the Buyer Entities may
transfer or assign, in whole or from time to time in part, to one or more of
their Affiliates or lenders, their rights under this Agreement, but no such
transfer or assignment will relieve the Buyer Entities of their obligations
under this Agreement, including Section 7.03 of this Agreement. The Sellers and
Buyer Entities expressly acknowledge that Buyer contemplates assigning various
of its rights hereunder to Buyer Acquisition, Buyer Camden GP, Buyer Camden LP,
Buyer Linden GP and Buyer Linden LP or other Affiliated designees in the manner
set forth herein, and the Sellers hereby consent (as between the Sellers and the
Buyer Entities) to such assignments. Each of such parties shall become a party
to this Agreement by executing a counterpart signature page to this Agreement,
in the form attached hereto, prior to Closing.
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SECTION 13.06. Governing Law; Arbitration.
(a) This Agreement (including, but not limited to, the
validity and enforceability hereof and thereof) shall be governed by,
and construed in accordance with, the laws of the State of Texas, other
than the conflict of laws rules thereof.
(b) Except as contemplated by Sections 2.06 and 5.03 of this
Agreement, any and all claims, counterclaims, demands, cause of action,
disputes, controversies, and other matters in question arising under
this Agreement or the alleged breach of any provision hereof, (all of
which are referred to herein as "DISPUTED CLAIMS"), whether such
Disputed Claims arise at law or in equity, under State or federal law,
for damages or any other relief, shall be resolved by binding
arbitration.
(c) The validity, construction, and interpretation of this
agreement to arbitrate, and all procedural aspects of the arbitration
conducted pursuant to this agreement to arbitrate and the rules
governing the conduct of the arbitration (including the time for filing
an answer, the time for the filing of counter Disputed Claims, the
times for amending the pleadings, the specificity of the pleadings, the
extent and scope of discovery, the issuance of subpoenas, the times for
the designation of experts, whether the arbitration is to be stayed
pending resolution of related litigation involving third parties not
bound by this Agreement, the receipt of evidence, and the like), shall
be decided by the arbitrators. In deciding the substance of the
parties' Disputed Claims, the arbitrators shall refer to the
substantive laws of the State of Texas for guidance (excluding Texas
choice-of-law principles that might call for the application of some
other state's law).
(d) The arbitration proceedings shall be conducted in Houston,
Texas by three arbitrators in accordance with the CPR Institute for
Dispute Resolution Non-Administered Arbitration rules in effect on the
date of this agreement. Within 30 days of the notice of initiation of
the arbitration procedure, the parties shall select three arbitrators.
If the parties are unable to agree upon the identity of the three
arbitrators, within the time set forth herein, the vacancies in the
selection of agreed arbitrators shall be filled by CPR in the manner
specified in CPR Rule 6. The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. Section 1-16, as such Act is
modified by this Agreement and judgment upon the award rendered by the
arbitrators may be entered by any court having jurisdiction thereof.
(e) All fees of the arbitrators and other administrative
charges related to the arbitration shall be borne equally by the
parties.
(f) The parties hereby agree that the arbitration proceeding
and the arbitrators' award are to remain confidential and none of the
parties or their counsel will divulge or discuss, directly or
indirectly, in the newspaper, electronic media, or other public or
private forum, or with any third parties, the arbitration proceeding
and/or the arbitrators' award except: (1) to the extent required by a
court of law or any federal, state, or local government, agency or
regulatory body or to the extent required to comply with applicable
securities laws or stock exchange requirements; (2) to the extent
further agreed to by the parties hereto,
39
<PAGE> 47
which consent will not be unreasonably withheld; or (3) to the extent
necessary under subsection (g) below.
(g) The award of the arbitrators shall be final and binding on
the parties, and judgment thereon may be entered in a court of
competent jurisdiction.
SECTION 13.07. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received a
counterpart of this Agreement signed by the other parties hereto, except as
otherwise provided by Section 13.05.
SECTION 13.08. Entire Agreement. This Agreement and the other
Transaction Documents constitute the entire agreement among the parties with
respect to the subject matter of such documents and supersede all prior
agreements, understandings and negotiations, both written and oral, between the
parties with respect to the subject matter of such documents.
SECTION 13.09. Captions. The captions in this Agreement are included
for convenience of reference only and shall be ignored in the construction or
interpretation of the provisions of this Agreement.
SECTION 13.10. Conflicts. In the event of a conflict between any term
of this Agreement and information contained in the Disclosure Schedule, the
terms included in this Agreement shall govern.
SECTION 13.11. Sellers' Representatives.
(a) Each McNair Group Seller hereby irrevocably appoints
McNair as a Sellers' Representative, and each Minority Group Seller
hereby irrevocably appoints John Hansen and H. Fred Levine, jointly, as
Sellers' Representatives. Each Seller agrees that the Sellers'
Representatives, acting jointly, shall have full power to act as their
agent and attorney-in-fact to take all actions on behalf of such Seller
that are expressly set forth in this Agreement, and to approve on
behalf of such Seller any amendment to the Transaction Documents (or
waivers of provisions of the Transaction Documents) that do not
adversely affect the interest of such Seller. Any action permitted to
be taken under this Agreement by the Sellers' Representatives must be
taken by both of them acting jointly and neither of the Sellers'
Representatives shall have any power to bind any Seller unless acting
jointly with the other Sellers' Representative. The McNair Group
Sellers agree that if McNair (or his replacement pursuant to this
Section 13.11) becomes unable to serve as a Sellers' Representative,
the remaining McNair Group Sellers will promptly appoint a successor to
act as a Sellers' Representative and will notify Buyer of such
appointment. The Minority Group Sellers agree that if either of John
Hansen or H. Fred Levine (or their replacements pursuant to this
Section 13.11) becomes unable to serve as a Sellers' Representative,
the remaining Minority Group Sellers will promptly appoint a successor
to act as a Sellers' Representative and will notify Buyer of such
appointment. Any successor Sellers' Representative appointed pursuant
to this Section shall be reasonably acceptable to Buyer. In the event
that for any reason the Sellers'
40
<PAGE> 48
Representatives are unable to take any action specified in this
Agreement to be taken by the Sellers' Representatives, such action may
be taken by all of the Sellers.
(b) The powers of attorney granted pursuant to this Section
13.11 and all authority conferred hereby are granted and conferred
subject to and in consideration of the interests of the Buyer Entities
and for the purposes of completing the Contemplated Transactions. Such
powers of attorney are an agency coupled with an interest and all
authority conferred hereby shall be irrevocable, and shall not be
terminated by any act of any Seller or by operation of law, including,
without limiting the foregoing, the death or incapacity of any Seller,
the termination of any trust or estate, the death or incapacity of one
or more trustees, guardians, executors or administrators under such
trust or estate, the dissolution or liquidation of any corporation,
limited liability company or partnership or the occurrence of any other
event.
SECTION 13.12. Certain Agreements of Parent. Parent hereby irrevocably
and unconditionally guarantees the timely payment when due of any financial
obligations of the Buyer under this Agreement (including financial obligations
arising out of any indemnification provisions of this Agreement) to the extent
Buyer fails to pay such obligations. Parent also agrees to make available to the
applicable Buyer Entities the Parent Shares to be delivered in connection with
the Linden Acquisition.
41
<PAGE> 49
The parties have caused this Agreement to be duly executed individually
or by their authorized representatives on the day and year first above written.
ENRON CORP.
By: /s/ J. CLIFFORD BAXTER
---------------------------------
J. Clifford Baxter
Senior Vice President
ENRON CAPITAL & TRADE RESOURCES CORP.
By: /s/ JEFFREY M. DONAHUE, JR.
---------------------------------
Jeffrey M. Donahue, Jr.
Vice President
RCM HOLDINGS, INC.
By: /s/ RICHARD A. LYDECKER, JR.
---------------------------------
Richard A. Lydecker, Jr.
Senior Vice President and
Chief Financial Officer
COGEN TECHNOLOGIES CAMDEN, INC.
By: /s/ RICHARD A. LYDECKER, JR.
---------------------------------
Richard A. Lydecker, Jr.
Senior Vice President and
Chief Financial Officer
COGEN TECHNOLOGIES CAPITAL COMPANY,
L.P.
By: Cogen Technologies GP Capital
Corporation, its General Partner
By: /s/ RICHARD A. LYDECKER, JR.
---------------------------------
Name: Richard A. Lydecker, Jr.
Title: Senior Vice President and
Chief Financial Officer
<PAGE> 50
THE MCNAIR GROUP SELLERS:
/s/ ROBERT C. McNAIR
-------------------------------------
Robert C. McNair
/s/ ROBERT CARY McNAIR, JR.
-------------------------------------
Robert Cary McNair, Jr.
/s/ DANIEL CALHOUN McNAIR
-------------------------------------
Daniel Calhoun McNair
/s/ ROBERT CARY McNAIR, JR.,
-------------------------------------
Robert Cary McNair, Jr.,
as Trustee of the Robert Cary McNair,
Jr. Trust UTA dated 11/14/88, as
amended
/s/ DANIEL CALHOUN McNAIR
-------------------------------------
Daniel Calhoun McNair,
as Trustee of the Daniel Calhoun
McNair Trust UTA dated 11/14/88, as
amended
/s/ RUTH McNAIR SMITH
-------------------------------------
Ruth McNair Smith,
as Co-Trustee of the Ruth McNair Smith
Trust UTA dated 11/14/88, as amended
/s/ MELISSA EILEEN McNAIR REICHERT
-------------------------------------
Melissa Eileen McNair Reichert,
as Co-Trustee of the Melissa Eileen
McNair Walter Trust UTA dated
11/14/88, as amended
/s/ M. ROBERT DUSSLER
-------------------------------------
M. Robert Dussler
as Co-Trustee of (1) the Ruth McNair
Smith Trust UTA dated 11/14/88, as
amended and (2) the Melissa Eileen
McNair Walter Trust UTA dated
11/14/88, as amended
<PAGE> 51
THE MINORITY GROUP SELLERS:
COGEN TECHNOLOGIES LIMITED
PARTNERS JOINT VENTURE
By: /s/ C. DONALD VAN WART
----------------------------------
Name: C. Donald Van Wart
Title: General Partner
/s/ PAULINE E. BUCK, TRUSTEE
-------------------------------------
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
/s/ ROBERT A. HANSEN
-------------------------------------
Robert A. Hansen
Evergreen Partnership Energy, Ltd.
By: /s/ H. FRED LEVINE
----------------------------------
Name: H. Fred Levine
--------------------------------
Title: General Partner
-------------------------------
The 1989 Energy Trust
By: /s/ ROBERT CARY McNAIR, JR.
----------------------------------
Robert Cary McNair, Jr., Trustee
(and not in his individual
capacity)
/s/ DAVID C. HOLLAND
----------------------------------
David C. Holland, Trustee
(and not in his individual
capacity)
/s/ C. DONALD VAN WART
-------------------------------------
C. Donald Van Wart
<PAGE> 52
Hansfam Three, a Trust
By: /s/ JOHN P. HANSEN
----------------------------------
John P. Hansen, Trustee
(and not in his individual
capacity)
/s/ C. DONALD VAN WART
----------------------------------
C. Donald Van Wart, Trustee
(and not in his individual
capacity)
/s/ JOANN K. SOWELL
-------------------------------------
Joann K. Sowell
<PAGE> 53
COUNTERPART SIGNATURE PAGE FOR BUYER ACQUISITION, BUYER
CAMDEN GP, BUYER CAMDEN LP, BUYER LINDEN GP, BUYER
LINDEN LP AND OTHER AFFILIATES OF BUYER PURSUANT TO SECTION
13.05.
Pursuant to Section 13.05 hereof, the undersigned hereby executes and
delivers and becomes party to this Agreement as of the date set forth below.
Name of Entity:
------------------------------
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Date:
---------------------------------
<PAGE> 54
EXHIBIT I
DEFINITIONS
The following terms, as used in this Agreement, have the following
meanings:
"ACCOUNTING REFEREE" has the meaning set forth in Section 2.06(d).
"ACQUIRED ENTITIES" means MESC, Linden Ltd. and CT Camden and each of
their respective Subsidiaries.
"ADJUSTED COMBINED BALANCE SHEET" has the meaning set forth in Section
2.06(a).
"ADJUSTED COMBINED YEAR-END BALANCE SHEET" has the meaning set forth in
Section 2.06(b).
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such other Person.
"APPLICABLE INSURANCE" has the meaning set forth in Section 5.05(a).
"APPLICABLE LAW" means, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, judgment, decree
or other requirement of any Governmental Authority (including any Environmental
Law) applicable to such Person or any of its Affiliates or any of their
respective properties, assets or Representatives (in connection with such
Representative's activities on behalf of such Person or any of its Affiliates).
"ASSIGNED CONTRACT" has the meaning set forth in Section 7.09.
"BASE RATE" means a percentage equal to the 30-day London Interbank
Offered Rate as published in the Wall Street Journal, Eastern Edition, in effect
from time to time.
"BAYONNE ACQUISITION" means the redemption and acquisition of shares of
MESC Common Stock and the other transactions all as set forth in Section 2.03.
"BAYONNE BALANCE SHEET" means the balance sheet of MESC dated as of
June 30, 1998, included in Section II.07 of the Disclosure Schedule.
"BAYONNE CONSENT" has the meaning set forth in Section 7.04(b).
"BAYONNE PLANT" means the 176 megawatt gas-fired, combined cycle
cogeneration facility owned by NJ Venture and located on the site of the IMTT
Facility in Bayonne, New Jersey.
"BAYONNE RIGHT OF FIRST REFUSAL" has the meaning set forth in Section
10.01(d).
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"BAYONNE SELLERS" means the Sellers who are shareholders of MESC.
"BAYONNE SELLER NOTES" has the meaning set forth in Section 2.03(a).
"BENEFIT PLANS" means any employee pension benefit plan (whether or not
insured), as defined in Section 3(2) of ERISA, any employee welfare benefit plan
(whether or not insured) as defined in Section 3(1) of ERISA, any plans that
would be employee pension benefit plans or employee welfare benefit plans if
they were subject to ERISA, such as foreign plans and plans for directors, any
stock bonus, stock ownership, stock option, stock purchase, stock appreciation
rights, phantom stock, or other stock plan (whether qualified or nonqualified),
and any bonus or incentive compensation plan sponsored, maintained, or
contributed to by any of the Acquired Entities for the benefit of any of the
present or former directors, officers, employees, agents, consultants, or other
similar representatives providing services to or for such Acquired Entity in
connection with such services or any such plans which have been so sponsored,
maintained, or contributed to within six years prior to the date of this
Agreement; provided, however, that such term shall not include (a) routine
employment policies and procedures developed and applied in the ordinary course
of business and consistent with past practice, including wage, vacation,
holiday, and sick or other leave policies, (b) workers compensation insurance,
and (c) directors and officers liability insurance.
"BUSINESS DAY" means a day other than a Saturday, Sunday or other day
on which commercial banks in Houston, Texas or New York, New York are authorized
or required by law to close.
"BUYER" has the meaning set forth in the introductory paragraph to this
Agreement.
"BUYER ACQUISITION" means a limited liability company or other entity
to be owned directly or indirectly by JEDI II or Buyer's other designee and
designated as such prior to the Closing for the purposes of this Agreement,
which designation shall be evidenced by the execution by such entity of this
Agreement in the manner contemplated by Section 13.05.
"BUYER CAMDEN GP" means a limited liability company or other entity to
be owned directly or indirectly by Buyer Acquisition and designated as such
prior to the Closing for the purposes of this Agreement, which designation shall
be evidenced by the execution by such entity of this Agreement in the manner
contemplated by Section 13.05.
"BUYER CAMDEN LP" means a limited liability company or other entity to
be owned directly or indirectly by Buyer Acquisition and designated as such
prior to the Closing for the purposes of this Agreement, which designation shall
be evidenced by the execution by such entity of this Agreement in the manner
contemplated by Section 13.05.
"BUYER ENTITIES" has the meaning set forth in the introductory
paragraph to this Agreement.
"BUYER LINDEN GP" means a limited liability company or other entity to
be owned directly or indirectly by Buyer Acquisition and designated as such
prior to the Closing for the purposes of
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<PAGE> 56
this Agreement, which designation shall be evidenced by the execution by such
entity of this Agreement in the manner contemplated by Section 13.05.
"BUYER LINDEN LP" means a limited liability company or other entity to
be owned directly or indirectly by Buyer Acquisition and designated as such
prior to the Closing for the purposes of this Agreement, which designation shall
be evidenced by the execution by such entity of this Agreement in the manner
contemplated by Section 13.05.
"CAMDEN ACQUISITION" means the acquisition of all of the partnership
interests in CT Camden and the other transactions all as set forth in Section
2.04.
"CAMDEN BALANCE SHEET" means the balance sheet of CT Camden dated as of
June 30, 1998, included in Section II.07 of the Disclosure Schedule.
"CAMDEN BANK CONSENT" has the meaning set forth in Section 7.04(c).
"CAMDEN COGEN PARTNERSHIP AGREEMENT" means the Agreement of Limited
Partnership of Camden Cogen, as amended to the date hereof.
"CAMDEN COGEN" means Camden Cogen LP, a Delaware limited partnership.
"CAMDEN GE CONSENT" has the meaning set forth in Section 7.04(b).
"CT CAMDEN TERM LOAN" means all outstanding principal, interest and
penalties or premium (if any) due under the Term Loan Agreement dated as of
February 4, 1992 and amended as of April 1, 1993 between CT Camden as borrower
and General Electric Capital Corporation as lender.
"CAMDEN PLANT" means the 146 megawatt gas-fired, combined cycle
cogeneration facility owned by Camden Cogen and located in Camden, New Jersey.
"CAUSE" means a Person's continued failure to perform diligently his or
her reasonably assigned duties, fraud, theft or embezzlement by such Person or
the commission by such Person of any fraudulent activity against or involving
any Acquired Entity, any Buyer Entity or any Affiliate of any of the foregoing,
the commission by such Person of a felony, any willful or negligent act or
omission by such Person which is injurious (including, without limitation,
reputational injuries) to any Acquired Entity, any Buyer Entity or any Affiliate
of any of the foregoing or such Person's violation of Buyer's work rules or
policies to the extent such violation is, in the ordinary course, considered by
Buyer to constitute just cause for dismissal for similarly situated employees.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, and any rules or regulations promulgated
under such Act.
"CLOSING" has the meaning set forth in Section 2.05.
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"CLOSING DATE" means the date of the Closing.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPETING TRANSACTION" means any proposal or offer with respect to a
merger, consolidation, acquisition of an equity interest, share exchange,
business combination, reorganization, recapitalization, liquidation, dissolution
or similar transaction involving, or any purchase or sale of all or any
significant portion of the assets of, any Acquired Entity or any Affiliate of an
Acquired Entity.
"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement dated
as of June 15, 1998 by and between CT Capital and Buyer.
"CONSIDERATION" has the meaning set forth in Section 2.01.
"CONTEMPLATED EXPANSIONS" means (i) an up to approximate 500-megawatt
combined cycle plant at or in the vicinity of the Bayonne Plant, (ii) an up to
approximate 250-megawatt combined cycle plant or an up to approximate
300-megawatt peaking plant at or in the vicinity of the Linden Plant, and (iii)
an up to approximate 150-megawatt combined cycle or peaking plant located at or
in the vicinity of the Camden Plant.
"CONTEMPLATED TRANSACTIONS" means the acquisitions of the Interests and
the other transactions contemplated by this Agreement.
"COVERED PARTIES" has the meaning set forth in Section 7.03(a).
"CT CAMDEN" means Cogen Technologies Camden GP Limited Partnership, a
Delaware limited partnership.
"CT CAPITAL" has the meaning set forth in the introductory paragraph to
this Agreement.
"CT GENERATING" has the meaning set forth in Section 2.08(a).
"CT GLOBAL" means CT Global Insurance, Ltd., a company organized under
the laws of Bermuda.
"CTCI" has the meaning set forth in the introductory paragraph to this
Agreement.
"CTLPJV" means Cogen Technologies Limited Partners Joint Venture, a
Texas general partnership.
"CTLPJV INITIAL LINDEN INTEREST" means an undivided 47.5% of the
limited partnership interest owned by CTLPJV in Linden Ltd.
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"CTLPJV REMAINING LINDEN INTEREST" means an undivided 52.5% of the
limited partnership interest owned by CTLPJV in Linden Ltd.
"CURRENT BENEFIT PLANS" shall mean Benefit Plans that are sponsored,
maintained, or contributed to (directly or indirectly) by the Acquired Entities
as of the date of this Agreement.
"DAMAGES" has the meaning set forth in Section 11.02(a).
"DGCL" means the Delaware General Corporation Law.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule delivered by
Sellers relating to this Agreement, which contains the disclosures required to
be made by the Sellers under the various terms and provisions of this Agreement.
The Disclosure Schedule constitutes an integral part of this Agreement and
modifies the respective representations, warranties, covenants or agreements of
the Sellers contained herein to the extent that such representations,
warranties, covenants or agreements expressly refer specifically to the
applicable section of the Disclosure Schedule. Each item of disclosure set forth
in the Disclosure Schedule specifically refers to the article and section of the
Agreement to which such disclosure responds, and shall not be deemed to be
disclosed with respect to any other article or section of the Agreement.
"DISPUTED CLAIMS" has the meaning set forth in Section 13.06(b).
"EFFECTIVE TIME" has the meaning set forth in Section 2.03(b).
"END DATE" has the meaning set forth in Section 12.01(b).
"ENVIRONMENTAL LAWS" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, judicial decision,
regulation, rule, ordinance, judgment, order, decree, injunction, permit or
governmental restriction or any agreement with any Governmental Authority or
other third party, in effect on or prior to the date of this Agreement, relating
to the environment, human health and safety or to the discharge, release, use,
treatment, transportation, storage or handling of pollutants, contaminants,
wastes or chemicals or any toxic, radioactive, ignitable, corrosive, reactive or
otherwise Hazardous Substances.
"ENVIRONMENTAL LIABILITIES" means any and all liabilities arising in
connection with or in any way relating to the Acquired Entities, any property
now or previously owned, leased or operated by the Acquired Entities or any
activities or operations occurring or conducted at the Real Property (including,
without limitation, offsite transportation or disposal of Hazardous Substances
or arrangements for transport or disposal of Hazardous Substances), whether
accrued, contingent, absolute, determined, determinable or otherwise, which
arise under or relate to any Environmental Law and relate to actions occurring
or conditions existing on or prior to the Closing Date (including, without
limitation, any matter disclosed or required to be disclosed in Section II.22 of
the Disclosure Schedule).
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"ENVIRONMENTAL PERMITS" means all permits, licenses, franchises,
certificates, approvals, exemptions and other similar authorizations of any
Governmental Authority relating to or required by Environmental Laws and
affecting, or relating in any way to, the Acquired Entities.
"GE" means General Electric Capital Corporation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FERC" means the Federal Energy Regulatory Commission.
"FINAL WORKING CAPITAL" has the meaning set forth in Section 2.07(a).
"GOVERNMENTAL AUTHORITY" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing.
"HAZARDOUS SUBSTANCES" means any hazardous or toxic substance, material
or waste regulated by any Environmental Law, including, without limitation,
whether or not so regulated, petroleum, including crude oil or any fraction
thereof, any radioactive material, radon gas, polychlorinated biphenyls and any
asbestos in any form or condition.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"INDEMNIFIED PARTIES" has the meaning set forth in Section 11.03(a).
"INDEMNIFYING PARTIES" has the meaning set forth in Section 11.03(a).
"INDEBTEDNESS FOR BORROWED MONEY" means all obligations for borrowed
money, including (a) any obligation owed for all or any part of the purchase
price of property or other assets or for services or for the cost of property or
other assets constructed or of improvements to such property or other assets,
other than current trade accounts payable included in current liabilities and
incurred in respect of property or services purchased in the ordinary course of
business, (b) any capital lease obligation, (c) any obligation (whether fixed or
contingent) to reimburse any bank or other Person in respect of amounts paid or
payable under a standby letter of credit (other than obligations under standby
letters of credit securing performance under Material Contracts), (d) any
guarantee with respect to indebtedness for borrowed money (of the kind otherwise
described in this definition) of another Person, (e) any factored or sold
receivables, (f) any progress payments in excess of specifically related
inventory (net of accounts payable) and (g) an amount equal to the excess of (i)
the aggregate amount of all past due accounts payable of the Acquired Entities
as of the Closing Date over (ii) the aggregate amount of all past due accounts
payable of the Acquired Entities as of June 30, 1998.
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"INITIAL MESC SHARES" means, with respect to each Bayonne Seller, a
number of shares of MESC Common Stock equal to 90% of the shares of MESC Common
Stock owned by such Bayonne Seller, rounded down to the nearest whole share.
"INTELLECTUAL PROPERTY RIGHT" means any trademark, service mark,
service name, trade name, mask work, invention, patent, process, trade secret,
copyright, technology, proprietary data, formula, research and development data,
computer software program, know-how (including any registrations or applications
for registration of any of the foregoing) or any other similar type of
proprietary intellectual property right.
"INTERESTS" means all of the outstanding capital stock of MESC, all of
the outstanding limited and general partnership interests in CT Camden, the RCM
Holdings Initial Linden Interest and the CTLPJV Initial Linden Interest.
"ISRA" means the New Jersey Industrial Site Recovery Act, as amended,
previously known as the New Jersey Environmental Cleanup Responsibility Act,
also referred to as ECRA.
"JEDI II" means Joint Energy Development Investments II Limited
Partnership, a Delaware limited partnership.
"LATEST BALANCE SHEETS" means the Bayonne Balance Sheet, the Linden
Balance Sheet and the Camden Balance Sheet.
"LIEN" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance or other adverse claim of
any kind in respect of such property or asset, other than (i) Liens for current
taxes and assessments not yet due, (ii) inchoate workmen, repairmen,
warehousemen and carriers Liens arising in the ordinary course of business and
(iii) Liens created by any Buyer Entity. For the purposes of this Agreement, a
Person shall be deemed to own subject to a Lien any property or asset which it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"LINDEN ACQUISITION" means the acquisition of certain partnership
interests in Linden Ltd. and the other transactions all as set forth in Section
2.02.
"LINDEN BALANCE SHEET" means the balance sheet of Linden Ltd., dated
June 30, 1998, included in Section II.07 of the Disclosure Schedule.
"LINDEN BANK CONSENT" has the meaning set forth in Section 7.04(c).
"LINDEN GE CONSENT" has the meaning set forth in Section 7.04(b).
"LINDEN GP TERM LOAN" means the Amended and Restated Term Loan
Agreement, dated as of September 15, 1992 (as amended by the First Amendment to
GP Term Loan Agreement dated as of April 30, 1993), between Linden Ltd. and the
Owner Trustee.
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"LINDEN GROUND LEASE" has the meaning set forth in Section II.22(d) of
Exhibit II.
"LINDEN LTD." means Cogen Technologies Linden, Ltd., a Texas limited
partnership.
"LINDEN LTD. PARTNERSHIP AGREEMENT" means the Agreement of Limited
Partnership of Linden Ltd. dated June 28, 1989 between RCM Holdings and CTLPJV,
as amended to the date of this Agreement.
"LINDEN PLANT" means the 715 megawatt gas-fired, combined cycle
cogeneration facility owned by Linden Venture and located in Linden, New Jersey
on the site of the Bayway Refinery facility.
"LINDEN RECEIVABLE" means the amounts owed by Cogen Technologies
Financial Services, L.P., a Delaware limited partnership (currently called Old
Cogen Technologies Financial Services, L.P.) to Linden Ltd. as evidenced by the
$115,000,000 term promissory note and the revolving promissory note each dated
as of January 1, 1994 and each amended as of January 1, 1997 and July 28, 1998,
executed by Cogen Technologies Financial Services, L.P. as maker in favor of
Linden Ltd.
"LINDEN STEAM AGREEMENT" means the Agreement between Cogen Technologies
Linden Venture, L.P. and Exxon Corporation for the Sale of Steam dated August 1,
1990.
"LINDEN VALUE" has the meaning set forth in Section 2.02.
"LINDEN VENTURE" means Cogen Technologies Linden Venture, L.P., a
Delaware limited partnership.
"LINDEN VENTURE PARTNERSHIP AGREEMENT" means the Amended and Restated
Agreement of Limited Partnership dated as of September 15, 1992, between Linden
Ltd. and the Owner Trustee under a Trust Agreement dated as of December 28,
1990, between the Owner Trustee and Linden Owners Partnership, a Delaware
partnership, as amended to the date of this Agreement.
"MATERIAL ADVERSE EFFECT" means any effect or change that is or would
be materially adverse to the business, results of operations, condition
(financial or otherwise), assets or liabilities of the Acquired Entities, when
taken as a whole.
"MATERIAL CONTRACT" has the meaning set forth in Section II.10(a) of
Exhibit II.
"MCNAIR" means Robert C. McNair.
"MCNAIR GROUP SELLERS" means Robert C. McNair; Robert Cary McNair, Jr.;
Daniel Calhoun McNair; Robert Cary McNair, Jr. Trust UTA dated 11/14/88, as
amended; Daniel Calhoun McNair Trust UTA dated 11/14/88, as amended; Ruth McNair
Smith Trust UTA dated 11/14/88, as amended; and Melissa Eileen McNair Walter
Trust UTA dated 11/14/88, as amended.
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"MESC" means McNair Energy Services Corporation, a Texas corporation.
"MESC COMMON STOCK" means the common stock, par value $1.00 per share,
of MESC.
"MESC/NJ MERGER" has the meaning set forth in Section 2.03(a).
"MESC PRE-CLOSING TAXES" has the meaning set forth in Section VI.01 of
Exhibit VI.
"MINORITY GROUP SELLERS" means CTLPJV; the Charles N. Buck Family
Trust-A and the Charles N. Buck Family Trust-B under the Will of Charles N.
Buck; Robert A. Hansen; Evergreen Partnership Energy, Ltd.; The 1989 Energy
Trust; C. Donald Van Wart; Hansfam Three, a Trust; and Joann K. Sowell.
"NJDEP" means the New Jersey Department of Environmental Protection.
"NJ INC." means Cogen Technologies NJ, Inc., a Delaware corporation.
"NJ INC. COMMON STOCK" means the common stock, par value $.01 per
share, of NJ Inc.
"NJ VENTURE" Cogen Technologies NJ Venture, a New Jersey general
partnership.
"NJ VENTURE PARTNERSHIP AGREEMENT" means the Amended and Restated Joint
Venture Agreement of NJ Venture dated as of August 25, 1986.
"OPERATING FACILITIES" means the Linden Plant, the Bayonne Plant and
the Camden Plant.
"OWNER TRUSTEE" means State Street Bank and Trust Company of
Connecticut, National Association, as trustee of an owner trust under the Linden
Venture Partnership Agreement.
"PARENT" has the meaning set forth in the introductory paragraph to
this Agreement.
"PARENT COMMON STOCK" means the common stock, without par value, of
Parent.
"PARENT SEC REPORTS" has the meaning set forth in Section III.03(a) of
Exhibit III.
"PARENT SHARES" has the meaning set forth in Section 2.01.
"PARENT STOCK RECIPIENT" means any Seller who receives Parent Shares
pursuant to this Agreement, including each stockholder, partner, beneficiary or
donee by gift of such Seller.
"PARENT STOCK VALUE" means the average of the closing prices of the
Parent Common Stock as reported on the New York Stock Exchange Composite Tape
for the ten trading days ending on and including the third trading day prior to
the Closing Date.
"PARTNERSHIP CONSENTS" has the meaning set forth in Section 7.04(a).
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"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a Governmental Authority.
"PROJECT ENTITIES" has the meaning set forth in Section II.19(b) of
Exhibit II.
"PURPA" means the Public Utility Regulatory Policies Act of 1978, as
amended.
"PURPA REQUIREMENTS" has the meaning set forth in Section II.19(a) of
Exhibit II.
"QUARTERLY DATE" has the meaning set forth in Section 2.07(b).
"RCM HOLDINGS" has the meaning set forth in the introductory paragraph
to this Agreement.
"RCM HOLDINGS INITIAL LINDEN INTEREST" means an undivided 47.5% of the
general partnership interest owned by RCM Holdings in Linden Ltd.
"RCM HOLDINGS REMAINING LINDEN INTEREST" means an undivided 52.5% of
the general partnership interest owned by RCM Holdings in Linden Ltd.
"REAL ESTATE OPTION" has the meaning set forth in Section 2.08(b).
"REAL PROPERTY" has the meaning set forth in Section II.13(a) of
Exhibit II.
"RECEIVABLE AMOUNT" has the meaning set forth in Section 2.02.
"REMAINING MESC SHARES" means, with respect to each Bayonne Seller, all
shares of MESC Common Stock owned by such Bayonne Seller that are not redeemed
pursuant to the provisions of Section 2.03(b).
"REPRESENTATIVES" means with respect to any Person, the officers,
directors, employees, accountants, counsel, consultants, advisors and agents of
such Person.
"REQUIRED CONSENTS" has the meaning set forth in Section II.06 of
Exhibit II.
"S-1 REGISTRATION STATEMENT" means to the Registration Statement on
Form S-1 of Cogen Technologies, Inc. filed with the SEC under the Securities Act
(File No. 333-53533), as amended.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLERS" has the meaning set forth in the introductory paragraph of
this Agreement.
"SELLERS' REPRESENTATIVES" means (i) Robert C. McNair and (ii) John
Hansen and H. Fred Levine, acting jointly, or any successor appointed in
accordance with the provisions of Section 13.11.
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"SPECIFIED RATE" means the 90-day London Interbank Offered Rate as
published in the Wall Street Journal, Eastern Edition, in effect from time to
time.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation or
other entity of which 50% or more of the securities or other ownership interests
having ordinary voting power are at the time directly or indirectly owned by
such Person or by a Subsidiary of such Person, or (ii) any limited partnership
of which such Person (or a Subsidiary of such Person) is a general partner or of
which 50% or more of the limited partnership interests are at the time owned
directly or indirectly by such Person or a Subsidiary of such person, or (iii)
any general partnership of which 50% or more than of the equity interests are
owned directly or indirectly by such Person or by a Subsidiary of such Person.
"TBCA" means the Texas Business Corporation Act.
"TERMINATED BENEFIT PLANS" means Benefit Plans that were sponsored,
maintained, or contributed to (directly or indirectly) by the Acquired Entities
within six years prior to the date of this Agreement but which have been
terminated prior to the date of this Agreement.
"THERMAL HOST" has the meaning set forth in Section II.19(c) of Exhibit
II.
"THIRD PARTY CLAIMS" has the meaning set forth in Section 11.03(a).
"TRANSACTION DOCUMENTS" means this Agreement and any other agreements
to be entered into in accordance with the terms hereof.
"TRANSFERRED EMPLOYEE" has the meaning set forth in Section 9.01(a).
"TURBINE ORDER" has the meaning set forth in Section 2.08(a).
"YEAR-END BALANCE SHEETS" has the meaning set forth in Section 2.06(b).
"YEAR-END WORKING CAPITAL" has the meaning set forth in Section
2.06(b).
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EXHIBIT II
REPRESENTATIONS AND WARRANTIES OF MCNAIR
McNair represents and warrants to the Buyer Entities and the Parent as
of the date of this Agreement and as of the Closing Date as follows:
II.01. Corporate Existence and Power.
(a) Each of RCM Holdings, CTCI, CT Capital and the Acquired
Entities is a corporation, partnership or other entity duly
incorporated or organized, validly existing and (other than with
respect to partnerships) in good standing under the laws of its
jurisdiction of incorporation or organization, has all corporate or
other similar powers required to carry on its business as now
conducted, is duly qualified to do business and (other than with
respect to partnerships) is in good standing in each jurisdiction where
such qualification is necessary, except for those jurisdictions where
failure to be so qualified would not, individually or in the aggregate,
have a Material Adverse Effect. Included in Section II.01 of the
Disclosure Schedule are true and complete copies of the organizational
documents of Camden Cogen, Linden Venture and NJ Venture.
(b) Except as disclosed in Section II.01(b) of the Disclosure
Schedule, each of NJ Inc., PSEG Bayonne, Inc., and NJ Venture were
formed in connection with the development, construction, financing,
ownership and operation of the Bayonne Plant and have not conducted any
operations, incurred any liabilities or been parties to any agreements
except in connection with such activities. Except as disclosed in
Section II.01(b) of the Disclosure Schedule, each of CTCI, CT Camden
and Camden Cogen were formed in connection with the development,
construction, financing, ownership and operation of the Camden Plant
and have not conducted any operations, incurred any liabilities or been
parties to any agreements except in connection with such activities.
Except as disclosed in Section II.01(b) of the Disclosure Schedule,
each of RCM Holdings, Linden Ltd. and Linden Venture were formed in
connection with the development, construction, financing, ownership and
operation of the Linden Plant and have not conducted any operations,
incurred any liabilities or been parties to any agreements except in
connection with such activities.
II.02. Authorization. The execution, delivery and performance by RCM
Holdings, CTCI, CT Capital and each Acquired Entity of the Transaction Documents
to which it is a party and the consummation of the Contemplated Transactions to
which it is a party are within its corporate or other similar powers and have
been duly authorized by all necessary corporate or other similar action on the
part of such entity. Each Transaction Document to which RCM Holdings, CTCI, CT
Capital or any Acquired Entity is a party has been duly and validly executed and
delivered by or on behalf of such entity and constitutes a valid and binding
agreement of such entity, enforceable against such entity in accordance with its
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or equity). There is no vote
or other approval of any shareholders of RCM
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Holdings or CTCI required in connection with consummation of the Contemplated
Transactions, except those disclosed in Section II.02 of the Disclosure
Schedule, each of which have been obtained.
II.03. [Intentionally Omitted].
II.04. Noncontravention. Except as disclosed in Section II.04 or II.06
of the Disclosure Schedule, the execution, delivery and performance by each of
RCM Holdings, CTCI, CT Capital or any Acquired Entity of the Transaction
Documents to which it is a party and the consummation of the Contemplated
Transactions do not and will not (i) violate the certificate or articles of
incorporation, bylaws, partnership or other organizational documents of RCM
Holdings, CTCI, CT Capital or any Acquired Entity, (ii) assuming compliance with
the matters referred to in the last sentence of this Section II.04, violate any
Applicable Law, (iii) assuming the obtaining of all Required Consents,
constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of RCM Holdings, CTCI,
CT Capital or any Acquired Entity or to a loss of any benefit to which such
entity is entitled under any provision of any agreement or other instrument
binding upon such entity or by which such entity is or may be bound or (iv)
result in the creation or imposition of any Lien on any assets of RCM Holdings,
CTCI, CT Capital or any Acquired Entity, other than Permitted Liens, except for
such violations referred to in clause (ii), defaults, rights of termination,
cancellation or acceleration or losses referred to in clause (iii) or
impositions of Liens referred to in clause (iv) that could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect or to
interfere or conflict with the consummation of the Contemplated Transactions.
The execution, delivery and performance by RCM Holdings, CTCI, CT Capital and
each Acquired Entity of the Transaction Documents to which it is a party and the
consummation of the Contemplated Transactions require no material action by or
in respect of, or material filing with, any Governmental Authority other than
compliance with any applicable requirements of the HSR Act and ISRA and filings
with the Secretaries of State of Delaware and Texas in connection with the
MESC/NJ Merger.
II.05. Capitalization; Etc.
(a) The authorized capital stock of MESC consists of 1,000,000
shares of common stock ("MESC COMMON STOCK"), of which 198,447 shares
are issued and outstanding (no shares being held in treasury). Each
outstanding share of MESC Common Stock has been duly authorized, is
validly issued, fully paid and nonassessable and was not issued in
violation of any preemptive rights of any Person. Set forth in the
Section II.05(a) of the Disclosure Schedule are the names of each
record holder of MESC Common Stock, together with the number of shares
held by each such person. The authorized capital stock of NJ Inc.
consists of 1,000 shares of NJ Inc. Common Stock, of which 100 shares
are issued and outstanding, all of which are owned by MESC, free and
clear of any Lien. Each outstanding share of NJ Inc. capital stock has
been duly authorized, is validly issued, fully paid and nonassessable
and was not issued in violation of any preemptive rights of any Person.
NJ Inc. owns a 91.75% general partner interest in NJ Venture, free and
clear of any Lien. Section II.05(a) of the Disclosure Schedule sets
forth a complete list of each other
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holder of a partnership interest in NJ Venture, including the
percentage equity ownership held by each such owner.
(b) The authorized capital stock of RCM Holdings consists of
10,000 shares of common stock, of which 1,131 shares are issued and
outstanding (no shares being held in treasury). Each outstanding share
of RCM Holdings common stock has been duly authorized, is validly
issued, fully paid and nonassessable and was not issued in violation of
any preemptive rights of any Person. Set forth in the Section II.05(b)
of the Disclosure Schedule are the names of each record holder of the
common stock of RCM Holdings, together with the number of shares held
by each such person. RCM Holdings is the sole general partner of Linden
Ltd. RCM Holdings holds such general partner interest, which comprises
the RCM Holdings Initial Linden Interest and the RCM Holdings Remaining
Linden Interest, free and clear of any Lien. CTLPJV is the sole limited
partner of Linden Ltd. Upon consummation of the Contemplated
Transactions, Buyer Acquisition and Buyer Linden LP shall be the record
and beneficial owner of the RCM Holdings Initial Linden Interest, free
and clear of any Lien, and the CTLPJV Initial Linden Interest, which
together shall constitute all of the partnership interests in Linden
Ltd., and in each case with full right to admission as a partner.
Linden Ltd. is the sole general partner of Linden Venture with all
rights given to it as such pursuant to the Linden Venture Partnership
Agreement, and, except as set forth in Section II.05(b) of the
Disclosure Schedule, holds such general partner interest free and clear
of any Lien.
(c) The authorized capital stock of CTCI consists of 10,000
shares of common stock (the "CTCI COMMON STOCK"), of which 1,000 shares
are issued and outstanding (no shares being held in treasury). Each
outstanding share of CTCI Common Stock has been duly authorized, is
validly issued, fully paid and nonassessable and was not issued in
violation of any preemptive rights of any Person. Set forth in the
Section II.05(c) of the Disclosure Schedule are the names of each
record holder of CTCI Common Stock, together with the number of shares
held by each such person. CTCI is the sole general partner of CT
Camden. Except as set forth in Section II.05(c) of the Disclosure
Schedule, CTCI holds such general partner interest (the "CT CAMDEN GP
INTEREST") free and clear of any Lien. CTLPJV is the sole limited
partner of CT Camden. Upon consummation of the Contemplated
Transactions, Buyer Acquisition and Buyer Camden LP shall be the record
and beneficial owner of the CT Camden GP Interest, free and clear of
any Lien, and the CT Camden LP Interest, which together shall
constitute all of the partnership interests in CT Camden, in each case
with full right to admission as a partner. CT Camden is the sole
general partner of Camden Cogen with all rights given to it as such
pursuant to the Camden Cogen Partnership Agreement. Except as set forth
in the Section II.05(c) of the Disclosure Schedule, CT Camden holds
such general partner interest free and clear of any Lien.
(d) Except as contemplated by this Agreement, there is not
outstanding any option, warrant or right, entitling the holder thereof
to purchase or otherwise acquire any shares of capital stock or
partnership or other equity interests in any of the Acquired Entities,
and there are no contracts, agreements, commitments or arrangements
obligating any Acquired Entity (i) to issue, sell, pledge, dispose of
or encumber any shares of capital stock
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or partnership or other equity interests of, or any options, warrants
or rights of any kind to acquire, or any securities that are
convertible into or exercisable or exchangeable for, any shares of
capital stock or partnership or other equity interests in any Acquired
Entity or (ii) to redeem, purchase or acquire or offer to acquire any
shares of capital stock or partnership or other equity interests of, or
any outstanding option, warrant or right to acquire, or any securities
that are convertible into or exercisable or exchangeable for, any
shares of capital stock or partnership or other equity interests in any
Acquired Entity. Except as set forth in Section II.05(d) of the
Disclosure Schedule, none of McNair, RCM Holdings or CTCI is party to,
or has any knowledge of, any agreement or arrangement relating to or
affecting the Interests in which RCM Holdings, CTCI or McNair have an
interest, including any agreement relating to the voting of such
Interests, any right of first refusal or first offer or any obligation
to sell or otherwise transfer such Interests.
II.06. Consents. Section II.06 of the Disclosure Schedule sets forth
each Material Contract binding upon RCM Holdings, CTCI, CT Capital or any
Acquired Entity or any Permit, in each case requiring a consent or other action
by any Person as a result of the execution, delivery and performance of the
Transaction Documents or the consummation or the Contemplated Transactions (the
"REQUIRED CONSENTS").
II.07 Financial Statements. Included as Section II.07 of the Disclosure
Schedule are:
(a) True and complete copies of the financial statements of
MESC consisting of (i) audited balance sheets of MESC as of December
31, 1996 and 1997, and the related audited statements of income,
changes in shareholders' equity and cash flows for the three calendar
years ended December 31, 1997 (including the notes thereto) (the
"BAYONNE AUDITED FINANCIAL STATEMENTS"), which financial statements
have been audited, and are accompanied by the audit opinion of Arthur
Andersen LLP, and (ii) an unaudited balance sheet of MESC as of June
30, 1998, and the related unaudited statements of income, changes in
shareholders' equity and cash flows for the six months then ended and
for the corresponding period of MESC's prior calendar year (the
"BAYONNE INTERIM FINANCIAL STATEMENTS," and, collectively with the
Bayonne Audited Financial Statements, the "BAYONNE FINANCIAL
STATEMENTS"). The Bayonne Financial Statements present fairly the
financial position of Bayonne and the results of its operations and
changes in financial position as of the dates and for the periods
indicated therein in conformity with generally accepted accounting
principles applied on a consistent basis, except as disclosed in the
notes thereto (subject, in the case of the Bayonne Interim Financial
Statements, to normal year-end audit adjustments on a basis comparable
with past periods). The Bayonne Financial Statements do not omit to
state any liabilities, absolute or contingent, required to be stated
therein in accordance with generally accepted accounting principles
consistently applied.
(b) True and complete copies of the financial statements of
Linden Ltd. consisting of (i) audited balance sheets of Linden Ltd. as
of December 31, 1996 and 1997, and the related audited statements of
income, changes in partners' equity and cash flows for the three
calendar years ended December 31, 1997 (including the notes thereto)
(the "LINDEN AUDITED FINANCIAL STATEMENTS"), which financial statements
have been audited, and are accompanied
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by the audit opinion of Arthur Andersen LLP, and (ii) an unaudited
balance sheet of Linden Ltd. as of June 30, 1998, and the related
unaudited statements of income, changes in partners' equity and cash
flows for the six months then ended and for the corresponding period of
Linden Ltd.'s prior calendar year (the "LINDEN INTERIM FINANCIAL
STATEMENTS," and, collectively with the Linden Audited Financial
Statements, the "LINDEN FINANCIAL STATEMENTS"). The Linden Financial
Statements present fairly the financial position of Linden Ltd. and the
results of its operations and changes in financial position as of the
dates and for the periods indicated therein in conformity with
generally accepted accounting principles applied on a consistent basis,
except as disclosed in the notes thereto (subject, in the case of the
Linden Interim Financial Statements, to normal year-end audit
adjustments on a basis comparable with past periods). The Linden
Financial Statements do not omit to state any liabilities, absolute or
contingent, required to be stated therein in accordance with generally
accepted accounting principles consistently applied.
(c) True and complete copies of the financial statements of CT
Camden consisting of (i) audited balance sheets of CT Camden as of
December 31, 1996 and 1997, and the related audited statements of
income, changes in partners' equity and cash flows for the three
calendar years ended December 31, 1997 (including the notes thereto)
(the "CAMDEN AUDITED FINANCIAL STATEMENTS"), which financial statements
have been audited, and are accompanied by the audit opinion of Arthur
Andersen LLP, and (ii) an unaudited balance sheet of CT Camden as of
June 30, 1998, and the related unaudited statements of income, changes
in partners' equity and cash flows for the six months then ended and
for the corresponding period of CT Camden's prior calendar year (the
"CAMDEN INTERIM FINANCIAL STATEMENTS," and, collectively with the
Camden Audited Financial Statements, the "CAMDEN FINANCIAL
STATEMENTS"). The Camden Financial Statements present fairly the
financial position of CT Camden and the results of its operations and
changes in financial position as of the dates and for the periods
indicated therein in conformity with generally accepted accounting
principles applied on a consistent basis, except as disclosed in the
notes thereto (subject, in the case of the Camden Interim Financial
Statements, to normal year-end audit adjustments on a basis comparable
with past periods). The Camden Financial Statements do not omit to
state any liabilities, absolute or contingent, required to be stated
therein in accordance with generally accepted accounting principles
consistently applied.
II.08. Absence of Certain Changes. Since December 31, 1997, except as
set forth in Section II.08 of the Disclosure Schedule, the Acquired Entities
have conducted their respective businesses in the ordinary course consistent
with past practices and there has not been:
(a) any event, occurrence, development or state of
circumstances or facts which, individually or in the aggregate, has had
or could reasonably be expected to have a Material Adverse Effect;
(b) any creation or other incurrence of any Lien, except for
Permitted Liens, on any material asset of the Acquired Entities;
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(c) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the Acquired Entities which,
individually or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect or has been or could
reasonably be expected to be material to the Bayonne Plant, the Camden
Plant or the Linden Plant;
(d) any material transaction or commitment made, or, except as
disclosed in Section II.10(a) of the Disclosure Schedule, any Material
Contract entered into, by any Acquired Entity (including the
acquisition or disposition of any assets) or any relinquishment by any
Acquired Entity of any material contract or other right, other than
transactions and commitments in the ordinary course of business
consistent with past practices and those contemplated by the
Transaction Documents;
(e) except as contemplated by this Agreement and except for
any such change after the date of this Agreement required by reason of
a concurrent change in generally accepted accounting principles, any
change in any method of accounting or accounting practice with respect
to the Acquired Entities;
(f) except as set forth in Sections II.10(a) and II.10(c) of
the Disclosure Schedule, any (i) employment, deferred compensation,
severance, welfare, retirement or other similar agreement or
arrangement entered into with any officer or employee of any Acquired
Entity (or any amendment to any such existing agreement), (ii) grant of
any severance or termination pay to any officer or employee of any
Acquired Entity, (iii) grant of annual compensation or other benefits
to any new employee of any Acquired Entity in excess of the comparable
amounts paid to the individual previously serving in the position in
which such new employee is to serve or (iv) change in compensation or
other benefits payable to any officer or employee of any Acquired
Entity pursuant to any severance, welfare or retirement plans or
policies of such plans, other than in the ordinary course of business
consistent with past practices; or
(g) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or
Representative of a labor union to organize any employees of an
Acquired Entity, or any lockouts, strikes, slowdowns, work stoppages
or, to the knowledge of McNair, RCM Holdings, CTCI or any Acquired
Entity, threats of any of the foregoing by or with respect to employees
of any Acquired Entity.
II.09. No Undisclosed Material Liabilities. There are no liabilities of
the Acquired Entities of any kind whatsoever, whether known or unknown, accrued,
absolute, contingent, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability, other than:
(a) liabilities provided for in the Latest Balance Sheets; or
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(b) liabilities incurred after June 30, 1998 in the ordinary
course of business consistent with past practices that, individually or
in the aggregate, have not had and could not reasonably be expected to
have a Material Adverse Effect.
II.10. Material Contracts or Indebtedness.
(a) Except as set forth in Section II.10(a) of the Disclosure
Schedule, none of the Acquired Entities is a party to or bound by (each
of the following being referred to herein as a "MATERIAL CONTRACT"):
(i) any site lease with respect to an Operating
Facility and any other lease (whether of real or personal
property) providing for annual rentals of $250,000 or more;
(ii) any power purchase agreement, power marketing
agreement, fuel supply agreement, steam sales agreement,
operating and/or maintenance agreements and spare parts
purchase agreements and discount arrangements relating to an
Operating Facility;
(iii) any agreement or contract that would be a
"material contract" with respect to the Acquired Entities
(taken as whole) within the meaning of Item 601(b)(10) of
Regulation S-K under the Securities Act;
(iv) any partnership, joint venture, debt or equity
interest or investment in any Person (other than Acquired
Entities) or other similar agreement or arrangement;
(v) any agreement (other than the Transaction
Documents) relating to the acquisition or disposition of a
Subsidiary of such entity or any material asset outside the
ordinary course of business (whether by merger, sale of stock,
sale of assets or otherwise);
(vi) any agreement or series of related agreements
relating to Indebtedness for Borrowed Money in excess of
$250,000 and any Lien related thereto;
(vii) any agreement that limits the freedom of such
Acquired Entity to compete in any line of business or with any
Person or in any area or to own, operate, sell, transfer,
pledge or otherwise dispose of or encumber any material asset;
(viii) any agreement or arrangement with or for the
benefit of any Affiliate of any Seller or Acquired Entity;
(ix) any employment, consulting or similar agreement
and any agreement pursuant to which any Acquired Entity could
be obligated, in each case providing for payments to any
Person upon a change of control or severance or similar event
in excess of $100,000;
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(x) any agreement pursuant to which any Acquired
Entity could be obligated to pay management, consulting, fuel
management, owners' representative, development, broker's,
finders or similar fees or compensation to any Person in
excess of $100,000; or
(xi) any other agreement, commitment, arrangement or
plan not related to the business of the Operating Facilities
or not made in the ordinary course of business consistent with
past practices that is material to the Acquired Entities.
True and complete copies of each such Material Contract have
been made available to Buyer.
(b) Except as set forth in Section II.10(b) of the Disclosure
Schedule, there has been no agreement, correspondence, waiver or
similar documentation pursuant to which any Acquired Entity or any
Affiliate of an Acquired Entity has canceled, qualified, waived or
released any of its claims, rights or interests under the Linden Steam
Agreement.
(c) Each Benefit Plan is listed in Section II.10(c) of the
Disclosure Schedule. True and correct copies of each of the following,
to the extent applicable, have been made available to the Buyer with
respect to each Current Benefit Plan: the most recent annual report
(Form 5500) filed with the Internal Revenue Service, the plan document,
the trust agreement, the underlying insurance contract, or other
funding vehicle the most recent summary plan description and the most
recent determination letter issued by the IRS with respect to any
Current Benefit Plan intended to be qualified under Section 401 of the
Code. Except as set forth in Section II.10(c) of the Disclosure
Schedule, none of the Acquired Entities is a party to or is bound by
any severance agreement, program, or policy. True and correct copies of
all employment agreements with employees of the Acquired Entities and
all vacation, overtime, and other compensation policies of the Acquired
Entities relating to their employees have been made available to the
Buyer. There are no Terminated Benefit Plans. None of the ERISA
Affiliates (as defined below) sponsors, maintains or contributes to or
has at any time during the six-year period ending on the date of this
Agreement sponsored, maintained or contributed to a plan subject to
Title IV of ERISA or a "multiemployer plan," within the meaning of
Section 3(37) of ERISA. The term "ERISA Affiliates" shall mean the
Acquired Entities and each corporation, trade, business or entity under
common control with any of the Acquired Entities within the meaning of
Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986,
as amended, or Section 4001 of the ERISA.
(d) Except as disclosed in Section II.10(d)of the Disclosure
Schedule, each Material Contract is a legal, valid and binding
obligation of each Acquired Entity that is a party thereto and, to the
knowledge of McNair, RCM Holdings, CTCI, CT Capital or the Acquired
Entities, each other party to such Material Contract, enforceable
against such Acquired Entity and, to the knowledge of McNair, RCM
Holdings, CTCI, CT Capital or the Acquired Entities, each such other
party in accordance with its terms (except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating
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to or affecting creditors' rights generally and general equitable
principles (regardless of whether such enforceability is considered in
a proceeding at law or in equity)), and neither such Acquired Entity
nor, to the knowledge of McNair, RCM Holdings, CTCI, CT Capital or the
Acquired Entities, any other party to such Material Contract is in
material default or has failed to perform any material obligation under
such Material Contract (other than payment delinquencies under accounts
receivable), and there does not exist any event, condition or omission
which would constitute a material breach or material default (whether
by lapse of time or notice or both), except for any such defaults,
failures or breaches as, individually or in the aggregate, have not had
and could not reasonably be expected to have a Material Adverse Effect.
(e) True and complete copies of all agreements,
questionnaires, internal reports and analyses and material
correspondence relating to the Year 2000 issue at any of the Operating
Facilities (including such materials received from or relating to any
power purchaser, gas supplier, steam purchaser, operations and
maintenance contractor or other material vendor at any Operating
Facility) have been made available to Buyer.
II.11. Litigation.
(a) Except as set forth in Section II.11(a) of the Disclosure
Schedule, there is no action, suit, claim, investigation (of which
McNair, RCM Holdings, CTCI or any Acquired Entity has received notice
or is aware) or proceeding pending or threatened in writing against any
Acquired Entity before any Governmental Authority or pursuant to any
agreement to arbitrate, including any action, suit, claim,
investigation or proceeding against or with respect to any Benefit Plan
or its assets or arising out of or relating to any Environmental Laws.
(b) Except as set forth in Section II.11(b) of the Disclosure
Schedule, none of the matters listed in Section II.11(a) of the
Disclosure Schedule, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect or could reasonably be
expected to prevent, enjoin, alter or materially delay consummation of
the Contemplated Transactions.
II.12. Compliance with Laws. None of the Acquired Entities is in
violation of, has violated, or, to the knowledge of McNair, RCM Holdings, CTCI,
CT Capital or the Acquired Entities, is under investigation with respect to or
has been threatened to be charged with or given notice of any material violation
of any Applicable Law applicable to the Acquired Entities. It is understood that
this Section II.12 does not address matters under Environmental Laws, which
matters are addressed in Section II.22.
II.13. Properties.
(a) Section II.13 of the Disclosure Schedule correctly
describes all real property (the "REAL PROPERTY") which any Acquired
Entity owns, leases, operates or subleases, any title insurance
policies and surveys with respect to such Real Property, and any Liens
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thereon, specifying in the case of leases or subleases, the name of the
lessor or sublessor, the lease term and the basic annual rent.
(b) Each Acquired Entity has good and indefeasible title to,
or in the case of leased Real Property or personal property, valid
leasehold interests in, all material assets (whether real, personal,
tangible or intangible) reflected on its respective Latest Balance
Sheet or acquired after June 30, 1998, except for properties and assets
sold since June 30, 1998 in the ordinary course of business consistent
with past practices. Except as set forth on Section II.13 of the
Disclosure Schedule, no material asset of any Acquired Entity is
subject to any Lien, except:
(i) Liens disclosed on the Latest Balance Sheets;
(ii) Liens for taxes not yet due or being contested
in good faith (and for which adequate accruals or reserves
have been established on the Latest Balance Sheets); or
(iii) Liens which do not materially detract from the
value of such asset, or materially interfere with any present
or intended use of such asset (Liens referred to in clauses
(i) - (iii) of this Section II.13(b) are, collectively, the
"PERMITTED LIENS").
(c) The plants, buildings, structures and equipment owned by
the Acquired Entities, including the Operating Facilities, have no
material defects, are in good operating condition and repair and have
been reasonably maintained consistent with standards generally followed
in the industry (giving due account to the age and length of use of
same, ordinary wear and tear excepted), are adequate and suitable for
their present or intended uses and, in the case of plants, buildings
and other structures, are structurally sound.
(d) The plants, buildings and structures owned by the Acquired
Entities, including the Operating Facilities, currently have access to
(i) public roads or valid easements over private streets or private
property for such ingress to and egress from all such plants, buildings
and structures and (ii) water supply, storm and sanitary sewer
facilities, telephone, gas and electrical connections, fire protection,
drainage and other public utilities, in each case as is necessary for
the conduct of their respective businesses as previously conducted.
None of the structures on the Real Property encroaches upon real
property of another Person, and no structure of any other Person
substantially encroaches upon any Real Property.
(e) The Real Property, and its continued use, occupancy and
operation as currently used, occupied and operated, does not constitute
a nonconforming use under any applicable building, zoning, subdivision
and other land use and similar laws, regulations and ordinances.
II.14. [Intentionally Omitted].
II.15. Employee Benefit Matters.
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(a) With respect to each Benefit Plan, no event has occurred
and there exists no condition or set of circumstances in connection
with which the Acquired Entities could be subject to any liability
under the terms of such Benefit Plan (other than for benefits owed
pursuant to its terms), ERISA, the Code, or any other applicable Law,
other than any condition or set of circumstances that could not
reasonably be expected to have a Material Adverse Effect on the
Acquired Entities.
(b) The Cogen Technologies 401(k) Savings Plan, the only
Current Benefit Plan that is intended to be qualified under Section 401
of the Code, satisfies in form the requirements of such Section except
to the extent that amendments are not required by law to be made until
a date after the Closing Date and has been operated in all material
respects in compliance with the requirements of Section 401(a) of the
Code. The National Office of the Internal Revenue Service has ruled
that the terms of the standardized prototype plan documents that have
been adopted in connection with the Cogen Technologies 401(k) Savings
Plan satisfy the requirements of Section 401(a) of the Code.
(c) Except as specified below, there has been no termination
or partial termination of any Current Benefit Plan within the meaning
of Section 411(d)(3) of the Code. During the 1997 fiscal year of the
Cogen Technologies 401(k) Savings Plan such plan was partially
terminated and the benefits of all affected participants in such plan
were fully vested as required by the Code.
(d) There are no actions, suits, or claims pending (other than
routine claims for benefits) or threatened against, or with respect to,
any Benefit Plan or its assets that could reasonably be expected to
have a Material Adverse Effect. There is no matter pending (other than
routine qualification determination filings) with respect to any
Benefit Plan before the Internal Revenue Service, the Department of
Labor or other Governmental Authority.
(e) All contributions required to be made to Benefit Plans
pursuant to their terms and the provisions of ERISA, the Code, or any
other applicable law have been timely made.
(f) In connection with the consummation of the transactions
contemplated by this Agreement, no payments of money or other property,
acceleration of benefits, or provision of other rights have been or
will be made hereunder, under any agreement contemplated herein, or
under any Current Benefit Plans or any of the programs, agreements,
policies, or other arrangements described in Section II.10(c) of the
Disclosure Schedule that would be reasonably likely to be nondeductible
under Section 280G of the Code, whether or not some other subsequent
action or event would be required to cause such payment, acceleration,
or provision to be triggered.
(g) Except as expressly provided by this Agreement or required
by Section 411 of the Code, the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
will not (i) require the Acquired Entities to make a larger
contribution to, or pay greater benefits or provide other rights under,
any Current Benefit Plan or any of the programs, agreements, policies,
or other arrangements described in Section
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II.10(c) of the Disclosure Schedule than otherwise would be the case,
whether or not some other subsequent action or event would be required
to cause such payment or provision to be triggered, or (ii) create or
give rise to any additional vested rights or service credits under any
Current Benefit Plan or any of such programs, agreements, policies, or
other arrangements, whether or not some other subsequent action or
event would be required to cause such creation or acceleration to be
triggered.
(h) Except as set forth in Section II.10(c) of the Disclosure
Schedule, no Benefit Plan provides retiree medical or retiree life
insurance benefits to any Person and none of the Acquired Entities is
contractually or otherwise obligated (whether or not in writing) to
provide any Person with life insurance or medical benefits upon
retirement or termination of employment, other than as required by the
provisions of Sections 601 through 608 of ERISA and Section 4980B of
the Code. No termination of any Benefit Plan or other arrangement
described in Section II.10(c) of the Disclosure Schedule would result
in liability for the Acquired Entities except as to benefits accrued
thereunder prior to such termination.
(i) The vacation and sick pay policies of the Acquired
Entities and its Subsidiaries do not provide for carryover of vacation
or sick pay from one calendar year to the next.
(j) No collective bargaining agreement is being negotiated by
the Acquired Entities. There is no pending or threatened labor dispute,
strike, or work stoppage against the Acquired Entities. None of the
Acquired Entities nor any representative or employee of any of the
Acquired Entities has in the United States committed any unfair labor
practices in connection with the operation of the business of the
Acquired Entities and there is no pending or threatened charge or
complaint against the Acquired Entities by the National Labor Relations
Board or any comparable agency of any state of the United States.
II.16. Intellectual Property.
(a) Section II.16 of the Disclosure Schedule contains a list
of all Intellectual Property Rights owned or licensed by any Acquired
Entity that are material to the Acquired Entity ("MATERIAL INTELLECTUAL
PROPERTY RIGHTS"), specifying as to each, as applicable: (i) the nature
of such Intellectual Property Right, (ii) the jurisdictions by or in
which such Intellectual Property Right (A) is recognized (without
regard to registration) or (B) has been issued or registered or in
which an application for such issuance or registration has been filed,
(iii) the registration or application numbers and (iv) the termination
or expiration dates.
(b) Section II.16 of the Disclosure Schedule sets forth a list
of all licenses, sublicenses and other agreements as to which any
Acquired Entity is a party and pursuant to which any Person is
authorized to use any Material Intellectual Property Right, including
the identity of all parties to such licenses, sublicenses and other
agreements.
(c) The Acquired Entities own, free and clear of all Liens
other than Permitted Liens, all right, title and interest in the
Material Intellectual Property Rights.
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(d) Except as set forth in Section II.16 of the Disclosure
Schedule, the Acquired Entities own, or possess licenses or other valid
rights to use, all material Intellectual Property Rights necessary for
the continued operation of their respective businesses in substantially
the same manner as its operations have previously been conducted.
(e) (i) Except as set forth in Section II.16 of the Disclosure
Schedule, since January 1, 1995, none of the Acquired Entities has been
a defendant in any action, suit, investigation or proceeding relating
to, or otherwise has been notified of, any alleged claim of
infringement of any Intellectual Property Right, and none of McNair,
RCM Holdings, CTCI or any Acquired Entity has any knowledge of any
other such infringement by any Acquired Entity, and (ii) none of the
Acquired Entities has any outstanding claim or suit for, and has no
knowledge of, any continuing infringement by any other Person of any
Intellectual Property Rights. No Material Intellectual Property Right
is subject to any outstanding judgment, injunction, order, decree or
agreement restricting the use of such Intellectual Property Right by
any Acquired Entity or restricting the licensing of such Intellectual
Property Right by any Acquired Entity to any Person. None of the
Acquired Entities has entered into any agreement to indemnify any other
Person against any charge of infringement of any Intellectual Property
Right.
II.17. Insurance Coverage. The Sellers have furnished to Buyer a list
of all insurance policies and fidelity bonds relating to the Acquired Entities
and their respective businesses and operations and officers and employees,
except those provided by CT Global. Except as set forth in Section II.17 of the
Disclosure Schedule, there is no claim by any Acquired Entity pending under any
of such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds or in respect of which
such underwriters have reserved their rights. All premiums payable under all
such policies and bonds have been timely paid and each Acquired Entity has
otherwise complied fully with the terms and conditions of all such policies and
bonds. Except as set forth in Section II.17 of the Disclosure Schedule, such
policies of insurance and bonds (or other policies and bonds providing
substantially similar insurance coverage) have been in effect since January 1,
1995 and remain in full force and effect. Such policies and bonds are of the
type and in amounts customarily carried by Persons conducting businesses similar
to the business conducted by the Acquired Entities. Except as contemplated by
this Agreement, none of McNair, RCM Holdings, CTCI or any Acquired Entity knows
of any threatened termination of, premium increase with respect to, or material
alteration of coverage under, any of such policies or bonds. Except as
contemplated by this Agreement, or as set forth in Section II.17 of the
Disclosure Schedule, after the Closing the Acquired Entities shall continue to
have coverage under such policies and bonds with respect to events occurring
prior to the Closing.
II.18. Licenses and Permits. Section II.18 of the Disclosure Schedule
correctly describes each material license, franchise, permit, certificate,
approval or other similar authorization affecting, or relating in any way to,
the Acquired Entities or their respective businesses and operations (the
"PERMITS") together with the name of the government agency or entity issuing
such Permit. Except as set forth in Section II.18 of the Disclosure Schedule,
(i) the Permits are valid and in full force and effect, (ii) none of the
Acquired Entities is in default, and no condition exists that with notice or
lapse of time or both would constitute a default, under the Permits and (iii)
none of the Permits will,
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assuming the related Required Consents have been obtained prior to the Closing
Date, be terminated or impaired or become terminable, in whole or in part, as a
result of consummation of the Contemplated Transactions. It is understood that
this Section II.18 does not address Permits granted under Environmental Laws,
which matters are addressed in Section II.22.
II.19 Certain Regulatory Matters.
(a) Each Operating Facility is, and since the commencement of
power generation at each Operating Facility, has continuously been, a
"qualifying cogeneration facility" within the meaning of Section
3(18)(B) of the Federal Power Act, as amended, and the FERC's
regulations thereunder, at 18 C.F.R. Part 292, interpretations thereof
by the FERC and courts of competent jurisdiction of PURPA and such
regulations (collectively, PURPA, the regulations and all such
interpretations, the "PURPA REQUIREMENTS").
(b) Each of Linden Venture, Camden Cogen and NJ Venture (the
"PROJECT ENTITIES") is, and has continuously been, since the
commencement of power generation at the Operating Facility owned by
such Project Entity, in compliance with the Federal Power Act, as
amended, and the FERC's regulations thereunder.
(c) Except as set forth in Section II.19 of the Disclosure
Schedule, each of the Operating Facilities has in effect a contract
with an entity under which such entity (the "THERMAL HOST") has agreed
to purchase steam from such Operating Facility and use such steam for
an industrial or commercial process or for heating or cooling, or has
agreed to obtain cooling or chilling service from such Operating
Facility, or both, in aggregate amounts which equal or exceed the
projected amount of "useful thermal energy output" required for
continued qualification of the facility as a qualifying cogeneration
facility under the PURPA Requirements. All such uses of steam satisfy
the requirements to be "useful thermal energy output" as defined in the
PURPA Requirements, and, except as set forth in Section II.19 of the
Disclosure Schedule, each such contract runs for a period of at least
as long as the power purchase agreement of such Operating Facility,
subject only to the specific termination provisions therein. None of
the Operating Facilities has materially breached any agreement with a
Thermal Host, or, except as specifically disclosed on Section II.19 of
the Disclosure Schedule, has been informed of any alleged material
breach by the Operating Facility of an agreement with a Thermal Host,
or, to the knowledge of McNair, RCM Holdings, CTCI or any Acquired
Entity, has learned of any material breach or threatened breach by a
Thermal Host of any agreement with such Operating Facility.
(d) None of the Acquired Entities or any "affiliate" thereof,
as defined in the Public Utility Holding Company Act of 1935, as
amended ("PUHCA") is subject to regulation: (i) as a "public utility"
under the Federal Power Act, other than as contemplated by 18 C.F.R.
Section 292.601(c); (ii) as a "public-utility company," a "holding
company," or a "subsidiary company," "associate company," or
"affiliate" of a "public-utility company" or a "holding company" or an
"affiliate" of a "subsidiary company" of a "holding company", as each
such term is defined in PUHCA or the regulations of the SEC thereunder;
or
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(c) under any state law or regulation with respect to rates or the
financial or organizational regulation of electric utilities, other
than as contemplated by 18 C.F.R. Section 292.602(c)(2).
(e) None of the Project Entities is subject to regulation as a
"public utility" under the laws of the State of New Jersey or as an
"electric corporation" under the laws of the State of New York.
II.20. Finders' Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of RCM Holdings, CTCI, CT Capital or any Acquired Entity or any of their
respective Affiliates who might be entitled to any fee or commission from
Parent, any Buyer Entity or any Acquired Entity in connection with the
Contemplated Transactions.
II.21. [Intentionally Omitted].
II.22. Environmental Compliance.
(a) Except as set forth in Section II.22 of the Disclosure
Schedule:
(i) in connection with or relating to the Acquired
Entities, no notice, notification, demand, request for
information, citation, summons or order has been received, no
complaint has been filed, no penalty has been assessed and no
investigation, action, claim, proceeding or review is pending,
or to the knowledge of McNair, RCM Holdings, CTCI or any
Acquired Entity, threatened by any Governmental Authority or
other Person with respect to matters arising out of or
relating to any applicable Environmental Law that could,
individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect;
(ii) there are no Environmental Liabilities arising,
or, to the knowledge of McNair, RCM Holdings, CTCI or any
Acquired Entity, threatened, in connection with or in any way
relating to the Acquired Entities arising under or relating to
any applicable Environmental Law and there are no facts,
conditions, situations or set of circumstances which could
reasonably be expected to result in or be the basis for any
such liability, in each case that could reasonably be expected
to result in a Material Adverse Effect;
(iii) no incinerator, sump, surface impoundment,
lagoon, landfill, septic, wastewater treatment or other
disposal system or underground storage tank (active or
abandoned) is or, to the knowledge of McNair, RCM Holdings,
CTCI or any Acquired Entity, has been present at, on, under or
in any property now or previously owned, leased or operated by
any Acquired Entity in a manner or location that would trigger
any investigation or remedial action obligations under
Environmental Laws;
(iv) no Hazardous Substance has been discharged,
disposed of, dumped, injected, pumped, deposited, spilled,
leaked, emitted or released at, on, under or
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from any Real Property or any other property now or previously
owned, leased or operated by any Acquired Entity in a
concentration, amount or location that would trigger any
material investigation or remedial action obligations under
applicable Environmental Laws;
(v) no property now or, to the knowledge of McNair,
RCM Holdings, CTCI or any Acquired Entity, previously owned,
leased or operated by any Acquired Entity nor any property to
or at which Hazardous Substances located on or resulting from
the operations of any Acquired Entity have been transported,
disposed or arranged for transportation or disposal is listed
or, to the knowledge of McNair, RCM Holdings, CTCI or any
Acquired Entity, proposed for listing on the National
Priorities List promulgated pursuant to CERCLA, on CERCLIS (as
defined in CERCLA) or on any similar federal, state, local or
foreign list of sites requiring investigation or cleanup; and
(vi) each Acquired Entity is in compliance in all
material respects and has at all times in the past complied in
all material respects with all Environmental Laws and has and
is in compliance in all material respects with all
Environmental Permits; such Environmental Permits are valid
and in full force and effect and, assuming the related
Required Consents have been obtained prior to the Closing
Date, are transferable and will not be terminated or impaired
or become terminable as a result of consummation of the
Contemplated Transactions.
(b) There has been no environmental investigation, study,
assessment, audit, test, review or other analysis conducted of which
McNair, RCM Holdings, CTCI or any Acquired Entity has knowledge in
relation to any Acquired Entity or any property or facility now or
previously owned, leased or operated by any Acquired Entity that
discloses Environmental Liabilities which has not been delivered by the
Sellers to Buyer at least ten days prior to the date of this Agreement.
Any such environmental investigation, study, assessment, audit, test,
review or other analysis conducted after the date of this Agreement
that discloses Environmental Liabilities will be promptly delivered by
Sellers to Buyer.
(c) For purposes of this Section, the term "Acquired Entity"
shall include any entity which is, in whole or in part, a "predecessor"
of such Acquired Entity as such term is used in any applicable
Environmental Law.
(d) Neither the execution and delivery of the Transaction
Documents nor the closing of the Linden Acquisition and the other
Contemplated Transactions shall result in the provisions of ISRA
becoming applicable with respect to any of "Exxon's Property other than
the Demised Premises (and perhaps a butane supply line extending to the
Demised Premises and the electrical interconnect lines from the
Cogeneration Facility and the ground underlying those lines)" within
the meaning of the Ground Lease between Linden Venture and Exxon
Corporation, dated August 1, 1990, as amended (the "LINDEN GROUND
LEASE") or otherwise result in a default or event of default under the
Linden Ground Lease.
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(e) There shall be no materially misleading statement or
omission in the filings with the NJDEP in connection with the
Contemplated Transactions relating to the Linden Plant.
II.23. Bank Accounts. Section II.23 of the Disclosure Schedule includes
the names and locations of all banks in which any Acquired Entity has an account
or safe deposit box and the names of all persons authorized to draw thereon or
to have access thereto.
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EXHIBIT III
REPRESENTATIONS AND WARRANTIES OF THE MCNAIR GROUP SELLERS
AND THE MINORITY GROUP SELLERS
Each McNair Group Seller and Minority Group Seller severally represents
and warrants to the Buyer Entities and the Parent as of the date of this
Agreement and as of the Closing Date as follows (it being understood that (i)
with respect to representations herein concerning any McNair Group Seller or
Minority Group Seller (including as a Parent Stock Recipient), such
representations are made by each such McNair Group Seller or Minority Group
Seller only with respect to itself and not with respect to the other McNair
Group Sellers or Minority Group Sellers, and (ii) with respect to
representations herein relating to CTLPJV (including in its capacity as a
Minority Group Seller, such representations are made severally only by the
Minority Group Sellers who are partners in CTLPJV):
III.01. Corporate Existence and Power. CTLPJV is a general partnership
duly organized, validly existing under the laws of its jurisdiction of
organization, has all partnership powers required to carry on its business as
now conducted, and is duly qualified to do business and is in good standing in
each jurisdiction where such qualification is necessary, except for
jurisdictions where the failure to be so qualified would not, individually or in
the aggregate, have a Material Adverse Effect. The Minority Group Sellers have
made available to Buyer true and complete copies of the partnership agreement
and any other organizational documents of CTLPJV as currently in effect.
III.02. Authorization. The execution, delivery and performance by each
McNair Group Seller or Minority Group Seller of the Transaction Documents to
which it is a party and the consummation of the Contemplated Transactions to
which it is a party are within its partnership, trust or other powers and have
been duly authorized by all necessary partnership, trust or other action on the
part of entity. Each Transaction Document to which each McNair Group Seller or
Minority Group Seller is a party has been duly and validly executed and
delivered by or on behalf of such party and constitutes a valid and binding
agreement of such party, enforceable against such party in accordance with its
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or equity). There is no vote
or other approval of or with respect to the partners, beneficiaries or owners of
any McNair Group Seller or Minority Group Seller required in connection with
consummation of the Contemplated Transactions, except those that have been
received.
III.03. Investment Representations.
(a) Each Parent Stock Recipient is capable of evaluating the
merits and risks of its investment in the Parent Shares, and has the
capacity to protect its own interests in connection with the
acquisition of the Parent Shares hereunder. Each Parent Stock Recipient
is an "accredited investor" as defined in Rule 501 of Regulation D
promulgated pursuant to the Securities Act. Each Parent Stock Recipient
is taking the Parent Shares for such Seller's own account and not with
a view to or for sale in connection with any distribution of such
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securities as such terms are defined under the Securities Act. Each
Parent Stock Recipient has reviewed Buyer's Annual Report on Form 10-K
for the year ended December 31, 1997, Buyer's Quarterly Reports on Form
10-Q for the quarters ended March 31, 1998 and June 30, 1998, and any
Form 8-K's filed subsequent thereto and prior to the date of this
Agreement and the Proxy Statement relating to Buyer's 1998 Annual
Meeting of Shareholders (the "PARENT SEC REPORTS"). Each Parent Stock
Recipient is familiar with the business and financial condition,
properties, operations and prospects of Buyer, and has had an
opportunity to discuss Buyer's business and financial condition,
properties, operations and prospects with Buyer's management and to ask
questions of officers of Buyer, which questions, if any, were answered
to such Seller's satisfaction.
(b) Each Parent Stock Recipient understands that (i) the
Parent Shares will be "restricted securities" under the applicable
federal securities laws, (ii) that the Securities Act and the rules of
the SEC provide in substance that such shareholder may dispose of the
Parent Shares only pursuant to an effective registration statement
under the Securities Act or in a transaction exempt from the
registration requirements of the Securities Act, and (iii) that, except
as set forth in Exhibit V to this Agreement, neither Parent nor Buyer
has any obligation or intention to register the sale of the Parent
Shares pursuant to the Securities Act, and that, accordingly, such
Seller may be required to bear the economic risk of the investment in
the Parent Shares for a substantial period of time.
III.04. Noncontravention. Except as disclosed in Section III.04 of the
Disclosure Schedule, the execution, delivery and performance by each McNair
Group Seller or Minority Group Seller of the Transaction Documents to which it
is a party and the consummation of the Contemplated Transactions do not and will
not (i) violate the partnership or trust agreement or other organizational
documents of such McNair Group Seller or Minority Group Seller, (ii) to its
knowledge and assuming compliance with the matters described in the last
sentence of Section II.04, violate any Applicable Law, (iii) assuming the
obtaining of all Required Consents, constitute a default under or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of any McNair Group Seller or Minority Group Seller or, to its
knowledge, give rise to a loss of any benefit to which such McNair Group Seller
or Minority Group Seller is entitled under any provision of any agreement or
(iv) result in the creation or imposition of any Lien on any assets of such
McNair Group Seller or Minority Group Seller, other than Permitted Liens, except
for such violations referred to in clause (ii), defaults, rights of termination,
cancellation or acceleration or losses referred to in clause (iii) or
impositions of Liens referred to in clause (iv) that could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect or to
interfere with or conflict with consummation of the Contemplated Transactions.
III.05. Capitalization; Etc.
(a) All of the shares of MESC Common Stock that are owned by
any McNair Group Seller or Minority Group Seller are held by such
holder free and clear of any Lien.
(b) CTLPJV holds its limited partner interest in Linden Ltd.,
which comprises the CTLPJV Initial Linden Interest and the CTLPJV
Remaining Linden Interest, free and clear
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of any Lien. Upon consummation of the Contemplated Transactions, Buyer
Linden LP shall be the record and beneficial owner of the CTLPJV
Initial Linden Interest, free and clear of any Lien and with full right
to admission as a partner. CTLPJV holds its interest in CT Camden (the
CT Camden LP Interest) free and clear of any Lien. Upon consummation of
the Contemplated Transactions, Buyer Camden LP shall be the record and
beneficial owner of the CT Camden LP Interest, free and clear of any
Lien and with full right to admission as a partner. Set forth in the
Section III.05(b) of the Disclosure Schedule are the names of each
owner of any partnership or other equity interest in CTLPJV, in each
case together with the percentage equity ownership held by each such
owner.
(c) Except as set forth in Section III.05(c) of the Disclosure
Schedule, none of the McNair Group Sellers or Minority Group Sellers is
party to, or has any knowledge of, any agreement or arrangement
relating to or affecting the Interests in which such McNair Group
Seller or Minority Group Seller has an interest, including any
agreement relating to the voting of such interests, any right of first
refusal of first offer or any obligation to sell or otherwise transfer
such Interests, or any options, warrants or rights of any kind to
acquire, or any securities that are convertible into or exercisable or
exchangeable for, any Interests.
III.06. Consents. Section III.06 of the Disclosure Schedule sets forth
any Required Consent required to be obtained by or with respect to any McNair
Group Seller or Minority Group Seller as a result of the execution, delivery and
performance of the Transaction Documents or the consummation or the Contemplated
Transactions. All of such consents have been obtained.
III.07. Finders' Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of the McNair Group Sellers or Minority Group Sellers, or any of their
respective Affiliates, who might be entitled to any fee or commission from
Parent, any Buyer Entity or any Acquired Entity in connection with the
Contemplated Transactions.
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EXHIBIT IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER ENTITIES
The Buyer Entities jointly and severally represent and warrant to the
Sellers as of the date of this Agreement (except that, with respect to all
representations and warranties set forth herein concerning any Buyer Entity that
has not yet been formed and made a party to this Agreement, such representations
and warranties are not made as of the date of this Agreement but are made as of
the date that such Buyer Entity becomes a party to this Agreement pursuant to
Section 13.05) and as of the Closing Date that:
IV.01. Corporate Existence and Power; Ownership. Each of the Buyer
Entities and Parent is a corporation or limited liability company duly
incorporated or organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization and has all corporate or
other similar powers required to carry on its business as now conducted. Buyer
is a wholly owned subsidiary of Parent. Buyer Acquisition is an Affiliate of
Buyer, and Buyer Camden GP, Buyer Camden LP, Buyer Linden GP and Buyer Linden LP
are each wholly owned direct or indirect subsidiaries of Buyer Acquisition. Each
of Buyer Acquisition, Buyer Camden GP, Buyer Camden LP, Buyer Linden GP and
Buyer Linden LP have not conducted any material operations except with respect
to the transactions contemplated hereby.
IV.02. Authorization. The execution, delivery and performance by Parent
and each Buyer Entity of the Transaction Documents to which it is a party and
the consummation of the Contemplated Transactions are within the corporate or
other similar powers of such entity and have been duly authorized by all
necessary corporate or other similar action on the part of such entity. Each
Transaction Document to which Parent or any Buyer Entity is a party has been
duly and validly executed and delivered by such entity and constitutes a valid
and binding agreement of such entity, enforceable against such entity in
accordance with its terms (except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or equity)).
IV.03. Noncontravention. The execution, delivery and performance by
Parent and each Buyer Entity of the Transaction Documents to which such entity
is a party and the consummation of the Contemplated Transactions do not and will
not (i) violate the certificate of incorporation or bylaws or other
organizational documents of such entity or (ii) assuming compliance with the
matters referred to in Section IV.02, violate any Applicable Law. Except as
provided in the following sentence, and assuming that each Operating Facility
is, and since the commencement of power generation at such Operating Facility,
has continuously been, a "qualifying cogeneration facility" within the meaning
of the PURPA Requirements, the execution, delivery and performance by Parent and
each Buyer Entity of the Transaction Documents to which such entity is a party
and the consummation of the Contemplated Transactions require no material action
by or in respect of, or material filing with, any Governmental Authority other
than compliance with any applicable requirements of the HSR Act and ISRA. The
following filings must be submitted to the FERC as promptly as practicable
following the consummation of the Contemplated Transactions: (1) notices
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of self-certification for the Bayonne Plant, the Camden Plant and the Linden
Plant, pursuant to 18 C.F.R. Section 292.207; (2) filings required under 18
C.F.R. Part 46; and (3) notifications of changes in facts regarding market-rate
authority granted by FERC to certain Affiliates of the Buyer Entities.
IV.04. Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Buyer, threatened against or
affecting, Parent or any Buyer Entity before any Governmental Authority or
pursuant to any arbitration agreement, which in any manner challenges or seeks
to prevent, enjoin, alter or materially delay consummation of the Contemplated
Transactions.
IV.05. Finders' Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Parent or any Buyer Entity who might be entitled to any fee or commission in
connection with the Contemplated Transactions.
IV.06. Parent Shares. The Parent Shares to be issued pursuant to this
Agreement have been duly authorized for issuance and, when they have been issued
in accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable.
IV.07 Parent SEC Reports. Parent has, since December 31, 1997, filed
with the SEC all reports on forms 10-K, 10-Q or 8-K required to be filed by it
pursuant to the Securities Exchange Act of 1934. The Parent SEC Reports, at the
time they were filed (including at the time of filing of any amendments
thereto), (i) complied as to form in all material respects with the rules and
regulations of the SEC under the Securities Exchange Act of 1934 and (ii) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
IV.08 QF Status. Provided that each Operating Facility is as of the
Closing Date, and since the commencement of power generation at each Operating
Facility has continuously been, a "qualifying cogeneration facility" within the
meaning of the PURPA Requirements, consummation of the Contemplated Transactions
by the Buyer Entities and Parent will not result in the loss of such status for
such Operating Facility.
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EXHIBIT V
PROVISIONS REGARDING PARENT COMMON STOCK
TO BE RECEIVED BY SELLERS
V.01 Definitions. The following terms, as used in this Exhibit V, have
the following meanings:
"REGISTRATION EXPENSES" means all expenses incident to
Parent's performance of or compliance with Exhibit V, including,
without limitation, all registration and filing fees, messenger and
delivery expenses incurred by Parent, internal expenses incurred by
Parent (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), all
expenses relating to the preparation, printing, distribution and
reproduction of the registration statement and the prospectus, the fees
and expenses incurred in connection with the listing of the shares of
Parent Common Stock on any securities exchange, and fees and
disbursements of counsel for Parent and of its independent public
accountants; provided, however, that the fees and disbursements of
counsel for the Parent Stock Recipients who are selling Parent Shares
pursuant to the Resale Registration Statement shall not be considered
"Registration Expenses."
"REGISTRATION INDEMNIFIED PARTY" means any Person asserting a
claim for indemnification under Section V.08.
"REGISTRATION INDEMNIFYING PARTY" means any Person against
whom a claim for indemnification is asserted under Section V.08.
"RESALE REGISTRATION STATEMENT" has the meaning set forth in
Section V.04(a).
"RESTRICTED STOCK" means all Parent Shares, all shares of
Parent Common Stock evidenced by certificates delivered upon reissue or
transfer of Parent Shares (other than certificates representing shares
sold pursuant to the Resale Registration Statement or shares sold or
disposed of in accordance with the terms of this Agreement which may,
in the opinion of counsel for Parent, after such sale or disposition be
transferred by the transferee thereof without registration under the
Securities Act) and all shares of Parent Common Stock evidenced by
certificates delivered in connection with stock dividends and stock
splits attributable to Parent Shares.
V.02 Issuance of Shares; Restrictions and Restrictive Legend. On the
Closing Date, certificates representing the Parent Shares shall be delivered to
the applicable Sellers pursuant to the Linden Acquisition and in accordance with
the terms of this Exhibit V. All certificates representing Parent Shares issued
hereunder shall initially be Restricted Stock. The Parent Stock Recipients agree
that, during the time that such stock is Restricted Stock, such stock shall be
subject to appropriate stop-transfer instructions to be given by Parent to its
transfer agents and shall have endorsed thereon a legend substantially as
follows:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER ANY APPLICABLE STATE LAW, AND MAY NOT BE TRANSFERRED WITHOUT
REGISTRATION UNDER THE ACT OR SUCH APPLICABLE STATE LAW UNLESS AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE THEREUNDER.
Such Parent Shares shall cease to be Restricted Stock on the date two years
after their date of issuance, except for such shares then held by Affiliates of
Parent which shall cease to be Restricted Stock after the later of two years
after the date of their issuance and three months after such person ceases to be
an Affiliate of Parent. At any time that Parent Shares are not Restricted Stock
and in connection with a sale of such shares pursuant to the Resale Registration
Statement, stop transfer instructions given pursuant to this Section V.02 shall
be rescinded and the legend endorsed on the certificates representing such
shares shall be removed upon the presentation of such certificate to the
transfer agent for such purpose.
V.03 Plan of Distribution. In order to provide liquidity to Parent
Stock Recipients receiving Parent Shares in connection with the transactions
contemplated by this Agreement, Parent has agreed to file the Resale
Registration Statement. Such Parent Stock Recipients acknowledge that Parent
will be required in the Resale Registration Statement to provide a description
of the methods and plans by which such Parent Stock Recipients may distribute
and resell the Parent Shares acquired pursuant to this Agreement. Accordingly,
such Parent Stock Recipients have advised Parent, acknowledging that Parent will
rely thereon in preparation of the Resale Registration Statement, that Parent
Shares may be sold by or on behalf of such Parent Stock Recipients through or to
brokers or dealers, or directly to investors pursuant to the prospectus
contained in the Resale Registration Statement (or another prospectus contained
in and forming a part of an effective registration statement under the
Securities Act) or in transactions that are exempt from the requirements of
registration under the Securities Act, at a fixed price or prices, which may be
changed from time to time, at market prices prevailing at the time of such sale,
at prices related to such market prices or at negotiated prices, and in
connection therewith distributors' or sellers' commissions may be paid or
allowed. Brokers or dealers may act as agents for such Parent Stock Recipients,
or may purchase shares from such Parent Stock Recipients as principal and
thereafter resell such shares from time to time in or through transactions or
distributions (which may involve crosses and block transactions) on the New York
Stock Exchange, the London Stock Exchange or other United States or foreign
stock exchanges where trading privileges are available, in the over-the-counter
market, in private transactions or in some combination of the foregoing. Each
such Parent Stock Recipient agrees that if Parent Shares are sold through
brokers or dealers acting as such, only one broker or dealer at a time will be
used by such Parent Stock Recipient.
V.04 Registration Procedures. Parent will, subject to the provisions of
this Section V.04 and of Section V.05, use all reasonable efforts to effect the
registration and the sale of the Parent Shares by Parent Stock Recipients under
the Resale Registration Statement in accordance with the intended method of
disposition thereof described in Section V.03. In connection therewith, Parent
will:
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(a) prepare and file with the SEC within 60 days of the
Closing Date (the "REQUIRED FILING DATE"), a "shelf" registration
statement on Form S-3 (or other appropriate form) pursuant to Rule 415
under the Securities Act providing for the resale from time to time of
the Parent Shares by the Parent Stock Recipients in accordance with the
intended method of distribution thereof described in Section V.03 (the
"RESALE REGISTRATION STATEMENT"), and shall use its reasonable efforts
to cause such registration statement to become effective; provided,
that Parent may defer the filing of the Resale Registration Statement
until a date not later than 60 days after the Required Filing Date if
(i) Parent or its Subsidiaries are engaged in confidential negotiations
or other confidential business activities, disclosure of which would be
required in such registration statement (but would not be required if
such registration statement were not filed), or (ii) prior to filing
the registration statement, the Parent has determined to effect a
registered underwritten public offering of securities and has taken
substantial steps to effect such offering;
(b) prepare and file with the SEC such amendments and
supplements to such Resale Registration Statement and the prospectus
contained therein as may be necessary to keep such Resale Registration
Statement effective for a period ending on the first anniversary of the
Closing Date or such shorter period as shall terminate when all Parent
Shares covered by such registration statement have been sold;
(c) as soon as reasonably practicable, furnish to each Parent
Stock Recipient, prior to filing the Resale Registration Statement,
copies of such registration statement as proposed to be filed, and
thereafter furnish to such Parent Stock Recipient such number of copies
of such Resale Registration Statement, each amendment and supplement
thereto (in each case, if specified by such Parent Stock Recipient,
including all exhibits thereto), the prospectus included in such Resale
Registration Statement (including each preliminary prospectus) and such
other documents as such Parent Stock Recipient may reasonably request
in order to facilitate the disposition of Parent Shares owned by such
Parent Stock Recipient;
(d) promptly notify the Parent Stock Recipients at any time
when a prospectus relating thereto is required to be delivered under
the Securities Act within the period that Parent is required to keep
the Resale Registration Statement effective of the happening of any
event as a result of which the prospectus included in such Resale
Registration Statement (as then in effect) contains an untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances then existing, not misleading, and Parent will
promptly prepare and file a supplement or amendment to such prospectus
so that, as thereafter delivered to the purchasers of such Parent
Shares, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances then existing, not misleading; provided, however, that
notwithstanding the foregoing, if Parent determines in its good faith
judgment that the filing of any supplement or amendment to the Resale
Registration Statement to keep such Resale Registration Statement
available for use by the Parent Stock Recipients for resales of Parent
Shares would require the disclosure of material information
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that Parent has a bona fide business purpose for preserving as
confidential, then upon written notice of such determination by Parent
to each Parent Stock Recipient, the obligation of Parent to supplement
or amend the Resale Registration Statement will be suspended until
Parent notifies the Parent Stock Recipients in writing that the reasons
for suspension of such obligations on the part of Parent no longer
exist and Parent amends or supplements the Resale Registration
Statement as may be required; provided that the aggregate number of
days (whether or not consecutive) during which Parent may delay the
filing of any such supplement or amendment shall in no event exceed 60
days;
(e) promptly notify each Parent Stock Recipient of any stop
order issued by the SEC and take all reasonable actions to obtain the
removal of any such stop order; and
(f) use its reasonable efforts to cause all such Parent Shares
to be listed on the New York Stock Exchange (or the principal stock
exchange on which the Parent Shares are then listed).
V.05 Conditions and Limitations. Parent's obligations under Section
V.04 shall be subject to the following limitations:
(a) Parent shall not be required to file more than one Resale
Registration Statement pursuant to this Agreement.
(b) The Resale Registration Statement may, at Parent's option,
cover securities other than the Parent Shares.
(c) Parent shall have received the information and documents
specified in Section V.06 and each Parent Stock Recipient shall have
observed or performed its other covenants and conditions contained in
such section; provided that the failure of a Parent Stock Recipient to
have observed and performed such other covenants and conditions shall
not excuse Parent's obligations hereunder with respect to Parent Stock
Recipients who have so observed and performed such covenants and
conditions.
(d) Each Parent Stock Recipient agrees that, upon receipt of
any notice from Parent of the happening of any event of the kind
described in Section V.04(d), such Parent Stock Recipient will
forthwith discontinue disposition of Parent Shares until such Parent
Stock Recipient's receipt of the copies of the supplemented or amended
prospectus contemplated by Section V.04(d) hereof, and, if so directed
by Parent, such Parent Stock Recipient will deliver to Parent (at
Parent's expense) all copies, other than permanent file copies then in
such Parent Stock Recipient's possession, of the prospectus covering
such Parent Shares at the time of receipt of such notice.
(e) Each Parent Stock Recipient agrees that, upon receipt of
any notice from Parent stating that Parent has determined to effect a
registered underwritten public offering of securities and has taken
substantial steps to effect such offering, such Parent Stock Recipient
will forthwith discontinue disposition of Parent Shares until such
Parent Stock
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Recipient's receipt of notice from the Parent that such dispositions
may be continued, provided that the aggregate number of days (whether
or not consecutive) during which Parent may suspend use of the Resale
Registration Statement pursuant to this Section shall in no event
exceed 60 days.
(f) Notwithstanding anything to the contrary in this Article
V, any notice required to be given by Parent to any Parent Stock
Recipient shall be deemed given for the purposes hereof if given to the
Sellers' Representatives.
V.06 Information from and Certain Covenants of Parent Stock Recipients.
Parent may require the Parent Stock Recipients to furnish to Parent such
information regarding the Parent Stock Recipients and the distribution of such
Parent Shares as Parent may from time to time reasonably request in writing to
carry out its obligations as to the Resale Registration Statement. Each Parent
Stock Recipient agrees to notify Parent as promptly as practicable of any
inaccuracy or change in information previously furnished by such Parent Stock
Recipient to Parent or of the occurrence of any event in either case as a result
of which any prospectus relating to such registration contains an untrue
statement of a material fact regarding such Parent Stock Recipient or the
distribution of such Parent Shares or omits to state any material fact regarding
such Parent Stock Recipient or the distribution of such Parent Shares required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing, and promptly to furnish to Parent
any additional information required to correct and update any previously
furnished information or required so that such prospectus shall not contain,
with respect to such Parent Stock Recipient or the distribution of such Parent
Shares, an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances then existing, not misleading. Each Parent Stock
Recipient shall execute all consents, powers of attorney and other documents
reasonably required to be signed by it in order to cause such registration
statement to become effective. Each Parent Stock Recipient covenants that, in
disposing of its Parent Shares, it will comply with all applicable securities
laws, including the prospectus delivery requirements under the Securities Act.
V.07 Registration Expenses. All Registration Expenses will be borne by
Parent. Any broker's fee, underwriting discount and commission applicable to the
sale of Parent Shares shall be borne by the Parent Stock Recipient of the Parent
Shares to which such broker's fee, discount or commission relates, and each
Parent Stock Recipient shall be responsible for all fees and expenses incurred
by such Parent Stock Recipient in connection with any registration under this
Exhibit V other than Registration Expenses.
V.08 Indemnification.
(a) Indemnification by Parent. Parent agrees to indemnify and
hold harmless each Parent Stock Recipient who has sold Parent Shares
pursuant to the Resale Registration Statement and, if applicable, its
officers, directors and agents and each Person, if any, who controls
such Parent Stock Recipient within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act, from and against
any and all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation and
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defense) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in the Resale
Registration Statement or the final prospectus contained therein
relating to the Parent Shares or in any amendment or supplement
thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or expenses arise
out of, or are based upon, any such untrue statement or omission or
allegation thereof based upon information furnished in writing to
Parent by such Parent Stock Recipient or on such Parent Stock
Recipient's behalf expressly for use therein.
(b) Indemnification by Parent Stock Recipients. Each Parent
Stock Recipient agrees to indemnify and hold harmless Parent, its
officers, directors and agents and each Person, if any, who controls
Parent within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses,
claims, damages, liabilities and expenses (including reasonable costs
of investigation and defense) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact by such Parent
Stock Recipient contained in the Resale Registration Statement or the
prospectus contained therein and relating to the Parent Shares or in
any amendment or supplement thereto, or arising out of or based upon
any omission or alleged omission by such Parent Stock Recipient to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that
such losses, claims, damages, liabilities or expenses arise out of, or
are based upon, any such untrue statement or omission or allegation
thereof based upon information furnished in writing to Parent by such
Parent Stock Recipient or on such Parent Stock Recipient's behalf
expressly for use therein.
(c) Conduct of Indemnification Proceedings. If any action or
proceeding (including any governmental investigation) shall be brought
or asserted against any Registration Indemnified Party in respect of
which indemnity may be sought from a Registration Indemnifying Party,
the Registration Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such
Registration Indemnified Party, and shall assume the payment of all
expenses. Such Registration Indemnified Party shall have the right to
employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Registration Indemnified Party unless (i) the
Registration Indemnifying Party has agreed to pay such fees and
expenses, or (ii) the Registration Indemnifying Party shall have failed
to assume the defense of such action or proceeding or employ counsel
reasonably satisfactory to such Registration Indemnified Party or (iii)
the named parties to any such action or proceeding (including any
impleaded parties) include both such Registration Indemnified Party and
such Registration Indemnifying Party, and such Registration Indemnified
Party shall have been advised by counsel that there may be one or more
legal defenses available to such Registration Indemnified Party which
are different from or additional to those available to the Registration
Indemnifying Party (in which case if such Registration Indemnified
Party notifies the Registration Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Registration
Indemnifying Party, the Registration Indemnifying Party shall not have
the right to assume the defense of
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such action or proceeding on behalf of such Registration Indemnified
Party, it being understood, however, that the Registration Indemnifying
Party shall not, in connection with any one such action or proceeding
or separate but substantially similar or related actions or proceedings
in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one
separate firm of attorneys at any time for such Registration
Indemnified Party, which firm shall be designated in writing by such
Registration Indemnified Party). The Registration Indemnifying Party
shall not be liable for any settlement of any such action or proceeding
effected without its written consent, not to be unreasonably withheld,
but if settled with its written consent, or if there is a final
judgment for the plaintiff in any such action or proceeding, the
Registration Indemnifying Party agrees to indemnify and hold harmless
such Registration Indemnified Party from and against any loss or
liability (to the extent stated above) by reason of such settlement or
judgment.
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EXHIBIT VI
TAX MATTERS
VI.01. Tax Definitions. The following terms, as used in this Agreement,
have the following meanings:
"CODE" means the Internal Revenue Code of 1986, as amended.
"MESC PRE-CLOSING TAXES" means (i) any federal income Taxes imposed
with respect to the consolidated federal income Tax Return of the "affiliated
group" (as such term is defined in Section 1504 of the Code) of which MESC is
the common parent (within the meaning of Section 1504 of the Code) for the
taxable year ended December 31, 1995 (the "1995 Federal Consolidated Return")
and any prior taxable years, as a result of a Tax Audit, and (ii) any state or
local income Taxes imposed with respect to any separate or consolidated,
combined, affiliated or unitary state or local income Tax Return of, or which
includes, MESC and/or NJ Inc. for the taxable year ended December 31, 1995
(each, a "1995 State Income Tax Return") as a result of any adjustments thereto
resulting from a Tax Audit.
"PARTNERSHIP ACQUIRED ENTITIES" means the Acquired Entities other than
MESC and NJ Inc.
"PRE-CLOSING TAX PERIOD" means (i) any Tax period ending on or before
the Closing Date and (ii) with respect to a Tax period that commences on or
before but ends after the Closing Date, the portion of such period up to and
including the Closing Date.
"PROPERTY TAXES" is defined in Section VI.03.
"TAX" means (i) all taxes or other levies imposed by any Governmental
Authority, domestic or foreign (a "TAXING AUTHORITY") including, without
limitation, any net income, alternative or add-on minimum tax, gross income,
gross receipts, sales, use, ad valorem, value added, transfer, franchise,
profits, license, registration, recording, documentary, conveyancing, gains,
withholding on amounts paid to or by the Business, the Sellers or the Acquired
Entities, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom duty or other tax or
other like assessment, together with any interest, penalty, addition to tax or
additional amount imposed by any Taxing Authority, or (ii) liability for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group or being a
party to any agreement under which liability is determined or taken account with
reference to the liability of any other Person; or (iii) liability for the
payment of any amounts of the type described in (i) as a result of any express
or implied obligation to indemnify any other Person or as a result of being
party to any other arrangement or agreement.
"TAX AUDIT" means an audit of the 1995 Federal Consolidated Return or
any prior tax return, written notice of the commencement of which is received by
MESC from the Internal Revenue Service on or before September 15, 1999, and the
commencement of which was not the result of, or caused by, any action taken by
any of the Buyer Entities or their Affiliates.
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"TAX ASSET" means any net operating loss, net capital loss, investment
tax credit, foreign tax credit, charitable deduction or any other credit or tax
attribute which could reduce Taxes (including without limitation deductions and
credits related to alternative minimum Taxes).
"TAX SHARING OR INDEMNITY AGREEMENT" means all Tax sharing or Tax
indemnity agreements or arrangements (whether or not written) created or entered
into before the Closing and binding any of the Acquired Entities, including
without limitation any agreements or arrangements which (i) afford any other
person the benefit of any Tax Asset of any of the Acquired Entities; (ii)
require any Acquired Entities to take into account any income, revenues,
receipts, gain, or any Tax items of any other person in determining the Acquired
Entities' Tax liability; or (iii) require any Acquired Entities to make any
payment to or otherwise indemnify any other person in respect of any Tax.
"TAX RETURNS" means all Tax returns, statements, reports and forms
(including estimated tax or information returns and reports) required to be
filed with any Taxing Authority with respect to any Pre-Closing Tax Period.
"TRANSFER TAXES" is defined in Section VI.03.
VI.02. Tax Matters. McNair hereby represents and warrants to the Buyer
Entities and the Parent as of the date of this Agreement and as of the Closing
Date that:
(a) Except as set forth in Section VI.02 (a) of the Disclosure
Schedule, (i) all material Tax Returns of or with respect to any Tax
which is required to be filed on or before the Closing Date by or with
respect to any Acquired Entity have been or will be duly and timely
filed, (ii) all items of income, gain, loss, deduction and credit or
other items required to be included in each such Tax Return have been
or will be so included and all information provided in each such Tax
Return is true, correct and complete in all material respects, (iii)
all material Taxes which have become or will become due with respect to
the period covered by each such Tax Return have been or will be timely
paid in full, and (iv) all withholding Tax requirements imposed on or
with respect to any Acquired Entity have been or will be satisfied in
full in all material respects.
(b) Except as set forth in Section VI.02(b) of the Disclosure
Schedule there is not in force any extension of time with respect to
the due date for the filing of any Tax Return of or with respect to any
Acquired Entity or any waiver or agreement for any extension of time
for the assessment or payment of any Tax of or with respect to any
Acquired Entity.
(c) The total amounts set up as liabilities for current and
deferred Taxes in the Latest Balance Sheets are sufficient to cover the
payment of all Taxes, whether or not assessed or disputed, which are,
or are hereafter found to be, or to have been, due by or with respect
to any Acquired Entity up to and through the periods covered thereby.
(d) Except as set forth in Section VI.02(d) of the Disclosure
Schedule, no Acquired Entity will be required to include any amount in
income for any taxable period
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beginning after December 31, 1997 as a result of a change in accounting
method occurring on or before the Closing Date or pursuant to any
agreement with any Tax authority executed on or before the Closing
Date.
(e) Since formation each of the Partnership Acquired Entities
has properly been classified as a partnership for federal income tax
purposes and no position has been taken by any of the Sellers or any
Acquired Entity inconsistent with such classification.
(f) Section VI.02(f) of the Disclosure Schedule contains a
list of all jurisdictions (whether foreign or domestic) to which any
material Tax is properly payable by any Acquired Entity.
(g) There is no contract, plan or arrangement (written or
otherwise) covering any employee or former employee of any Acquired
Entity or business of a Acquired Entity that, individually or
collectively, is likely to give rise to the payment by any Buyer Entity
or the Acquired Entities of any amount that would not be deductible
under Section 280G of the Code.
(h) There is no claim, audit, action, suit, proceeding, or
investigation now pending or threatened in writing against or with
respect to any Acquired Entity or business of a Acquired Entity in
respect of any Tax.
(i) Section VI.02(i) of the Disclosure Schedule sets forth all
requests for rulings or determinations in respect of any Tax or Tax
Asset relating to any Acquired Entity or business of a Acquired Entity
that have been filed with any Taxing Authority.
(j) None of the property of any Acquired Entity or used in the
business of an Acquired Entity is subject to a safe-harbor lease
(pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954 as
in effect after the Economic Recovery Tax Act of 1981 and before the
Tax Reform Act of 1986) or is "tax-exempt use property" (within the
meaning of Section 168(h) of the Code) or "tax-exempt bond financed
property" (within the meaning of Section 168(g)(5) of the Code).
(k) None of the Acquired Entities has entered into any
agreement or consent pursuant to Section 341(f) of the Code.
(l) Except as set forth in Section VI.02 (d) of the Disclosure
Schedule, none of the Acquired Entities (i) has been a member of an
affiliated, consolidated, combined or unitary group or (ii) has entered
into or has been subject to any Tax Sharing or Indemnity Agreement
which imposes any obligation on the Buyer Entities or any Acquired
Entity after the Closing.
VI-3
<PAGE> 97
VI.03 Tax Returns, Access to Information and Pre-Closing Acts.
(a) With respect to each Tax Return that is required to be
filed with respect to a Tax period ending before the Closing Date for,
by or with respect to any Acquired Entity, Sellers shall cause such Tax
Returns to be prepared and timely filed and shall cause to be included
in such Tax Return all items of income, gain, loss, deduction and
credits or other items required to be included therein. With respect to
each Tax Return that is required to be filed after the Closing Date
for, by or with respect to any Acquired Entity with respect to a Tax
period ending on or after the Closing Date, Buyer shall cause such Tax
Return to be prepared and timely filed, and shall cause to be included
in such Tax Return all items of income, gain, loss, deduction and
credit or other items required to be included therein. Any partnership
Tax Return covering a taxable period during which the Closing occurs
shall allocate income, gains, losses, deductions and credits between
the transferors and transferees based upon an interim closing of the
partnership's books.
(b) Sellers shall grant to the Buyer (or its designees) access
at all reasonable times to all of the information, books and records
relating to any Acquired Entity within the possession of Sellers
(including workpapers and correspondence with taxing authorities), and
shall afford Buyer (or its designees) the right (at Buyer's expense) to
take extracts therefrom and to make copies thereof, to the extent
reasonably necessary to permit Buyer (or its designees) to prepare Tax
Returns, to conduct negotiations with Tax authorities, and to implement
the provisions of, or to investigate or defend any claims between the
parties arising under, the Transaction Documents.
(c) Buyer shall grant or cause the Acquired Entities to grant
to Sellers (or its designees) access at all reasonable times to all of
the information, books and records relating to any Acquired Entity
within the possession of Buyer or any Acquired Entity (including
workpapers and correspondence with taxing authorities), and shall
afford Sellers (or their designees) the right (at Sellers' expense) to
take extracts therefrom and to make copies thereof, to the extent
reasonably necessary to permit Sellers' (or its designees) to prepare
Tax Returns, to conduct negotiations with Tax authorities, and to
implement the provisions of, or to investigate or defend any claims
between the parties arising under, the Transaction Documents.
(d) Each of the parties hereto will preserve and retain all
schedules, workpapers and other documents relating to any Tax Returns
of or with respect to any Acquired Entity or to any claims, audits or
other proceedings affecting any Acquired Entity until the expiration of
the statute of limitations (including extensions) applicable to the
taxable period to which such documents relate or until the final
determination of any controversy with respect to such taxable period,
and until the final determination of any payments that may be required
with respect to such taxable period under this Agreement.
(e) Without the prior written consent of Buyer, neither the
Sellers nor Sellers' Affiliates nor the Acquired Entities shall make or
change any tax election, change an annual tax accounting period, adopt
or change any method of tax accounting, file any amended Tax
VI-4
<PAGE> 98
Return, enter into any closing agreement, settle any Tax claim or
assessment, surrender any right to claim a Tax refund, consent to any
extension or waiver of the limitations period applicable to any Tax
claim or assessment or take any other action or omit to take any other
action, if any such action or omission would have the effect of
increasing the Tax liability or reducing any Tax Asset of any Acquired
Entity after Closing.
VI-5
<PAGE> 1
EXHIBIT 10.2
AMENDMENT NO. 1 TO
TRANSACTION AGREEMENT
THIS AMENDMENT NO. 1 TO TRANSACTION AGREEMENT ("AMENDMENT") is
made effective as of this 6th day of November, 1998 between Enron Corp., an
Oregon corporation, Enron Capital & Trade Resources Corp., a Delaware
corporation, RCM Holdings, Inc., a Texas corporation (formerly Cogen
Technologies, Inc.), Cogen Technologies Camden, Inc., a Texas corporation,
Cogen Technologies Capital Company, L.P. and the McNair Group Sellers and
Minority Group Sellers listed on the signature page hereto, with reference to
the following background.
WHEREAS, the parties hereto are all of the parties to a Transaction
Agreement dated October 25, 1998 (the "TRANSACTION AGREEMENT"); and
WHEREAS, the parties hereto wish to amend the Transaction Agreement on
the terms set forth herein;
NOW THEREFORE, in consideration of the respective agreements contained
herein, the parties hereto agree as follows (capitalized terms used but not
defined herein have the meaning set forth in the Transaction Agreement):
SECTION 1. Amendments.
(a) The parenthetical phrase beginning in the third line of
Section 2.05(a) of the Transaction Agreement reading "(or, at Buyer's
option, on December 31, 1998 with respect to the Closing of the Linden
Acquisition and the Camden Acquisition, provided that the terms of
such Closing shall be reasonably agreeable to each of the parties
hereto)" is hereby deleted.
(b) Section 2.07(a) of the Transaction Agreement is hereby
amended to replace each reference therein to "negative $4,932,952"
with a reference to "negative $2,532,952".
(c) Section 12.01(g) of the Transaction Agreement is hereby
deleted (without affecting Annex 12.01(g) for the purposes of new
Section 13.13 added below).
(d) Article 13 of the Transaction Agreement is hereby amended
by adding thereto a new Section 13.13 as follows:
SECTION 13.13. Reimbursement for Certain Matters.
(a) Subject to paragraph (c) below, Buyer
agrees that if, after the Closing, Linden Venture is
awarded and receives compensation in the arbitration
referred to in Item 6 of Section II.11(a) of the
Disclosure Schedule with respect to the matter
referred to in Item 1 of Annex 12.01(g), then Buyer
will cause the amount of such compensation, up to a
maximum of
<PAGE> 2
$2,400,000, to be paid to the Sellers promptly after
Linden Venture's receipt thereof, in the manner
reasonably specified by the Sellers'
Representatives.
(b) Subject to paragraph (c) below, Buyer
agrees that if, after the Closing, Linden Venture
does not spend at least $2,400,000 to address the
matter referred to in Item 1 of Annex 12.01(g) prior
to December 31, 2000, then Buyer will cause to be
paid to the Sellers (in the manner reasonably
specified by the Sellers' Representatives) promptly
after December 31, 2000 an amount in cash equal to
the amount by which the funds spent by Linden
Venture to address such matter is less than
$2,400,000.
(c) Sellers agree that any amounts paid to
them pursuant to paragraph (a) above will be
credited against any amounts due to them pursuant to
paragraph (b), and any amounts paid to them pursuant
to paragraph (b) will be credited against any
amounts due to them pursuant to paragraph (a). In no
event will the Sellers be entitled to receive more
than a total of $2,400,000 pursuant to the
provisions of this Section 13.13.
SECTION 2. Remainder of Agreement Not Affected. Except set forth in
Section 1 hereof, the terms and provisions of the Transaction Agreement remain
in full force and effect and are hereby ratified and confirmed.
SECTION 3. Authority. Each party represents that such party has full
corporate, partnership, trust or other power and authority to enter into this
Amendment, and that this Amendment constitutes a legal, valid and binding
obligation of such party, enforceable against such party in accordance with its
terms.
SECTION 4. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 5. Governing Law. This Amendment shall be governed by Texas
law, without regard to the conflicts of laws principles thereof.
2
<PAGE> 3
The parties have caused this Amendment to be duly executed
individually or by their authorized representatives on the day and year first
above written.
ENRON CORP.
By: /s/ J. CLIFFORD BAXTER
-------------------------------------------------------
J. Clifford Baxter
Senior Vice President
ENRON CAPITAL & TRADE RESOURCES CORP.
By: /s/ JEFFREY M. DONAHUE, JR.
-------------------------------------------------------
Jeffrey M. Donahue, Jr.
Vice President
RCM HOLDINGS, INC.
By: /s/ RICHARD A. LYDECKER, JR.
-------------------------------------------------------
Richard A. Lydecker, Jr.
Senior Vice President and Chief Financial Officer
COGEN TECHNOLOGIES CAMDEN, INC.
By: /s/ RICHARD A. LYDECKER, JR.
-------------------------------------------------------
Richard A. Lydecker, Jr.
Senior Vice President and Chief Financial Officer
3
<PAGE> 4
COGEN TECHNOLOGIES CAPITAL COMPANY, L.P.
By: Cogen Technologies GP Capital
Corporation, its General Partner
By: /s/ RICHARD A. LYDECKER, JR.
-----------------------------------------------------
Name: Richard A. Lydecker, Jr.
Title: Senior Vice President and
Chief Financial Officer
THE MCNAIR GROUP SELLERS:
/s/ ROBERT C. MCNAIR
--------------------------------------------------------
Robert C. McNair
/s/ ROBERT CARY MCNAIR, JR.
--------------------------------------------------------
Robert Cary McNair, Jr.
DANIEL CALHOUN MCNAIR
--------------------------------------------------------
Daniel Calhoun McNair
/s/ ROBERT CARY MCNAIR, JR.
--------------------------------------------------------
Robert Cary McNair, Jr.,
as Trustee of the Robert Cary McNair, Jr.
Trust UTA dated 11/14/88, as amended
/s/ DANIEL CALHOUN MCNAIR
--------------------------------------------------------
Daniel Calhoun McNair,
as Trustee of the Daniel Calhoun McNair Trust
UTA dated 11/14/88, as amended
/s/ RUTH MCNAIR SMITH
--------------------------------------------------------
Ruth McNair Smith,
as Co-Trustee of the Ruth McNair Smith Trust
UTA dated 11/14/88, as amended
4
<PAGE> 5
/s/ MELISSA EILEEN MCNAIR REICHERT
--------------------------------------------------------
Melissa Eileen McNair Reichert,
as Co-Trustee of the Melissa Eileen McNair Walter Trust
UTA dated 11/14/88, as amended
/s/ ROBERT DUSSLER
--------------------------------------------------------
M. Robert Dussler
as Co-Trustee of (1) the Ruth
McNair Smith Trust UTA dated
11/14/88, as amended and (2) the
Melissa Eileen McNair Walter Trust
UTA dated 11/14/88, as amended
THE MINORITY GROUP SELLERS:
COGEN TECHNOLOGIES LIMITED
PARTNERS JOINT VENTURE
By: /s/ C. DONALD VAN WART
-----------------------------------------------------
Name: C. Donald Van Wart
Title: General Partner
/s/ PAULINE E. BUCK
--------------------------------------------------------
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
/s/ ROBERT A. HANSEN
--------------------------------------------------------
Robert A. Hansen
Evergreen Partnership Energy, Ltd.
By: /s/ H. FRED LEVINE
-----------------------------------------------------
Name: H. Fred Levine
Title: General Partner
5
<PAGE> 6
The 1989 Energy Trust
By: /s/ ROBERT CARY McNAIR, JR.
-----------------------------------------------------
Robert Cary McNair, Jr., Trustee
(and not in his individual capacity)
/s/ DAVID C. HOLLAND
-----------------------------------------------------
David C. Holland, Trustee
(and not in his individual capacity)
/s/ C. DONALD VAN WART
--------------------------------------------------------
C. Donald Van Wart
Hansfam Three, a Trust
By: /s/ JOHN P. HANSEN
-----------------------------------------------------
John P. Hansen, Trustee
(and not in his individual capacity)
/s/ C. DONALD VAN WART
-----------------------------------------------------
C. Donald Van Wart, Trustee
(and not in his individual capacity)
/s/ JOANN K. SOWELL
--------------------------------------------------------
Joann K. Sowell
6
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------
PRO FORMA COMPANY COMPANY COGEN TECH GROUP
------------------------- --------- -------------------------
THREE MONTHS YEAR PERIOD PERIOD THREE MONTHS
ENDED ENDED ENDED ENDED ENDED
MARCH 31, DECEMBER 31, MARCH 31, FEBRUARY 4, MARCH 31,
1999 1998 1999 1999 1998
------------ ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
INCOME FOR FIXED CHARGE COVERAGE
Income Before Tax $ (73.0) $ (54.6) $ (3.6) $ (56.0) $ 16.4
Distributions Received Greater (Less) than
Equity in Earnings of Affiliates 75.4 43.9 (0.8) 71.8 (4.5)
--------- ---------- --------- --------- ---------
Income for Fixed Charge Coverage $ 2.4 $ (10.7) $ (4.4) $ 15.8 $ 11.9
========= ========== ========= ========= =========
FIXED CHARGES
Group Interest Expense $ 28.2 $ 99.7 $ 17.2 $ 2.0 $ 5.3
Group Share of Interest Expense of Affiliates (1)
Bayonne Venture 1.6 7.1 0.9 0.6 1.6
Camden Venture 1.5 5.4 0.9 0.6 1.5
Portion of Rent Expense Representative
of Interest Factor -- 0.1 -- -- --
--------- ---------- --------- --------- ---------
Total Fixed Charges $ 31.3 $ 112.3 $ 19.0 $ 3.2 $ 8.4
========= ========== ========= ========= =========
INCOME FOR FIXED CHARGE COVERAGE PLUS
TOTAL FIXED CHARGES $ 33.7 $ 101.6 $ 14.6 $ 19.0 $ 20.3
========= ========== ========= ========= =========
FIXED CHARGE COVERAGE (Income for Fixed Charge
Coverage Plus Total Fixed Charges divided by
Total Fixed Charges) 1.1 0.9 0.8 5.9 2.4
========= ========== ========= ========= =========
(1) The Company's / Group's share of interest expense of
affiliates is computed as follows (millions of dollars,
except as noted):
Bayonne Venture Interest Expense 1.7 7.7 1.0 0.7 1.9
% of earnings allocated to Group 91.75% 91.75% 91.75% 91.75% 86.50%
Company's / Group's Share of Bayonne Venture Interest Expense 1.6 7.1 0.9 0.6 1.6
Camden Venture Interest Expense 1.9 7.4 1.1 0.8 1.9
% of earnings allocated to Group 80.00% 72.60% 80.00% 80.00% 77.60%
Company's / Group's Share of Camden Venture Interest Expense 1.5 5.4 0.9 0.6 1.5
<CAPTION>
HISTORICAL
--------------------------------------------------
COGEN TECH GROUP
--------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
INCOME FOR FIXED CHARGE COVERAGE
Income Before Tax $ 88.6 $ 78.3 $ 73.1 $ 79.7 $ 55.8
Distributions Received Greater (Less) than
Equity in Earnings of Affiliates (8.6) (3.5) 6.2 5.6 (1.2)
------- ------- ------- ------- -------
Income for Fixed Charge Coverage $ 80.0 $ 74.8 $ 79.3 $ 85.3 $ 54.6
======= ======= ======= ======= =======
FIXED CHARGES
Group Interest Expense $ 19.3 $ 21.8 $ 23.3 $ 26.5 $ 25.9
Group Share of Interest Expense of Affiliates (1)
Bayonne Venture 6.8 7.0 7.4 7.6 78.0
Camden Venture 5.4 7.0 7.7 8.2 8.6
Portion of Rent Expense Representative
of Interest Factor 0.1 0.1 0.2 0.1 0.1
------- ------- ------- ------- -------
Total Fixed Charges $ 31.6 $ 35.9 $ 38.6 $ 42.4 $ 112.6
======= ======= ======= ======= =======
INCOME FOR FIXED CHARGE COVERAGE PLUS
TOTAL FIXED CHARGES $ 111.6 $ 110.7 $ 117.9 $ 127.7 $ 167.2
======= ======= ======= ======= =======
FIXED CHARGE COVERAGE (Income for Fixed Charge
Coverage Plus Total Fixed Charges divided by
Total Fixed Charges) 3.5 3.1 3.1 3.0 1.5
======= ======= ======= ======= =======
(1) The Company's / Group's share of interest expense of
affiliates is computed as follows (millions of dollars,
except as noted):
Bayonne Venture Interest Expense 7.7 8.1 8.5 8.8 9.0
% of earnings allocated to Group 88.70% 86.50% 86.50% 86.50% 86.50%
Company's / Group's Share of Bayonne Venture Interest Expense 6.8 7.0 7.4 7.6 7.8
Camden Venture Interest Expense 7.4 7.7 8.2 8.4 8.8
% of earnings allocated to Group 72.60% 90.70% 94.00% 97.40% 97.40%
Company's / Group's Share of Camden Venture Interest Expense 5.4 7.0 7.7 8.2 8.6
</TABLE>
<PAGE> 1
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
June 25, 1999
<PAGE> 1
EXHIBIT 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
-------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
-------------
East Coast Power L.L.C.
(Exact name of obligor as specified in its charter)
Delaware 52-2143667
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
711 Louisiana Street
Houston, Texas 77002
(Address of principal executive offices) (Zip code)
-------------
Senior Secured Notes due 2008
Senior Secured Notes due 2012
Senior Secured Notes due 2017
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to
Form T-1 filed with Registration Statement No. 33-6215, Exhibits
1a and 1b to Form T-1 filed with Registration Statement No.
33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
-2-
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 24th day of June, 1999.
THE BANK OF NEW YORK
By: /s/ ILIANA A. ARCIPRETE
----------------------------------
Name: ILIANA A. ARCIPRETE
Title: ASSISTANT TREASURER
<PAGE> 4
EXHIBIT 7
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31, 1999,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS In Thousands
<S> <C>
Cash and balances due from depository
institutions:
Noninterest-bearing balances and currency
and coin .............................................. $ 4,508,742
Interest-bearing balances ............................... 4,425,071
Securities:
Held-to-maturity securities ............................. 836,304
Available-for-sale securities ........................... 4,047,851
Federal funds sold and Securities purchased
under agreements to resell .............................. 1,743,269
Loans and lease financing receivables:
Loans and leases, net of unearned
income...............39,349,679
LESS: Allowance for loan and
lease losses............603,025
LESS: Allocated transfer risk
reserve........................15,906
Loans and leases, net of unearned income,
allowance, and reserve ................................ 38,730,748
Trading Assets ............................................. 1,571,372
Premises and fixed assets (including capitalized
leases) ................................................. 685,674
Other real estate owned .................................... 10,331
Investments in unconsolidated subsidiaries and
associated companies .................................... 182,449
Customers' liability to this bank on acceptances
outstanding ............................................. 1,184,822
Intangible assets .......................................... 1,129,636
Other assets ............................................... 2,632,309
---------------
Total assets ............................................... $ 61,688,578
===============
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
LIABILITIES
Deposits:
In domestic offices ..................................... $ 25,731,036
Noninterest-bearing.......................10,252,589
Interest-bearing..........................15,478,447
In foreign offices, Edge and Agreement
subsidiaries, and IBFs ................................ 18,756,302
Noninterest-bearing..........................111,386
Interest-bearing..........................18,644,916
Federal funds purchased and Securities sold under
agreements to repurchase ................................ 3,276,362
Demand notes issued to the U.S.Treasury .................... 230,671
Trading liabilities ........................................ 1,554,493
Other borrowed money:
With remaining maturity of one year or less ............. 1,154,502
With remaining maturity of more than one year
through three years ................................... 465
With remaining maturity of more than three years ........ 31,080
Bank's liability on acceptances executed and
outstanding ............................................. 1,185,364
Subordinated notes and debentures .......................... 1,308,000
Other liabilities .......................................... 2,743,590
-------------
Total liabilities .......................................... 55,971,865
=============
EQUITY CAPITAL
Common stock ............................................... 1,135,284
Surplus .................................................... 764,443
Undivided profits and capital reserves ..................... 3,807,697
Net unrealized holding gains (losses) on
available-for-sale securities ........................... 44,106
Cumulative foreign currency translation adjustments......... (34,817)
-------------
Total equity capital ....................................... 5,716,713
-------------
Total liabilities and equity capital ....................... $ 61,688,578
=============
</TABLE>
<PAGE> 1
EXHIBIT 99.1
EAST COAST POWER L.L.C.
LETTER OF TRANSMITTAL
FOR
OFFER TO EXCHANGE
6.737% SERIES B SENIOR SECURED NOTES DUE 2008
7.066% SERIES B SENIOR SECURED NOTES DUE 2012 AND
7.536% SERIES B SENIOR SECURED NOTES DUE 2017
FOR ALL OUTSTANDING
6.737% SERIES A SENIOR SECURED NOTES DUE 2008
7.066% SERIES A SENIOR SECURED NOTES DUE 2012 AND
7.536% SERIES A SENIOR SECURED NOTES DUE 2017
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1999, UNLESS EXTENDED BY
EAST COAST POWER L.L.C. (THE "EXPIRATION DATE").
THE EXCHANGE AGENT
FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<S> <C>
The Bank of New York
Attention Reorganization Section
Floor 7E
101 Barclay Street
New York, New York 10286
</TABLE>
By Facsimile Transmission (for Eligible Institutions only):
(212) 815-6339
(Originals of all documents sent by facsimile should be sent promptly by
registered or certified mail, by hand, or by overnight delivery service.)
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE
INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
The undersigned hereby acknowledges receipt and review of the Prospectus
dated , 1999 (the "Prospectus") of East Coast Power L.L.C., a Delaware
limited liability company (the "Company"), and this Letter of Transmittal (the
"Letter of Transmittal"), which together describe the Company's offer (the
"Exchange Offer") to exchange its Series B Senior Secured Notes due 2008, 2012
and 2017 (the "Exchange Notes"), which have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), for a like principal amount of
its issued and outstanding Series A Senior Secured Notes due 2008, 2012 and 2017
(the "Original Notes"). Capitalized terms used but not defined herein have the
respective meaning given to them in the Prospectus.
The Company reserves the right, at any time or from time to time, to extend
the Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the latest date to which the Exchange Offer is extended. The Company
shall notify the Exchange Agent and each registered holder of the Original Notes
of any extension by oral or written notice prior to 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
-1-
<PAGE> 2
This Letter of Transmittal is to be used by a holder of Original Notes if
Original Notes are to be forwarded herewith. An Agent's Message (as defined in
the next sentence) is to be used if delivery of Original Notes is to be made by
book-entry transfer to the account maintained by the Exchange Agent at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedures set forth in the Prospectus under the caption "The Exchange
Offer -- Procedures for Tendering." The term "Agent's Message" means a message,
transmitted by the Book-Entry Transfer Facility and received by the Exchange
Agent and forming a part of the confirmation of a book-entry transfer
("Book-Entry Confirmation"), which states that the Book-Entry Transfer Facility
has received an express acknowledgment from a participant tendering Original
Notes which are the subject of such Book-Entry Confirmation and that such
participant has received and agrees to be bound by the terms of the Letter of
Transmittal and that the Company may enforce such agreement against such
participant. Holders of Original Notes whose Original Notes are not immediately
available, or who are unable to deliver their Original Notes and all other
documents required by this Letter of Transmittal to the Exchange Agent on or
prior to the Expiration Date, or who are unable to complete the procedure for
book-entry transfer on a timely basis, must tender their Original Notes
according to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer -- Guaranteed Delivery Procedures." See
Instruction 2. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent.
The term "holder" with respect to the Exchange Offer means any person in
whose name Original Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered holder. The undersigned has completed, executed and delivered this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer. Holders who wish to tender their Original
Notes must complete this Letter of Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
-2-
<PAGE> 3
List below the Original Notes to which this Letter of Transmittal relates.
If the space below is inadequate, list the registered numbers and principal
amount on a separate signed schedule and affix the list to this Letter of
Transmittal.
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
DESCRIPTION OF ORIGINAL NOTES TENDERED
- ------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED OWNER(S) AGGREGATE PRINCIPAL AMOUNT
AS (IT/THEY) APPEAR(S) ON THE ORIGINAL NOTES REPRESENTED BY ORIGINAL NOTES
- ------------------------------------------------------------------------------------------------------------
CERTIFICATE AMOUNT OF
NUMBER(S)* ORIGINAL NOTES PRINCIPAL AMOUNT
OF ORIGINAL NOTES* TENDERED TENDERED
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
TOTAL PRINCIPAL**
- ------------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Unless otherwise indicated, any tendering holder of Original Notes will be deemed to have tendered the
entire aggregate principal amount represented by such Original Notes. All tenders must be in integral
multiples of $1,000.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(If additional space is required, attach a continuation sheet in substantially
the above form.)
METHOD OF DELIVERY
[ ] Check here if tendered Original Notes are enclosed herewith.
[ ] Check here if tendered Original Notes are being delivered by book-entry
transfer made to an account maintained by the Exchange Agent with a
Book-Entry Transfer Facility and complete the following:
Name of Tendering Institution:
Account Number:
Transaction Code Number:
[ ] Check here if tendered Original Notes are being delivered pursuant to a
Notice of Guaranteed Delivery and complete the following:
Name(s) of Registered Holder(s):
Date of Execution of Notice of Guaranteed Delivery:
Window Ticket Number (if available):
Name of Eligible Institution that guaranteed delivery:
Account Number (If delivered by book-entry transfer):
-3-
<PAGE> 4
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
1. The undersigned hereby tenders to the Company the Original Notes
described above pursuant to the Company's offer of $1,000 principal amount of
registered Exchange Notes, in exchange for each $1,000 principal amount of the
Original Notes, upon the terms and subject to the conditions contained in the
Prospectus, receipt of which is hereby acknowledged, and this Letter of
Transmittal.
2. The undersigned hereby represents and warrants that it has full
authority to tender, exchange, assign and transfer the Original Notes described
above. The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of Original Notes.
3. The undersigned understands that the tender of the Original Notes
pursuant to all of the procedures set forth in the Prospectus will constitute an
agreement between the undersigned and the Company as to the terms and conditions
set forth in the Prospectus.
4. The undersigned acknowledge(s) that this Exchange Offer is being made in
reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the "SEC"),
including Exxon Capital Holdings Corporation, SEC No-Action (available May 13,
1988), Morgan Stanley & Co. Inc., SEC No-Action Letter (available June 5, 1991)
and Mary Kay Cosmetics, Inc., SEC No-Action Letter (available June 5, 1991),
that the Exchange Notes issued in exchange for the Original Notes pursuant to
the Exchange Offer may be offered for resale, resold and otherwise transferred
by holders thereof (other than a broker-dealer who purchased Original Notes
exchanged for such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act and any
such holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holders' business and
such holders are not participating in, and have no arrangement with any person
to participate in, the distribution of such Exchange Notes.
5. Unless the box under the heading "Special Registration Instructions" is
checked, the undersigned hereby represents and warrants that:
(i) the Exchange Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the holder;
(ii) the holder is not engaging in and does not intend to engage in a
distribution of such Exchange Notes;
(iii) the holder does not have an arrangement or understanding with
any person to participate in the distribution of such Exchange Notes; and
(iv) the holder is not an "affiliate," as such term is defined under
Rule 405 promulgated under the Securities Act, of the Company.
6. The undersigned may, if unable to make all of the representations and
warranties contained in Item 5 above and as otherwise permitted in the
Registration Rights Agreement, elect to have its Original Notes registered in
the shelf registration statement described in the registration rights agreement
(the "Registration Rights Agreement") dated as of April 14, 1999 among the
Company and the Initial Purchasers. Such election may be made by checking the
box under "Special Registration Instructions" on page 7. By making such
election, the undersigned agrees, as a holder of Transfer Restricted Securities
participating in a shelf registration, to indemnify and hold harmless the
Company, each of the directors of the Company, each of the officers of the
Company who signs such Registration Statement, each person who controls the
Company within the meaning of either the Securities Act or the Securities
Exchange Act of 1934, as amended (the
-4-
<PAGE> 5
"Exchange Act"), and each other holder of Transfer Restricted Securities, from
and against any and all losses, claims, damages or liabilities caused by any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus, or in any supplement thereto or amendment
thereof, or caused by the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; but only with respect to information relating to the undersigned
furnished in writing by or on behalf of the undersigned expressly for use in the
Registration Statement, the Prospectus or any amendments or supplements thereto.
Any such indemnification shall be governed by the terms and subject to the
conditions set forth in the Registration Rights Agreement, including, without
limitation, the provisions regarding notice, retention of counsel, contribution
and payment of expenses set forth therein. The above summary of the
indemnification provision of the Registration Rights Agreement is not intended
to be exhaustive and is qualified in its entirety by the Registration Rights
Agreement.
7. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Original Notes, it represents that the
Original Notes to be exchanged for the Exchange Notes were acquired as a result
of market-making activities or other trading activities and acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and delivering a prospectus, the undersigned will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. If the undersigned is a broker-dealer and Original Notes held
for its own account were not acquired as a result of market-making or other
trading activities, such Original Notes cannot be exchanged pursuant to the
Exchange Offer.
8. Any obligation of the undersigned hereunder shall be binding upon the
successors, assigns, executors, administrators, trustees in bankruptcy and legal
and personal representatives of the undersigned.
9. Unless otherwise indicated herein under "Special Delivery Instructions,"
please issue the certificates for the Exchange Notes in the name of the
undersigned.
-5-
<PAGE> 6
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed only (i) if Original Notes in a principal amount not tendered,
or Exchange Notes issued in exchange for Original Notes accepted for exchange,
are to be issued in the name of someone other than the undersigned, or (ii) if
Original Notes tendered by book-entry transfer which are not exchanged are to be
returned by credit to an account maintained at the Book-Entry Transfer Facility.
Issue Exchange Notes and/or Original Notes to:
Name
- ----------------------------------------
(Type or Print)
Address
- --------------------------------------
- ------------------------------------------------
(Zip Code)
- ------------------------------------------------
(Tax Identification or Social Security Number)
(Complete Substitute Form W-9)
Credit Unexchanged Original Notes
Delivered by Book-Entry Transfer
to the Book-Entry Transfer Facility
Set Forth Below:
- ------------------------------------------------
Book-Entry Transfer Facility
Account Number:
- ------------------------------------------------
- ------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY if the Exchange Notes are to be issued or sent to
someone other than the undersigned or to the undersigned at an address other
than as indicated above.
Mail [ ] Issue [ ] (check appropriate boxes)
Certificates to:
Name
- ----------------------------------------
(Type or Print)
Address
- --------------------------------------
- ------------------------------------------------
(Zip Code)
- ------------------------------------------------
(Tax Identification or Social Security Number)
- ------------------------------------------------
-6-
<PAGE> 7
SPECIAL REGISTRATION INSTRUCTIONS
To be completed ONLY if (i) the undersigned satisfies the conditions set
forth in Item 6 above, (ii) the undersigned elects to register its Original
Notes in the shelf registration statement described in the Registration Rights
Agreement and (iii) the undersigned agrees to indemnify certain entities and
individuals as set forth in Item 6 above. (See Item 6.)
[ ] By checking this box the undersigned hereby (i) represents that it is unable
to make all of the representations and warranties set forth in Item 5 above,
(ii) elects to have its Original Notes registered pursuant to the shelf
registration statement described in the Registration Rights Agreement and
(iii) agrees to indemnify certain entities and individuals identified in,
and to the extent provided in, Item 6 above.
SPECIAL BROKER-DEALER INSTRUCTIONS
[ ] Check here if you are a broker-dealer and wish to receive 10 additional
copies of the Prospectus and 10 copies of any amendments or supplements
thereto.
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
(Zip Code)
- --------------------------------------------------------------------------------
IMPORTANT
PLEASE SIGN HERE WHETHER OR NOT
ORIGINAL NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE)
(Signature(s) of Registered Holders of Original Notes)
- ------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated , 1999
(The above lines must be signed by the registered holder(s) of Original
Notes as name(s) appear(s) on the Original Notes or on a security position
listing, or by person(s) authorized to become registered holder(s) by a properly
completed bond power from the registered holder(s), a copy of which must be
transmitted with this Letter of Transmittal. If Original Notes to which this
Letter of Transmittal relate are held of record by two or more joint holders,
then all such holders must sign this Letter of Transmittal. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
then such person must (i) set forth his or her full title below and (ii) unless
waived by the Company, submit evidence satisfactory to the Company of such
person's authority so to act. See Instruction 5 regarding completion of this
Letter of Transmittal, printed below.)
Name(s)
- --------------------------------------------------------------------------------
(Please Type or Print)
Capacity:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number:
- ---------------------------------------------------------------------------
-7-
<PAGE> 8
MEDALLION SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 5)
Certain signatures must be Guaranteed by an Eligible Institution.
Signature(s) Guaranteed by an Eligible Institution:
(Authorized Signature)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name of Firm)
- --------------------------------------------------------------------------------
(Address, Include Zip Code)
(Area Code and Telephone Number)
- -------------------------------------------------------------------------
Dated: ______________ , 1999
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND ORIGINAL NOTES OR BOOK-ENTRY
CONFIRMATIONS.
All physically delivered Original Notes or any confirmation of a book-entry
transfer to the Exchange Agent's account at the Book-Entry Transfer Facility of
Original Notes tendered by book-entry transfer (a "Book-Entry Confirmation"), as
well as a properly completed and duly executed copy of this Letter of
Transmittal or Agent's Message or facsimile hereof, and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at its address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. THE METHOD OF DELIVERY OF THE TENDERED ORIGINAL NOTES, THIS
LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS
AT THE ELECTION AND RISK OF THE HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW,
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE
EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. INSTEAD OF
DELIVERY BY MAIL, IT IS RECOMMENDED THAT THE HOLDER USE AN OVERNIGHT OR HAND
DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF
TRANSMITTAL OR ORIGINAL NOTES SHOULD BE SENT TO THE COMPANY.
2. GUARANTEED DELIVERY PROCEDURES.
Holders who wish to tender their Original Notes and whose Original Notes
are not immediately available or who cannot deliver their Original Notes, this
Letter of Transmittal or any other documents required hereby to the Exchange
Agent prior to the Expiration Date or who cannot complete the procedure for
book-entry transfer on a timely basis and deliver an Agent's Message, must
tender their Original Notes according to the guaranteed delivery procedures set
forth in the Prospectus. Pursuant to such procedures a tender may be effected if
the Exchange Agent has received at its office, on or prior to the Expiration
Date, a letter, telegram or facsimile transmission from an Eligible Institution
setting forth the name and address of the tendering holder, the name(s) in which
the Original Notes are registered and the certificate number(s) of the Original
Notes to be tendered, and stating that the tender is being made thereby and
guaranteeing that, within three business days after the date of execution of
such letter, telegram or facsimile transmission by the Eligible Institution,
such Original Notes, in proper form for transfer (or a confirmation of
book-entry transfer of such Original Notes into the Exchange Agent's account at
DTC), will be delivered by such Eligible Institution together with a properly
completed and duly executed Letter of Transmittal (and any other required
documents). Unless Original Notes being tendered by the above-described method
are deposited with the
-8-
<PAGE> 9
Exchange Agent within the time period set forth above (accompanied or preceded
by a properly completed Letter of Transmittal and any other required documents),
the Company may, at its option, reject the tender.
Any holder of Original Notes who wishes to tender Original Notes pursuant
to the guaranteed delivery procedures described above must ensure that the
Exchange Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m.,
New York City time, on the Expiration Date. Upon request of the Exchange Agent,
a Notice of Guaranteed Delivery will be sent to holders who wish to tender their
Original Notes according to the guaranteed delivery procedures set forth above.
See "The Exchange Offer -- Terms of the Exchange Offer -- Guaranteed Delivery
Procedures" section of the Prospectus.
3. TENDER BY HOLDER.
Only a holder of Original Notes may tender such Original Notes in the
Exchange Offer. Any beneficial holder of Original Notes who is not the
registered holder and who wishes to tender should arrange with the registered
holder to execute and deliver this Letter of Transmittal on his behalf or must,
prior to completing and executing this Letter of Transmittal and delivering his
Original Notes, either make appropriate arrangements to register ownership of
the Original Notes in such holder's name or obtain a properly completed bond
power from the registered holder.
4. PARTIAL TENDERS.
Tenders of Original Notes will be accepted only in integral multiples of
$1,000 (except for the 2008 Notes, the exchange of which will reflect a partial
payment of principal on June 30, 1999). If less than the entire principal amount
of any Original Notes is tendered, the tendering holder should fill in the
principal amount-tendered in the third column of the box entitled "Description
of Original Notes Tendered" above. The entire principal amount of Original Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of all Original Notes is not
tendered, then Original Notes for the principal amount of Original Notes not
tendered and Exchange Notes issued in exchange for any Original Notes accepted
will be sent to the holder at his or her registered address, unless a different
address is provided in the appropriate box on this Letter of Transmittal,
promptly after the Original Notes are accepted for exchange.
5. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES.
If this Letter of Transmittal (or facsimile hereof) is signed by the record
holder(s) of the Original Notes tendered hereby, the signature must correspond
with the name(s) as written on the face of the Original Notes without
alteration, enlargement or any change whatsoever. If this Letter of Transmittal
(or facsimile hereof) is signed by a participant in the Book-Entry Transfer
Facility, the signature must correspond with the name as it appears on the
security position listing as the holder of the Original Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Original Notes listed and tendered hereby and
the Exchange Notes issued in exchange therefor are to be issued (or any
untendered principal amount of Original Notes is to be reissued) to the
registered holder, the said holder need not and should not endorse any tendered
Original Notes, nor provide a separate bond power. In any other case, such
holder must either properly endorse the Original Notes tendered or transmit a
properly completed separate bond power with this Letter of Transmittal, with the
signatures on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered holder or holders of any Original Notes listed, such
Original Notes must be endorsed or accompanied by appropriate bond powers, in
each case signed as the name of the registered holder or holders appears on the
Original Notes.
If this Letter of Transmittal (or facsimile hereof) or any Original Notes
or bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the
6
<PAGE> 10
Company, evidence satisfactory to the Company of their authority to act must be
submitted with this Letter of Transmittal.
Endorsements on Original Notes or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Letter of Transmittal (or
facsimile hereof) is signed by the registered holder(s) of the Original Notes
tendered herein (or by a participant in the Book-Entry Transfer Facility whose
name appears on a security position listing as the owner of the tendered
Original Notes) and the Exchange Notes are to be issued directly to such
registered holder(s) (or, if signed by a participant in the Book-Entry Transfer
Facility, deposited to such participant's account at such Book-Entry Transfer
Facility) and neither the box entitled "Special Delivery Instructions" nor the
box entitled "Special Registration Instructions" has been completed, or (ii)
such Original Notes are tendered for the account of an Eligible Institution. In
all other cases, all signatures on this Letter of Transmittal (or facsimile
hereof) must be guaranteed by an Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS.
Tendering holders should indicate, in the applicable box or boxes, the name
and address (or account at the Book-Entry Transfer Facility) to which Exchange
Notes or substitute Original Notes for principal amounts not tendered or not
accepted for exchange are to be issued or sent, if different from the name and
address of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated.
Tax law requires that a holder of any Original Notes which are accepted for
exchange must provide the Company (as payor) with its correct taxpayer
identification number ("TIN"), which, in the case of a holder who is an
individual is his or her social security number. If the Company is not provided
with the correct TIN, the holder may be subject to a $50 penalty imposed by
Internal Revenue Service. (If withholding results in an overpayment of taxes, a
refund may be obtained). Certain holders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the Original Notes are registered in more than one name or are not in the
name of the actual owner, see the enclosed "Guidelines for Certification of
Taxpayer Identification Number of Substitute Form W-9" for information on which
TIN to report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligations regarding backup
withholding.
7. VALIDITY OF TENDERS.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance, and withdrawal of tendered Original Notes will be
determined by the Company, in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any or all
tenders not in proper form or the acceptance for exchange of which may, in the
opinion of counsel for the Company, be unlawful. The Company also reserves the
absolute right to waive any of the conditions of the Exchange Offer or any
defect or irregularity in the tender of any Original Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Original Notes must be cured within such time as the Company shall determine.
Although the Company intends to notify holders of defects
7
<PAGE> 11
or irregularities with respect to tenders of Original Notes, neither the
Company, the Exchange Agent, nor any other person shall be under any duty to
give notification of any defects or irregularities in tenders or incur any
liability for failure to give such notification. Tenders of Original Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Original Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering holders,
unless otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
8. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive, in whole or part, any of
the conditions to the Exchange Offer set forth in the Prospectus.
9. NO CONDITIONAL TENDER.
No alternative, conditional, irregular or contingent tender of Original
Notes on transmittal of this Letter of Transmittal will be accepted.
10. MUTILATED, LOST, STOLEN OR DESTROYED ORIGINAL NOTES.
Any holder whose Original Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Requests for assistance or for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address or
telephone number set forth on the cover page of this Letter of Transmittal.
Holders may also contact their broker, dealer, commercial bank, trust company or
other nominee for assistance concerning the Exchange Offer.
12. WITHDRAWAL.
Tenders may be withdrawn only pursuant to the limited withdrawal rights set
forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal of
Tenders."
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH THE ORIGINAL NOTES DELIVERED BY BOOK-ENTRY TRANSFER OR IN
ORIGINAL HARD COPY FORM) MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE
OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, PRIOR TO THE
EXPIRATION DATE.
8
<PAGE> 12
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN Social Security Number
FORM W-9 THE BOX AT RIGHT AND CERTIFY BY OR ------------------------------------
SIGNING AND DATING BELOW. Employer Identification Number
------------------------------------------------------------------------------------------
Department of the PART 2 -- Certification Under penalties of perjury, I certify that:
Treasury -- (1) The number shown on this form is my correct Taxpayer Identification Number (or I am
Internal Revenue waiting for a number to be issued to me) and
Service (2) I am not subject to backup withholding either because I have not been notified by the
PAYER'S REQUEST FOR Internal Revenue Service ("IRS") that I am subject to backup withholding as a result
TAXPAYER IDENTIFICATION of failure to report all interest or dividends, or the IRS has notified me that I am
NUMBER (TIN) no longer subject to backup withholding.
Certificate Instructions -- You must cross out item (2) in Part 2 above if you have been
notified by the IRS that you are subject to backup withholding because of under reporting
interest or dividends on your tax return. However, if after being notified by the IRS that
you were subject to backup withholding you received another notification from the IRS
stating that you are no longer subject to backup withholding, do not cross out item (2).
------------------------------------------------------------------------------------------
SIGNATURE ____________ PART 3 --
DATE ____________, 1999 Awaiting TIN [ ]
Please complete the Certificate of
Awaiting Taxpayer Identification Number
below.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF
THE SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number to the payor within 60
days, 31% of all reportable payments made to me thereafter will be withheld
until I provide a number.
Signature ____________________ Date ______________ , 1999
CERTIFICATE FOR FOREIGN RECORD HOLDERS
Under penalties of perjury, I certify that I am not a United States citizen
or resident (or I am signing for a foreign corporation, partnership, estate or
trust).
Signature ____________________ Date ______________ , 1999
-12-
<PAGE> 13
EXHIBIT 99.2
EAST COAST POWER L.L.C.
LETTER TO CLIENTS
FOR
TENDER OF ALL OUTSTANDING
6.737% SERIES A SENIOR SECURED NOTES DUE 2008
7.066% SERIES A SENIOR SECURED NOTES DUE 2012 AND
7.536% SERIES A SENIOR SECURED NOTES DUE 2017
IN EXCHANGE FOR
6.737% SERIES B SENIOR SECURED NOTES DUE 2008
7.066% SERIES B SENIOR SECURED NOTES DUE 2012 AND
7.536% SERIES B SENIOR SECURED NOTES DUE 2017
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE").
NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE UNLESS PREVIOUSLY ACCEPTED
FOR EXCHANGE.
To Our Clients:
We are enclosing herewith a Prospectus, dated , 1999, of East
Coast Power L.L.C., a Delaware limited liability company (the "Company"), and a
related Letter of Transmittal, which together constitute the Company's offer
(the "Exchange Offer") to exchange its Series B Senior Secured Notes due 2008,
2012 and 2017 (the "Exchange Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), for a like principal
amount of its issued and outstanding Series A Senior Secured Notes due 2008,
2012 and 2017 (the "Original Notes"), upon the terms and subject to the
conditions set forth in the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum number of Original
Notes being tendered.
We are the holder of record of Original Notes held by us for your own
account. A tender of such Original Notes can be made only by us as the record
holder and pursuant to your instructions. The Letter of Transmittal is furnished
to you for your information only and cannot be used by you to tender Original
Notes held by us for your account.
We request instructions as to whether you wish to tender any or all of the
Original Notes held by us for your account pursuant to the terms and conditions
of the Exchange Offer. We also request that you confirm that we may on your
behalf make the representations and warranties contained in the Letter of
Transmittal.
Very truly yours,
PLEASE RETURN YOUR INSTRUCTIONS TO US IN THE ENCLOSED ENVELOPE WITHIN AMPLE
TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION
DATE.
<PAGE> 1
INSTRUCTION TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER PARTICIPANT
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1999 (the "Prospectus") of East Coast Power L.L.C., a
Delaware limited liability company (the "Company"), and the accompanying Letter
of Transmittal (the "Letter of Transmittal"), that together constitute the
Company's offer (the "Exchange Offer") to exchange its 6.737% Series B Senior
Secured Notes due 2008, 7.066% Series B Senior Secured Notes due 2012 and 7.536%
Series B Senior Secured Notes due 2017 (the "Exchange Notes"), for all of its
outstanding 6.737% Series A Senior Secured Notes due 2008, 7.066% Series A
Senior Secured Notes due 2012 and 7.536% Series A Senior Secured Notes due 2017
(the "Original Notes"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Original Notes held by you for the account of
the undersigned.
The aggregate face amount of the Original Notes held by you for the account
of the undersigned is (FILL IN AMOUNT):
$ of the 6.737% Series A Senior Secured Notes due 2008
$ of the 7.066% Series A Senior Secured Notes due 2012
and
$ of the 7.536% Series A Senior Secured Notes due 2017.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[ ] To TENDER the following Original Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF ORIGINAL NOTES TO BE TENDERED) (IF
ANY):
[ ] NOT to TENDER any Original Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Original Notes held by you
for the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned by its signature below,
hereby makes to you), the representations and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations, that (i) the
Exchange Notes acquired in exchange for Original Notes pursuant to the Exchange
Offer are being acquired in the ordinary course of business of the person
receiving such Exchange Notes, whether or not the undersigned, (ii) the
undersigned is not engaging in and does not intend to engage in a distribution
of the Exchange Notes, (iii) the undersigned does not have any arrangement or
understanding with any person to participate in the distribution of Exchange
Notes, and (iv) neither the undersigned nor any such other person is an
"affiliate" (within the meaning of Rule 405 under the Securities Act of 1933, as
amended) of the Company. If the undersigned is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Original Notes, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
2
<PAGE> 2
SIGN HERE
Name of beneficial owner(s):
- --------------------------------------------------------------------------------
Signature(s)
Name(s):
- --------------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
(Please Print)
Address:
- --------------------------------------------------------------------------------
Telephone number:
- --------------------------------------------------------------------------------
Taxpayer Identification or Social Security Number:
- ----------------------------------------------------------
Date:
- --------------------------------------------------------------------------------
3
<PAGE> 1
EXHIBIT 99.3
EAST COAST POWER L.L.C.
LETTER TO REGISTERED HOLDERS AND
DEPOSITORY TRUST COMPANY PARTICIPANTS
FOR
TENDER OF ALL OUTSTANDING
6.737% SERIES A SENIOR SECURED NOTES DUE 2008,
7.066% SERIES A SENIOR SECURED NOTES DUE 2012 AND
7.536% SERIES A SENIOR SECURED NOTES DUE 2017
IN EXCHANGE FOR
6.737% SERIES B SENIOR SECURED NOTES DUE 2008,
7.066% SERIES B SENIOR SECURED NOTES DUE 2012 AND
7.536% SERIES B SENIOR SECURED NOTES DUE 2017
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE").
ORIGINAL NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE UNLESS PREVIOUSLY
ACCEPTED FOR EXCHANGE.
To Registered Holders and Depository Trust Company Participants:
We are enclosing herewith the material listed below relating to the offer
by East Coast Power L.L.C., a Delaware limited liability company (the
"Company"), to exchange its Series B Senior Secured Notes due 2008, 2012 and
2017 (the "Exchange Notes"), which have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), for a like principal amount of its
issued and outstanding Series A Senior Secured Notes due 2008, 2012 and 2017
(the "Original Notes") upon the terms and subject to the conditions set forth in
the Company's Prospectus, dated , 1999, and the related Letter
of Transmittal (which together constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated , 1999;
2. Letter of Transmittal (together with accompanying Substitute Form
W-9 Guidelines);
3. Notice of Guaranteed Delivery;
4. Letter which may be sent to your clients for whose account you hold
Original Notes in your name or in the name of your nominee; and
5. Letter which may be sent from your clients to you with such
client's instruction with regard to the Exchange Offer.
We urge you to contact your clients promptly. Please note that the Exchange
Offer will expire on the Expiration Date unless extended.
The Exchange Offer is not conditioned upon any minimum number of Original
Notes being tendered.
Pursuant to the Letter of Transmittal, each holder of Original Notes will
represent to the Company that (i) the Exchange Notes acquired in exchange for
Original Notes pursuant to the Exchange Offer are being acquired in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
the undersigned, (ii) the undersigned is not engaging in and does not intend to
engage in a distribution of the Exchange Notes, (iii) the undersigned does not
have any arrangement or understanding with any person to participate in the
distribution of Exchange Notes, and (iv) neither the undersigned nor any such
other person
<PAGE> 2
is an "affiliate" (within the meaning of Rule 405 under the Securities Act of
1933, as amended) of the Company. If the holder is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Original Notes that
were acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus in connection with
any resale of such Exchange Notes.
The enclosed Letter to Clients contains an authorization by the beneficial
owners of the Original Notes for you to make the foregoing representations.
The Company will not pay any fee or commission to any broker or dealer or
to any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Original Notes pursuant to the Exchange Offer.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
EAST COAST POWER L.L.C.
2
<PAGE> 1
EXHIBIT 99.4
EAST COAST POWER L.L.C.
NOTICE OF GUARANTEED DELIVERY OF SERIES A SENIOR SECURED NOTES
DUE 2008, 2012 AND 2017
As set forth in the Prospectus dated , 1999 (as the same may be
amended or supplemented from time to time, the "Prospectus") of East Coast Power
L.L.C. (the "Issuer") under the caption "The Exchange Offer -- Procedures for
Tendering" and in the Letter of Transmittal for Offer to Exchange Series B
Senior Secured Notes due 2008, 2012 and 2017 (the "Letter of Transmittal"), this
form or one substantially equivalent hereto must be used to accept the Exchange
Offer (as defined below) of the Issuer if: (i) certificates for the
above-referenced notes (the "Original Notes") are not immediately available,
(ii) time will not permit all required documents to reach the Exchange Agent (as
defined below) on or prior to the Expiration Date (as defined in the Prospectus)
or (iii) the procedures for book-entry transfer cannot be completed on or prior
to the Expiration Date. Such form may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or letter to the Exchange Agent.
TO: THE BANK OF NEW YORK (THE "EXCHANGE AGENT")
For Information by Telephone:
(212)
The Bank of New York
Attention: Reorganization Section
101 Barclay Street
Floor 7E
New York, NY 10286
By Facsimile Transmission (for Eligible Institutions Only):
(212) 815-6339
(Facsimile confirmation)
(212)
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OR NUMBER OTHER THAN THOSE SHOWN
ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE, WILL NOT CONSTITUTE VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuer, upon the terms and conditions
set forth in the Prospectus and the Letter of Transmittal (which together
constitute the "Exchange Offer"), receipt of which are hereby acknowledged, the
principal amount of Original Notes set forth below pursuant to the guaranteed
delivery procedures described in the Prospectus and the Letter of Transmittal.
The undersigned understands and acknowledges that the Exchange Offer will
expire at 5:00 p.m., New York City time, on , 1999, unless extended by
the Issuer. With respect to the Exchange Offer, "Expiration Date" means such
time and date, or if the Exchange Offer is extended, the latest time and date to
which the Exchange Offer is so extended by the Issuer.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
1
<PAGE> 2
DESCRIPTION OF ORIGINAL NOTES TENDERED
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
AMOUNT
CERTIFICATE NUMBER(S) (IF KNOWN) OF ORIGINAL NOTES OR REPRESENTED BY PRINCIPAL AMOUNT
ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY OLD NOTES TENDERED
<S> <C> <C>
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total:
- --------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
Signature(s):
- --------------------------------------------- Name(s):
---------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Address: Capacity (full title), if signing
(Zip Code) in a representative capacity:
Area Code and Telephone Number:
Taxpayer Identification or Social
Dated: ------------------------------ Security Number:
</TABLE>
GUARANTEE OF DELIVERY
The undersigned, a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended, hereby guarantees (a) that the above-named person(s) own(s)
the above-described securities tendered hereby within the meaning of Rule 10b-4
under the Securities Exchange Act of 1934, (b) that such tender of the
above-described securities complies with Rule 10b-4, and (c) that delivery to
the Exchange Agent of certificates tendered hereby, in proper form for transfer,
or delivery of such certificates pursuant to the procedure for book-entry
transfer, in either case with delivery of a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) and any other required documents,
is being made within three business days after the date of execution of a Notice
of Guaranteed Delivery of the above-named person.
(Name of Firm)
Sign here:
(Authorized Signature)
Name:
(Please Type or Print)
(Area Code and Telephone Number)
Address Zip Code ______________
Dated: , 1999
2
