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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 15, 1999
REGISTRATION NO. 333-81601
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1 TO
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)
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<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) 345-9722
(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. [ ]
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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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 OCTOBER 15, 1999
$833,939,040
[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
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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 December 31, 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 June 30, 1999, our subsidiaries had approximately $351.0 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. The exchange offer will not be extended beyond
, 1999.
- - 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.
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YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 10 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.
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The date of this prospectus is , 1999.
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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.
---------------------
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
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.
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PROSPECTUS SUMMARY
This prospectus 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. 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."
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 "-- Terms of the New
Notes" and "Description of the New Notes" 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" for further information
regarding the exchange offer and resale of the new notes.
The Exchange Offer.....
We are offering to exchange up to $833,939,040 aggregate
principal amount of new notes for up to $833,939,040
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 partial payments of principal on June 30,
1999 and September 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. We will not extend the exchange
offer beyond , 1999.
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 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" 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
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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-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."
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 "United States
Income Tax Considerations."
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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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... $279,939,040 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 December 31, 1999
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.
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 June 30, 1999, our subsidiaries had approximately
$351.0 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
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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 the voting
securities in our Company, 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.
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.
COVENANTS............ The terms of the new notes will restrict our ability and
the ability of our subsidiaries to:
- incur additional debt;
- incur liens on our property;
- consolidate or merge or sell assets;
- enter into certain transactions with affiliates; and
- 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."
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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" for more information
regarding your rights as a holder of outstanding notes.
RISK FACTORS
You should carefully consider "Risk Factors" beginning on page 10 before
participating in the exchange offer. The following is a summary of the most
significant risks relating to an investment in the notes:
- 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.
- 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' 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 depend on a small number of customers and contracts to provide all of
our revenues. If any of our customers is able to amend or terminate its
agreement with us, our revenues, and therefore our ability to make
payments on the new notes could be materially and adversely affected.
- The operation of our facilities involves risks, including equipment
breakdowns, fuel interruptions, underperformance and catastrophic events.
- We and our subsidiaries may incur additional debt, which could adversely
affect you by diluting the value of the collateral to you and by
diverting our cash flow to the payment of additional debt.
- Our business is subject to substantial regulations and permitting
requirements and may be adversely affected by changes in these
regulations or requirements.
- Our revenues may be adversely affected by fuel cost increases and
unavailability of fuel.
- There are risks associated with the Year 2000 computer problem which
could adversely affect the operations of our facilities or those of our
customers or suppliers.
- 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.
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. 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. In this prospectus, we refer to the
acquisition of our interests in these facilities as "the acquisition." Our
activities are limited to the ownership, operation and potential expansion of
our facilities.
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We are owned by Enron Corp., the California Public Employees' Retirement
System ("CalPERS"), El Paso Energy Corporation and Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"). Enron and CalPERS 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. El Paso Energy and DLJ hold their interests
through Mesquite Investors, L.L.C. 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. 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
Our Camden facility is a 146 megawatt base load cogeneration facility
located in Camden, New Jersey which began commercial operations in March 1993.
Bayonne
Our Bayonne facility is a 176 megawatt base load cogeneration facility
located in Bayonne, New Jersey which began commercial operations in October
1988.
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.
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- 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 the New York City area served by The
Consolidated Edison Company of New York, Inc. 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. Any 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.
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STRUCTURE AND OWNERSHIP
The following chart depicts the summary structure of our ownership
interests in the facilities and our subsidiaries:
Organizational Chart
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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 marketing of natural gas, electricity and other commodities and
related risk management and finance services worldwide;
- the development, construction and operation of power plants, pipelines
and other energy-related assets worldwide;
- 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; and
- the delivery of high bandwidth communication applications throughout the
United States.
In this prospectus, the term "Enron" refers to Enron Corp. and its
subsidiaries.
Mesquite Investors
Mesquite Investors was formed in July 1999 to invest in energy-related
projects. The members of Mesquite are wholly owned subsidiaries of El Paso
Energy and DLJ.
El Paso Energy
Headquartered in Houston, Texas, El Paso Energy provides energy solutions
coast-to-coast and worldwide through its five business units. El Paso Energy has
operations in:
- interstate natural gas transmission;
- gas gathering and processing;
- international infrastructure development; and
- energy marketing.
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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.
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 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 -- The Exchange
Offer" and "The Exchange Offer" 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.
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, East Coast Power Holding Company
L.L.C., Enron, CalPERS, Mesquite Investors, El Paso Energy and DLJ, 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 June 30, 1999, our subsidiaries
had $351.0 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."
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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.
WE DEPEND ON A SMALL NUMBER OF CUSTOMERS AND CONTRACTS TO PROVIDE ALL OF OUR
REVENUES. IF ANY OF OUR CUSTOMERS IS ABLE TO AMEND OR TERMINATE ITS AGREEMENT
WITH US, OUR REVENUES, AND THEREFORE OUR ABILITY TO MAKE PAYMENTS ON THE NEW
NOTES, COULD BE MATERIALLY AND ADVERSELY AFFECTED.
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 Public Service Electric and Gas Company
of New Jersey and Jersey Central Power & Light Company 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, INCLUDING EQUIPMENT BREAKDOWNS,
FUEL INTERRUPTIONS, UNDERPERFORMANCE AND CATASTROPHIC EVENTS.
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
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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.
WE AND OUR SUBSIDIARIES MAY INCUR ADDITIONAL DEBT WHICH COULD ADVERSELY AFFECT
YOU BY DILUTING THE VALUE OF THE COLLATERAL TO YOU AND BY DIVERTING OUR CASH
FLOW TO THE PAYMENT OF ADDITIONAL DEBT.
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 THESE 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."
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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."
THERE ARE RISKS ASSOCIATED WITH THE YEAR 2000 COMPUTER PROBLEM WHICH COULD
ADVERSELY AFFECT THE OPERATIONS OF OUR FACILITIES OR THOSE OF OUR CUSTOMERS OR
SUPPLIERS.
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."
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.
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<PAGE> 17
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 is 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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<PAGE> 18
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. However, 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 above summary of the registration rights agreement contains all of its
material terms.
RESALE OF NEW NOTES
Based on interpretations of the SEC 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 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-
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<PAGE> 19
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 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. Broker dealers that acquired the outstanding
notes from us may not rely on the interpretations of the SEC discussed above and
must comply with the registration and prospectus delivery requirements of the
Securities Act, including being named as selling noteholders in order to resell
the outstanding notes or new notes. Please read "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 partial
payments of principal on June 30, 1999 and September 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, $833,939,040 aggregate principal amount
of the outstanding notes are outstanding, reflecting the June 30, 1999 and
September 30, 1999 payments of principal on the 2008 notes in the amount of
$12,130,080, or 4.098%, and $3,930,880, or 1.328%, respectively, 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. We will not
extend the exchange offer beyond , 1999.
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
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<PAGE> 20
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.
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 file
with the SEC a post-effective amendment to the registration statement of which
this prospectus is a part to disclose such amendment. We will distribute the
prospectus included in the post-effective amendment 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.
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<PAGE> 21
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.
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.
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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 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
19
<PAGE> 23
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 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 properly 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
20
<PAGE> 24
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.
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.
21
<PAGE> 25
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.
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.
22
<PAGE> 26
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 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 June 30, 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.
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 10.
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.
23
<PAGE> 27
OUR OWNERS
GENERAL
Our Company is a limited liability company organized in Delaware. We have
three members:
- JEDI II indirectly owns 51% of the Class A membership interests and 1% of
the Class B membership interests;
- Mesquite Investors owns 49% of the Class A membership interests and 49%
of the Class B membership interests; and
- CalPERS owns 50% of the Class B membership interests.
In August 1999, Enron transferred its Class B membership interest
(representing 50% of the total Class B membership interests) to ECP Holding
Company. Also in August 1999, ECP Holding Company transferred a 49% Class A
membership interest and a 49% Class B membership interest to Mesquite Investors,
an affiliate of El Paso Energy and DLJ. Our limited liability company agreement
was amended and restated in August 1999 to admit Mesquite Investors as a Class A
and Class B Member.
Our members are not obligated to make any other contributions to us. All
distributions will be made to the Class A Members until the Class A Members have
received distributions equal to $80.0 million plus specified rates of return.
After the Class A Members have received their preferential distributions, all
distributions will be made 90% to the Class A Members 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
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 marketing of natural gas, electricity and other commodities and
related risk management and finance services worldwide;
- the development, construction and operation of power plants, pipelines
and other energy related assets worldwide;
- 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; and
- the delivery of high bandwidth communication applications throughout the
United States.
MESQUITE INVESTORS
Mesquite Investors was formed in July 1999 to invest in energy-related
projects. The members of Mesquite Investors are wholly owned subsidiaries of El
Paso Energy and DLJ.
24
<PAGE> 28
EL PASO ENERGY
Headquartered in Houston, Texas, El Paso Energy provides energy solutions
coast-to-coast and worldwide through its five business units. El Paso Energy has
operations in:
- interstate natural gas transmission;
- gas gathering and processing;
- international infrastructure development; and
- energy marketing.
25
<PAGE> 29
USE OF PROCEEDS
Our proceeds from the sale of the outstanding notes were $850.0 million. In
connection with the closing of the sale of the outstanding notes, JEDI II made
an equity contribution to our Company of $80.0 million. We used these funds as
follows:
- we used $831.0 million to repay a bridge loan to NationsBank, N.A.
incurred in connection with the acquisition, which resulted in the
release of a $25.0 million guaranty by CalPERS;
- we used $62.1 million to repay a portion of a $250.0 million
subordinated note issued to Enron in connection with the
acquisition;
- we used $25.0 million to make a distribution to Enron North America
in respect of its membership interest in the Company; and
- we used $11.9 million to pay a purchase price adjustment to the
sellers based on changes in working capital.
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.
26
<PAGE> 30
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999 (in
millions):
<TABLE>
<S> <C>
Cash, cash equivalents and restricted cash.................. $ 42.0
========
Notes(1).................................................... $ 837.9
Linden Ltd. term loan(2).................................... 202.8
Subordinated note........................................... 187.9
Member's equity............................................. 79.2
--------
Total capitalization........................................ $1,307.8
========
</TABLE>
- ---------------
(1) Includes current portion of $14.2 million.
(2) Includes current portion of $14.7 million and $3.9 million unamortized
premium recognized in connection with the acquisition.
27
<PAGE> 31
SELECTED FINANCIAL DATA
The following table sets forth summary historical financial data for the
Company and its predecessor 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."). We
completed our acquisition of the Acquired Group in February 1999. The summary
historical balance sheet data as of June 30, 1999 and the summary income
statement data for the period from February 4, 1999 to June 30, 1999 for the
Company are derived from the unaudited consolidated financial statements
included elsewhere in this prospectus. The summary historical balance sheet data
as of December 31, 1998 and 1997 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 June 30, 1998
and the summary income statement data for the period ended February 4, 1999 and
the six months ended June 30, 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 June 30,
1999 and 1998 and the summary income statement information for the periods then
ended are derived from the unaudited combined 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."
As a result of the acquisition, the capital structure of the Company and
the accounting basis of its assets and liabilities differ from those of the
business acquired. Accordingly, certain of the financial information for the
periods prior to the acquisition is not comparable to that for periods
subsequent to the acquisition.
28
<PAGE> 32
<TABLE>
<CAPTION>
ACQUIRED GROUP (PREDECESSOR)
--------------------------------------------------------------
THE COMPANY SIX
----------- MONTHS
2/4/99 1/1/99 ENDED YEAR ENDED DECEMBER 31,
TO TO JUNE 30, ------------------------------------------
6/30/99 2/4/99 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............................. $ 21.4 $(44.6) $ 35.8 $ 75.3 $ 73.8 $ 78.7 $ 59.0 $ 64.2
Camden Venture............................. 1.4 (11.9) 6.5 14.2 14.5 13.7 13.4 11.8
Bayonne Venture............................ 13.0 5.0 23.6 47.6 17.5 18.1 28.3 17.4
-------- ------ ------ ------ ------ ------ ------ ------
35.8 (51.5) 65.9 137.1 105.8 110.5 100.7 93.4
-------- ------ ------ ------ ------ ------ ------ ------
Costs and expenses:
Operating overhead........................... -- 0.9 17.2 21.6 11.6 9.6 8.4 6.8
General and administrative................... 2.9 1.7 9.9 20.2 19.9 10.9 10.4 12.2
-------- ------ ------ ------ ------ ------ ------ ------
2.9 2.6 27.1 41.8 31.5 20.5 18.8 19.0
-------- ------ ------ ------ ------ ------ ------ ------
Income (loss) from operations.................. 32.9 (54.1) 38.8 95.3 74.3 90.0 81.9 74.4
Other income (expense):
Interest and other income.................... 9.9 0.1 6.5 12.6 15.5 16.7 17.8 13.8
Interest expense............................. (43.3) (2.0) (9.6) (19.3) (21.8) (23.3) (26.5) (25.9)
Allowance for long-term receivable........... -- -- -- -- 10.3 (10.3) 6.5 (6.5)
-------- ------ ------ ------ ------ ------ ------ ------
(33.4) (1.9) (3.1) (6.7) 4.0 (16.9) (2.2) (18.6)
Income (loss) before income taxes.............. (0.5) (56.0) 35.7 88.6 78.3 73.1 79.7 55.8
Income taxes................................. -- (1.7) (6.8) (14.6) (4.2) (4.1) (7.5) (2.9)
-------- ------ ------ ------ ------ ------ ------ ------
Net income (loss).............................. $ (0.5) $(57.7) $ 28.9 $ 74.0 $ 74.1 $ 69.0 $ 72.2 $ 52.9
======== ====== ====== ====== ====== ====== ====== ======
BALANCE SHEET DATA AT END OF PERIOD:
Investment in affiliates..................... $1,272.5 $82.1 $ 73.8 $ 83.8 $ 75.7 $ 71.8 $ 71.8 $ 74.0
Total assets................................. 1,328.3 259.3 230.1 247.2 250.8 250.5 280.1 282.2
Long-term debt (including current portion)... 1,228.6 205.6 224.7 218.0 230.9 246.9 262.2 276.2
Owner's equity (deficit)..................... 79.2 41.7 (13.3) 16.7 (11.6) (27.4) (16.0) (36.2)
OTHER FINANCIAL DATA:
Distributions received from affiliates....... $ 46.8 $20.3 $ 67.8 $128.5 $102.3 $116.7 $106.3 $ 92.2
Ratio of earnings to fixed charges(1)........ 1.0 -- 3.3 3.8 3.2 2.9 2.9 2.3
</TABLE>
- ---------------
(1) For purposes of calculating the ratio of earnings to fixed charges, earnings
are defined as income (loss) from continuing operations before income taxes
and fixed charges. Fixed charges consist of interest expense including
amortization of loan fees. For the period ended February 4, 1999 earnings
were insufficient to cover fixed charges by $56.0 million.
29
<PAGE> 33
LINDEN VENTURE
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 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........................... $128.5 $132.4 $262.8 $283.5 $290.4 $246.9 $259.0
Steam................................. 3.4 6.4 11.3 15.5 15.1 8.7 10.1
------ ------ ------ ------ ------ ------ ------
131.9 138.8 274.1 299.0 305.5 255.6 269.1
------ ------ ------ ------ ------ ------ ------
Costs and expenses:
Fuel.................................. 63.7(1) 61.2 118.1 138.1 138.6 104.8 117.5
Operating and maintenance............. 9.8 9.5 19.9 22.1 22.6 28.1 26.3
Depreciation and amortization......... 7.5 7.7 15.4 22.3 22.2 22.3 21.9
General and administrative............ 49.1(2) 5.2 10.1 11.4 10.7 9.1 9.7
Taxes other than income............... 0.8 0.9 1.6 0.6 1.7 2.1 1.8
------ ------ ------ ------ ------ ------ ------
130.9 84.5 165.1 194.5 195.8 166.4 177.2
------ ------ ------ ------ ------ ------ ------
Income (loss) from operations........... 1.0 54.3 109.0 104.5 109.7 89.2 91.9
Interest expense...................... -- -- -- -- (0.1) (0.1) (0.1)
Other income.......................... 3.8 0.4 0.8 1.1 0.6 0.8 3.5
------ ------ ------ ------ ------ ------ ------
Net income (loss)..................... $ 4.8 $ 54.7 $109.8 $105.6 $110.2 $ 89.9 $ 95.3
====== ====== ====== ====== ====== ====== ======
THE ACQUIRED GROUP'S SHARE OF:
Net income (loss)....................... $ (7.7)(3) $ 35.8 $ 75.3 $ 73.8 $ 78.7 $ 59.0 $ 64.2
Cash distributions...................... 43.7 36.4 74.0 75.6 77.7 59.4 71.6
BALANCE SHEET DATA AT END OF PERIOD:
Property and equipment, net............. $405.0 $420.7 $413.6 $428.2 $450.1 $470.6 $490.1
Total assets............................ 466.2 474.4 470.6 492.4 514.8 525.8 546.5
Long-term debt (including current
portion).............................. -- -- -- -- -- -- --
Partners' capital....................... 438.8 450.8 444.5 458.4 480.4 499.5 520.3
SELECTED OPERATING INFORMATION:
Megawatt-hours generated (thousands).... 1,910 1,874 3,808 3,891 3,806 3,952 3,991
Average heat rate (without steam
credit)(4)............................ 9,796 9,654 9,588 9,852 9,924 9,768 9,783
Average heat rate (with steam
credit)(4)............................ 8,917 8,758 8,757 8,664 8,938 8,848 9,014
Average equivalent availability......... 97% 95% 96% 94% 89% 91% 94%
Steam produced (millions of pounds)..... 2,465 2,391 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.
30
<PAGE> 34
CAMDEN VENTURE
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 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.............................. $ 31.9 $ 36.6 $ 73.1 $ 80.2 $ 77.2 $ 67.5 $ 66.0
Steam.................................... -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
31.9 36.6 73.1 80.2 77.2 67.5 66.0
------ ------ ------ ------ ------ ------ ------
Costs and expenses:
Fuel..................................... 15.3(1) 17.4 33.3 39.2 38.4 28.9 30.2
Operating and maintenance................ 3.5 3.4 7.0 7.7 6.4 7.2 5.7
Depreciation and amortization............ 1.9 1.9 3.7 6.9 6.8 6.8 6.7
General and administrative............... 13.5(2) 1.1 2.2 2.6 2.6 2.3 2.1
Taxes other than income.................. 0.2 0.2 0.4 0.6 0.6 0.5 0.7
------ ------ ------ ------ ------ ------ ------
34.4 24.0 46.6 57.0 54.8 45.7 45.4
------ ------ ------ ------ ------ ------ ------
Income (loss) from operations.............. (2.5) 12.6 26.5 23.2 22.4 21.8 20.6
Interest expense......................... (3.5) (3.7) (7.4) (7.7) (8.2) (8.4) (8.8)
Other income............................. 0.3 0.2 0.4 0.4 0.4 0.4 0.2
------ ------ ------ ------ ------ ------ ------
Net income (loss)........................ $ (5.7) $ 9.1 $ 19.5 $ 15.9 $ 14.6 $ 13.8 $ 12.0
====== ====== ====== ====== ====== ====== ======
THE ACQUIRED GROUP'S SHARE OF:
Net income (loss).......................... $ (7.7)(3) $ 6.5 $ 14.2 $ 14.5 $ 13.7 $ 13.4 $ 11.8
Cash distributions......................... 6.8 7.7 15.0 8.6 14.5 15.0 4.3
BALANCE SHEET DATA AT END OF PERIOD:
Property and equipment, net................ $101.4 $104.6 $103.1 $106.3 $108.9 $115.3 $121.8
Total assets............................... 119.8 123.6 121.4 125.3 128.4 133.5 140.7
Long-term debt (including current
portion)................................. 81.7 87.5 84.6 90.2 95.2 99.8 104.0
Partners' capital.......................... 29.8 28.0 29.2 28.0 23.8 26.7 30.7
SELECTED OPERATING INFORMATION:
Megawatt-hours generated (thousands)....... 516 586 1,153 1,208 1,190 1,169 1,127
Average heat rate (without steam
credit)(4)............................... 8,686 8,832 8,791 8,764 8,740 8,662 8,709
Average heat rate (with steam credit)(4)... 8,403 8,646 8,601 8,431 8,422 8,347 8,404
Average equivalent availability............ 83% 95% 96% 97% 98% 98% 94%
Steam produced (millions of pounds)........ 134 148 300 301 310 302 281
</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.
31
<PAGE> 35
BAYONNE VENTURE
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, 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.............................. $ 52.5 $ 56.3 $112.8 $ 92.8 $ 90.4 $ 93.2 $ 82.6
Steam.................................... 1.8 2.2 3.8 3.7 4.9 3.3 3.8
------ ------ ------ ------ ------ ------ ------
54.3 58.5 116.6 96.5 95.3 96.5 86.4
------ ------ ------ ------ ------ ------ ------
Costs and expenses:
Fuel..................................... 18.4 19.2 38.6 43.2 45.2 33.4 34.9
Operating and maintenance................ 5.5 5.5 10.9 14.4 10.2 11.4 13.0
Depreciation and amortization............ 1.4 1.5 3.0 6.9 6.9 6.9 6.7
General and administrative............... 1.4 1.5 3.1 2.9 2.8 2.6 2.1
Taxes other than income.................. 0.4 0.3 0.5 0.5 0.5 0.5 0.4
------ ------ ------ ------ ------ ------ ------
27.1 28.0 56.1 67.9 65.6 54.8 57.1
------ ------ ------ ------ ------ ------ ------
Income from operations..................... 27.2 30.5 60.5 28.6 29.7 41.7 29.3
Interest expense......................... (3.6) (3.9) (7.7) (8.1) (8.5) (8.8) (9.0)
Other income............................. 0.1 0.7 1.2 0.1 0.1 0.1 0.1
------ ------ ------ ------ ------ ------ ------
Net income............................... $ 23.7 $ 27.3 $ 54.0 $ 20.6 $ 21.3 $ 33.0 $ 20.4
====== ====== ====== ====== ====== ====== ======
THE ACQUIRED GROUP'S SHARE OF:
Net income................................. $ 21.8 $ 23.6 $ 47.6 $ 17.5 $ 18.1 $ 28.3 $ 17.4
Cash distributions......................... 16.6 23.7 39.5 18.1 24.5 31.9 16.3
BALANCE SHEET DATA AT END OF PERIOD:
Property and equipment, net................ $ 69.5 $ 72.3 $ 70.9 $ 73.8 $ 80.6 $ 87.2 $ 92.6
Total assets............................... 100.8 99.8 98.4 99.0 99.8 107.3 111.4
Long-term debt (including current
portion)................................. 66.5 70.2 68.4 71.8 74.9 77.7 80.1
Partners' capital.......................... 27.1 21.3 21.5 12.2 12.5 19.6 23.4
SELECTED OPERATING INFORMATION:
Megawatt-hours generated (thousands)....... 706 669 1,400 1,330 1,351 1,386 1,225
Average heat rate (without steam
credit)(1)............................... 9,275 9,240 9,183 9,285 9,215 4,184 9,430
Average heat rate (with steam credit)(1)... 8,285 8,191 8,278 8,449 8,370 8,141 8,037
Average equivalent availability............ 95% 97% 95% 94% 97% 98% 91%
Steam produced (millions of pounds)........ 582 585 1,056 927 952 975 1,025
</TABLE>
- ---------------
(1) Btu/Kilowatt-hour.
32
<PAGE> 36
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
East Coast Power L.L.C. is a Delaware limited liability company that was
formed in December 1998 by JEDI II, a limited partnership in which Enron Corp.
and CalPERS each own a 50% interest. On February 4, 1999, the Company's limited
liability company agreement was amended and restated to convert JEDI II's
initial membership to that of a Class A Member and to admit Enron North America
Corp. (formerly Enron Capital & Trade Resources Corp.), a wholly owned
subsidiary of Enron, and CalPERS as Class B members. On February 4, 1999, the
Company acquired equity interests in three power generation facilities located
in Linden, Bayonne and Camden, New Jersey. The facilities have a total nameplate
capacity of 1,037 megawatts of generating capacity. In 1998, the facilities
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 expansion of the facilities.
On August 13, 1999, Enron North America transferred its Class B membership
interest in the Company (representing 50% of the total Class B membership
interests) to ECP Holding Company. Also on August 13, 1999, ECP Holding Company
transferred a 49% Class A membership interest and a 49% Class B membership
interest in the Company to Mesquite Investors, L.L.C., a Delaware limited
liability company which is jointly owned by El Paso Energy Corporation and
Donaldson, Lufkin & Jenrette Securities Corporation. The limited liability
company agreement of the Company was amended and restated on August 13, 1999 to
admit Mesquite Investors as a Class A and Class B Member and to provide for
certain preferential distributions to ECP Holding Company in the event of
certain contract restructuring or capital projects.
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, which comprise the Cogen Tech Group). 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." 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 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, and such
difference is reflected in our first quarter results as described below. The
Company employs
33
<PAGE> 37
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 six months ended June 30, 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, $2.4 million and $0.3 million, respectively, for Linden Venture and
$1.3 million, $0.7 million and $0.1 million, respectively, for Camden Venture.
The results of operations for the Acquired Group in the year 1998 and the six
months ended June 30, 1998 also includes operating overhead of $16.3 million and
$14.9 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 six months ended June 30, 1998 include general and
administrative expense of $6.0 million and $3.2 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 this transaction took place on January 1, 1998, the
Acquired Group's equity in the earnings of Bayonne Venture for the year 1998 and
six months ended June 30, 1998 would have increased by $1.5 million and $1.3
million, respectively, and net income would have increased by $1.0 million and
$.8 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 of approximately $4.3 million per
month through September 1998 was reduced 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
34
<PAGE> 38
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
between reimbursement of fuel costs and actual costs. This provision has not had
a material impact on the Bayonne Facility 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 the purchaser's, 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 provides steam to Infineum USA L.P. and sells steam to
Bayway Refining Company 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. As a result of the
pricing and credit provisions of the Infineum agreement, Infineum does not pay
Linden Venture for any of the steam take up to the contract limit. If Infineum
increases its steam take up to the maximum allowed under the contract,
distributions to the Company from Linden Venture could be reduced by
approximately $1.3 million per year.
RESULTS OF OPERATIONS
East Coast Power L.L.C. -- Six Months Ended June 30, 1999
Our results of operations for the six months ended June 30, 1999 include
the effect of the results of operations of the Acquired Group for the period
subsequent to the acquisition (February 5 to June 30, 1999). Unless otherwise
indicated, discussions with respect to Linden Venture, Camden Venture and
Bayonne Venture reflect the results of operations for the full six-month periods
ended June 30, 1999 and 1998.
Our equity in earnings of affiliates for the six months ended June 30, 1999
totaled $35.8 million, and we received $46.8 million in cash distributions
during the period subsequent to the acquisition.
Linden Venture. Revenues decreased from $138.8 million for the six
months ended June 30, 1998 to $131.9 million for the six months ended June
30, 1999. Electricity revenues decreased by $3.9 million
35
<PAGE> 39
due primarily to a lower fuel component. Electricity revenues in the six
months ended June 30, 1999 reflected a $4.7 million limitation in the
Linden power purchase agreement on the pass-through of fuel costs compared
with a $3.8 million limitation in the prior period. Steam revenues declined
by $3.0 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 taken by Infineum and sold to Bayway Refining discussed under
"-- Linden Steam Agreements." Costs and expenses totaled $130.9 million in
the six months ended June 30, 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. These amounts are included in general
and administrative and fuel costs, respectively. Excluding these charges,
costs and expenses decreased from $84.5 million in the six months ended
June 30, 1998 to $78.5 million in the six months ended June 30, 1999,
primarily reflecting a $3.5 million decrease in fuel costs.
Linden Venture had net income of $4.8 million in the six months ended
June 30, 1999 after $52.4 million of one-time charges discussed above,
compared to earnings of $54.7 million in the six months ended June 30,
1998. Linden Venture made cash distributions of $63.0 million in the six
months ended June 30, 1999 compared to $62.4 million in the six months
ended June 30, 1998. The one-time charges of $52.4 million were allocated
100% to the Acquired Group, resulting in a net loss allocation of $7.7
million to the Acquired Group for the six months ended June 30, 1999.
Excluding these one-time charges, the Acquired Group was allocated earnings
of $44.7 million in the six months ended June 30, 1999 compared to earnings
of $35.8 million in the six months ended June 30, 1998. The Acquired
Group's share of Linden Venture cash distributions in the six months ended
June 30, 1999 was $43.7 million compared to $36.4 million in the prior
period.
Subsequent to the acquisition, Linden Venture reported earnings of
$47.4 million and made cash distributions of $43.3 million. The Company's
share of such earnings, $36.9 million, are included in the Company's
results of operations for the six months ended June 30, 1999, and its share
of such cash distributions, $30.3 million, are included in cash flows for
the six months ended June 30, 1999. The Company's equity in the earnings of
Linden Venture, $21.4 million, is reported net of $15.5 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 $36.6 million for the six
months ended June 30, 1998 to $31.9 million for the six months ended June
30, 1999, primarily reflecting a lower fuel component. Costs and expenses
totaled $34.4 million in the six months ended June 30, 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. These
amounts are included in general and administrative and fuel costs,
respectively. Excluding these charges, costs and expenses decreased from
$24.0 million in the six months ended June 30, 1998 to $20.0 million in the
six months ended June 30, 1999, primarily reflecting a $3.7 million
decrease in fuel costs.
Camden Venture had a net loss of $5.7 million in the six months ended
June 30, 1999 after $14.4 million of one-time charges discussed above,
compared to earnings of $9.1 million in the six months ended June 30, 1998.
Camden Venture made cash distributions of $11.5 million in the six months
ended June 30, 1999 compared to $9.0 million in the six months ended June
30, 1998. The one-time charges of $14.4 million were allocated 100% to the
Acquired Group resulting in a net loss allocation of $7.7 million to the
Acquired Group for the six months ended June 30, 1999. Excluding these
one-time charges, the Acquired Group was allocated earnings of $6.7 million
in the six months ended June 30, 1999 compared to earnings of $6.5 million
in the six months ended June 30, 1998. The Acquired Group's share of Camden
Venture cash distributions in the six months ended June 30, 1999 was $6.8
million compared to $7.7 million in the six months ended June 30, 1998.
Subsequent to the acquisition, Camden Venture reported earnings of
$5.6 million and made cash distributions of $9.1 million ($5.8 million
excluding a $3.3 million special distribution to the limited partner in
connection with the acquisition). The Company's share of these earnings,
$4.2 million, is included in the Company's results of operations for the
six months ended June 30, 1999, and its share of
36
<PAGE> 40
these cash distributions, $4.7 million, is included in cash flows for the
six months ended June 30, 1999. The Company's equity in the earnings of
Camden Venture, $1.4 million, is reported net of $2.8 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 $58.5 million in the six
months ended June 30, 1998 to $54.3 million in the six months ended June
30, 1999. Electricity revenues for the six months ended June 30, 1998
include a $6.4 million fuel component adjustment related to 1997 and 1996
operations. Excluding the adjustment, electricity revenues were $2.6
million higher in the six months ended June 30, 1999, primarily reflecting
a higher fuel component with respect to sales to one of the electricity
purchasers. Costs and expenses decreased from $28.0 million in the six
months ended June 30, 1998 to $27.1 million in the six months ended June
30, 1999, primarily reflecting a $0.8 million decrease in fuel costs. The
other income included in the six months ended June 30, 1998 represents
interest related to the previously mentioned fuel component adjustment.
Bayonne Venture had net income of $23.7 million in the six months
ended June 30, 1999, compared to earnings of $27.3 million in the six
months ended June 30, 1998, and made cash distributions of $18.0 million in
the six months ended June 30, 1999, compared to $18.2 million in the six
months ended June 30, 1998. The Acquired Group's share of Bayonne Venture's
net income in the six months ended June 30, 1999 was $21.7 million,
compared to $23.6 million in the six months ended June 30, 1998, and the
Acquired Group's share of Bayonne Venture cash distributions in the six
months ended June 30, 1999 was $16.6 million compared to $15.8 million in
the six months ended June 30, 1998.
Subsequent to the acquisition, Bayonne Venture reported earnings of
$18.3 million and made cash distributions of $12.8 million. The Company's
share of these earnings, $16.8 million, is included in the Company's
results of operations for the six months ended June 30, 1999, and its share
of these cash distributions, $11.8 million, is included in cash flows for
the six months ended June 30, 1999. The Company's equity in the earnings of
Bayonne Venture, $13.0 million, is reported net of $3.8 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 (including operating overhead) for the
Company totaled $2.9 million for the six months ended June 30, 1999, compared to
the Acquired Group's costs of $2.6 million in the one-month period in 1999 and
$27.1 million in the six months ended June 30, 1998. The reasons for the lower
costs reported by the Company are discussed in "-- The Acquisition -- Operating,
General and Overhead Expenses."
The Company recorded interest expense of $43.3 million for the six months
ended June 30, 1999. This amount includes $36.7 million in interest expense
related to the bridge loan, the senior secured notes, the Enron subordinated
note and the Linden Ltd. term loan, a $0.5 million loss on an interest swap with
respect to the bridge loan and $6.1 million in write-off and amortization of
deferred costs related to the bridge loan, the Linden Ltd. term loan and the
senior secured notes. See "-- Liquidity and Capital Resources -- Acquisition
Financing."
The Company's loan agreements require it to maintain compliance with
certain financial covenants, among other things. The Company believes that it is
in compliance with the terms and conditions of the loan agreements as of
September 30, 1999.
Acquired 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
37
<PAGE> 41
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 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.
38
<PAGE> 42
Acquired 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 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.
39
<PAGE> 43
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 July 15, 2017.
On April 20, 1999 we sold $850.0 million of senior secured 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 year and are repayable in 36 quarterly installments of varying amounts
beginning on June 30, 1999, with the final payment due March 31, 2008. The June
30, 1999 payment of $12.1 million and the September 30, 1999 payment of $3.9
million reduced the original principal amount of the 2008 notes to $279.9
million. The 2012 notes bear interest at 7.066% per year 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
year 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 made on
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.
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 Enron North America, repay $62.1 million of the principal
amount of the Enron subordinated note and make an $11.9 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.
General
The Company has received a proposal from Bank of America, N.A. with respect
to a $30.0 million credit facility, which the Company expects to use to fund its
capital expenditure projects and for general corporate purposes.
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.
40
<PAGE> 44
Linden. Linden Venture has planned capital expenditures of approximately
$0.6 million and $26.3 million in 1999 and 2000, respectively. Included in the
planned expenditures is approximately $0.6 million and $9.9 million in 1999 and
2000, respectively, for the Linden "gray water" project and $1.5 million and
$16.1 million in 1999 and 2000, respectively, for the thermal energy storage
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. The thermal energy storage project is designed to use available
electrical energy during off-peak hours for the production of a cold energy
(i.e., ice) reserve. This energy reserve will then be utilized during peak hours
to cool the inlet air feeding each of the Linden facility's gas turbines,
thereby increasing electrical output. The gray water and thermal energy storage
projects are subject, to, among other things, further negotiations and receipt
of necessary approvals.
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
$0.1 million and $0.7 million in 1999 and 2000, respectively, for plant
improvements.
Bayonne. Bayonne Venture has planned capital expenditures of approximately
$0.1 million and $0.3 million in 1999 and 2000, respectively, for plant
improvements.
Existing Project and Subsidiary Debt
The following table summarizes the outstanding long-term indebtedness of
our subsidiaries at June 30, 1999:
<TABLE>
<CAPTION>
CURRENT LONG-TERM TOTAL MATURITY
------- --------- ------ --------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Linden Ltd.(1)
Fixed rate............................................ $ 7.0 $ 83.5 $ 90.5 2007
Floating rate......................................... 7.7 90.7 98.4 2007
Working capital....................................... -- 10.0 10.0 2007
----- ------ ------
14.7 184.2 198.9
----- ------ ------
Camden Venture
Term loan -- Tranche A loan........................... 5.3 53.8 59.1 2007
Term loan -- Tranche B loan........................... 1.1 21.5 22.6 2009
----- ------ ------
6.4 75.3 81.7
----- ------ ------
Bayonne Venture
Term loan............................................. 4.1 62.0 66.1 2008
Equipment loan........................................ 0.4 -- 0.4 1999
----- ------ ------
4.5 62.0 66.5
----- ------ ------
Total......................................... $25.6 $321.5 $347.1
===== ====== ======
</TABLE>
- ---------------
(1) Does not include $3.9 million unamortized premium recorded in connection
with the acquisition.
41
<PAGE> 45
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 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 June 30, 1999, Linden Ltd. had outstanding
indebtedness of $198.9 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
June 30, 1999, $90.5 million was outstanding under the fixed rate portion, $98.4
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 December 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 December
1, 1999 being $1.9 million. The working capital portion bears interest at a one
month financial commercial paper rate plus 0.55%, with interest payable
quarterly.
42
<PAGE> 46
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 a 6.338% 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
43
<PAGE> 47
the 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.
44
<PAGE> 48
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 June 30, 1999, the aggregate outstanding
principal balance of Tranche A, which matures May 1, 2007, was $59.1 million. At
June 30, 1999, the outstanding principal balance of Tranche B, which matures May
1, 2009, was $22.6 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 November 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 November 1, 1999
being $0.3 million, and the final eight
45
<PAGE> 49
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.
46
<PAGE> 50
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>
47
<PAGE> 51
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 June 30, 1999, Bayonne Venture had $66.1
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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has not been required to fund the debt service reserve. At June 30, 1999,
Bayonne Venture's debt service coverage ratio as calculated under the Bayonne
Term Loan was 4.5x.
Bayonne Venture has received a commitment letter from Southwest Bank of
Texas with respect to a $5.0 million credit facility, which is expected to be
used to fund the daily operating cash flow needs of the Bayonne facility.
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 exist 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 than 1999 in an effort to mitigate any adverse
operational or financial impacts.
State Of Readiness
In June 1999 the facilities successfully implemented the Year 2000 Program
(the "Plan"), which was generally based on an approach developed by FERC.
General Electric is contracted to operate and maintain the facilities and has
been responsible for implementing the Plan and preparing the facilities for the
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<PAGE> 53
Year 2000. 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 following table sets forth the status of each element
of the Plan at each facility and the expected date of completion. The notation
"C" indicates that the particular element has been completed.
<TABLE>
<CAPTION>
AWARENESS INVENTORY ASSESSMENT REMEDIATION TESTING CONTINGENCY PLANNING
--------- --------- ---------- ----------- -------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Linden............... C C C C C C
Camden............... C C C C C C
Bayonne.............. C C C C 10/31/99 C
</TABLE>
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. At each facility, over 70 systems were
evaluated to determine their "mission-critical" status, resulting in the review
of over 500 individual components. The following systems were determined to be
mission-critical:
- distributed control systems;
- gas turbine and steam turbine control systems;
- continuous emissions monitoring systems; and
- fire protection systems.
At the Camden and Linden facilities, the distributed control systems were
made Year 2000 ready and have been tested. With respect to the Bayonne facility,
General Electric advised the Company that the distributed control systems are
Year 2000 ready. In addition, the Company has been in contact with an outside
cogeneration facility of the same General Electric design and age as the Bayonne
facility and that facility has tested its distributed control system and did not
identify any remediation required to be Year 2000 ready. Testing of the
distributed control systems at the Bayonne facility is scheduled for late
October 1999.
The Bayonne, Camden, and Linden facilities have General Electric gas
turbine and steam turbine control systems. General Electric has advised the
Company that the Mark 3, 3A and 4 gas turbine and steam turbine control systems
were already Year 2000 ready. A minor change was made to the Mark 5 gas turbine
and steam turbine controls, and that system is now also Year 2000 ready. The
Linden facility has Mark 3A and 4 Simulators which were tested and did not
identify any remediation required to be Year 2000 ready. The air quality
monitoring systems were redesigned and the related software was rewritten in
late 1998 and early 1999 to comply with the new reporting requirements of the
Environmental Protection Agency and the New Jersey Department of Environmental
Protection. These components are now Year 2000 ready. The fire protection and
other systems were found to be free of embedded chips and are, in most cases,
analog devices which are not date sensitive.
Other significant components at the facilities include digital relays,
transmitters, communications equipment and switchgear. 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. The
Company's mission-critical third party suppliers and systems are:
- fuel suppliers;
- water suppliers;
- utility transmission systems; and
- telecommunications systems with the Company's utility company customers.
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 the Company expects them to be Year 2000 ready by late 1999 or
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before. These mission-critical third-parties have assured the Company through
verbal communications and written correspondence that they currently are or will
be Year 2000 ready. The Company's management therefore has a high level of
confidence that suppliers and customers have recognized the potential for
problems and are taking prudent action to mitigate risks. Nonetheless, extended
interruptions of the fuel and water supply, disruptions in the transmission
systems and/or losses of communications with the Company's utility company
customers could result in the shutdown of the affected facility.
The Company has expended a total of approximately $200,000 on material and
approximately six man-months of effort preparing for the year-end rollover and
expects to expend an additional one-half man-month of effort to complete its
preparations.
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. The
Company's contingency plan includes safe shutdown and quick restart scenarios in
the event of a Year 2000 or other interruption and provides for the presence of
additional operations, maintenance and management staff at the facilities during
the year-end rollover. This increased presence will provide the necessary
manpower to reestablish control systems operations in the event of a failure and
to restart generation equipment in a timely fashion.
The contingency plans mitigate the risks associated with the Company's
mission-critical third party suppliers and systems as follows:
- 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 respond to potential problems associated with
the facilities' fuel supply. The Company's contingency plan for fuel
supply requires dual fuel operation during the year-end rollover. The
Company's multi-unit facilities at Linden and Bayonne will have all of
their generators in operation, with some units burning liquid fuel and
the rest burning natural gas. The Camden facility will remain on natural
gas but will have the ability to transfer to liquid fuel automatically if
the natural gas fuel supply is lost. All of the facilities' generation
equipment can operate an alternate fuel supply. The Company will have
alternate fuel supplies at each of the facilities in sufficient quantity
to allow approximately four to five days of continuous operation.
- Each of the facilities has alternate water supply sources in the event of
interruptions to their normal supply. Each facility has direct
connections (including backup connections) to the local water utility and
substantial onsite water storage. The onsite storage is used for makeup
water to the steam systems and for fire protection. In addition, the
facilities have cooling tower and storm water storage basins that can be
used in emergency situations to continue operations.
- The Linden facility has a "black start" diesel generator which will allow
it to be in a state of readiness if its utility customer is unable to
accept power. The Camden facility plans to lease a temporary diesel
generator which will allow it to be in a state of readiness if its
utility customer is unable to accept power. The Camden and Linden
facilities will therefore be able to come on-line rapidly following the
restoration of the utility transmission system. The Bayonne facility has
an alternate source of power that is supplied from a substation different
from the one where power from the facility is delivered which should
allow it to be in a state of readiness if its utility customer is unable
to accept power.
- The Company's contingency plan provides alternate means of communicating
effectively with electric power dispatchers. In the event of
interruptions in land line communications, each facility is equipped with
radio band communication equipment and cellular phones. Although the
Company did not participate, recent communications readiness/contingency
programs sponsored by FERC and NERC indicate that the year-end rollover
will not interfere with normal operations.
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In addition, all onsite tanks, including potable water, backup fuel and
water treatment chemical tanks, will be filled several days prior to the
year-end rollover. Onsite storage of the necessary chemicals will allow the
facilities to continue to produce demineralized water for their boilers.
The Company's contingency plans also 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 rollover to
1/1/2000.
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, 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 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
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<PAGE> 56
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.
MARKET RISK DISCLOSURES
The Company's exposure to interest rate risk results from the Linden Ltd.
Term Loan. In regards to the floating rate and working capital portion of this
loan, a 10% fluctuation in LIBOR rates and in financial commercial paper rates
in effect during the first half of 1999 would impact earnings in the second half
of 1999 by approximately $0.3 million.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Statement Accounting Standards Board ("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 July 1999, the FASB adopted SFAS No. 137, which defers
the required adoption date of SFAS No. 133 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.
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<PAGE> 57
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.
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.
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.
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
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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 and Infineum. 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 and Infineum is not returned to the cycle. All raw makeup water is
purchased from Elizabethtown Water Company.
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 (2.756c for June 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.
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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 (1.258c per KWh for June 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.
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 and Bayway Refining under two separate agreements. 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 and Standard & Poor's Ratings Services 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 Refining 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 Refining. Historically, under the
Linden contractual steam arrangements, Bayway Refining 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
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<PAGE> 60
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.
If Infineum elects to take steam up to the maximum contract quantity
during the peak and off-peak periods throughout the contract term, it is
estimated that distributions to the Company from Linden Venture could be
reduced by approximately $1.3 million per year over the life of the
contract. It is possible that this amount 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.
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 Refining 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
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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 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 Refining 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 Refining. 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
Refining is entitled to terminate the Linden site lease in the event Linden
Venture
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defaults under the Bayway Refining 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 Refining's property for various
interconnections to the Linden Facility.
THE CAMDEN FACILITY
Camden Facility Description. The Camden Facility is a 146 MW gas-fired,
combined-cycle cogeneration facility located in Camden, New Jersey.
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 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.
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. 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 June 30, 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
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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 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 June 1999, the adjustable
component was 1.966c/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 June 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
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- 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.
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.
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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 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.
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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 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.
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 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
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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 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 June 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 June 1999, this component was approximately 0.973c/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 June 1999, this component was approximately
0.792c/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.
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 arising prior to such event 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.
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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 June 30, 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 during the base term of the PSE&G PPA.
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 June 1999, the fuel energy component
rate was 2.176c/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 June 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 June 30, 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
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
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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 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.
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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. 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
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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 three 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
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
results of operations 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 has 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 7.5% of the electricity sold in the United States be generated from
renewable energy sources such as the wind or sun by 2010. In addition, the
proposal would supplement an Environmental Protection Agency 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
current Congress. The prospects for the enactment of any new legislation are
uncertain. 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.
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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 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. A notice of appeal was
filed in October 1999 by a group of New Jersey industrial intervenors. The
notice does not make any reference to the recovery of the above-market costs of
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
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contracts which have previously been reviewed and approved by NJBPU,
notwithstanding the specific date, must be eligible for stranded cost recovery."
NJBPU based its determination that it lacks jurisdiction to order
modification of 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.
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
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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 the
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;
- 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.
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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 recently adopted regulations
implementing a region-wide plan for nitrogen oxide emissions. While our plants
are subject to this rule, and therefore subject to additional operating
requirements, we believe that the new rules do 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 substantial compliance with RCRA and comparable state statutes,
and we do not expect the cost of disposal of the regulated wastes to be
material.
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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")
The 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. Similarly, our Camden and Linden facilities are subject to the TCPA due
to their use of aqueous ammonia. 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. Under our limited liability
company agreement, our Class A Members have the authority to manage our business
and affairs. 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 Class B Members do not have any authority to manage our Company.
However, the Company must have the consent of all Class B 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.
EXECUTIVE OFFICERS
We currently have three 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 Acquired 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 Acquired 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.
Robert J. Licato, 36, has served as Vice President -- Operations and
Secretary of the Company since April 1999. From February 1992 to January 1999,
he served in various management positions of companies affiliated with the
Acquired Group, most recently as Director of Operations Support/Projects. Prior
to February 1992, Mr. Licato held positions in engineering and management with
Con Ed.
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with Mr. Ain and Mr. Bollinger.
Each of these agreements provides for an initial term of one year from the
closing of our acquisition of the facilities and for a renewal term of three
years following the expiration of the initial term.
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
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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, 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"), and Enron has also provided several letters of credit for
the Company's benefit. Enron and El Paso Energy have agreed to share in the
costs of providing this credit support, for which we pay Enron and El Paso
Energy 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
arm's length transactions among unaffiliated parties and that the terms of the
transaction be approved by all Class A Members. 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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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 (the "Issue Date"). 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 partial payments of principal on June 30, 1999 and September 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: $279,939,040 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 December 31, 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. Interest will be computed on the
basis of a 360-day year comprising twelve 30-day months.
Principal payments on the notes will continue to 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% -- --
September 30, 2000.......................................... 1.090% -- --
</TABLE>
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<TABLE>
<CAPTION>
2008 2012 2017
PAYMENT DATE NOTES NOTES NOTES
- ------------ ------- ------- -------
<S> <C> <C> <C>
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%
June 30, 2013............................................... -- -- 3.580%
</TABLE>
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<TABLE>
<CAPTION>
2008 2012 2017
PAYMENT DATE NOTES NOTES NOTES
- ------------ ------- ------- -------
<S> <C> <C> <C>
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 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 Mesquite Investors 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.;
- the pledge by JEDI Linden LP, L.L.C. of its limited partnership interests
in Linden Ltd.;
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- 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 Treasury Rate by
taking the arithmetic mean of the yields on U.S. treasury securities published
under the
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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.
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
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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;
- 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
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- 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
- 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,
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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:
<TABLE>
<S> <C> <C> <C>
(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
</TABLE>
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<TABLE>
<S> <C> <C> <C>
(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.
</TABLE>
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 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).
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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);
- 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.
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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 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.
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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 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;
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- entry of any final judgment or decree for the payment of money against
the Company (which is non-appealable, 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; and
- on or after the Issue Date other than in accordance with the provisions
of the indenture or the Security Documents, (a) 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) 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 at least 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 of the notes and additional notes and accrued interest on, Make-Whole
Premium (if any) and other amounts payable with respect to the notes and
additional notes shall become due and payable immediately. However, 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 notes and
additional notes and the accrued interest on, and any other amounts payable with
respect to, the notes or additional notes shall automatically become due and
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 those holders have offered to
the trustee reasonable security or indemnity. Subject to these provisions for
indemnity and other specified 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 the holder previously has given to the
trustee written notice of Default and its continuance and unless the holders of
at least a majority in aggregate principal amount of the notes and additional
notes then outstanding affected by the Event of Default shall have requested the
trustee to institute the action and shall have offered the trustee security or
reasonable indemnity, and the trustee shall not have instituted the 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. Even though the right of a holder to
institute a proceeding with respect to the indenture is subject to certain
conditions precedent, each holder has the absolute and unconditional right 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. These 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
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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;
- 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
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- 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.
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
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- 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.
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."
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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 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
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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.
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.
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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.
"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);
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- 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.
"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.
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"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.
"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;
- 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.
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"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.
"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.
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"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.
"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.
"Mesquite Investors Security Agreement" means the security agreement dated
August 13, 1999 between Mesquite Investors and 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 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.
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"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.
"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
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(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 Mesquite Investors Security Agreement, the
CalPERS Security Agreement, the ECP Holding Company Security Agreement and the
Common Security Agreement.
"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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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.
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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 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.
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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 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.
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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 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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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.
109
<PAGE> 113
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.
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.
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.
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 of the
exchange offer 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.
110
<PAGE> 114
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 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 and the tax consequences of the exchange
offer will be passed upon for the Company by Vinson & Elkins L.L.P., Houston,
Texas.
INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements 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.
111
<PAGE> 115
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
112
<PAGE> 116
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.
113
<PAGE> 117
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 Operations of East
Coast Power L.L.C. for the six months ended June 30,
1999................................................... F-4
Pro Forma Consolidated Statement of Operations of East
Coast Power L.L.C. for the year ended December 31,
1998................................................... F-6
UNAUDITED FINANCIAL STATEMENTS OF EAST COAST POWER L.L.C.
Consolidated Statement of Operations of East Coast Power
L.L.C. for the period February 4, 1999 to June 30,
1999................................................... F-9
Consolidated Balance Sheet of East Coast Power L.L.C. as
of June 30, 1999....................................... F-10
Consolidated Statement of Cash Flows of East Coast Power
L.L.C. for the period February 4, 1999 to June 30,
1999................................................... F-11
Consolidated Statement of Members' Equity of East Coast
Power L.L.C. for the period February 4, 1999 to June
30, 1999............................................... F-12
Notes to Consolidated Financial Statements of East Coast
Power L.L.C............................................ F-13
AUDITED FINANCIAL STATEMENTS OF EAST COAST POWER L.L.C.
Report of Independent Public Accountants.................. F-19
Consolidated Statement of Operations of East Coast Power
L.L.C. for the period February 4, 1999 to March 31,
1999................................................... F-20
Consolidated Balance Sheet of East Coast Power L.L.C. as
of March 31, 1999...................................... F-21
Consolidated Statement of Cash Flows of East Coast Power
for the period February 4, 1999 to March 31, 1999...... F-22
Consolidated Statement of Members' Equity of East Coast
Power L.L.C. for the period February 4, 1999 to March
31, 1999............................................... F-23
Notes to Consolidated Financial Statements of East Coast
Power L.L.C. .......................................... F-24
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 and the six
months ended June 30, 1998............................. F-35
Combined Statement of Cash Flows of Cogen Tech Group for
the period January 1, 1999 to February 4, 1999 and the
six months ended June 30, 1998......................... F-36
Combined Statement of Owners' Equity of Cogen Tech Group
for the period January 1, 1999 to February 4, 1999..... F-37
Notes to Combined Financial Statements of Cogen Tech
Group.................................................. F-38
AUDITED FINANCIAL STATEMENTS OF COGEN TECH GROUP
Report of Independent Public Accountants.................. F-41
Combined Statements of Income of Cogen Tech Group for the
years ended December 31, 1998, 1997 and 1996........... F-42
Combined Balance Sheets of Cogen Tech Group as of December
31, 1998 and 1997...................................... F-43
Combined Statements of Cash Flows of Cogen Tech Group for
the years ended December 31, 1998, 1997 and 1996....... F-44
Combined Statements of Owners' Equity of Cogen Tech Group
for the years ended December 31, 1998, 1997 and 1996... F-45
Notes to Combined Financial Statements of Cogen Tech
Group.................................................. F-46
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 June 30, 1999, the period from
January 1, 1999 to February 4, 1999 and the six months
ended June 30, 1998.................................... F-56
Combined Balance Sheets of Cogen Technologies New Jersey
Operating Partnerships as of June 30, 1999 and December
31, 1998............................................... F-57
</TABLE>
F-1
<PAGE> 118
<TABLE>
<S> <C>
Combined Statements of Cash Flows of Cogen Technologies New Jersey Operating Partnerships for the period
from February 5, 1999 to June 30, 1999, the period from January 1, 1999 to February 4, 1999 and the
six months ended June 30, 1998........................................................................ F-58
Combined Statements of Partners' Capital of Cogen Technologies New Jersey Operating Partnerships for the
period from February 5, 1999 to June 30, 1999 and the period from January 1, 1999 to February 4,
1999.................................................................................................. F-59
Notes to Combined Financial Statements of Cogen Technologies New Jersey Operating Partnerships........... F-60
AUDITED FINANCIAL STATEMENTS OF COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
Report of Independent Public Accountants................................................................. F-63
Combined Statements of Income of Cogen Technologies New Jersey Operating Partnerships for the years ended
December 31, 1998, 1997 and 1996...................................................................... F-64
Combined Balance Sheets of Cogen Technologies New Jersey Operating Partnerships as of December 31, 1998
and 1997.............................................................................................. F-65
Combined Statements of Cash Flows of Cogen Technologies New Jersey Operating Partnerships for the years
ended December 31, 1998, 1997 and 1996................................................................ F-66
Combined Statements of Partners' Capital of Cogen Technologies New Jersey Operating Partnerships for the
years ended December 31, 1998, 1997 and 1996.......................................................... F-67
Notes to Combined Financial Statements of Cogen Technologies New Jersey Operating Partnerships........... F-68
</TABLE>
F-2
<PAGE> 119
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 Cogen Tech Group (the "Acquired Group").
The following unaudited pro forma consolidated financial statements give effect
to (i) the acquisition of the Acquired Group by the Company in February 1999 and
certain related transactions, (ii) the acquisition by an entity acquired by the
Company 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.
The unaudited pro forma consolidated statements of operations for the year
ended December 31, 1998 and the six months ended June 30, 1999 assume such
transactions were consummated at the beginning of the period presented. 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 Acquired 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 operations 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> 120
EAST COAST POWER L.L.C.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
HISTORICAL
-------------------------
ACQUIRED COMPANY
GROUP FEBRUARY 4
JANUARY 1 TO TO COMPANY
FEBRUARY 4, JUNE 30, 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) $ 21.4 $ (3.0)(2) $(26.2)
Camden Venture............................ (11.9) 1.4 (0.6)(2) (11.1)
Bayonne Venture........................... 5.0 13.0 (0.8)(2) 17.2
------ ------ ------ ------
(51.5) 35.8 (4.4) (20.1)
Costs and Expenses
Operating overhead........................... 0.9 -- -- 0.9
General and administrative................... 1.7 2.9 -- 4.6
------ ------ ------ ------
2.6 2.9 -- 5.5
------ ------ ------ ------
Income (Loss) from Operations.................. (54.1) 32.9 (4.4) (25.6)
Other Income (Expense)
Interest and other income.................... 0.1 9.9 (8.9)(3) 1.1
12.2(4)
(18.5)(5)
(1.6)(6)
Interest expense............................. (2.0) (43.3) (0.3)(7) (53.5)
------ ------ ------ ------
Loss Before Income Taxes....................... (56.0) (0.5) (21.5) (78.0)
Income taxes................................. (1.7) -- 1.7(8) --
------ ------ ------ ------
Net Loss....................................... $(57.7) $ (0.5) $(19.8) $(78.0)
====== ====== ====== ======
Ratio of Earnings to Fixed Charges(9).......... --
======
</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 Group's proportionate
usage. Such aircraft was not acquired by the Company and is not available
for use
F-4
<PAGE> 121
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, as indicated in the table below. The
adjustments reflect amortization with respect to the period prior to the
acquisition. In the acquisition, the Company allocated the purchase price of
$1,096.2 million to the fair value of assets acquired and liabilities
assumed as follows (in millions of dollars):
<TABLE>
<CAPTION>
AMORTIZATION
PERIOD FOR
ALLOCATED EXCESS OF FAIR
BOOK FAIR VALUE OVER BOOK
ASSETS ACQUIRED/LIABILITIES ASSUMED VALUE VALUE VALUE
----------------------------------- ----- --------- ---------------
<S> <C> <C> <C>
Linden Venture........................................ $ 56.3 $ 918.6 23 years
Camden Venture........................................ 15.6 179.0 24 years
Bayonne Venture....................................... 10.2 185.9 20 years
Other Assets.......................................... 28.2 28.2 --
Liabilities Assumed................................... (210.7) (215.5) 8 years
========
Purchase Price........................................ $1,096.2
========
</TABLE>
The purchase price reflected in the above table has been preliminarily
allocated based on estimated fair values at the date of acquisition pending
final determination of acquisition costs and certain acquired balances.
(3) Reflects the reversal of an $8.9 million payment received with respect to
the cancellation of the interest rate swap in April 1999. The interest rate
swap was related to the bridge loan and represented a $600.0 million
notional swap with a February 11, 2009 maturity date. Under the terms of the
swap, the Company was the fixed-rate payor (5.65%) and the floating rated
receiver (LIBOR).
(4) Reflects the reversal of historical interest expense with respect to: (i)
the bridge loan ($10.4 million); (ii) the interest rate swap ($0.5 million);
(iii) a $62.1 million principal payment on the subordinated note ($1.2
million); and (iv) 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.
(5) Reflects interest expense associated with the outstanding notes for the
period January 1 to April 20 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 for the period January 1 to February 4 at 9%.
(7) Reflects the amortization of $12.1 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, $4.2 million over 9 years,
$3.4 million over 13 years and $4.5 million over 18 years. The adjustment
reflects amortization for the period from January 1 to April 20.
(8) Reflects the effect of reversing historical taxes for MESC. The Company will
be taxed as a partnership.
(9) For purposes of calculating the ratio of earnings to fixed charges, earnings
are defined as income (loss) from continuing operations before income taxes
and fixed charges. Fixed charges consist of interest expense including
amortization of loan fees. For the pro-forma period ended June 30, 1999
earnings were insufficient to cover fixed charges by $78.0 million.
F-5
<PAGE> 122
EAST COAST POWER L.L.C.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<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
(60.2)(5)
(16.9)(6)
(1.0)(7)
(5.7)(8)
1.3(9)
Interest expense....................................... (19.3) 0.5(10) (101.3)
------ ------- ------
Income (Loss) Before Income Taxes........................ 88.6 (144.8) (56.2)
Income taxes........................................... (14.6) 14.6(11) --
------ ------- ------
Net Income (Loss)........................................ $ 74.0 $(130.2) $(56.2)
====== ======= ======
Ratio of Earnings to Fixed Charges(12)................... --
======
</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> 123
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, as indicated in the table below. The
adjustments reflect one year of amortization. In the acquisition, the
Company allocated the purchase price of $1,096.2 million to the fair value
of assets acquired and liabilities assumed as follows (in millions):
<TABLE>
<CAPTION>
AMORTIZATION
PERIOD FOR
ALLOCATED EXCESS OF FAIR
BOOK FAIR VALUE OVER
ASSETS ACQUIRED/LIABILITIES ASSUMED VALUE VALUE BOOK VALUE
----------------------------------- ------- --------- --------------
<S> <C> <C> <C>
Linden Venture..................................... $ 56.3 $ 918.6 23 Years
Camden Venture..................................... 15.6 179.0 24 Years
Bayonne Venture.................................... 10.2 185.9 20 Years
Other Assets....................................... 28.2 28.2 --
Liabilities Assumed................................ (210.7) (215.5) 8 Years
--------
Purchase Price........................... $1,096.2
========
</TABLE>
The purchase price reflected in the above table has been preliminarily
allocated based on estimated fair values at the date of acquisition pending
final determination of acquisition costs and certain acquired balances.
(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 $12.1 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, $4.2 million over 9 years,
$3.4 million over 13 years and $4.5 million over 18 years. The adjustment
reflects one year of amortization.
(8) Reflects the write-off 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> 124
(12) For purposes of calculating the ratio of earnings to fixed charges,
earnings are defined as income (loss) from continuing operations before
income taxes and fixed charges. Fixed charges consist of interest expense
including amortization of loan fees. For the pro-forma period ended
December 31, 1998 earnings were insufficient to cover fixed charges by
$56.2 million.
F-8
<PAGE> 125
EAST COAST POWER L.L.C.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FEBRUARY 4, 1999
TO JUNE 30, 1999
-------------------
<S> <C>
Revenues
Equity in earnings of
Cogen Technologies Linden Venture, L.P................. $ 21.4
Camden Cogen L.P....................................... 1.4
Cogen Technologies NJ Venture.......................... 13.0
------
35.8
Cost and Expenses
General and administrative................................ 2.9
------
Income from Operations...................................... 32.9
Other Income (Expense)
Interest and other income................................. 9.9
Interest expense.......................................... (43.3)
------
Net Loss.................................................... $ (0.5)
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE> 126
EAST COAST POWER L.L.C.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(IN MILLIONS OF DOLLARS)
ASSETS
<TABLE>
<CAPTION>
JUNE 30,
1999
--------
<S> <C>
Current Assets
Cash and cash equivalents................................. $ 28.7
Restricted cash........................................... 13.3
Other current assets...................................... 0.3
--------
42.3
--------
Investments in Affiliates
Cogen Technologies Linden Venture, L.P.................... 909.7
Camden Cogen L.P.......................................... 175.7
Cogen Technologies NJ Venture............................. 187.1
--------
1,272.5
--------
Other Assets................................................ 13.5
--------
$1,328.3
========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities
Accounts payable.......................................... $ 0.4
Accounts payable, affiliate............................... 1.2
Current maturities on long-term debt...................... 28.9
Interest payable.......................................... 9.2
Other current liabilities................................. 9.7
--------
49.4
Long-Term Debt.............................................. 1,199.7
Commitments and Contingencies (Note 6)
Members' Equity............................................. 79.2
--------
$1,328.3
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE> 127
EAST COAST POWER L.L.C.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
FEBRUARY 4,
1999 TO
JUNE 30,
1999
--------------
<S> <C>
Operating Activities:
Net loss.................................................. $ (0.5)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Equity in earnings of affiliates
Cogen Technologies Linden Venture, L.P............... (21.4)
Camden Cogen L.P..................................... (1.4)
Cogen Technologies NJ Venture........................ (13.0)
Distributions received from affiliates
Cogen Technologies Linden Venture, L.P............... 30.3
Camden Cogen L.P..................................... 4.7
Cogen Technologies NJ Venture........................ 11.8
Amortization of deferred financing costs............... 6.1
Changes in other operating assets and liabilities
Decrease in accounts receivable........................ 8.6
Increase in accounts receivable, affiliate............. (0.1)
Increase in other current assets....................... (0.2)
Increase in accounts payable........................... 0.4
Increase in accounts payable, affiliate................ 1.2
Increase in interest payable........................... 6.2
Decrease in other current liabilities.................. (0.7)
Net change in other assets and liabilities............. (0.5)
---------
Net Cash Provided by Operating Activities................... 31.5
---------
Investing Activities:
Acquisition of Acquired Group (net of cash acquired of
$17.7)................................................. (820.2)
Purchase of Enron Corp. common stock...................... (250.0)
---------
Net Cash Used in Investing Activities....................... (1,070.2)
---------
Financing Activities:
Long-term borrowings under bridge loan.................... 831.0
Long-term borrowings under Enron Subordinated Note........ 250.0
Long-term borrowings under senior secured notes........... 850.0
Principal payments on long-term debt...................... (912.0)
Financing costs........................................... (18.0)
Contributions received.................................... 105.0
Distributions Paid........................................ (25.3)
---------
Net Cash Provided by Financing Activities................... 1,080.7
---------
Increase in Cash and Cash Equivalents....................... 42.0
Cash and Cash Equivalents at Beginning of Period............ --
---------
Cash and Cash Equivalents at End of Period.................. $ 42.0
=========
Cash Paid for Interest...................................... $ 31.1
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE> 128
EAST COAST POWER L.L.C.
CONSOLIDATED STATEMENT OF MEMBERS' EQUITY (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
FEBRUARY 4,
1999 TO
JUNE 30,
1999
--------------
<S> <C>
Balance at February 4, 1999................................. $ --
Contributions............................................. 105.0
Distributions............................................. (25.3)
Net loss.................................................. (0.5)
------
Balance at June 30, 1999.................................... $ 79.2
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE> 129
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
East Coast Power L.L.C. (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. ("Enron") and the California Public Employees' Retirement System
("CalPERS") each own a 50% interest. On February 4, 1999, the limited liability
company agreement of the Company was amended and restated to convert JEDI II's
initial membership to that of a Class A Member and to admit Enron North America
Corp. ("Enron North America"), formerly Enron Capital & Trade Resources Corp., a
wholly-owned subsidiary of Enron Corp., and CalPERS as Class B Members. The
Company and its wholly owned subsidiaries own equity interests in and control
and operate three power generation facilities located in New Jersey (the
"facilities").
All distributions from the Company will be made to the Class A Members
until the Class A Members have received distributions equal to $80.0 million
plus specified rates of return. After the Class A Members have received their
preferential distributions, all distributions will be made 90% to the Class A
Members and 10% to the Class B Members.
The Company had no assets or liabilities and conducted no operations prior
to February 4, 1999. On February 4, 1999 the Company indirectly acquired equity
interests in the facilities (the "acquisition") through the acquisition of
entities (collectively, the "Acquired Group") that were under the common control
of Robert C. McNair, members of his immediate family and related trusts. The
Acquired 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. JEDI Bayonne GP, L.L.C. is 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. The Company's interest in Linden Ltd., Camden GP and
Bayonne Venture are held through wholly-owned limited liability companies, which
were formed for the specific and limited purpose of holding the interests in
these entities. The financial position and results of operations of these
limited liability companies are reflected in the consolidated financial
statements of the Company.
Cash distributions, net income and net losses are allocated to the partners
of Linden Venture, Camden Venture, and Bayonne Venture (collectively, the
"Ventures") in accordance with the Ventures' partnership agreements.
Basis of Consolidation and Presentation
The accompanying unaudited consolidated financial statements reflect, in
the opinion of management, all adjustments, consisting only of normal and
recurring adjustments, necessary to present fairly the consolidated financial
position of the Company and its wholly-owned subsidiaries as of June 30, 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 June
30, 1999. All material transactions between the consolidated entities have been
eliminated. Interim period results are not necessarily indicative of the results
of operations or cash flows for a full year period.
F-13
<PAGE> 130
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
These financial statements should be read in conjunction with the audited
financial statements of the Company.
The Company'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 June 30, 1999, $13.3
million of the Company'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 Linden Venture.
Derivative Financial Instruments
From time to time the Company uses derivatives to manage interest rate
risk. The Company's policy is to use derivatives for risk management purposes
only and does not enter into such contracts for trading purposes. To date, the
Company has entered into one interest rate swap agreement with Enron North
America, which was cancelled on April 14, 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 5.
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, the Company and its
consolidated subsidiaries are not subject to state or federal income taxes. Such
taxes accrue to the owners of the Company and, accordingly, income taxes have
not been recognized in the consolidated financial statements.
Recent Accounting Pronouncements
The Financial Statement Accounting Standards Board ("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 July 1999, the FASB adopted SFAS No. 137 that defers
the required adoption date of SFAS No. 133 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.
F-14
<PAGE> 131
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
(2) THE ACQUISITION
As discussed in Note 2 to the Company's March 31, 1999 financial
statements, in a series of transactions on February 4 and 5, 1999, the Company
acquired the assets and liabilities of the Acquired 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
the Company'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.
The following table reflects the Company's estimate of this allocation
based upon the latest information available:
<TABLE>
<CAPTION>
AMORTIZATION
PERIOD FOR
EXCESS OF
ALLOCATED FAIR VALUE
BOOK FAIR OVER BOOK
ASSET ACQUIRED/LIABILITIES ASSUMED VALUE VALUE VALUE
---------------------------------- ------ --------- ------------
<S> <C> <C> <C>
Linden Venture.............................................. 56.3 918.6 23 years
Camden Venture.............................................. 15.6 179.0 24 years
Bayonne Venture............................................. 10.2 185.9 20 years
Other Assets................................................ 28.2 28.2 --
Liabilities Assumed......................................... (210.7) (215.5) 8 years
-------
Purchase Price.............................................. 1,096.2
=======
</TABLE>
The purchase price reflected in the above table has been preliminarily
allocated based on estimated fair values at the date of acquisition pending
final determination of acquisition costs and certain acquired balances.
(3) CAPITAL TRANSACTIONS
Capital Contribution
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 the
Company.
Bridge Loan
In connection with the acquisition, on February 4, 1999 the Company
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 the Company. All amounts outstanding under the bridge
loan were repaid on April 20, 1999 using a portion of the proceeds from the sale
by the Company of $850.0 million of senior secured notes. The repayment resulted
in the release of the pledges and assignments serving the bridge loan.
Senior Secured Notes
On April 20, 1999, the Company 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
F-15
<PAGE> 132
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
March 31, 2012 with the final payment due June 30, 2017. Interest on the Notes
is payable quarterly beginning 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 the Company's subsidiaries and to the distribution rights of
minority partners in the Ventures. The Notes are secured by the pledge by the
owners of the Company of their interest in the Company, the pledge by the
Company 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 the Company.
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 mandatorily 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 the
Company's ability to pay dividends, incur additional indebtedness, make payments
on subordinated debt and make certain other restricted payments. The terms of
the Notes also require the Company to maintain compliance with certain financial
covenants, including funding 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
the Company is not currently funding the debt service reserve account. The
Company believes it is in compliance with the terms and conditions of the Notes.
Use of Proceeds
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 Enron North America, 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.
F-16
<PAGE> 133
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
(4) INVESTMENT IN AFFILIATES
The following table presents summary income statement information for the
Company's affiliates for the periods January 1, 1999 to February 4, 1999 and
February 5, 1999 to June 30, 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 JUNE 30, TO FEBRUARY 4, TO JUNE 30, TO FEBRUARY 4, TO JUNE 30, TO FEBRUARY 4,
1999 1999 1999 1999 1999 1999
----------- -------------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Electricity.............. $104.6 $ 23.9 $23.7 $ 8.2 $41.4 $11.1
Steam.................... 2.8 0.6 -- -- 1.4 0.4
------ ------ ----- ------ ----- -----
107.4 24.5 23.7 8.2 42.8 11.5
------ ------ ----- ------ ----- -----
Costs and Expenses
Fuel..................... 47.5 16.2 10.5 4.8 14.8 3.6
Operating and
maintenance........... 7.9 1.9 2.9 0.6 4.4 1.1
Depreciation and
amortization.......... 6.1 1.4 1.5 0.4 1.1 0.3
General and
administrative........ 1.6 47.5 0.5 13.0 1.1 0.3
Taxes, other than
income................ 0.6 0.2 0.2 -- 0.4 --
------ ------ ----- ------ ----- -----
63.7 67.2 15.6 18.8 21.8 5.3
------ ------ ----- ------ ----- -----
Income (Loss) from
Operations............... 43.7 (42.7) 8.1 (10.6) 21.0 6.2
------ ----- -----
Other Income (Expense)
Interest and other
income................ 3.7 0.1 0.3 -- 0.1 --
Interest expense......... -- -- (2.8) (0.7) (2.8) (0.8)
------ ------ ----- ------ ----- -----
Net Income (Loss).......... $ 47.4 $(42.6) $ 5.6 $(11.3) $18.3 $ 5.4
====== ====== ===== ====== ===== =====
</TABLE>
(5) DERIVATIVE FINANCIAL INSTRUMENTS
The Company entered into a $600.0 million notional amount interest rate
swap agreement with Enron North America to hedge its exposure to the floating
interest rates of the Bridge Loan. The agreement was 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 were accrued in the financial statements as part of interest
expense on the underlying debt over the life of the agreement. During the period
ended June 30, 1999 the Company recorded interest expense of $0.5 million in
connection with the interest rate swap. On April 14, 1999 the interest rate swap
was cancelled and the Company received a payment of $8.9 million in connection
with the cancellation. This amount has been included in other income for the
period. There are no outstanding derivative financial instruments at June 30,
1999.
(6) COMMITMENTS AND CONTINGENCIES
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.
F-17
<PAGE> 134
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
The McNair Interests have indemnified the Company 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 the Company, 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 the Company.
(7) SUBSEQUENT EVENTS
On August 13, 1999, Enron North America transferred its Class B membership
interest in the Company (representing 50% of the total Class B membership
interests) to East Coast Power Holding Company L.L.C. ("ECP Holding Company").
Also on August 13, 1999, ECP Holding Company transferred a 49% Class A
membership interest and a 49% Class B membership interest in the Company to
Mesquite Investors, L.L.C., a Delaware limited liability company and an
affiliate of El Paso Energy Corporation ("Mesquite Investors"). The limited
liability company agreement of the Company was amended and restated on August
13, 1999 to admit Mesquite Investors as a Class A and Class B Member and to
provide that ECP Holding Company is entitled to certain preferential
distributions in the event of certain contract restructuring or capital
projects.
F-18
<PAGE> 135
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-19
<PAGE> 136
EAST COAST POWER L.L.C.
CONSOLIDATED STATEMENT OF OPERATIONS
(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................. $ 6.4
Camden Cogen L.P....................................... 1.9
Cogen Technologies NJ 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 Loss.................................................... $ (3.6)
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE> 137
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................................. $ 7.3
Restricted cash........................................... 17.9
Accounts receivable....................................... 8.6
Contributions receivable.................................. 80.0
Other current assets...................................... 0.3
--------
114.1
--------
Investments in Affiliates
Cogen Technologies Linden Venture, L.P.................... 915.9
Camden Cogen L.P.......................................... 179.1
Cogen Technologies NJ Venture............................. 188.8
--------
1,283.8
--------
Other Assets................................................ 24.9
--------
$1,422.8
========
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................................. 22.4
--------
96.3
Long-Term Debt.............................................. 1,250.1
Commitments and Contingencies (Note 8)
Members' Equity............................................. 76.4
--------
$1,422.8
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE> 138
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 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............... (6.4)
Camden Cogen L.P..................................... (1.9)
Cogen Technologies NJ Venture........................ (6.4)
Distributions received from affiliates
Cogen Technologies Linden Venture, L.P............... 9.1
Camden Cogen L.P..................................... 1.8
Cogen Technologies NJ Venture........................ 3.0
Amortization of deferred financing costs............... 2.8
Changes in other 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 Acquired Group (net of cash acquired of
$17.7)................................................. (807.1)
Purchase of Enron Corp. common stock...................... (250.0)
---------
Net Cash Used in Investing Activities....................... (1,057.1)
---------
Financing Activities:
Long-term borrowings under bridge loan.................... 831.0
Long-term borrowings under Enron subordinated note........ 250.0
Principal payments on long-term debt...................... (3.3)
Financing costs........................................... (5.1)
Contributions received.................................... 25.0
---------
Net Cash Provided by Financing Activities................... 1,097.6
---------
Increase in Cash and Cash Equivalents....................... 46.1
Cash and Cash Equivalents at Beginning of Period............ --
---------
Cash and Cash Equivalents at End of Period (includes $20.9
million which is classified as Other Assets).............. $ 46.1
=========
Cash Paid for Interest...................................... $ 8.7
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE> 139
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-23
<PAGE> 140
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. (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 the Company was amended and restated to convert JEDI II's initial
membership to that of a Class A Member and to admit Enron North America Corp.
("Enron North America"), formerly Enron Capital & Trade Resources Corp., a
wholly-owned subsidiary of Enron Corp., and CalPERS as Class B Members. The
Company 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.
The Company had no assets or liabilities and conducted no operations prior
to February 4, 1999. On February 4, 1999 the Company indirectly acquired equity
interests in the facilities (the "acquisition") through the acquisition of
entities (collectively, the "Acquired Group") that were under the common control
of Robert C. McNair, members of his immediate family and related trusts. The
Acquired 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. JEDI Bayonne GP, L.L.C. is 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. The Company's interest in Linden Ltd., Camden GP and
Bayonne Venture are held through wholly-owned limited liability companies which
were formed for the specific and limited purpose of holding the interests in
these entities. The financial position and results of operations of these
limited liability companies are reflected in the consolidated financial
statements of the Company.
Cash distributions, net income and net losses are allocated to the partners
of Linden Venture, Camden Venture, and Bayonne Venture (collectively, the
"Ventures") in accordance with the Ventures' partnership agreements, as
discussed in Note 4.
Basis of Consolidation and Presentation
The accompanying consolidated financial statements present the consolidated
financial position of the Company 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.
F-24
<PAGE> 141
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's investments in 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 the Company'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 \Linden Venture. Also at March 31, 1999, the use of
$25.8 million of the Company'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 the
Company's balance sheet at March 31, 1999.
Derivative Financial Instruments
From time to time the Company uses derivatives to manage interest rate
risk. The Company's policy is to use derivatives for risk management purposes
only and does not enter into such contracts for trading purposes. To date, the
Company has entered into one interest rate swap agreement with Enron North
America, 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 the Company 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, the Company and its
consolidated subsidiaries are not subject to state or federal income taxes. Such
taxes accrue to the owners of the Company and, accordingly, such income taxes
have not been recognized in the consolidated financial statements.
Recent Accounting Pronouncements
The Financial Accounting Standards Board ("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
F-25
<PAGE> 142
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, the Company acquired
the assets and liabilities of the Acquired 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 the Company'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 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, the Company
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, the Company received a $25.0 million
contribution from CalPERS in the form of a guaranty on the bridge loan, and on
February 5, 1999, the Company received a contribution valued at $25.0 million
from Enron North America in the form of an indirect interest in one of the
facilities. Such contributions were received in respect to the Class B
memberships of Enron North America and CalPERS.
In the acquisition, the Company allocated the purchase price of $1,096.2
million to the fair value of assets acquired and liabilities assumed, as follows
(in millions of dollars):
<TABLE>
<CAPTION>
AMORTIZATION
PERIOD FOR
ALLOCATED EXCESS OF FAIR
BOOK FAIR VALUE OVER BOOK
ASSETS ACQUIRED/LIABILITIES ASSUMED VALUE VALUE VALUE
----------------------------------- ----- --------- ---------------
<S> <C> <C> <C>
Linden Venture............................................ $ 56.3 $ 918.6 23 years
Camden Venture............................................ 15.6 179.0 24 years
Bayonne Venture........................................... 10.2 185.4 20 years
Other Assets.............................................. 28.2 28.2 --
Liabilities Assumed....................................... (210.7) (215.0) 8 years
--------
Purchase Price............................................ $1,096.2
========
</TABLE>
The purchase price reflected in the above table has been preliminarily
allocated based on estimated fair values at the date of acquisition pending
final determination of acquisition costs and certain acquired balances.
The acquisition of the Acquired 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 at March 31, 1999; and (iii)
$215.0 million of liabilities assumed in the acquisition.
F-26
<PAGE> 143
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 the Company is not subject to such taxes. The
historical combined results of operations represent the combined results of
operations of the Acquired Group for the period January 1, 1999 to February 4,
1999 and the Company 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
----------------------------
THE
ACQUIRED GROUP COMPANY PRO FORMA
1/1/99 TO 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 Acquired 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
Interest Rate Swap
On April 14, 1999 the interest rate swap with Enron North America was
canceled and the Company received a payment of $8.9 million in connection with
the cancellation.
Financing Transactions
On April 20, 1999 the Company 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 the Company's subsidiaries and to the distribution rights of
minority partners in the Ventures. The Notes are secured by the pledge by the
owners of the Company of their interest in the Company, the pledge by the
Company 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 the Company.
F-27
<PAGE> 144
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 mandatorily 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 the
Company's ability to pay dividends, incur additional indebtedness, make payments
on subordinated debt and make certain other restricted payments. The terms of
the 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 the Company 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 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 Notes and the capital contribution by
JEDI II were used to repay the bridge loan, make a $25.0 million cash
distribution to Enron North America (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.
Expansion of the Linden Facility
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.
Event (Unaudited) Subsequent to Date of Auditors' Report
Mesquite Investors Transaction
On August 13, 1999, Enron North America transferred its Class B membership
interest in the Company (representing 50% of the total Class B membership
interests) to East Coast Power Holding Company L.L.C. ("ECP Holding Company").
Also on August 13, 1999, ECP Holding Company transferred a 49% Class A
membership interest and a 49% Class B membership interest in the Company to
Mesquite Investors, L.L.C., a Delaware limited liability company and an
affiliate of El Paso Energy Corporation ("Mesquite Investors"). The limited
liability company agreement of the Company was amended and restated August 13,
1999 to admit Mesquite Investors as a Class A and Class B Member and to provide
that ECP Holding Company is entitled to certain preferential distributions in
the event of certain contract restructurings or capital projects.
F-28
<PAGE> 145
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) INVESTMENT IN AFFILIATES
The following table reflects the changes in the Company'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>
The following table presents summary balance sheet information for the
Company'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>
F-29
<PAGE> 146
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents summary income statement information for the
Company'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>
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 statement of cash flows information for the
Company'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>
F-30
<PAGE> 147
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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. The
Company 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 the Company
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 the Company. 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 the Company borrowed
$250.0 million under the terms of the Enron subordinated note. Amounts
outstanding under the Enron subordinated note bear interest
F-31
<PAGE> 148
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 the Company,
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 the Company's ability to
make distributions to its members. The Company believes it is in compliance with
the terms and conditions of the note.
On April 20, 1999 the Company 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.
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
The Company has entered into a $600.0 million notional amount interest rate
swap agreement with Enron North America 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
F-32
<PAGE> 149
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the period ended March 31, 1999 the Company recorded interest expense of $0.5
million in connection with the interest rate swap.
(7) RELATED PARTY TRANSACTIONS
Enron North America provides the Company with services such as legal,
finance and human resources. In addition the Company is allocated certain
expenses such as building rent and miscellaneous office services. The Company
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 the Company with respect to such costs and services totaled
$0.2 million.
The Company's employees participate in a noncontributory defined benefit
retirement plan maintained by Enron and 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 Enron North America, which
are reflected in the consolidated balance sheet as Accounts payable, affiliates,
totaled $2.5 million, including $1.6 million due to Enron North America with
respect to certain items related to the acquisition.
In connection with the acquisition and at the request of Enron, Bank of
America issued two letters of credit on behalf of the Company: (i) a $22.25
million letter of credit issued to the lenders under the Linden Ltd. term loan
which secures the obligations under that loan; and (ii) a $4.5 million letter of
credit issued to Public Service Electric & Gas Company of New Jersey which
secures certain obligations pursuant to Camden Venture's power purchase
agreement.
(8) COMMITMENTS AND CONTINGENCIES
The McNair Interests have indemnified the Company 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 the Company, 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 the Company.
(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 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>
F-33
<PAGE> 150
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 the Company had a $600.0 million interest rate swap
agreement with respect to the bridge loan. The agreement was canceled in April
1999 and the Company 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-34
<PAGE> 151
COGEN TECH GROUP
COMBINED STATEMENTS OF INCOME (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JANUARY 1, FOR THE SIX
1999 TO MONTHS ENDED
FEBRUARY 4, JUNE 30,
1999 1998
--------------- ------------
<S> <C> <C>
Revenues
Equity in earnings (loss) of
Cogen Technologies Linden Venture, L.P................. $(44.6) $35.8
Camden Cogen L.P....................................... (11.9) 6.5
Cogen Technologies NJ Venture.......................... 5.0 23.6
------ -----
(51.5) 65.9
Cost and Expenses
Operating overhead........................................ 0.9 17.2
General and administrative................................ 1.7 9.9
------ -----
2.6 27.1
------ -----
Income (Loss) from Operations............................... (54.1) 38.8
Other Income (Expense)
Interest and other income................................. 0.1 6.5
Interest expense.......................................... (2.0) (9.6)
------ -----
Income (Loss) Before Income Taxes........................... (56.0) 35.7
Income taxes.............................................. (1.7) (6.8)
------ -----
Net Income (Loss)........................................... $(57.7) $28.9
====== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE> 152
COGEN TECH GROUP
COMBINED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JANUARY 1, FOR THE SIX
1999 TO MONTHS ENDED
FEBRUARY 4, JUNE 30,
1999 1998
--------------- ------------
<S> <C> <C>
Operating Activities
Net income (loss)......................................... $(57.7) $ 28.9
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............... 44.6 (35.8)
Camden Cogen L.P..................................... 11.9 (6.5)
Cogen Technologies NJ Venture........................ (5.0) (23.6)
Distributions received from affiliates
Cogen Technologies Linden Venture, L.P............... 13.4 36.4
Camden Cogen L.P..................................... 2.1 7.7
Cogen Technologies NJ Venture........................ 4.8 23.7
Deferred income taxes.................................. 0.6 2.2
Changes in operating assets and liabilities............... (9.9) (16.6)
------ ------
Net Cash Provided by Operating Activities................... 4.8 16.4
------ ------
Investing Activities
Decreases in long-term receivable, affiliate.............. -- 48.4
Increases in long-term receivable, affiliate.............. -- (28.0)
Contributions to affiliates............................... (70.1) --
------ ------
Net Cash Provided by (Used in) Investing Activities......... (70.1) 20.4
------ ------
Financing Activities
Principal payments on long-term borrowings................ (12.4) (6.2)
Contributions received.................................... 82.7 --
Cash distributions........................................ -- (30.6)
------ ------
Net Cash Provided by (Used in) Financing Activities......... $ 70.3 $(36.8)
------ ------
Increase in Cash and Cash Equivalents....................... 5.0 --
Cash and Cash Equivalents at Beginning of Period............ 12.7 12.6
------ ------
Cash and Cash Equivalents at End of Period.................. $ 17.7 $ 12.6
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-36
<PAGE> 153
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-37
<PAGE> 154
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 "Acquired
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
Acquired 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 Acquired
Group reflect, in the opinion of management, all adjustments, consisting only of
normal and recurring adjustments, necessary to present fairly the Acquired
Group's results of operations and cash flows for the period January 1, 1999 to
February 4, 1999 and the six months ended June 30, 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 Acquired 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. ("the Company"). The Company 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, the Company 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-38
<PAGE> 155
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 of a loan from the Company.
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, the Company 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 North
America Corp. ("Enron North America"), formerly Enron Capital & Trade Resources
Corp., 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 Enron North America and Enron North America contributed its
interest in Bayonne Venture to the Company. In addition, the Company retired the
$216.0 million of MESC Notes.
Investments in Affiliates
The Acquired 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-39
<PAGE> 156
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
Acquired 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 Acquired Group.
F-40
<PAGE> 157
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 Cogen Tech 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-41
<PAGE> 158
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................. $ 75.3 $ 73.8 $ 78.7
Camden Cogen L.P....................................... 14.2 14.5 13.7
Cogen Technologies NJ 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-42
<PAGE> 159
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.................... 61.9 60.6
Camden Cogen L.P.......................................... 11.9 12.7
Cogen Technologies NJ 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-43
<PAGE> 160
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............... (75.3) (73.8) (78.7)
Camden Cogen L.P..................................... (14.2) (14.5) (13.7)
Cogen Technologies NJ Venture........................ (47.6) (17.5) (18.1)
Distributions received from affiliates:
Cogen Technologies Linden Venture, L.P............... 74.0 75.6 77.7
Camden Cogen L.P..................................... 15.0 8.6 14.5
Cogen Technologies NJ 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............... (12.5) -- --
Decreases in long-term receivable, affiliate.............. 68.7 70.0 37.2
Increases in long-term receivable, affiliate.............. (56.9) (62.2) (20.0)
------ ------ ------
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-44
<PAGE> 161
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-45
<PAGE> 162
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 "Acquired
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
Acquired 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 Acquired 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 Acquired 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 Acquired 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-46
<PAGE> 163
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-47
<PAGE> 164
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 North
America Corp. ("Enron North America"), formerly Enron Capital & Trade Resources
Corp., 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 Enron North America and Enron North America 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 Acquired 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-48
<PAGE> 165
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 Acquired Group's equity in the
earnings of Bayonne Venture for the year ended December 31, 1998 by $1.5 million
and the Acquired 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
Acquired 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
Acquired 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-49
<PAGE> 166
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents statement of cash flows information for the
Acquired 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-50
<PAGE> 167
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-51
<PAGE> 168
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-52
<PAGE> 169
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(6) INCOME TAXES
As explained in Note 1, certain entities in the Acquired 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-53
<PAGE> 170
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
Acquired 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-54
<PAGE> 171
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-55
<PAGE> 172
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, SIX MONTHS
1999 TO 1999 TO ENDED
JUNE 30, FEBRUARY 4, JUNE 30,
1999 1999 1998
----------- ----------- ----------
<S> <C> <C> <C>
Revenues
Electricity.............................................. $169.7 $ 43.2 $225.3
Steam.................................................... 4.2 1.0 8.6
------ ------ ------
173.9 44.2 233.9
------ ------ ------
Costs and Expenses
Fuel..................................................... 72.8 24.6 97.8
Operating and maintenance................................ 15.2 3.6 18.4
Depreciation and amortization............................ 8.7 2.1 11.1
General and administrative............................... 3.2 60.8 7.8
Taxes, other than income................................. 1.2 0.2 1.4
------ ------ ------
101.1 91.3 136.5
------ ------ ------
Income (Loss) from Operations.............................. 72.8 (47.1) 97.4
Other Income (Expense)
Interest and other income................................ 4.1 0.1 1.3
Interest expense......................................... (5.6) (1.5) (7.6)
------ ------ ------
Net Income (Loss).......................................... $ 71.3 $(48.5) $ 91.1
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-56
<PAGE> 173
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30,
1999 DECEMBER 31,
(UNAUDITED) 1998
----------- ------------
(IN MILLIONS OF DOLLARS)
<S> <C> <C>
Current Assets
Cash and cash equivalents................................. $ 38.5 $ 39.1
Accounts receivable....................................... 49.7 42.7
Inventories............................................... 15.7 16.7
Other current assets...................................... 3.2 2.7
------- -------
107.1 101.2
------- -------
Property, Plant and Equipment, at cost...................... 826.7 827.6
Accumulated depreciation.................................. (250.8) (240.0)
------- -------
575.9 587.6
------- -------
Other Assets................................................ 3.8 1.6
------- -------
$ 686.8 $ 690.4
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Accounts payable.......................................... $ 33.5 $ 29.1
Accounts payable, affiliate............................... 0.1 0.4
Current maturities on long-term debt...................... 10.9 10.4
Short-term debt........................................... -- 0.9
Interest payable.......................................... 2.9 3.1
Other current liabilities................................. 6.4 7.1
------- -------
53.8 51.0
Long-Term Debt.............................................. 137.3 142.6
Other Long-Term Liabilities................................. -- 1.6
Commitments and Contingencies (Note 3)
Partners' Capital........................................... 495.7 495.2
------- -------
$ 686.8 $ 690.4
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-57
<PAGE> 174
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, SIX MONTHS
1999 TO 1999 TO ENDED
JUNE 30, FEBRUARY 4, JUNE 30,
1999 1999 1998
----------- ----------- ----------
<S> <C> <C> <C>
Operating Activities
Net income (loss)........................................ $ 71.3 $(48.5) $ 91.1
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 8.7 2.1 11.1
Changes in other operating assets and liabilities
Net change in other assets and liabilities............ 0.1 (6.3) (19.4)
------ ------ ------
Net Cash Provided by (Used In) Operating Activities........ 80.1 (52.7) 82.8
------ ------ ------
Investing Activities
Additions to property, plant and equipment............... -- -- (0.4)
------ ------ ------
Net Cash Used in Investing Activities...................... -- -- (0.4)
------ ------ ------
Financing Activities
Net change in borrowings................................. (5.4) (0.3) (4.3)
Cash contributions by partners........................... -- 70.1 --
Cash distributions to partners........................... (65.1) (27.3) (89.6)
------ ------ ------
Net Cash Used in Financing Activities...................... (70.5) 42.5 (93.9)
------ ------ ------
Net Increase (Decrease) in Cash and Cash Equivalents....... 9.6 (10.2) (11.5)
Cash and Cash Equivalents at Beginning of Period........... 28.9 39.1 39.5
------ ------ ------
Cash and Cash Equivalents at End of Period................. $ 38.5 $ 28.9 $ 28.0
====== ====== ======
Cash Paid for Interest..................................... $ 3.6 $ 3.7 $ 7.6
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-58
<PAGE> 175
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................................ $ 79.0 $416.2 $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................................. 77.3 412.2 489.5
Net income (loss)......................................... 57.8 13.5 71.3
Distributions............................................. (46.9) (18.2) (65.1)
------ ------ ------
Balance at June 30, 1999.................................... $ 88.2 $407.5 $495.7
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-59
<PAGE> 176
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 six
months of 1999 and 1998, Camden GP received 83% (excluding a $3.3 million
special distribution to the limited partner related to the East Coast Power
acquisition) and 86%, 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 six months of 1999 and 1998, Camden GP was allocated 77% (excluding the
$14.4 million of one-time payments in connection with the termination of the gas
management and
F-60
<PAGE> 177
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
management services agreements that were allocated 100% to Camden GP's share of
income) and 71%, 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
six months of 1999 and 1998, Linden Ltd. received 69% and 58%, 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 six months of 1999 and 1998, Linden Ltd. was allocated 78%
(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 June 30, 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 June 30, 1999 and the
six-month period ended June 30, 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) COMMITMENTS AND 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 April 1999, the proceeding was settled and Linden Venture was
relieved of its obligation to pay certain liabilities and received a cash
payment of $1.2 million.
F-61
<PAGE> 178
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
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.
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.
F-62
<PAGE> 179
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-63
<PAGE> 180
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-64
<PAGE> 181
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-65
<PAGE> 182
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-66
<PAGE> 183
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-67
<PAGE> 184
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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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 in the useful
life and residual value resulted in increases in earnings in 1998 of $9.2
million and $5.0 million, respectively.
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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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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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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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
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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.
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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-76
<PAGE> 193
- ---------------------------------------------------------
- ---------------------------------------------------------
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>
Prospectus Summary..................... 1
Risk Factors........................... 10
The Exchange Offer..................... 14
Forward-Looking Statements............. 23
Our Owners............................. 24
Use of Proceeds........................ 26
Capitalization......................... 27
Selected Financial Data................ 28
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 33
Our Business........................... 54
Regulation............................. 69
Our Management......................... 78
Description of the New Notes........... 80
United States Income Tax
Considerations....................... 105
Plan of Distribution................... 110
Legal Matters.......................... 111
Independent Public Accountants......... 111
Available Information.................. 111
Glossary of Technical Terms............ 112
Index to Financial Statements.......... F-1
</TABLE>
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
PROSPECTUS
$833,939,040
[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
, 1999
- ---------------------------------------------------------
- ---------------------------------------------------------
<PAGE> 194
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 6.04 of the Company's Second 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 Members 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 or the Class A Member 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 6.04, 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 6.04, the Indemnified Person shall, if a claim in
respect thereof is to be made against the Company under this Section 6.04,
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 6.04 for any legal or other expenses subsequently incurred by the
Indemnified Person in connection with the defense thereof; 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> 195
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 -- Second Amended and Restated Limited Liability Company
Agreement of East Coast Power L.L.C., dated as of August
13, 1999 among East Coast Power Holding Company L.L.C.,
the California State Public Employees' Retirement System
and Mesquite Investors, L.L.C.
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(a) -- 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.
*4.6(b) -- First Amendment to East Coast Power Holding Company
Security Agreement, dated as of August 13, 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.
*4.8 -- Mesquite Security Agreement, dated as of August 13, 1999,
made by Mesquite Investors, L.L.C., 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 -- Amended and Restated Credit Support Agreement dated as of
August 13, 1999, among East Coast Power L.L.C., Enron
Corp. and the Lenders.
</TABLE>
II-2
<PAGE> 196
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
*10.7(a) -- Promissory Note, dated as of August 13, 1999, by East
Coast Power L.L.C. in favor of Enron Corp.
*10.7(b) -- Promissory Note, dated as of August 13, 1999, by East
Coast Power L.L.C. in favor of El Paso Energy Corp.
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).
*(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 Linden Venture, L.P. (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 Linden Venture, L.P. (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
effective 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.
</TABLE>
II-3
<PAGE> 197
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
*(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.
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).
</TABLE>
II-4
<PAGE> 198
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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.
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).
</TABLE>
II-5
<PAGE> 199
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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).
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).
</TABLE>
II-6
<PAGE> 200
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
**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.
*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).
</TABLE>
II-7
<PAGE> 201
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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.
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).
</TABLE>
II-8
<PAGE> 202
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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).
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).
</TABLE>
II-9
<PAGE> 203
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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).
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
Venture 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).
</TABLE>
II-10
<PAGE> 204
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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).
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, Midatlantic
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).
</TABLE>
II-11
<PAGE> 205
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
**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.).
**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).
*10.97 -- Purchase Agreement, dated as of August 2, 1999, between
East Coast Power Holding Company, L.L.C. and Mesquite
Investors, L.L.C.
*10.98 -- Contribution Agreement, dated as of August 2, 1999, among
ECT Merchant Investments Corp., Enron Capital Management
II Limited Partnership, Enron Capital Management III
Limited Partnership, Joint Energy Development Investments
II Limited Partnership, East Coast Power Holding Company
L.L.C., the California Public Employees' Retirement
System and Mesquite Investors, L.L.C.
*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>
- ---------------
* Filed herewith.
** To be filed by amendment.
II-12
<PAGE> 206
(b) Financial Statement Schedules
None.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statements (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registration pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) 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.
(d) 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.
II-13
<PAGE> 207
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 October 15, 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 October 15, 1999
- ----------------------------------------------------- (principal executive officer)
Ross D. Ain
/s/ JOSEPH M. BOLLINGER President, Generating (principal October 15, 1999
- ----------------------------------------------------- executive, financial and
Joseph M. Bollinger accounting officer)
/s/ MARK A. FREVERT Director of Enron Capital II October 15, 1999
- ----------------------------------------------------- Corp., the indirect general
Mark A. Frevert partner of the Company's
majority Class A Member
/s/ JAMES V. DERRICK, JR. Director of Enron Capital II October 15, 1999
- ----------------------------------------------------- Corp., the indirect general
James V. Derrick, Jr. partner of the Company's
majority Class A Member
/s/ KEVIN P. HANNON Director of Enron Capital II October 15, 1999
- ----------------------------------------------------- Corp., the indirect general
Kevin P. Hannon partner of the Company's
majority Class A Member
</TABLE>
II-14
<PAGE> 208
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
*3.1 -- Second Amended and Restated Limited Liability Company
Agreement of East Coast Power L.L.C., dated as of August
13, 1999 among East Coast Power Holding Company L.L.C.,
the California State Public Employees' Retirement System
and Mesquite Investors, L.L.C.
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(a) -- 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.
*4.6(b) -- First Amendment to East Coast Power Holding Company
Security Agreement, dated as of August 13, 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.
*4.8 -- Mesquite Security Agreement, dated as of August 13, 1999,
made by Mesquite Investors, L.L.C., 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 -- Amended and Restated Credit Support Agreement dated as of
August 13, 1999, among East Coast Power L.L.C., Enron
Corp. and the Lenders.
*10.7(a) -- Promissory Note, dated as of August 13, 1999, by East
Coast Power L.L.C. in favor of Enron Corp.
</TABLE>
<PAGE> 209
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
*10.7(b) -- Promissory Note, dated as of August 13, 1999, by East
Coast Power L.L.C. in favor of El Paso Energy Corp.
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).
*(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 Linden Venture, L.P. (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 Linden Venture, L.P. (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
effective 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.
</TABLE>
<PAGE> 210
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
*(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.
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).
</TABLE>
<PAGE> 211
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
*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.
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).
</TABLE>
<PAGE> 212
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
**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.
*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).
</TABLE>
<PAGE> 213
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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.
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).
</TABLE>
<PAGE> 214
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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).
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).
</TABLE>
<PAGE> 215
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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).
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
Venture 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).
</TABLE>
<PAGE> 216
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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).
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, Midatlantic
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).
</TABLE>
<PAGE> 217
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
**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.).
**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).
*10.97 -- Purchase Agreement, dated as of August 2, 1999, between
East Coast Power Holding Company, L.L.C. and Mesquite
Investors, L.L.C.
*10.98 -- Contribution Agreement, dated as of August 2, 1999, among
ECT Merchant Investments Corp., Enron Capital Management
II Limited Partnership, Enron Capital Management III
Limited Partnership, Joint Energy Development Investments
II Limited Partnership, East Coast Power Holding Company
L.L.C., the California Public Employees' Retirement
System and Mesquite Investors, L.L.C.
*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>
- ---------------
* Filed herewith.
** To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
================================================================================
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
EAST COAST POWER L.L.C.
A DELAWARE LIMITED LIABILITY COMPANY
================================================================================
<PAGE> 2
SECOND 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> <C>
ARTICLE 1
DEFINITIONS
1.01 DEFINITIONS.....................................................................................2
1.02 CONSTRUCTION...................................................................................11
ARTICLE 2
ORGANIZATION
2.01 FORMATION; CONSTRUCTION........................................................................12
2.02 NAME...........................................................................................12
2.03 REGISTERED OFFICE; REGISTERED AGENT; PRINCIPAL OFFICE IN THE UNITED STATES; OTHER OFFICES......12
2.04 PURPOSES.......................................................................................12
2.05 FOREIGN QUALIFICATION..........................................................................12
2.06 TERM...........................................................................................13
ARTICLE 3
MEMBERSHIP; DISPOSITIONS OF INTERESTS
3.01 MEMBERS........................................................................................13
3.02 REPRESENTATIONS, WARRANTIES AND COVENANTS......................................................13
3.03 DISPOSITIONS OF MEMBERSHIP INTERESTS...........................................................15
3.04 CREATION OF ADDITIONAL MEMBERSHIP INTERESTS....................................................22
3.05 ACCESS TO INFORMATION..........................................................................22
3.06 CONFIDENTIAL INFORMATION.......................................................................22
3.07 LIABILITY TO THIRD PARTIES.....................................................................23
3.08 CERTIFICATES...................................................................................23
3.09 PUT AND CALL OF INVESTOR'S MEMBERSHIP INTEREST.................................................24
3.10 CALL OF MEMBERSHIP INTEREST....................................................................25
3.11 BUY-SELL RIGHT.................................................................................26
ARTICLE 4
CAPITAL CONTRIBUTIONS
4.01 PREVIOUS CAPITAL CONTRIBUTIONS.................................................................26
4.02 SUBSEQUENT CAPITAL CONTRIBUTIONS...............................................................26
</TABLE>
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<TABLE>
<S> <C> <C>
4.03 FAILURE TO MAKE ADDITIONAL CAPITAL CONTRIBUTIONS...............................................27
4.04 RETURN OF CONTRIBUTIONS........................................................................28
4.05 LOANS..........................................................................................28
4.06 CAPITAL ACCOUNTS...............................................................................28
ARTICLE 5
DISTRIBUTIONS
5.01 DISTRIBUTIONS..................................................................................29
5.02 DISTRIBUTIONS ON DISSOLUTION AND WINDING UP....................................................31
5.03 ALLOCATIONS....................................................................................31
5.04 ADDITIONAL ALLOCATIONS.........................................................................32
5.05 ALLOCATIONS FOR TAX PURPOSES...................................................................32
5.06 VARYING INTERESTS..............................................................................32
5.07 TRUE-UP........................................................................................33
ARTICLE 6
MANAGEMENT
6.01 MANAGEMENT OF COMPANY AFFAIRS..................................................................33
6.02 MANAGEMENT BY CLASS A MEMBERS..................................................................35
6.03 STANDARDS OF PERFORMANCE AND CONFLICTS OF INTEREST.............................................39
6.04 INDEMNIFICATION................................................................................41
6.05 OFFICERS; DAY-TO-DAY MANAGEMENT................................................................42
6.06 MANAGEMENT BY MEMBERS..........................................................................42
6.07 CAPITAL PROJECTS...............................................................................46
ARTICLE 7
TAXES
7.01 TAX RETURNS....................................................................................46
7.02 TAX ELECTIONS..................................................................................46
7.03 TAX MATTERS MEMBER.............................................................................46
7.04 FISCAL YEAR....................................................................................47
ARTICLE 8
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
8.01 MAINTENANCE OF BOOKS...........................................................................47
8.02 BANK ACCOUNTS..................................................................................47
8.03 FINANCIAL STATEMENTS AND REPORTS...............................................................47
8.04 OPERATIONAL DATA...............................................................................48
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE 9
DISSOLUTION, WINDING-UP AND TERMINATION
9.01 DISSOLUTION....................................................................................48
9.02 WINDING-UP AND TERMINATION.....................................................................48
9.03 CERTIFICATE OF CANCELLATION....................................................................49
ARTICLE 10
GENERAL PROVISIONS
10.01 NOTICES........................................................................................49
10.02 ENTIRE AGREEMENT; SUPERSEDING EFFECT...........................................................49
10.03 EFFECT OF WAIVER OR CONSENT....................................................................49
10.04 AMENDMENT OR RESTATEMENT.......................................................................50
10.05 BINDING EFFECT.................................................................................50
10.06 GOVERNING LAW; SEVERABILITY....................................................................50
10.07 FURTHER ASSURANCES.............................................................................50
10.08 WAIVER OF CERTAIN RIGHTS.......................................................................50
10.09 CHARACTERIZATION OF INTERESTS..................................................................50
10.10 COUNTERPARTS...................................................................................50
</TABLE>
EXHIBIT:
A Members
B General Valuation Procedure
C Form of Certificate
SCHEDULE:
1 CalPERS Fiduciaries
2 Reporting Parties
3 Certain Approved Contracts
4 Current Officers of the Company
5 Power Purchase Agreements
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SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
EAST COAST POWER L.L.C.
A Delaware Limited Liability Company
This SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF
EAST COAST POWER L.L.C. (this "Agreement"), dated as of August 13, 1999 (the
"Effective Date"), is adopted, executed and agreed to, for good and valuable
consideration, by EAST COAST POWER HOLDING COMPANY L.L.C., a Delaware limited
liability company ("ECP Holding"), the CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT
SYSTEM, a unit of the State and Consumer Services Agency of the State of
California ("Investor" or "CalPERS"), and MESQUITE INVESTORS, L.L.C., a Delaware
limited liability company ("Mesquite").
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. Joint Energy Development Investments II Limited
Partnership, a Delaware limited partnership ("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. Effective as of February 4, 1999 (the "First Restatement Date"),
Enron Capital & Trade Resources Corp., a Delaware corporation ("ECT"), and
Investor were admitted to the Company as Members, and the Original Agreement was
amended and restated, pursuant to that certain Amended and Restated Limited
Liability Company Agreement of the Company, dated as of the First Restatement
Date (as amended, the "First Restated Agreement"). Pursuant to the First
Restated Agreement, JEDI II became the sole Class A Member having a 90% Sharing
Ratio; and each of ECT and Investor became a Class B Member having a 5% Sharing
Ratio.
3. ECT has assigned all of its membership interest in the Company to
its wholly-owned subsidiary, ECT Merchant Investment Corp., a Delaware
corporation ("ECT Merchant"), and ECT Merchant has assigned all of its
membership interest in the Company to JEDI II.
4. JEDI II has assigned all of its membership interest in the Company
to its wholly-owned subsidiary, ECP Holding.
5. Pursuant to that certain Purchase Agreement between ECP Holding and
Mesquite, dated as of August 2, 1999 (the "Purchase Agreement"), ECP Holding has
agreed to sell to Mesquite a 49% membership interest in the Company.
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6. ECP Holding, Investor and Mesquite now desire to amend and restate
the First Restated Agreement in its entirety and, in connection therewith, to
evidence the admission of Mesquite as a Member.
NOW, THEREFORE, for good and valuable consideration, ECP Holding,
Investor and Mesquite hereby amend and restate the First Restated 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):
ACT - the Delaware Limited Liability Company Act.
ACTIVITIES - Section 6.03(b).
ADDITIONAL CAPITAL CONTRIBUTION - Section 4.02(c).
AFFILIATE - (a) with respect to any Person, any other Person
controlling, controlled by, or under common control with that first
Person and (b) in any event with respect to (i) Mesquite, each of El
Paso and its Affiliates, but only so long as El Paso and its Affiliates
control Mesquite or own (directly or indirectly) 10% or more of the
voting securities or similar interests of such Person, and (ii) JEDI
II, each of Enron and its Affiliates, but only so long as Enron and its
Affiliates control JEDI II or own (directly or indirectly) 10% or more
of the voting securities or similar interests of JEDI II. 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 or similar interests, by contract, or otherwise.
Notwithstanding the foregoing, (i) Investor shall not be considered to
be an Affiliate of Enron or of ECP Holding, and (ii) the Company shall
not be considered an Affiliate of any Member, for purposes of this
Agreement.
AFFILIATE APPROVALS - Section 6.06.
AGREEMENT - introductory paragraph.
ANNUAL FUEL PROCUREMENT PLAN - Section 6.06(c).
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;
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<PAGE> 7
(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 PLANT - the 176 megawatt gas-fired, combined cycle
cogeneration facility owned by NJ Venture and located in Bayonne, New
Jersey on the site of the IMTT Facility.
BUSINESS DAY - any day other than a Saturday, a Sunday, or
other day on which commercial banks in New York, New York or Houston,
Texas are authorized or required by law to close.
BUY-SELL NOTICE - Section 3.11(a).
CALPERS - introductory paragraph.
CALL NOTICE - a notice containing a statement setting forth
the specific purpose for which additional capital is required, the
total amount of additional capital required and the amount of
additional capital required to be contributed by each Class A Member.
CAMDEN COGEN - Camden Cogen LP, a Delaware limited
partnership.
CAMDEN PLANT - the 146 megawatt gas-fired, combined cycle
cogeneration facility owned by Camden Cogen and located in Camden, New
Jersey.
CAPITAL ACCOUNT - the account to be maintained by the Company
for each Member in accordance with Section 4.06.
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.
CARRYING VALUE - means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
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<PAGE> 8
(a) the Carrying Value of any asset contributed or deemed
contributed by a Member to the Company shall be the gross fair market
value of such asset at the time of contribution as reasonably
determined by unanimous agreement of the Class A Members;
(b) the Carrying Value of any asset distributed or deemed
distributed by the Company to any member shall be adjusted immediately
prior to such distribution to equal its gross fair market value at such
time as reasonably determined by unanimous agreement of the Class A
Members;
(c) the Carrying Values of all Company assets may be adjusted
to equal their respective gross fair market values, as reasonably
determined by unanimous agreement of the Class A Members as of:
(i) the date of the acquisition of an additional
interest in the Company by any new or existing Member in
exchange for a contribution to the capital of the Company; or
(ii) upon the liquidation of the Company, or the
distribution by the Company to a retiring or continuing Member
of money or other Company property in reduction of such
Member's interest in the Company;
(d) any adjustments to the adjusted basis of any asset of the
Company pursuant to Sections 734 or 743 of the Code shall be taken into
account in determining such asset's Carrying Value in a manner
consistent with Treasury Regulation Section 1.704-1(b)(2)(iv)(m); and
(e) if the Carrying Value of an asset has been determined
pursuant to clauses (a) through (d) above, such Carrying Value shall
thereafter be adjusted in the same manner as would the asset's adjusted
tax basis for federal income tax purposes, except that depreciation and
amortization deductions shall be computed based on the asset's Carrying
Value as so determined, and not on the asset's adjusted tax basis.
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 - ECP Holding, Mesquite 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 Members, distributions from the
Company equal to the sum of (i) $80,000,000
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<PAGE> 9
plus any Additional Capital Contributions made by the Class A Members
pursuant to Section 4.02(c) (collectively, for purposes of this
definition, the "Base Amount"), plus (ii) the amount necessary to
provide the Class A Members, on an aggregate basis, with an Internal
Rate of Return on such Base Amount (without duplication of
distributions described in clause (i) above (i.e. the return of such
Base Amount)), of 31%, calculated from February 4, 1999 until
distributions equal to the full Class A Preference Amount have been
made.
CLASS B MEMBER - Each of ECP Holding, Investor, Mesquite 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.
CODE - the Internal Revenue Code of 1986, as amended.
COGEN TRANSACTION AGREEMENT - the Transaction Agreement dated
October 25, 1998, as amended by Amendment No. 1 to Transaction
Agreement effective as of November 6, 1998, Amendment No. 2 to
Transaction Agreement effective as of November 13, 1998, and Amendment
No. 3 to Transaction Agreement effective as of February 1, 1999,
between Enron, Enron Capital & Trade Resources Corp., RCM Holdings,
Inc., (formerly Cogen Technologies, Inc.), Cogen Technologies Camden,
Inc., Cogen Technologies Capital Company, L.P., the McNair Group
Sellers and Minority Group Sellers listed on the signature page
thereto, the Company, JEDI Linden GP LLC, JEDI Linden LP LLC, JEDI
Camden GP LLC, JEDI Camden LP LLC and JEDI Bayonne GP LLC.
COMMITTEE REPRESENTATIVE - Section 6.02(e).
COMPANY - Recital 1.
CONTRIBUTION AGREEMENT - the Contribution Agreement dated
August 2, 1999, among Investor, ECP Holding, Mesquite, JEDI II, ECT
Merchant, and Enron Capital Management III Limited Partnership.
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.
DEADLOCK - a failure of the Class A Members to reach agreement
on a matter that requires their unanimous approval under this
Agreement, if such failure continues for 30 or more Days following
notice from one Class A Member to the other Class A Member that the
continuation of such disagreement for 30 Days will cause a Deadlock.
DEEMED MEMBERSHIP DISPOSITION - with respect to any Membership
Interest that is owned by a Special-Purpose Member, a Disposition of
any or all of the voting securities or other equity interests of such
(a) Special-Purpose Member or (b) a Special-Purpose Holding Company of
such Special-Purpose Member.
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<PAGE> 10
DEFAULT AMOUNT - an amount equal to the total Additional
Capital Contribution required to be made but not made by a Defaulting
Member.
DEFAULTING MEMBER - any Class A Member which shall fail to
make an Additional Capital Contribution pursuant to Section 4.02 by the
close of the Business Day following the date on which such Additional
Capital Contribution was due.
DELAWARE CERTIFICATE - Recital 1.
DISPOSE, DISPOSING or DISPOSITION - with respect to any asset
(including a Membership Interest or any portion thereof), a sale,
lease, 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.
DISPOSITION NOTICE - Section 3.03(d)(i).
DISSOLUTION EVENT - Section 9.01.
ECP HOLDING - introductory paragraph.
ECT - Recital 2.
ECT MERCHANT - Recital 3.
EFFECTIVE DATE - introductory paragraph.
EL PASO - El Paso Energy Corporation, a Delaware corporation.
EL PASO MEMBER - any Member that is (a) El Paso or a
wholly-owned Affiliate of El Paso or (b) Mesquite (for so long as it
remains a Member and an Affiliate of El Paso).
EL PASO POWER - El Paso Power Holding Company, a Delaware
corporation.
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.
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<PAGE> 11
ENRON MEMBER - any Member that is Enron, JEDI II (for so long
as it remains an Affiliate of Enron) or a wholly-owned Affiliate of
Enron or of JEDI II (for so long as JEDI II remains an Affiliate of
Enron), including ECP Holding (for so long as it remains (i) a Member
and (ii) a wholly owned Affiliate (a) of Enron or (b) of JEDI II, so
long as JEDI II remains an Affiliate of Enron).
ERISA - Section 3.02(e).
FINANCIAL CLOSING - all conditions precedent to the full
effectiveness of a Power Contract Restructuring for a Power Purchase
Agreement have been satisfied or waived.
FIRST PRICE - Section 3.11(a).
FIRST RESTATED AGREEMENT - Recital 2.
FISCAL YEAR - Section 7.04.
FORMATION DATE - Recital 1.
FUEL MANAGER - Section 6.06(c).
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.
INDEBTEDNESS - without duplication, (a) all obligations of
such Person for borrowed money of any kind, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments,
(c) all obligations of such Person under conditional sale or other
title retention agreements relating to property or assets purchased by
such Person, (d) all obligations of such Person issued or assumed as
the deferred purchase price of property or services, (d) all
Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be
secured by) any encumbrance on property owned or acquired by such
Person, whether or not the obligations secured thereby have been
assumed, (f) all guarantees by such Person of Indebtedness of others,
(g) all obligations of such Person to pay rent or other amounts under
any lease or other right to use property, (h) all obligations of such
Person in respect of interest rate hedge agreements, other interest
rate swaps, collars or caps and other interest rate protection
arrangements, foreign currency exchange agreements, commodity exchange,
commodity future, commodity forward or commodity option agreement
(including with respect to natural
7
<PAGE> 12
gas and electric power, but only if such agreement is for a term of
longer than three months), or other interest or exchange rate or
commodity hedging arrangements, and (i) all obligations of such Person
as an account party in respect of letters of credit.
INDENTURE - the Indenture dated as of April 20, 1999, between
the Company and The Bank of New York, as Trustee.
INITIATING MEMBER - Section 3.11(a).
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.
INVESTMENT COMPANY ACT - Investment Company Act of 1940, as
amended.
INVESTOR - introductory paragraph.
JEDI II - Recital 1.
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.
LINDEN PLANT - 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 VENTURE - Cogen Technologies Linden Venture, L.P., a
Delaware limited partnership.
LOAN DOCUMENTS - the collective reference to the Senior Loan
Documents and the Subordinated Loan Documents.
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
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.
MESQUITE - introductory paragraph.
MW - megawatt.
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NET INCOME and NET LOSS - respectively, for any period, the
taxable income and taxable loss of the Company for the period as
determined for federal income tax purposes, provided that for purpose
of determining Net Income and Net Loss and each item thereof (and not
for income tax purposes) (a) there shall be taken into account any tax
exempt income of the Company; (b) any expenditures of the Company which
are described in Section 705(a)(2)(B) of the Code or which are deemed
to be described in Section 705(a)(2)(B) of the Code pursuant to
Treasury Regulations under Section 704(b) of the Code shall be treated
as deductible expenses; (c) if any Company asset has a Carrying Value
which differs from its adjusted tax basis as determined for federal
income tax purposes, income, gain, loss and deduction with respect to
such asset shall be computed based upon the asset's Carrying Value
rather than its adjusted tax basis; (d) items of gross income or
deduction allocated pursuant to Section 5.04 shall be excluded from the
computation of Net Income and Net Loss; (e) there shall be taken into
account any separately stated items under Section 702(a) of the Code;
and (f) if the Carrying Value of any Company asset is adjusted pursuant
to the definition thereof, the amount of such adjustment shall be taken
in to account in the taxable year of adjustment as gain or loss from
the disposition of such asset for purposes of computing Net Income and
Net Losses.
NJ VENTURE - Cogen Technologies NJ Venture, a New Jersey
general partnership.
NON-CASH CONSIDERATION - Section 3.03(d)(ii).
NON-DEFAULTING MEMBER - any Class A Member which is not a
Defaulting Member or an Affiliate of a Defaulting Member.
NOTES - the meaning specified in the Indenture.
OPTION AGREEMENT - any Option Agreement entered into between
ECP Holding and Mesquite pursuant to which ECP Holding grants to
Mesquite the option to purchase a portion of ECP Holding's Membership
Interest that would increase Mesquite's Sharing Ratio as a Class A
Member to 45% and as a Class B Member to 5%.
ORIGINAL AGREEMENT - Recital 1.
PERSON - any individual, corporation, company, voluntary
association, partnership, joint venture, limited liability company,
trust, estate, unincorporated organization or government or any agency,
instrumentality or political subdivision thereof, or any other form of
entity.
POWER CONTRACT RESTRUCTURING - (a) any of one or more of the
following negotiated agreements becoming effective with respect to any
Power Purchase Agreement: any termination; any reduction in payments;
any change in the amount of capacity or energy to be sold; any change
in the source of capacity or energy is delivered to the power
purchaser; or any change in the person to which capacity or energy is
delivered; or (b) any negotiated agreement which becomes effective and
which has substantially the same effect as the
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foregoing agreements; provided that in each case such agreement is
other than pursuant to such Power Purchase Agreement's terms or
pursuant to a default under, or cure of any default under, any such
agreement, and excluding any temporary or interim agreement which is
entered into at the request of the power purchaser in response to
temporary conditions respecting the purchaser's system or its
consumers.
POWER INDEX - Section 6.06(c).
POWER MARKETER - Section 6.06(c).
POWER PURCHASE AGREEMENT - the agreements listed on Schedule
5.
PREFERENTIAL RIGHT - Section 3.03(d)(i).
PRODUCTS - Section 6.06(c).
PUHCA TRANSACTION - Section 3.10.
PURCHASE AGREEMENT - Recital 5.
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.
RESPONDING MEMBER - Section 3.11(a).
SECOND PRICE - Section 3.11(b).
SECURITIES ACT - the Securities Act of 1933, as amended.
SENIOR LOAN DOCUMENTS - (a) the Indenture and (b) the Notes
and Security Documents (as such terms are defined in such Indenture);
in each case as such documents 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 Indenture.
SHARING RATIOS - 90% for the Class A Members (as of the
Effective Date, 45.9% for ECP Holding and 44.1% for Mesquite) and 10%
for the Class B Members (as of the Effective Date, 5.0% for Investor,
0.1% for ECP Holding and 4.9% for Mesquite).
SPECIAL-PURPOSE HOLDING COMPANY - an Affiliate of any Member
(other than Investor) all or substantially all of the Assets of which
consist of voting securities or other
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<PAGE> 15
equity interests of (a) a Special-Purpose Member or (b) one or more
intermediate Special-Purpose Holding Companies.
SPECIAL-PURPOSE MEMBER - any Member (other than Investor), all
or substantially all of the assets of which consist of a Membership
Interest.
SUBORDINATED LOAN DOCUMENTS - the meaning specified in the
Credit and Subordination Agreement dated as of February 4, 1999,
between Enron and the Company, as such documents 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.
SUBSIDIARY - An Affiliate that a Person controls, including,
in the case of the Company, Camden Cogen, Linden Venture and NJ
Venture.
SUBSTANTIAL COMPLETION DATE - the date that the applicable
facilities are substantially complete and available for commercial
operation in all material respects in accordance with the associated
project agreements.
TERM - Section 2.06.
TRANSACTION MEMBER - Section 3.10.
UTILITY AFFILIATE - a Member as to which one or more of the
representations in Section 3.02(n) is, or becomes, untrue.
1935 ACT - Section 3.02(n).
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.
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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. ECP Holding, Investor and Mesquite 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 Members may select.
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 directly or
indirectly through its Subsidiaries in (a) the acquisition, development, lease,
ownership and sale, 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 Camden Plant, the Linden Plant and the Bayonne Plant;
(b) the purchasing, ownership, use, transmission, marketing and sale of any
input, output or right associated therewith; and (c) 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 maintain its
qualification 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.
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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 9.03.
ARTICLE 3
MEMBERSHIP; DISPOSITIONS OF INTERESTS
3.01 MEMBERS. (a) There are two classes of Members in the Company,
Class A Members and Class B Members, and each has the respective rights accorded
it under this Agreement.
(b) Effective as of the Effective Date:
(i) ECP Holding is continuing as a Class A Member and is being
admitted as a Class B Member, and Investor is continuing as a Class B
Member; and
(ii) Mesquite is being admitted as a Class A Member and a
Class B Member.
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 (if applicable) 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;
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(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 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) that Member 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;
(g) that Member understands that it may not sell or transfer
its Membership Interest, except in accordance with Section 3.03;
(h) that Member 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;
(i) that Member has carefully reviewed this Agreement and any
other relevant information furnished to it in writing regarding the
Company, and it understands the risks of, and other considerations
relating to, an investment in its Membership Interest;
(j) that Member 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, its
Affiliates, and the Company's business activities, and the Company 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;
(k) that Member 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;
(l) that Member 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 in the Company
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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;
(m) that Member understands that the other Members 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;
(n) in the case of Members other than Enron Members, at the
time of its investment in the Company and at all times while it remains
a Member, that Member (i) is not and will not be an "electric utility
company," a "holding company," or a "subsidiary company" of a "holding
company," 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"); and (ii) shall not
be or become an "electric utility" or "electric utility holding
company" under PURPA, or a wholly or partially owned subsidiary of
either thereof, except to the extent that the failure to satisfy the
representations in clause (i) or (ii) above would 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 or the Class A
Members determine in their reasonable discretion that such loss of
"qualifying facility" status under PURPA would not materially adversely
affect such facility, the Company or its Members;
(o) at the time of its investment in the Company and at all
times while it remains a Member, such 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 Member does not treat itself as
subject to the Department of Labor Regulations ss.2510.3-101 or
interpret applicable state law as incorporating similar rules; and
(p) each Enron Member, at the time of its investment in the
Company and at all times while it remains both a Member and a Utility
Affiliate, will not own, directly or indirectly, more than 50% of the
interests in the Company or its Subsidiaries, except to the extent that
such ownership in excess of 50% would 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 or the Class A Members determine
in their reasonable discretion that such loss of "qualifying facility"
status under PURPA would not materially adversely affect such facility,
the Company or its Members.
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,
such consent (other than in the case of Investor) not to be
unreasonably withheld or delayed; provided,
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<PAGE> 20
however, that no such consent shall be required for the following
Dispositions of Membership Interests:
(A) a Disposition by an Enron Member to Enron or any
of its wholly-owned Affiliates (or at any time after Investor
is no longer a Member, any of its Affiliates) or to another
Enron Member;
(B) a Disposition by an El Paso Member to El Paso or
any of its wholly-owned Affiliates (or at any time after
Investor is no longer a Member, any of its Affiliates);
(C) a Disposition pursuant to the Contribution
Agreement;
(D) a Disposition pursuant to the Option Agreement;
and
(E) a Disposition pursuant to Section 3.03(e), 3.09,
3.10 or 3.11.
(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);
(iii) if such Member is an Enron Member or an El Paso Member,
it must comply with the requirements of Section 3.03(d); provided,
however, that such Section shall not apply to Dispositions of the type
described in Section 3.03(a)(i)(A) - (E);
(iv) 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 Members determine
in their reasonable discretion that such loss of "qualifying facility"
status under PURPA would not materially adversely affect such facility,
the Company or its Members; and
(v) such Disposition must not cause any termination or
acceleration under the Senior Loan Documents or result in a "Change of
Control" occurring under, and as defined in, the Indenture or result in
the holders of the Notes having the right to require the Company to
purchase the Notes in accordance with the terms of the Indenture.
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.
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(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 each non-Disposing Member:
(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
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
Dispositions of the type described in Section 3.03(a)(i)(A) -
(E) or to the Dispositions described in the Recitals hereof.
(D) TAX LAW OPINION. A favorable opinion of the
Company's legal counsel, or of other legal counsel acceptable
to the Class A Members, to the effect that the Disposition
(when considered together with the Dispositions contemplated
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by the Contribution Agreement, if such Dispositions have not
been consummated) would not result in the Company's being
considered to have terminated within the meaning of Code
Section 708; provided, however, that no opinion shall be
required pursuant to this Section 3.03(c)(i)(D) with respect
to the Dispositions described in the Recitals hereof or in
Section 3.03(e) or 3.03(g) hereof.
(ii) PAYMENT OF EXPENSES. The Disposing Member and its
Assignee (or, in the case of any Disposition pursuant to the
Contribution Agreement, ECP Holding) 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 opinions
referred to in Sections 3.03(c)(i)(C) and (D), 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) PREFERENTIAL PURCHASE RIGHT.
(i) PROCEDURE. If any Member (other than Investor) at any time
proposes to accept an offer (including one made by another Member) that
would result in the Disposition of its Membership Interest, then such
Disposing Member shall promptly give notice thereof (the "Disposition
Notice") to the other Members (other than Investor); provided, however,
that this Section 3.03(d) shall not apply to a Disposition described in
Section 3.03(a)(i). The Disposition Notice shall set forth all relevant
information with respect to the offer and the proposed Disposition,
including the name and address of the prospective Assignee, the precise
Membership Interest that is the subject of the Disposition, the price
to be paid for such Membership Interest, any other terms and conditions
of the offer and proposed Disposition and, if any portion of the
purchase price is to be paid in Non-Cash Consideration, the information
required by Section 3.03(d)(ii). The recipient of the Disposition
Notice shall have the preferential right ("Preferential Right") to
acquire, for the same purchase price (which, in the case of Non-Cash
Consideration, shall be deemed to be the fair market value in cash of
such Non-Cash Consideration as determined in accordance with Section
3.03(d)(ii)), and on the same terms and conditions, as are set forth in
the Disposition Notice, such Membership Interest, in accordance with
this Section 3.03. The recipient of the Disposition Notice shall have
15 Business Days following its receipt of the Disposition Notice in
which to notify the Disposing Member whether it desires to exercise the
Preferential Right.
(ii) NON-CASH CONSIDERATION. If any portion of the purchase
price is to be paid in a form other than cash or cash equivalents
(including real or personal property, promissory notes, securities,
contractual benefits, assumption of liabilities or anything else of
value) ("Non-Cash Consideration"), the Disposing Member shall state in
its Disposition Notice its determination of the aggregate fair market
value of such Non-Cash Consideration (which, in the case of marketable
securities, shall be the market price of such securities). If the
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<PAGE> 23
recipient of the Disposition Notice disagrees with such determination,
it shall notify the other Members of such disagreement within 10
Business Days of receiving the Disposition Notice. If such Dispute is
not resolved within five Business Days after such notice, the dispute
shall be resolved in a manner equivalent to that set forth on Exhibit
B.
(iii) WAIVER OF PREFERENTIAL RIGHT. If the recipient of the
Disposition Notice does not exercise the Preferential Right during the
15 Business-Day period referred to in Section 3.03(d)(i) (or, if later,
by the fifth Business Day after the resolution of any dispute under
Section 3.03(d)(ii)), the recipient shall be deemed to have waived the
Preferential Right as to such proposed Disposition, but not as to any
future Disposition. In that event, the Disposing Member shall have the
right, subject to compliance with the provisions of this Section 3.03,
to Dispose of the Membership Interest described in the Disposition
Notice to the proposed Assignee strictly in accordance with the terms
of the Disposition Notice for a period of 90 Days after the expiration
of such 15 Business-Day period. If, however, the Disposing Member fails
so to Dispose of the Membership Interest within such period, the
proposed Disposition shall again become subject to the Preferential
Right.
(iv) CLOSING. If the recipient of the Disposition Notice
validly exercises the Preferential Right, then, on the 30th Day
following such exercise, the recipient (or one or more Affiliates of
such recipient or third parties designated by such recipient, provided
that the recipient may designate a third party only if the Disposing
Member is Disposing of its entire Membership Interest or if the
purchase of such Membership Interest by the recipient or its Affiliates
(A) is prohibited by applicable Law, (B) would cause a default under
the Indenture or any other material contract to which the recipient or
the Company or any of their respective Affiliates is a party, or (C)
would create adverse regulatory circumstances under applicable law for
the recipient or the Company or any of their respective Affiliates)
shall pay to the Disposing Member the price therefor determined in
accordance with Section 3.03(d)(i), whereupon that Membership Interest
shall become the property of purchaser or its designated Affiliates or
third parties, and if the Disposing Member transfers all of its
Membership Interest, the Disposing Member shall cease to be a Member,
all effective as of the closing of such purchase.
(e) LEGALLY-REQUIRED DIVESTITURE BY INVESTOR. 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 reasonably acceptable to each Class A
Member from legal counsel (which the Class A Members agree may be Investor's
internal counsel) to that effect, then subject to the provisions of this Section
3.03(e), Investor may assign all or that part of its Membership Interest to the
Class A Members or their designees or to third parties (which may include
another Member) in each case reasonably acceptable to each Class A Member at a
price to be mutually determined between Investor and the Class A Members or such
designees or third parties, as applicable. If within 120 Days following the
occurrence of an event specified in this Section 3.03(e), Investor is unable to
make such assignment on terms reasonably acceptable to it, the Company will
redeem or (at the unanimous election of the Class A Members) Enron, El Paso,
Affiliates of Enron or El Paso, or third parties jointly designated by the Class
A Members, will purchase the Membership Interest of Investor (and, at the
election of the Class A Members, the Membership Interest of all other Class B
Members) in accordance with Exhibit B.
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(f) FALSITY OF CERTAIN REPRESENTATIONS.
(i) If any of the representations set forth in Section
3.02(n), (o) or (p) becomes false with respect to any Member (other
than an Enron Member with respect to the representation in Section
3.02(n)), such 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
include another Member) reasonably acceptable to all of the Class A
Members (or if the Member with respect to which the Trigger Event has
occurred is a Class A Member, the other Class A Member). If the
Disposition of the Membership Interest of such Member has not been
effected on or before the expiration of 60 days following the Trigger
Event, the Class A Members (in proportion to their respective Sharing
Ratios) or, if the Member with respect to which the Trigger Event has
occurred is a Class A Member, the other Class A Member, shall have the
option, exercisable by notice to such Member on or before the 90th day
following the Trigger Event, to purchase (or to cause their or its
Affiliates or third parties designated by them or it to purchase) the
Membership Interest of such 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 Members
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 purchasing Members, Affiliates
or third parties, as applicable, shall pay to the owner of such
Membership Interest the price therefor determined in accordance with
this Section 3.03(f)(i) in cash, whereupon that Membership Interest
shall become the property of such purchasing Members, Affiliates or
third parties, as applicable, and such Member shall cease to be a
Member, all effective as of the Repurchase Date.
(ii) Notwithstanding any purchase of its Membership Interest
pursuant to Section 3.03(f)(i), any Member or former Member whose
representations given in Section 3.02(n), (o) or (p) became false shall
be liable to the Company and the other Members for any damages caused
to the Company, the other Members or any Affiliates thereof arising out
of or related to any such representation being false at any period.
(g) INVESTOR'S FAILURE TO CONSENT TO DISPOSITION. If (i) a Class A
Member proposes to make a Disposition that requires the consent of the other
Members under Section 3.03(a)(i), (ii) Investor does not consent to such
Disposition, and (iii) all of the other Members consent to such Disposition,
then all of the Class A Members may at their option cause the Company to redeem
from Investor, or require Investor to sell to the Class A Members (or Affiliates
of the Class A Members or third parties jointly designated by the Class A
Members), all (but not part) of such Investor's Membership Interest. To exercise
this option, the Class A Members must give Investor notice of the exercise on or
before the 30th day after Investor notifies the Class A Member proposing to make
such Disposition that it will not consent to such Disposition (or, if Investor
does not give such notice,
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on or before the 60th day after such Class A Member first requests Investor's
consent to the Disposition). The price for any redemption or purchase and sale
of a Membership Interest under this Section 3.03(g) shall be the amount
determined in accordance with Exhibit B. The purchase price shall be payable in
cash. On the third Business Day following the determination of the price in
accordance with Exhibit B, the Company, the Class A Members (or their designated
Affiliates or third parties) shall pay the redemption or purchase price to
Investor, and if such interest is purchased, the Class A Members (or their
designated Affiliates or third parties) automatically shall become the owner of
that Membership Interest and Investor shall cease to be a Member in the Company,
effective as of the date of such closing.
(h) DEEMED MEMBERSHIP DISPOSITION. A Deemed Membership Disposition
shall be deemed to be a Disposition of the applicable Membership Interest, and
it must comply with following provision:
(i) if such Deemed Membership Disposition is of all of the
voting securities or other equity interests of the applicable
Special-Purpose Member or Special-Purpose Holding Company, then such
Disposition must comply with the requirements set forth in Section
3.03(a);
(ii) if such Deemed Membership Disposition is of less than all
of the voting securities or other equity interests of the applicable
Special-Purpose Member or Special-Purpose Holding Company, then:
(A) such Disposition must comply with the
requirements set forth in Section 3.03(a)(i), (ii) and (iv),
and
(B) the Class A Members (in proportion of their
respective Sharing Ratios) or, if such Special-Purpose Member
is a Class A Member, the other Class A Member, shall have the
option, exercisable by notice to such Special-Purpose Member
on or before the 60th day following notice of the proposed
Disposition, to purchase (or to cause their or its Affiliates
or third parties designated by them or it to purchase) the
Membership Interest of such Special- Purpose Member at the
price determined in accordance with Exhibit B. On the third
Business Day following the determination of the price in
accordance with Exhibit B, the Class A Members or their
designated Affiliates or third parties, or the other Class A
Member or its designated Affiliate or third party, as
applicable, shall pay to such Special-Purpose Member the price
therefor determined in accordance with Exhibit B in cash,
whereupon that Membership Interest shall become the property
of such purchasing Members, Affiliates or third parties, as
applicable, and such Special-Purpose Member shall cease to be
a Member, all effective as of such date.
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(i) CHANGE OF CONTROL. Each Member agrees not to take or consent to the
taking of any action, or permit any Affiliate of such Member to take or consent
to the taking of any action, that would result in a "Change of Control"
occurring under, and as defined in, the Indenture.
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
Members 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 Members (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.
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 Class A Members acknowledge
that, from time to time, they may receive information from or regarding the
Company, the Class A Members, Enron, Enron's Affiliates, El Paso or El Paso'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 Members if the Company is the Subject Person) consents otherwise, each
Class A 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 Class A Member (which Class A Member shall hold such information subject
to the provisions of this Section 3.06), except for disclosures (i) required by
Law or applicable stock exchange regulations (but the Class A Member must notify
the Subject Person (the Class A Members if the Company is the Subject Person)
promptly of any request for that information, before disclosing it
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if practicable), (ii) to advisers or representatives of the Class A Member or
Persons to which that Class A 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 Class A Member also has received from a source
independent of the Subject Person that the Class A Member reasonably believes
obtained that information and disclosed it to that Class A Member without breach
of any obligation of confidentiality. The Class A 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 Class A 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.
(c) If, pursuant to this Agreement or the Act, any Class B Member is
entitled to receive any information that would constitute confidential
information pursuant to Section 3.06(a), then as a condition to its right to
receive such information (which the Class B Members acknowledge is a reasonable
condition), each Class B Member must execute a confidentiality agreement
reasonably acceptable to each Class A Member containing substantially the same
terms as are set forth in Section 3.06(a).
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 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
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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 OF INVESTOR'S MEMBERSHIP INTEREST. (a) Investor may
at its option require the Class A Members to purchase (which purchase may, at
the option of the Class A Members, be made through a redemption by the Company
or a purchase by the Class A Members, Affiliates of the Class A Members or third
parties designated by the Class A Members) 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)
February 4, 2004 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 Members notice of the exercise (an "Option Exercise Notice") on or
before the 180th day prior to the Option Exercise Date.
(b) Promptly after receipt of an Option Exercise Notice from Investor,
the Class A Members shall notify the Class B Members (other than Investor) in
writing of the receipt of the Option Exercise Notice and shall afford ECP
Holding and Mesquite the option, exercisable for a period of fifteen Business
Days following receipt of such notice from the Class A Members, to (i) require
the Class A Members to purchase (which purchase may, at the option of the Class
A Members, be made through a redemption by the Company or a purchase by the
Class A Members, Affiliates of the Class A Members or third parties designated
by the Class A Members) all (but not part) of ECP Holding's and Mesquite's
Membership Interest as a Class B Member, 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 Members within the fifteen Business Day period
described above shall constitute an election by ECP Holding or Mesquite to
remain a Class B Member of the Company.
(c) The Class A Members may at their option cause the Company to redeem
from Investor, or require Investor to sell to the Class A Members (or Affiliates
of the Class A Members or third parties jointly designated by the Class A
Members), all (but not part) of such Investor's
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Membership Interest effective on an Option Exercise Date that is (i) February 4,
2004 or (ii) the first day of any calendar year thereafter, as provided in this
Section 3.09. To exercise this option, the Class A Members 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 Members (or their designated Affiliates
or third parties) shall pay the redemption or purchase price to the applicable
Class B Member, and if such interest is purchased, the Class A Members (or their
designated Affiliates or third parties) 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.
3.10 CALL OF MEMBERSHIP INTEREST. (a) If any Member or Affiliate of a
Member (the "Transaction Member") proposes to consummate a transaction (a "PUHCA
Transaction") that will 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 Members that are not Transaction Members jointly determine in
their reasonable discretion that such loss of "qualifying facility" status under
PURPA would not materially adversely affect such facility, the Company or its
Members, such Member shall promptly notify the other Members. In that event, the
other Members may at their option cause the Company to redeem from the
Transaction Member (and from Investor, if the Transaction Member is an Enron
Member), or require the Transaction Member (and Investor, if the Transaction
Member is an Enron Member) to sell to the other Members (or Affiliates of the
other Members or third parties designated by any such other Members), all or any
designated portion of the Transaction Member's (and Investor's, if applicable)
Membership Interest. To exercise this option, the other Members must give notice
to the Transaction Member (and Investor, if the Transaction Member is an Enron
Member) of the exercise on or before the 60th Day following receipt of such
notice from the Transaction Member.
(b) The price for a redemption or purchase and sale of a Membership
Interest under this Section 3.10 shall be the amount determined in accordance
with Exhibit B. The purchase price shall be payable in cash. On the earlier of
(i) the 30th Day following the other Members' notice to the Transaction Member
(and Investor, if the Transaction Member is an Enron Member) that it is
exercising such option, or (ii) the third Business Day preceding the anticipated
consummation of the PUHCA Transaction, the other Members (or their respective
designated Affiliates or third parties) shall pay the redemption or purchase
price to the Transaction Member (and Investor, if the Transaction Member is an
Enron Member), and if such interest is purchased, the other Members (or their
designated Affiliates or third parties) automatically shall become owners of
that Membership Interest and, if such Membership Interest constitutes all of the
Transaction Member's (and Investor's, if applicable) Membership Interest, the
Transaction Member (and Investor, if applicable) shall cease to be a Member in
the Company, effective as of the date of such closing.
(c) If the other Members do not exercise the option described in
Section 3.10(a), the Transaction Member (and Investor, if the Transaction Member
is an Enron Member) shall Dispose
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of their entire Membership Interests in accordance with Section 3.03 prior to
the consummation of the PUHCA Transaction.
3.11 BUY-SELL RIGHT. (a) If the Class A Members reach a Deadlock, then
either Class A Member (the "Initiating Member") may exercise a buy-sell right by
delivering a notice (the "Buy-Sell Notice") to the other Class A Member (the
"Responding Member"), in which the Initiating Member makes an offer to acquire
all, but not a part of, the Responding Member's Membership Interest (plus
Investor's Membership Interest, if the Responding Member is an Enron Member) for
a cash purchase price (the "First Price") specified in the Buy-Sell Notice.
(b) The Responding Member shall have the right, exercisable by notice
(the "Second Notice") given to the Initiating Member within 180 Days after the
giving of the Buy-Sell Notice, to purchase all, but not a part, of the
Membership Interest of the Initiating Member (plus Investor's Membership
Interest, if the Initiating Member is an Enron Member) for a cash purchase price
(the "Second Price") equal to the product of (i) the Sharing Ratio represented
by the Initiating Member's (plus Investor's, if applicable) Membership Interest
and (ii) a fraction, the numerator of which is the First Price and the
denominator of which is the Sharing Ratio of the Responding Member's (plus
Investor's, if applicable) Membership Interest.
(c) On the purchase date (which shall be selected by the purchasing
party but in no event later than 195 Days after the Buy-Sell Notice), the
Responding Member (and Investor, if applicable) shall sell, and the Initiating
Member (or its designated Affiliate or third party) shall purchase, the
Responding Member's Membership Interest for the First Price; provided, however,
that if a Second Notice shall have been timely given, then on the purchase date
the Initiating Member (and Investor, if applicable) shall sell, and the
Responding Member (or its designated Affiliate or third party) shall purchase,
the Initiating Member's (and Investor's, if applicable) Membership Interest for
the Second Price. In either case, the purchase price shall be payable in cash,
and the purchasing Member (or its designated Affiliate or third party)
automatically shall become the owner of that Membership Interest, and the
selling Member (and Investor, if applicable) shall cease to be a Member in the
Company, effective as of the date of such closing.
ARTICLE 4
CAPITAL CONTRIBUTIONS
4.01 PREVIOUS CAPITAL CONTRIBUTIONS. The Members have made (or, in the
case of Members that acquired their Membership Interests by assignment from
predecessor Members, are deemed to have made) the Capital Contributions
described in Section 4.01 of the First Restated Agreement.
4.02 SUBSEQUENT CAPITAL CONTRIBUTIONS. (a) Except as expressly provided
herein, no Member shall have any obligation to make any additional Capital
Contributions.
(b) No Class B Member may make any additional Capital Contributions. A
Class A Member may make additional Capital Contributions (i) with the consent of
the other Class A
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Members and (ii) without offering to any other Member the opportunity to make
such Capital Contributions.
(c) If at any time the Class A Members determine in accordance with the
provisions of Section 6.02(c) that additional capital is required or if funds
are otherwise required by the Company, then either Class A Member shall send a
Call Notice to the Class A Members. Each Class A Member shall thereupon be
required to make an additional capital contribution (an "Additional Capital
Contribution") in an amount equal to the product of (i) its Sharing Ratio
divided by the aggregate Sharing Ratios of the Class A Members multiplied by
(ii) the amount of additional capital determined by the Class A Members to be
required as set forth in the Call Notice. Each Class A Member shall, within
thirty (30) days after receipt of the Call Notice, make the Additional Capital
Contribution required to be made pursuant to such Call Notice by delivery of
immediately available funds to the Company. None of the terms, covenants,
obligations or rights contained in this Section 4.02 is or shall be deemed to be
for the benefit of any Person other than the Members and the Company, and no
such third Person shall under any circumstances have any right to compel any
actions or payments by the Members. Nothing herein shall be construed as
prohibiting the Class A Members from agreeing in accordance with Section 6.02 to
fund capital needs of the Company in the form of loans from the Members.
4.03 FAILURE TO MAKE ADDITIONAL CAPITAL CONTRIBUTIONS. In the event
that there is a Defaulting Member, the Non-defaulting Member may, in addition to
any other remedy available at law or in equity, elect by twenty (20) days
written notice to the Defaulting Member either (i) not to make the Additional
Capital Contribution otherwise required to be made by such Non-defaulting
Member, in which case neither of the Class A Members shall be deemed to be a
Defaulting Member, or (ii) to make the Additional Capital Contribution otherwise
required to be made by such Non- defaulting Member and to advance the Default
Amount to the Company, with the following results:
(i) the sum advanced constitutes a loan from the
Non-defaulting Member to the Defaulting Member and a Capital
Contribution of that sum to the Company by the Defaulting Member
pursuant to the applicable provisions of this Agreement;
(ii) the principal balance of the loan and all accrued unpaid
interest thereon is due and payable in whole on the tenth day after
written demand therefor by the Non-defaulting Member to the Defaulting
Member;
(iii) the amount lent bears interest at a rate equal to twelve
percent (12%) per annum, compounded annually from the Day that the
advance is deemed made until the date that the loan, together with all
interest accrued on it, is repaid to the Non-defaulting Member;
(iv) all distributions from the Company that otherwise would
be made to the Defaulting Member (whether before or after dissolution
of the Company) instead shall be paid to the Non-defaulting Member
until the loan and all interest accrued on it have been paid in full to
the Non-defaulting Member (with payments being applied first to accrued
and unpaid interest and then to principal), and
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(v) the Non-defaulting Member has the right, in addition to
the other rights and remedies granted to it pursuant to this Agreement
or available to it at Law or in equity, to take any action (including
court proceedings) that the Non-defaulting Member may deem appropriate
to obtain payment by the Defaulting Member of the loan and all accrued
and unpaid interest on it, at the cost and expense of the Defaulting
Member.
4.04 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.
4.05 LOANS. No Member may make any loans to the Company without the
consent of the Class A Members.
4.06 CAPITAL ACCOUNTS. A Capital Account shall be established and
maintained for each Member in accordance with Treasury Regulation Section
1.704-1(b)(2)(iv). 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 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), (c) the Net Income allocated to
such Member pursuant to Section 5.03, and (d) the gross income allocated to such
Member pursuant to Section 5.04, and shall be decreased by (e) the amount of
money distributed to that Member by the Company, (f) 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), (g) the Net Loss allocated to such
Member pursuant to Section 5.03, and (h) any "partner non-recourse deductions"
(as defined in Treasury Regulation Section 1-704-2(i)) and any "non-recourse
deductions" (as defined in Treasury Regulation Section 1-704-2(b)) allocated to
such Member pursuant to Section 5.04 of this Agreement. The Capital Account of
each Member shall be adjusted to reflect any adjustment to the Carrying Value of
the Company's assets attributable to the application of Sections 734 or 743 of
the Code to the extent required pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m). Except as otherwise provided in this Agreement, whenever
it is necessary to determine the Capital Account of any Member, the Capital
Account of such Member shall be determined after giving effect to the allocation
of Net Income, Net Loss and other items realized prior or concurrently to such
time (including any Net Income and Net Losses attributable to adjustments to
Carrying Values with respect to any concurrent distribution), and all
contributions and distributions made prior or concurrently to the time as of
which such determination is to be made. 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).
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ARTICLE 5
DISTRIBUTIONS
5.01 DISTRIBUTIONS. Distributions to the Members shall be made as
follows:
(a) As soon as practical after the Effective Date, to the extent such
amounts have not been distributed prior to such date, the Company shall
distribute to the Record Holder on June 30, 1999 of the Class A Member's
Membership Interest, all cash held by the Company as of June 30, 1999 that it is
permitted to distribute under the Loan Documents, after retention of reasonable
cash reserves (taking into account all other cash reserves of the Company then
on hand) for expected operating expenditures of the Company during the three
months following the date of such distribution, as reasonably determined jointly
by the Class A Members.
(b) From and after the Effective Date, the Company shall distribute on
a monthly basis (or, if less often, as frequently as it is permitted to
distribute under the Loan Documents), all cash it is permitted to distribute
under the Loan Documents (other than reasonable reserves for expected
expenditures during the succeeding six-month period as determined by the Class A
Members and other amounts the Class A Members unanimously determine are
necessary or appropriate for the expected business needs of the Company) to the
Class A Members, in proportion to their respective Sharing Ratios, until the
Class A Members have received distributions equal to the Class A Preference
Amount.
(c) After the Class A Members have received distributions equal to the
Class A Preference Amount, the Company shall distribute, on a monthly basis (or,
if less often, as frequently as it is permitted to distribute under the Loan
Documents), all cash it is permitted to distribute under the Loan Documents
(other than reasonable reserves for expected expenditures during the succeeding
six-month period as determined by the Class A Members and other amounts the
Class A Members unanimously determine are necessary or appropriate for the
expected business needs of the Company) to the Members in accordance with the
Sharing Ratios.
(d) (i) Notwithstanding the provisions of Section 5.01(b) and (c), but
subject to Section 5.01(d)(ii), (iii) and (iv), the Company shall make the
following cash distributions to ECP Holding as promptly after the occurrence of
the following events as may be permitted under the Loan Documents, and such
distributions shall be ignored for purposes of calculating the Class A
Preference Amount:
(A) $16,326,531 (i.e., $8,000,000 divided by .49)
upon the occurrence of Financial Closing of a Power Contract
Restructuring for either Power Purchase Agreement relating to
the Bayonne Plant;
(B) $16,326,531 (i.e., $8,000,000 divided by .49)
upon the occurrence of Financial Closing of a Power Contract
Restructuring for the Power Purchase Agreement relating to the
Camden Plant;
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(C) $16,326,531 (i.e., $8,000,000 divided by .49)
upon the occurrence of Financial Closing of Power Contract
Restructuring for the Power Purchase Agreement relating to the
Linden Plant;
(D) $5,102,041 (i.e., $2,500,000 divided by .49) upon
the occurrence of the Substantial Completion Date with respect
to the installation by the Company or any of its subsidiaries
of thermal energy storage at the Linden Plant to increase
summer capacity by 70MW;
(E) $6,122,449 (i.e., $3,000,000 divided by .49) upon
the occurrence of the Substantial Completion Date with respect
to the installation by the Company or any of its subsidiaries
of a simple cycle GE Frame 7FA turbine as new Unit 7 at the
Linden Plant.
(F) $2,040,816 (i.e., $1,000,000 divided by .49) upon
the occurrence of the Substantial Completion Date with respect
to the installation by the Company or any of its Subsidiaries
of a 16-inch gas bypass pipeline spur from the Transco
pipeline for the Bayonne Plant; and
(G) $3,061,224 (i.e., $1,500,000 divided by .49) upon
the occurrence of the Substantial Completion Date associated
with the installation by the Company or any of its
Subsidiaries of a reverse osmosis treatment facility at the
Linden Plant to allow it to accept waste water from the Linden
Roselle Sewerage Authority.
(ii) In no event will the sum of (A) 49% of the distributions
made by the Company to ECP Holding pursuant to this Section 5.01(d) and
(B) the payments made by Mesquite to ECP Holding pursuant to Section
2.03 of the Purchase Agreement exceed $17,000,000, excluding any
interest paid pursuant to Section 5.01(d)(iv) or Section 2.03 of the
Purchase Agreement.
(iii) If pursuant to Section 2.03 of the Purchase Agreement,
(A) Mesquite has made a payment to ECP Holding in connection with the
occurrence of any event described in clause (A), (B), (C), (D), (E),
(F), or (G) of Section 5.01(d)(i), then the distribution contemplated
by the applicable clause of this Section 5.01(d) and the aggregate
limit described in Section 5.01(d)(ii) shall be reduced by an amount
equal to the product of (1) the payment made by Mesquite and (2) a
fraction, the numerator of which is one and the denominator of which is
.49, or (B) Mesquite has paid to ECP Holding $17,000,000 in the
aggregate, then all distributions contemplated by this Section 5.01(d)
shall be cancelled and shall not be made by the Company.
(iv) If pursuant to Section 2.03(b) of the Purchase Agreement,
Mesquite is required to pay interest to ECP Holding on amounts owing
thereunder, then in addition to the applicable payment specified in
Section 5.01(d)(i), the Company shall distribute to ECP Holding an
amount of interest as provided in such Section 2.03(b), but only to the
extent such interest is not paid by Mesquite pursuant to such Section
2.03(b) of the Purchase Agreement.
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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 A Members
until the Class A Members have received distributions equal to the Class A
Preference Amount.
(b) After the Class A Members have received distributions equal to the
Class A Preference Amount, proceeds shall be distributed to the Members in
accordance with the Sharing Ratios.
5.03 ALLOCATIONS. (a) Net Income for any Fiscal Year shall be allocated
as follows:
(i) First, to the Class A Members 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)(iii) for all prior taxable
periods.
(ii) Next, to the Class A 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 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
(iii) Thereafter, to the Members in accordance with the
Sharing Ratios.
(b) Net Loss for any Fiscal Year 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)(iii) for all prior taxable periods;
(ii) Next, to the Class A Members 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)(ii) for all prior taxable
periods; and
(iii) Thereafter, to the Class A Members.
(c) Notwithstanding anything herein to the contrary, upon the
dissolution or winding up the Company, Net Profit and Net Loss, and to the
extent necessary, items of income, loss or deduction, shall be allocated among
the Members so that the distributions required to be made pursuant to Section
5.02 will be made in accordance with the Members' Capital Account balances.
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5.04 ADDITIONAL ALLOCATIONS. (a) Notwithstanding any other provision of
this Agreement (i) "partner non-recourse deductions" (as defined in Treasury
Regulation Section 1.704-2(i)), if any, of the Company shall be allocated to the
Member that bears the economic risk loss within the meaning of Treasury
Regulation Section 1.704-2(i)), and (ii) "non-recourse deductions" (as defined
in Treasury Regulation 1.704-2(b)), if any, of the Company with respect to each
period shall be allocated in the same proportion as Net Income and Net Losses
for such period.
(b) This Agreement shall be deemed to include "qualified income
offset," "minimum gain chargeback" and "partner non-recourse debt minimum gain
chargeback" provisions within the meaning of Treasury Regulations under Section
704(b) of the Code. Accordingly, notwithstanding any other provision of this
Agreement, items of gross income shall be allocated to the Members on a priority
basis to the extent and in the manner required by such provisions.
(c) Any special allocation of items pursuant to Sections 5.04(a) or (b)
shall be taken into account in computing subsequent allocations pursuant to
Section 5.03 so that the cumulative net amount of all items allocated to each
Member shall, to the extent possible, be equal to the amount that would have
been allocated to such Member if there had never been any special allocation
pursuant to Sections 5.04(a) or (b).
(d) For the first Fiscal Year of the Company, the Class B Members shall
be allocated gross income in an amount equal to any amount described in clauses
(ii), (iii) and (iv) of the definition of Class B Preference Amount in the First
Restated Agreement distributed (or deemed distributed) to the Class B Members.
Such amount shall be allocated to the Class B Members that received such
distributions (or deemed distributions).
(e) For any Fiscal Year, there shall be allocated to ECP Holding gross
income of the Company in an amount equal to distributions made to ECP Holdings
pursuant to Section 5.01(d) during such Fiscal Year.
5.05 ALLOCATIONS FOR TAX PURPOSES. For tax purposes, (i) all items of
income, gain, loss, deduction, and expense shall be allocated to the Members in
the same manner as the correlative items of "book" income, gain, loss,
deduction, and expense are allocated pursuant to Sections 5.03 and 5.04, and
(ii) each tax credit shall be allocated to Members in the same manner as the
receipt or expenditure giving rise to such credit is allocated pursuant to 5.03
and 5.04; provided, however, that in accordance with Section 704(c) of the Code,
the Treasury Regulations promulgated thereunder and Treasury Regulation Section
1.704-1(b)(4)(i), items of income, gain, loss, deduction, expense and credit
with respect to any property whose Carrying Value differs from its adjusted
basis for tax purposes shall, solely for tax purposes, be allocated between the
Members so as to take account of both the amount and character of such
variation.
5.06 VARYING INTERESTS. If during any Fiscal Year there is a change in
any Member's interest in the Company, the Members agree that their allocable
shares of the Profits and Losses (or items of income, gain, loss, or deduction)
for the taxable year shall be determined based on a closing of the Company's
books on the date of such change or any other method permissible under Code
Section 706 that is selected by all the Class A Members to take account of the
Member's varying interest.
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5.07 TRUE-UP. In order to ensure that, in the aggregate, no 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 that is not a Utility Affiliate 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 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
6.05 (which the Class A Members 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 Members shall have full,
complete, and exclusive authority to manage and control the business and affairs
of the Company. The Company will not have "managers," as that term is used in
the Act or Rev. Proc. 95-10, 1995-3 I.R.B. 20, it being understood that the
Representatives and the Officers do not constitute "managers."
(b) Notwithstanding the provisions of Section 6.01(a), the Company may
do any of the following only with the consent of the Class B Members:
(i) engage in any business other than as described in Section
2.04;
(ii) amend the Loan 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
(iii) 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)(iii), then the Class A Members may exercise the
same option as that set forth in Section 3.03(g).
(c) The Class A Members 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
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determination, the Class A Members 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 Members 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 Members 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 Members 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) No Member (other than the Class A Members) 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.
(e) Any Person dealing with the Company, other than a Member, may rely
on the authority of the Class A Members 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, regardless of whether that action
actually is taken in accordance with the provisions of this Agreement.
(f)(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.
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
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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 MANAGEMENT BY CLASS A MEMBERS. (a) Except as set forth in Sections
6.02(c), 6.06, 6.07 and 7.03, the Class A Members shall make decisions and take
actions regarding the Company collectively by majority vote (or written consent
in lieu of a vote), based upon their respective Sharing Ratios. The Class A
Members may delegate specific Management authority to either of the Class A
Members or their Affiliates, including the delegations set forth in Section
6.06.
(b) The Class A Members shall meet quarterly, subject to more or less
frequent meetings upon approval of the Class A Members. Special meetings of the
Class A Members may be called at such times, and in such manner, as any Class A
Member deems necessary. Any Class A Member calling for any such special meeting
shall notify the other Class A Member of the date and agenda for such meeting at
least ten Days prior to the date of such meeting. Such ten-Day period may be
shortened by the Class A Members. The presence of Class A Members holding among
them at least a majority of the Sharing Ratios of the Class A Members shall
constitute a quorum for the transaction of business at any meeting of the Class
A Members. Any action required or permitted to be taken at a meeting of the
Class A Members may be taken without a meeting, without prior notice, and
without a vote if a consent or consents in writing, setting forth the action so
taken, is signed by Class A Members that could have taken the action at a
meeting of the Class A Members at which all Class A Members entitled to vote on
the action were represented and voted. Class A Members may participate in and
hold such meeting by means of conference telephone, videoconference or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
(c) Notwithstanding Section 6.02(a) but subject to Article III and
Sections 6.01(b), 6.06, 9.01, 9.02(a)(iv) and 10.04, the following decisions and
actions from and after the Effective Date shall require the unanimous approval
of the Class A Members (with references to the "Company" in this Section 6.02(c)
referring to the Company or any of its Subsidiaries):
(i) causing or permitting the Company to Dispose of
or Encumber (A) all or substantially all of its assets or (B)
any asset, the fair market value or book value of which
exceeds $5,000,000;
(ii) causing or permitting the Company to incur any
Indebtedness, other than up to $5,000,000 of Indebtedness
incurred or assumed solely for the purpose
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of financing the cost of acquiring or constructing an asset or
for working capital purposes;
(iii) causing or permitting the Company to merge,
consolidate or convert into any other entity, to enter into a
joint venture, association or profit sharing with another
entity or to acquire any equity interest in any other Person
or all or substantially all of the assets of any other Person;
(iv) approving loans by the Members or their
Affiliates to the Company or by the Company to any other
Person and in each case, any draw thereunder, including any
decisions of the Company under the Amended Credit Support
Agreement;
(v) approving (A) the annual capital and operating
budget for the Company (with it being understood that the last
approved budget shall be used, and deemed approved, for any
subsequent period until the new budget for that period is so
approved), (B) any amendment or modification of any approved
annual budget and (C) any expenditures by the Company that
would exceed the approved budgeted amount for such expenditure
by more than (1) 5% of any line item expenditure (not to
exceed $50,000) or (2) $250,000 in excess of the total
approved annual budget;
(vi) causing or permitting the Company (A) to cancel,
terminate, amend or restate, or relinquish any material rights
under, any material contract or agreement to which the Company
is a party, or (B) to enter into any new material contract or
agreement (for the purposes of this subsection (vi), a
material contract or agreement shall include but not be
limited to contracts or agreements involving consideration
(including the assumption of actual and contingent
liabilities) in excess of $300,000 in any year or in excess of
$1,000,000 in total for the duration of such contract or
agreement;
(vii) causing or permitting the Company (A) to enter
into, engage in or incur any costs under any transaction,
contract, agreement or arrangement with a Member, Officer or
employee of the Company, an Affiliate of any of the foregoing,
or a Person related by blood or marriage to any of the
foregoing, in each case involving consideration exceeding the
amount authorized for expenditure in the annual budget for the
Company on the services provided thereunder, or (B) to amend
or modify any such contract, agreement or arrangement;
(viii) causing or permitting the Company to enter
into or engage in any transaction, contract, agreement or
arrangement that (A) is unrelated to the Company's purpose (as
set forth in Section 2.04), (B) otherwise contravenes the
Certificate or this Agreement, (C) would make it impossible to
carry on the ordinary business of the Company, or (D) is not
apparently for the carrying on of the business of the Company
in the usual way;
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(ix) causing or permitting the Company (A) to fail to
comply with any provisions of applicable Law, (B) to fail to
obtain, or comply with, all material permits and
authorizations from Governmental Authorities required for it
to conduct its business, or (C) to agree to the cancellation,
amendment, restatement, or relinquish of any material rights
under, any such material permit or authorization;
(x) approving any (A) change in the Company's
external auditors, (B) material change in accounting
procedures for the Company or (C) material adjustment
associated with the audit of the financial statements of the
Company;
(xi) causing or permitting the Company to liquidate
or to become Bankrupt (but this provision shall not be
construed to require any Member to ensure the profitability or
solvency of the Company);
(xii) causing or permitting the Company to issue or
redeem any Membership Interest;
(xiii) making the decisions, taking the actions, and
exercising the options required or permitted to be make, taken
or exercised by the Class A Members pursuant to Sections
3.03(a)(iv), 3.03(e), 3.03(f), 3.03(g), 3.09, 5.01(a), 6.01(b)
(proviso), 6.05(a) and 7.02(c);
(xiv) causing or permitting any power plant in which
the Company owns a direct or indirect interest to lose its
status as a "qualifying facility" under PURPA or would
otherwise subject the Company or its Members to regulation
under PUHCA or making a determination that the loss of such
status would not materially adversely affect the Company or
its Members;
(xv) initiating any litigation, arbitration or other
legal proceeding or the settlement of any litigation,
arbitration or other legal proceeding, as the case may be, if
the amount in dispute exceeds $1,000,000;
(xvi) making a determination under Section 4.02(c)
that Additional Capital Contributions are required;
(xvii) appointment and removal of the persons
nominated as officers or senior management positions of the
Company and the approval of the compensation of such officers
or senior management personnel;
(xviii) the registration of the Membership Interests
under the Securities Act of 1933, as amended;
(xix) causing or permitting any material action
relating to tax matters of the Subsidiaries of the Company;
and
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(xx) approval of any business plan for the Company.
(d) The Class A Members shall use commercially reasonable efforts to
cause the Company, directly or indirectly, to (i) be entitled to designate an
even number of representatives on the boards of directors or other management
committees of the Company's subsidiaries and (ii) designate its representatives
on each such board or committee in a manner that permits each Class A Member to
select 50% of such representatives; provided, however, that if the Company is
not entitled to designate an even number of representatives on any such board or
committee, the Class A Members shall alternate the selection of the odd-numbered
representative on an annual basis; provided, however, that the Class A Members
shall use reasonable efforts to cause all such representatives shall vote in
accordance with the decisions of the Company made pursuant to Sections 6.01 and
6.02.
(e) The Class A Members hereby establish (i) a Construction Committee
to provide oversight over any capital expenditure projects of the Company and
its Subsidiaries, (ii) an Operations Committee to provide oversight over the
operations of the Company and its Subsidiaries, (iii) a Commercial Committee to
provide oversight over the key commercial issues and contracts affecting the
Company and its Subsidiaries. The Class A Members may, by unanimous consent,
establish other committees after the date of execution of this Agreement. Unless
otherwise agreed to by the Class A Members, each such committee shall be
comprised of one representative of each Class A Member ("Committee
Representative"), designated by such Class A Member by written notice to each
other Class A Member. Each Class A Member shall have the right to designate one
or more alternate Committee Representatives to act in the place of the
designated Committee Representative, if such Class A Member's designated
Committee Representative is or becomes unavailable to act on behalf of such
Member. Any Class A Member may at any time, by written notice to each other
Member, remove its Committee Representative or alternate and designate a new
Committee Representative or alternate. The term "Committee Representative," as
used in this Agreement, includes an alternate Committee Representative if the
designated Committee Representative is unavailable to act on behalf of a Member.
Each Committee shall meet upon the request of any representative serving on such
Committee and upon the request of any Class A Member. In this regard, the
Construction Committee, the Operations Committee and the Commercial Committee
shall have the following responsibilities:
(A) Construction Committee - The Construction Committee shall provide
oversight and direction to ECP Holding, as the Member designated
responsibilities for capital expenditure projects in accordance with Section
6.06 of this Agreement. This shall include the review of matters submitted by
ECP Holding to the committee, including the review of (1) construction budgets,
(2) final engineering design and specifications for said facilities, unless
otherwise previously approved by the Members, (3) the bids for and the contracts
with third party suppliers, contractors and subcontractors, (4) establishment of
procedures for the testing, start up and commissioning of the new facilities and
(5) execution of an agreements associated with the acquisition of the necessary
rights-of-way or land for the capital expenditure projects. ECP Holding shall
provide periodic reports on the status of all of such construction projects,
including presentations by developers, consultants, contractors and suppliers
for such projects.
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(B) Operations Committee - The Operations Committee shall provide
oversight and direction to the Company associated with the operation,
maintenance and repair of the facilities of the Company and its Subsidiaries.
This shall include the review of matters submitted by the Company, including the
review of (1) operations and maintenance budgets, (2) any repair of any plant,
unless otherwise previously approved by the Members, and (3) schedules for
planned outages. The Company shall provide periodic reports on the status of the
operations of the facilities of the Company and its Subsidiaries, including
reports on outages at the plant, operating efficiencies (including efficiencies
required to maintain its status as a "qualifying facility" under PURPA),
comparisons to actual costs with budgeted costs, any significant environmental
matters and any such other matters that the Operations Committee reasonably
requests.
(C) Commercial Committee - The Commercial Committee shall provide
oversight and direction to the Company associated with the key commercial issues
and contracts affecting the Company. Without limiting the above, the Commercial
Committee shall provide oversight and direction to ECP Holding and El Paso, as
the Member and the Affiliate of a Member, respectively, designated
responsibilities for certain activities of the Company and its Subsidiaries in
accordance with Section 6.06 of this Agreement. This shall include the review of
matters submitted by ECP Holding and El Paso to the committee, including the
review of the agreements required to effectuate such activities.
(f) Notwithstanding the above, any Class A Member may require the
Company to assert a claim under the Cogen Transaction Agreement.
6.03 STANDARDS OF PERFORMANCE AND CONFLICTS OF INTEREST. (a) Except as
provided otherwise in this Agreement, the Class A Members 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 Class A Member 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 A CLASS A MEMBER IS NOT LIABLE FOR ITS OWN SIMPLE, PARTIAL, OR
CONCURRENT NEGLIGENCE. In no event shall a Class A Member be liable for any
action or course of conduct approved or consented to by the Class B Members (or,
after Investor is no longer a Member, by the other Class A Member) or any action
or course of conduct based on a determination by the Class B Members (or, after
Investor is no longer a Member by the other Class A Member) INCLUDING
SPECIFICALLY MATTERS FOR WHICH THE CLASS A MEMBER WOULD BE LIABLE IN THE ABSENCE
OF THIS SECTION 6.03, 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 a Class A Member be liable for any such action or
course of conduct if such Class A Member at the time or other Class A Member's
or 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 Class A Member shall devote such time and effort
to the duties described in Section 6.01 as is necessary to promote fully the
interests of the Company. In no event shall the
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provisions of this Section 6.03 relieve the Class A Members from liability
pursuant to the provisions of any contract or transaction that may be entered
into hereafter between the Company and a 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, El Paso and their 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 Members determine in their
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 a Member or one of its Affiliates
shall be 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 a Member
that is a Utility Affiliate, the terms of the transaction shall have been
approved by at least one Class A Member that is not a Utility Affiliate. Any
transaction between the Company and a Member or its Affiliates that has been
approved by the other 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 6.03(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 Members, Enron, El
Paso and their respective Affiliates do not guarantee the performance of the
Company or the Class A Members. Neither Enron, El Paso nor any other Affiliate
of Enron or El Paso (other than the Class A Members) shall have any liability
for the acts, omissions or courses of conduct of the Company or the Class A
Members, except in the case of gross negligence, willful misconduct or fraud by
the Class A Members (but such exception shall apply only for the benefit of
Investor and only for so long as Investor is a Member). As a result of the
foregoing, Enron, El Paso and their respective Affiliates (other than the Class
A Members) shall have NO LIABILITY FOR THE SIMPLE,
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PARTIAL OR CONCURRENT NEGLIGENCE OF THE CLASS A MEMBER, ENRON, EL PASO OR ANY OF
THEIR AFFILIATES in connection with the acts, omissions or courses of conduct of
the Company or the Class A Members. Nothing herein shall prohibit a Class B
Member or the Company from asserting valid claims other than as provided in this
Section 6.03. In no event shall the provisions of this Section 6.03(d) relieve
the Class A Members, Enron, El Paso 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, El Paso or any of their
respective Affiliates.
(e) This Section 6.03 constitutes a modification and disclaimer of
duties and obligations (express, implied, fiduciary or otherwise) with respect
to the matters described in this Section 6.03, pursuant to Section 18-1101 of
the Act. The Members agree that the provisions of this Section 6.03 are
"express" and "conspicuous" for all purposes of applicable Law.
6.04 INDEMNIFICATION. (a) To the fullest extent permitted by Law, the
Company shall indemnify the officers of the Company and the Class A Members 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 or the Class A Member 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 6.04, 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 6.04, the Indemnified Person shall, if a claim in
respect thereof is to be made against the Company under this Section 6.04,
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 6.04 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
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Person under this Section 6.04 for any legal or other expenses subsequently
incurred by the Indemnified Person in connection with the defense thereof;
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.
6.05 OFFICERS; DAY-TO-DAY MANAGEMENT. (a) The current Officers of the
Company are listed on Schedule 4. Officers of the Company may be appointed, and
may be removed and replaced, by the Class A Members, and such officers shall
have such titles, authority, duties and salary or other compensation, if any, as
the Class A Members 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
Members 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 Members and the other provisions of
this Agreement.
6.06 MANAGEMENT BY MEMBERS. The Members agree to delegate the
day-to-day management duties to the Members or the designated Affiliate of the
Member set forth below with regard to the following duties:
(a) Power Contract Restructuring - The Class A Members hereby delegate
to El Paso Power the authority to negotiate the restructuring of the Power
Purchase Agreements and the associated restructuring of steam sale, fuel supply
and other material project agreements (other than the capital arrangements set
forth in Section 6.06(b)(ii)) of the Company or its Subsidiaries; but no such
restructured agreement shall be made binding on the Company or its Subsidiaries
without the unanimous approval of the Class A Members.
(b) Capital Projects - The Class A Members hereby delegate to ECP
Holding the authority to manage (i) expansions and other capital expenditure
projects at the facilities of the Company or its Subsidiaries and (ii) the
restructuring of capital arrangements for the Company or its Subsidiaries; but
no such expansions, capital expenditure projects or restructurings shall be made
binding on the Company or its Subsidiaries without the unanimous approval of the
Class A Members.
(c) Gas and Power Marketing - The responsibility for the procurement of
fuel supplies and power marketing shall be divided between the Company, ECP
Holding and El Paso Power or their Affiliates as follows:
42
<PAGE> 47
(i) Pre-Restructuring Period - The Company and its employees
shall be responsible for all matters associated with the procurement of
fuel supplies and the marketing of the power from each of the Camden
Plant, the Bayonne Plant and the Linden Plant for all periods prior to
the completion of the Power Contract Restructuring for each such plant;
provided that ECP Holding or one of its Affiliates will be responsible
for any marketing of the power generation at the Linden Plant that is
not being sold pursuant to one or more long-term power purchase
agreements with Consolidated Edison Company prior to the completion of
the restructuring of the power purchase agreement for the Linden Plant.
(ii) Post-Restructuring Period - El Paso Power or its
Affiliates shall be responsible for all matters associated with the
procurement of fuel supplies and the marketing of power from the Camden
Plant and the Bayonne Plant for the period following the earlier of (A)
the completion of the Power Contract Restructuring and (B) the
termination or expiration of the applicable Power Purchase Agreement
for such plant. ECP Holding or its Affiliates shall be responsible for
all matters associated with the procurement of fuel supplies and the
marketing of power from the Linden Plant for the period following the
earlier of (1) the completion of the Power Plant Restructuring and (2)
the termination or expiration of the applicable Power Purchase
Agreement for such plant. Prior to the completion of the Power Contract
Restructuring for each such plant, the Company and El Paso Power or ECP
Holding or their respective Affiliates, as the case may be, shall
negotiate in good faith to enter into definitive agreements to govern
the relationship of the parties with regard to the procurement of fuel
supplies and the marketing of power from each of the plants. The
Members intend that such definitive agreements shall contain the
following terms and conditions:
(A) Fuel Procurement - The Member or its Affiliate
assigned responsibility for the procurement of fuel for a
plant (the "Fuel Manager") shall be responsible for the
delivery to the Company of 100% of the fuel requirements at
the applicable plant. Title to such fuel supplies shall be
transferred from the Fuel Manager to the Company at or near
the site of the applicable plant. The Fuel Manager shall be
responsible for entering into all purchase and transportation
arrangements upstream of such plant; provided that such
purchase and transportation arrangements shall be consistent
with the fuel procurement plan for each annual period that is
approved by the Company, through the unanimous vote of the
Class A Members (the "Annual Fuel Procurement Plan"). The
Annual Fuel Procurement Plan will provide general guidelines
regarding the terms and conditions associated with the
purchase and transportation from various available supply
locations, including the term of commitment, firm vs.
interruptible obligation to purchase, firm vs. interruptible
obligations to transport and other terms and conditions
affecting the revenues and risks associated with such purchase
and transportation). The Members intend that the Annual Fuel
Procurement Plans will contain terms and conditions for the
sale and transportation of fuel that will provide the Company
with the best economic result. The Members envision that the
Annual Fuel Procurement Plans will provide for a price for
fuel supplies delivered at the applicable plant that will be
based upon an index or basket of indices that are located at
or near the applicable plant that represent liquid and
transparent pricing points widely relied upon by buyers
43
<PAGE> 48
and sellers of fuel at such points as reflective of the market
conditions. Additional charges will be added to compensate for
(a) any applicable market based premiums associated with the
purchase of longer term or firm fuel supplies required by the
Company in accordance with the Annual Fuel Procurement Plan
and (b) for any market-based transportation costs to transport
fuel from such index or pricing point to the applicable plant.
(B) Power Sales - The Member or its Affiliates
assigned responsibility for the marketing of the power from a
plant (the "Power Marketer") shall be responsible for the
receipt from the Company of 100% of the electrical output of
the applicable plant. Title to such power shall be transferred
from the Company to the Power Marketer at the interconnection
of such plant to the interconnecting utility. The Power
Marketer shall be responsible for entering into all sales and
transmission arrangements downstream from such plant,
including any bilateral contracts or pool- type transactions.
Consistent with the operating parameters of the applicable
plant, it is envisaged that the Power Marketer will purchase
(a) energy, (b) capacity and (c) any ancillary services that
might be marketable from the plant (the "Products"). It is
envisaged that the Products sold to the Power Marketer shall
be based upon one of the following pricing alternatives:
(1) Index Pricing - To the extent that an
index (daily or monthly) or basket of indices are
available that are located at or near the applicable
plant that represent liquid and transparent pricing
points widely relied upon by buyers and sellers of
each Product at such points as reflective of the
market conditions (the "Power Index"), then the price
for the sale of such Product shall be based upon such
Power Index. The Power Marketer shall be eligible to
nominate between daily or monthly indices for a
future quarter on a basis to be agreed upon by the
Power Marketer and the Company should multiple liquid
and transparent indices exist. For avoidance of
doubt, the Power Marketer shall not be obligated to
account to, or to share the results or profits of any
resales of such Products to third parties with the
Company or any of its Members and the Company shall
not be obligated to reimburse the Power Marketer for
any losses that the Power Marketer might incur on the
resale of such Products.
(2) Passthrough Pricing - To the extent that
a Power Index is not available for any Product, then,
unless the Company and the Power Marketer otherwise
agree, the price for the sale of such Product shall
be an amount equal to (a) the revenues actually
received by the Power Marketer for the resale of the
applicable Product to a Person that is not an
Affiliate of the Power Marketer, less (b) any
transmission costs, FERC fees, pooling fees and other
similar costs incurred to market such Product at the
first liquid and transparent pricing point downstream
from such plant. Given a potential limitation by the
Power Marketer to delineate a bundled sale that may
include Products from Company and Products obtained
from a different source, the Power Marketer shall be
eligible to enter into a bilateral agreement to
44
<PAGE> 49
purchase Products from the Company provided that any
such contract will be at a market competitive price
and with a term less than three months. The Power
Marketer shall use all commercially reasonable
efforts to obtain terms and conditions for the sale
and transmission of such Products that will provide
the Company with the best economic result; provided
that it is acknowledged that the market for the
purchase and sale of such Products is often a
volatile and fluctuating market and that the Products
delivered from such plants may be priced on occasion
at levels that are above or below the then existing
market prices for such Products. The Power Marketer
will seek the approval of the Company of any
bilateral contracts for the sale of any such Products
under this subsection (2) that have a term in excess
of three months. The Power Marketer shall consult on
a periodic basis regarding purchase and sale
strategies for Products purchased pursuant to this
subsection (2). To the extent that the Power Marketer
has on a consistent basis over an extended period
failed to sell Products under this subsection (2)
that are equal to or above the prevailing market
prices for such Products, then the Company at the
sole direction of the non-Affiliated Class A Member
would have the right to terminate the arrangement
(and the associated fuel purchase agreement for such
plant) and to assign such responsibilities to the
other Member that has been assigned such power
marketing responsibilities at the other plant(s)
under this Agreement.
(d) The Company shall reimburse each Member for (i) the costs of
properly allocable direct compensation of personnel of such Member and its
Affiliates performing services in connection with the duties delegated to such
Member or its Affiliate pursuant to Section 6.06(a), (b) and (c)(ii)(B)(2),
which costs shall be based on actual payrolls (showing the time expended by
employees in providing such services), costs of holidays, taxes, fringe
benefits, vacations and other statutory contributions and costs of employee
benefits (including workers' compensation insurance), and as a percentage
allowance, an allocation for overhead of five percent (5%) of the direct labor
costs, it being agreed that amounts in the nature of overhead or general and
administrative expenses of the Member and its Affiliates shall not be included;
and (ii) reasonable documented direct out-of-pocket expenses incurred by such
Member and its Affiliates in performing the duties delegated to such Member or
its Affiliate pursuant to Section 6.06(a), (b) and (c)(ii)(B)(2), including
costs of supplies, required travel, lodging and subsistence of personnel, and
fees for independent contractors that are hired to assist in the performance of
such duties, and including (in the case of ECP Holding) any such expenses
incurred prior to the Effective Date, it being agreed that amounts in the nature
of overhead or general and administrative expenses of the Member and its
Affiliates shall not be included. All such costs and expenses shall be
reimbursed by the Company within 30 days following receipt of a proper invoice
therefor.
(e) Each Member and its Affiliates shall be entitled to employ such
personnel as may be reasonable, necessary and customary to perform the duties
delegated to such Member or its Affiliate pursuant to Section 6.06(a), (b) and
(c). Such Member and its Affiliates shall have the sole right to employ, and to
direct the employment of, and assignment of tasks to, all personnel performing
the duties, whether on a full-time, part-time or flex-time basis. Such Member
and its Affiliates shall keep the Company informed as to the identity of the
personnel performing such duties.
45
<PAGE> 50
(f) Within 30 days after the Effective Date, and thereafter, on or
before October 15 of each year during the term of this Agreement, each Member
shall prepare and submit to the Company for its review and approval a detailed
written estimate of the total costs and expenses in connection with performing
the duties delegated to it or its Affiliate pursuant to Section 6.06(a), (b),
(c) and (d), which in the case of the initial estimate, shall be for the
remainder of 1999, and for any estimate thereafter, shall be for the following
year. Unless the Company shall approve such budget within 15 days of submittal
by the Member, such budget shall be deemed to have been approved by the Company.
6.07 CAPITAL PROJECTS. If one Class A Member has proposed that the
Company or one of its Subsidiaries undertake a capital project and the Class A
Members have not approved such undertaking, then if (a) such capital project is
of a type that reasonably could be isolated from the other activities undertaken
by the Company or such Subsidiary and (b) the expenses and revenues associated
with the operation of such capital project reasonably could be isolated from the
expenses and revenues associated with the other activities undertaken by the
Company or such Subsidiary, the Class A Members will use reasonable efforts to
negotiate an appropriate amendment to this Agreement and any other appropriate
agreements by which the proposing Class A Member would provide the funding for
the capital project, bear all incremental expenses and other risks associated
with such capital project, and receive all incremental revenues generated by or
as a result of such capital project.
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;
(c) to make the election provided for in Section 754 of the
Code, if requested by Mesquite; and
(d) any other election the Class A Members may deem
appropriate by unanimous consent.
7.03 TAX MATTERS MEMBER. ECP Holding 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. The Tax Matters Member shall take no
material action with respect to taxes (including, but not limited to, (a)
making, changing or
46
<PAGE> 51
revoking a material tax election, (b) taking a significant position in any tax
return, and (c) settling or otherwise resolving any audit or other proceeding
relating to taxes) without the unanimous consent of the Class A Members. The Tax
Matters Member shall allow the other Class A Members an opportunity to review
and comment upon each federal tax return and each material state or local tax
return of the Company prior to filing.
7.04 FISCAL YEAR. The fiscal year of the Company for financial,
accounting, federal, state and local income tax purposes shall initially be the
fiscal year commencing on January 1 and ending on December 31 or such other
fiscal year that is the same as the taxable year that is required law for
federal income tax purposes (the "Fiscal Year").
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 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.
8.03 FINANCIAL STATEMENTS AND REPORTS. As soon as practicable following
the end of each calendar year and in any event within the time specified below
or such other times as may be required under the Loan Documents, the Company
shall prepare and deliver to each Member:
(a) Within forty-five (45) days following the end of each calendar
quarter in each Calendar year, a report containing information regarding changes
to the Capital Accounts of each Member during such calendar year, including (i)
the amount of Capital Contributions credited to each Member's Capital Account
during such quarter, (ii) any distributions received by a Member during such
quarter, and (iii) any items, such as income or loss from the Company's
activities, allocated to each Member's Capital Account during such quarter;
(b) Within sixty (60) days following the end of such calendar year (or
such later time as the Members shall permit), a report containing information
regarding changes to the Capital Account of each Member during such calendar
year, including (i) the amount of Capital Contributions credited to each
Member's Capital Account during such calendar year, (ii) any distributions
received by a Member during such calendar year under this Agreement, and (iii)
any items, such as income or loss from the Company's activities, allocated to
each Member's Capital Account during such calendar year under this Agreement;
and
(c) Such other reports and information reasonably requested by any
Member.
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<PAGE> 52
8.04 OPERATIONAL DATA. Following a Power Contract Restructuring with
respect to the Linden Plant, the Camden Plant or the Bayonne Plant, or if no
prohibition exists prior to such event under the applicable Power Purchase
Agreement, each Member and its Affiliates shall have the right to access and
review real-time operational data for the applicable plant. If any additional
systems or facilities or additional manpower or other costs are necessary to
permit such real-time data access, then the Members desiring such access will
bear such additional costs.
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 Members 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 Members shall continue to operate the Company's assets
with the same power and authority they had prior to the Dissolution Event. The
steps to be accomplished by the Class A Members are as follows:
(i) as promptly as possible after dissolution and again after
final winding up, the Class A Members 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 Members 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 Members may reasonably determine); and
(iii) the Class A Members may sell any or all the Company's
assets, including to Members; and
(iv) 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
a Member without its consent.
(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
48
<PAGE> 53
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 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.
10.02 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.
10.03 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 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.
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<PAGE> 54
10.04 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.
10.05 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.
10.06 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.
10.07 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.
10.08 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.
10.09 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.
10.10 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.
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IN WITNESS WHEREOF, the Members have executed this Agreement as of the
date first set forth above.
CLASS A MEMBERS: EAST COAST POWER HOLDING COMPANY L.L.C.
By: /s/ WILLIAM W. BROWN
--------------------------------------------------
Name:
------------------------------------------------
Title:
-----------------------------------------------
MESQUITE INVESTORS, L.L.C.
By: Chaparral Investors, L.L.C.,
its sole member
By: El Paso Chaparral Investor, L.L.C.,
its sole member
By: El Paso Chaparral Holding Company,
its sole member
By: /s/ LARRY M. KELLERMAN
---------------------------------
Name: Larry M. Kellerman
-------------------------------
Title: President
------------------------------
CLASS B MEMBERS: EAST COAST POWER HOLDING COMPANY L.L.C.
By: /s/ WILLIAM W. BROWN
--------------------------------------------------
Name:
------------------------------------------------
Title:
-----------------------------------------------
CALIFORNIA PUBLIC EMPLOYEES'
RETIREMENT SYSTEM
By: /s/ RICHARD J. HAYES
--------------------------------------------------
Name: Richard J. Hayes
------------------------------------------------
Title: Portfolio Manager
-----------------------------------------------
MESQUITE INVESTORS, L.L.C.
By: Chaparral Investors, L.L.C.,
its sole member
By: El Paso Chaparral Investor, L.L.C.,
its sole member
By: El Paso Chaparral Holding Company,
its sole member
By: /s/ LARRY M. KELLERMAN
---------------------------------
Name: Larry M. Kellerman
-------------------------------
Title: President
------------------------------
<PAGE> 56
EXHIBIT A
Members
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
NAME AND ADDRESS
- --------------------------------------------------------------------------------
CLASS A MEMBERS:
- --------------------------------------------------------------------------------
East Coast Power Holding Company L.L.C.
1400 Smith Street
Houston, Texas 77002
Attention: Shirley A. Hudler
Fax No. (713) 345-7744
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
Mesquite Investors, L.L.C.
c/o El Paso Power Services Company
1001 Louisiana Street
Houston, Texas 77002
Attention: David Siddall
Fax No.: (713) 420-4099
With copies to:
El Paso Power Services Company
1001 Louisiana Street
Houston, Texas 77002
Attention: Robert W. Baker
Fax No. (713) 420-2813
El Paso Power Services Company
1001 Louisiana Street
Houston, Texas 77002
Attention: John Harrison
Fax No. (713) 420-2108
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 57
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
NAME AND ADDRESS
- --------------------------------------------------------------------------------
CLASS B MEMBERS:
- --------------------------------------------------------------------------------
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
East Coast Power Holding Company L.L.C.
Mesquite Investors, L.L.C.
[same as shown above under "Class A Members"]
- --------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 58
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 (c) 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:
(a) no further Capital Contributions (other than for
working capital) will be made;
<PAGE> 59
(b) the Class A Members 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 Members 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> 60
EXHIBIT C
CERTIFICATE EVIDENCING MEMBERSHIP INTEREST
IN A LIMITED LIABILITY COMPANY
<TABLE>
<S> <C> <C>
--------------- ---------------------
NUMBER MEMBERSHIP INTEREST
--------------- ---------------------
CLASS [A][B]
----- EAST COAST POWER L.L.C. ___% 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 _____________________________ is the owner of a Class [A][B]
Membership Interest representing a ___% 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 Second
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 IN SECTION 3.03 OF THE COMPANY AGREEMENT AND MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED,
<PAGE> 61
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.
EAST COAST POWER L.L.C.
By:
------------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
Dated: , 1999
---------------
2
<PAGE> 62
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> 63
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> 64
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> 65
Schedule 2
Reporting Parties
<TABLE>
<S> <C>
Enron Corp.
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
Enron Covered Entities
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
Shirley A. Hudler Vice President
</TABLE>
<PAGE> 66
El Paso Energy Corporation
William A. Wise
H. Brent Austin
Britton White, Jr.
Joel Richards III
El Paso Power Holding Company
Larry M. Kellerman President
Randolph L. Wu Senior Vice President
Michael A. Prosser Senior Vice President
Timothy J. Sullivan Senior Vice President
Jeffrey I. Beason Vice President and Controller
Sean M. Cooper Vice President
John L. Harrison Vice President and Chief Financial Officer
Kent D. McDuffie Vice President
C. Dana Rice Vice President and Treasurer
Todd K. Torgerson Vice President
Judy A. Vandagriff Vice President
East Coast Power Officers
Ross D. Ain President, Business Development
Joseph M. Bollinger President, Operations
Robert Licato Vice President and Secretary
2
<PAGE> 67
Schedule 3
Certain Approved Contracts
1. First Amended and Restated Credit and Subordination Agreement dated as
of April 20, 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.
5. Corporate Services Agreement dated as of February 4, 1999 between the
Company and Enron Capital & Trade Resources Corp.
6. Consulting Services Agreement dated as of February 4, 1999 between the
Company and Enron Capital & Trade Resources Corp.
7. Spot Gas Sales Agreements dated as of July 20, 1997, between Enron
Capital & Trade Resources Corp. and Linden Venture, Camden Cogen, and
NJ Venture, respectively.
8. Master ISDA Agreement dated as of January 9, 1999 between the Company
and Enron Capital & Trade Resources Corp.
9. Amended and Restated Credit Support Agreement dated as of August 13,
1999 among the Company, Enron and El Paso.
<PAGE> 68
Schedule 4
Current Officers of the Company
Ross D. Ain President, Business Development
Joseph M. Bollinger President, Operations
Robert Licato Vice President and Secretary
<PAGE> 69
Schedule 5
Power Purchase Agreements
1. 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.), as assigned by Cogen Technologies,
Inc. to Linden, Ltd. with the consent of Consolidated Edison Company of
New York, Inc. on August 3, 1989 and as further assigned by Linden,
Ltd. to Linden Venture with the consent of Consolidated Edison Company
of New York, Inc. on December 22, 1989, and as amended by First
Amendment to Power Purchase Agreement dated as of September 17, 1990,
by and between Consolidated Edison Company of New York, Inc. and Cogen
Technologies Linden Venture, L.P., as amended by Second Amendment to
Power Purchase Agreement dated as of December 22, 1993, by and between
Consolidated Edison Company of New York, Inc. and Cogen Technologies
Linden Venture, L.P.
2. Power Purchase and Interconnection Agreement dated as of April 15,
1988, by and between Public Service Electric and Gas Company and Camden
Cogen L.P., as amended by First Amendment dated as of June 12, 1990, by
and between Public Service Electric and Gas Company and Camden Cogen
L.P., as amended by Second Amendment dated as of August 21, 1990, by
and between Public Service Electric and Gas Company and Camden Cogen
L.P.
3. Power Purchase and Operations Coordination Agreement dated as of June
5, 1989, by and between Public Service Electric and Gas Company and
Cogen Technologies NJ Venture.
4. Agreement for Purchase of Electric Power dated as of October 29, 1985,
by and between Cogen Technologies NJ, Inc. and Jersey Central Power &
Light Company, as amended by Amendment to Agreement for Purchase of
Electric Power dated as of September 5, 1986, by and between Cogen
Technologies NJ, Inc. and Jersey Central Power & Light Company, as
assigned to Cogen Technologies NJ Venture pursuant to an Assignment
Agreement by Cogen Technologies NJ, Inc. to Cogen Technologies NJ
Venture dated as of September 8, 1986, by and between Cogen
Technologies NJ, Inc. and Cogen Technologies NJ Venture, as amended by
Second Amendment to Power Purchase Agreement dated as of August 1,
1988, by and between Cogen Technologies NJ Venture and Jersey Central
Power & Light Company.
<PAGE> 1
EXHIBIT 4.6(b)
FIRST AMENDMENT TO
EAST COAST POWER HOLDING COMPANY
SECURITY AGREEMENT
Dated as of August 13, 1999
made by
EAST COAST POWER HOLDING COMPANY L.L.C.
as Grantor,
-----------
to
THE BANK OF NEW YORK
as Trustee
----------
<PAGE> 2
FIRST AMENDMENT TO
EAST COAST POWER HOLDING COMPANY
SECURITY AGREEMENT
FIRST AMENDMENT TO SECURITY AGREEMENT ("Amendment") dated August 13,
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 dated as
of April 20, 1999 by and among the Company and Trustee (the "Indenture")),
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 Grantor and the Trustee have entered into a Security Agreement
dated April 20, 1999 (the "Security Agreement").
(2) Grantor and El Paso Power Services Company ("El Paso") have entered
into a Purchase Agreement dated August 2, 1999 whereby El Paso has agreed to
purchase certain membership interests in East Coast Power L.L.C. which are the
subject to the Security Agreement.
(3) The Grantor and the Trustee have agreed to amend the Security
Agreement to change the description of membership interest which are the subject
of the Security Agreement.
NOW THEREFORE, in consideration of the premises and conditions set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Grantor and Trustee agree as
follows:
SECTION 1. Amendments. Schedule I of the Security Agreement is amended
by deleting the current Schedule I and interesting in its place the following:
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 Company 51% of Class A Limited Liability
Membership Interest Company Membership Interests
East Coast Power L.L.C. Class B Limited Liability 1% of the Class B Limited
Company Membership Liability Company
Interest Membership Interests
</TABLE>
<PAGE> 3
SECTION 2. Execution in Counterparts. This Amendment 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 Amendment by
telecopier shall be effective as delivery of a manually executed counterpart of
this Amendment.
SECTION 3. Governing Law; Entire Agreement. This Amendment shall be
governed by, and construed in accordance with, the laws of the State of New
York. This Amendment 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.
[SIGNATURES BEGIN NEXT PAGE]
-2-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment 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/ WILLIAM W. BROWN
-------------------------------------
Name: William W. Brown
Title: Vice President
First Amendment to East Coast Power
Holding Company -- Security Agreement [Signature Page - 1]
<PAGE> 5
THE BANK OF NEW YORK, as Trustee
By: /s/ MARY BETH LEWICKI
-----------------------------------------------
Name: Mary Beth Lewicki
Title: Vice President
First Amendment to East Coast Power
Holding Company -- Security Agreement [Signature Page - 2]
<PAGE> 1
EXHIBIT 4.8
MESQUITE SECURITY AGREEMENT
Dated as of August 13, 1999
made by
MESQUITE INVESTORS, L.L.C.
as Grantor,
to
THE BANK OF NEW YORK,
as Trustee
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
SECTION 1. Certain Defined Terms 2
SECTION 2. Grant of Security 2
SECTION 3. Security for Obligations 3
SECTION 4. Delivery of Collateral 3
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. 8
SECTION 12. Transfers and Other Liens; Additional Equity Interests 9
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
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
</TABLE>
SCHEDULE I [Schedule I - 1]
<PAGE> 3
MESQUITE INVESTORS, L.L.C. SECURITY AGREEMENT
SECURITY AGREEMENT dated August 13, 1999, made by MESQUITE
INVESTORS, 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
issued Notes in an aggregate principal amount of $850,000,000. Unless otherwise
defined in this Agreement, capitalized terms used in this Agreement have the
meanings specified in the Indenture.
(2) As a condition precedent to the initial purchase of the
Notes by the initial Holders thereof, ECT Merchant, CalPERS, and ECP Holding
Company granted a security interest in their respective limited liability
company membership interests in the Company pursuant to the ECT Merchant
Security Agreement, the CalPERS Security Agreement and the ECP Holding Company
Security Agreement, respectively. Section 12 of each of the ECT Merchant
Security Agreement and the ECP Holding Company Security Agreement provides that
any sale of the collateral covered by such Security Agreements shall be subject
to the Lien created in favor of the Trustee continuing in such collateral.
(3) ECT Merchant has caused to be contributed to ECP Holding
Company all of ECT Merchant's Class B limited liability company membership
interests in the Company.
(4) Pursuant to the Purchase Agreement dated as of August 2,
1999 between ECP Holding Company and El Paso Services Company (as amended, the
"Purchase Agreement"), ECP Holding Company is transferring to the Grantor (i)
49% of the Class B limited liability company membership interests in the
Company, which were previously pledged to the Trustee under the ECT Merchant
Security Agreement, and (ii) 49% of the Class A limited liability company
membership interests in the Company, which were previously pledged to the
Trustee under the ECP Holding Company Security Agreement.
(5) In order to comply with Section 12 of each of the ECT
Merchant Security Agreement and the ECP Holding Company Security Agreement and
as a condition precedent to closing under the Purchase Agreement, the Grantor
has agreed to grant the security interest and make the pledge and assignment
contemplated by this Agreement.
<PAGE> 4
2
NOW, THEREFORE, in consideration of the premises, 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).
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
<PAGE> 5
3
(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 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
<PAGE> 6
4
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 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. 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.
<PAGE> 7
5
(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.
(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
<PAGE> 8
6
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.
(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
<PAGE> 9
7
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;
(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
<PAGE> 10
8
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.
(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).
<PAGE> 11
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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.
(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
<PAGE> 12
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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.
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.
<PAGE> 13
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(c) Notwithstanding the foregoing, the Grantor and the Trustee
recognize that any disposition of Collateral must 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 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> 14
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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 or
cable communication) and, mailed, telecopied, cabled or delivered:
<PAGE> 15
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(a) if to the Grantor, at its address at 1001 Louisiana
Street, Houston, Texas 77002 Telecopy: (713) 420-2813, Telephone: (713)
757-2131 Attention: Robert W. Baker, Jr., Esq. and Vickie Sidhu; 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 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.
<PAGE> 16
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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 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.
<PAGE> 17
15
(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> 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.
MESQUITE INVESTORS, L.L.C.
By: CHAPARRAL INVESTORS, L.L.C.,
its sole Member
By: EL PASO CHAPARRAL
INVESTOR, L.L.C.,
its sole Member
By: EL PASO CHAPARRAL
HOLDING COMPANY,
its sole Member
By: /s/ LARRY M. KELLERMAN
-----------------------------------------
Name: Larry M. Kellerman
Title: President
THE BANK OF NEW YORK, as Trustee
By: /s/ MARY BETH LEWICKI
-----------------------------------------
Name: Mary Beth Lewicki
Title: Vice President
Mesquite Security Agreement [Signature Page - 1]
<PAGE> 19
Schedule I
EQUITY INTERESTS
<TABLE>
<CAPTION>
======================================================================================================
ISSUER TYPE OF INTEREST PERCENTAGE OF
OUTSTANDING
EQUITY INTEREST
======================================================================================================
<S> <C> <C>
East Coast Power L.L.C. Class A Limited Liability 49% of Class A Limited Liability
Company Membership Interest Company Membership Interests
======================================================================================================
East Coast Power L.L.C. Class B Limited Liability 49% of Class B Limited Liability
Company Membership Interest Company Membership Interests
======================================================================================================
</TABLE>
[SCHEDULE I -1]
<PAGE> 1
EXHIBIT 5.1
October 13, 1999
East Coast Power L.L.C.
711 Louisiana, Suite 3200
Houston, Texas 77002
Ladies and Gentlemen:
We have acted as counsel to East Coast Power L.L.C., a Delaware limited
liability company (the "Company"), in connection with the preparation of the
Registration Statement on Form S-4 (the "Registration Statement") to be filed
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Company's 6.737% Senior Notes due 2008, Series B; 7.066% Senior Notes due 2012,
Series B; and 7.530% Senior Notes due 2017, Series B (the "Notes").
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of (i) the Second Amended and Restated Limited Liability
Company Agreement of the Company, (ii) the Indenture dated as of April 20, 1999
(the "Indenture") between the Company, The Bank of New York, as Trustee (the
"Trustee") and (iii) such other certificates, statutes and other instruments and
documents as we considered appropriate for purposes of the opinions hereafter
expressed.
In connection with this opinion, we have assumed that the Registration
Statement, and any amendments thereto (including post-effective amendments),
will have become effective and the Notes will be issued and sold in compliance
with applicable federal and state securities laws and in the manner described in
the Registration Statement and the applicable Prospectus.
Based on the foregoing, we are of the opinion that when the Notes have been
duly executed, authenticated, issued and delivered in accordance with the
provisions of the Indenture, such Notes will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except as such enforcement is subject to any applicable bankruptcy,
insolvency, reorganization or other law relating to or affecting creditors'
rights generally and general principles of equity, and will be entitled to the
benefits of the Indenture.
The foregoing opinion is limited in all respects to the laws of the State
of New York and federal laws.
<PAGE> 2
East Coast Power L.L.C.
Page 2
October 13, 1999
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. By giving such consent, we do not admit that we are
within the category of persons whose consent is required under Section 7 of the
Securities Act or the rules and regulations of the Commission issued thereunder.
Very truly yours,
/s/ VINSON & ELKINS L.L.P.
<PAGE> 1
EXHIBIT 8.1
October 13, 1999
East Coast Power L.L.C.
711 Louisiana Street
Houston, Texas 77002
Ladies and Gentlemen:
We participated in the preparation of the Registration Statement on
Form S-4 dated June 25, 1999 (and all subsequent amendments) filed with the
Securities and Exchange Commission by East Coast Power L.L.C. (the "Company")
with respect to the Company's 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, respectively (the "Registration
Statement")(1), including the discussion set forth in the Registration Statement
under the heading "United States Income Tax Considerations". The discussion and
the legal conclusions with respect to United States federal income tax matters
set forth therein reflect our opinion, and we believe they are accurate and
complete in all material respects.
Our opinion is based and conditioned upon the initial and continuing
accuracy of the facts and assumptions set forth in the Registration Statement.
Our opinion is also based upon provisions of the United States Internal Revenue
Code of 1986, as amended, regulations promulgated or proposed thereunder and
interpretations thereof by the Internal Revenue Service and the courts, all as
of the date of the Registration Statement, all of which are subject to change
with prospective or retroactive effect, and our opinion could be adversely
affected or rendered obsolete by any such change.
We hereby consent to the use of our name in the Registration Statement
and to the filing of this opinion as part of the Registration Statement. This
consent does not constitute an admission that we are "experts" within the
meaning of such term as used in the Securities Act of 1933.
Very truly yours,
/s/ VINSON & ELKINS L.L.P.
VINSON & ELKINS L.L.P.
- --------------------
(1) All capitalized terms used but not defined herein have the meaning
ascribed to them in the Registration Statement.
<PAGE> 1
EXHIBIT 10.3
AMENDMENT NO. 2 TO
TRANSACTION AGREEMENT
THIS AMENDMENT NO. 2 TO TRANSACTION AGREEMENT ("AMENDMENT") is made
effective as of the 13th 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, as amended by Amendment No. 1 to Transaction
Agreement effective as of November 6, 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) Annex 7.04-F to the Transaction Agreement (referred to in
Section 7.04(a)(vi)) is hereby amended and restated to read in its
entirety as set forth on ANNEX 7.04-F attached hereto. Annexes 7.04-G,
7.04-H, 7.04-I, 7.04-J and 7.04-K are hereby deleted in their
entirety.
(b) Section 7.04(b) of the Transaction Agreement is hereby
amended and restated to read in its entirety as follows:
(b) McNair, RCM Holdings, CTCI and the Buyer Entities will
endeavor to use their commercially reasonable efforts to obtain
prior to the Closing the Bayonne Consents, the Camden Consents
and the Linden Consents.
(c) Section 7.04(c) of the Transaction Agreement is hereby
amended and restated to read in its entirety as follows:
(c) Sellers will pay all fees and expenses payable in
connection with obtaining the Bayonne Consents and all fees and
expenses payable in connection with obtaining the required
consent of GE or the Owner Trustee
<PAGE> 2
in connection with obtaining the Camden Consents or the Linden
Consents. The Buyer Entities will pay all fees and expenses
payable to the parties other than GE or the Owner Trustee in
connection with obtaining the Camden Consents and the Linden
Consents 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) Section 7.04(d) of the Transaction Agreement is hereby
amended and restated to read in its entirety as follows:
(d) The Buyer Entities and the Sellers acknowledge and agree
that the forms of Partnership Consents 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. Buyer and McNair each agree to use their
best efforts to keep each other reasonably informed as to their
progress in obtaining the consents referred to in this Section
7.04, and agree to notify the other as soon as possible if they
determine that any of the consents referred to in this Section
7.04 will not be able to be obtained on terms that would satisfy
the condition to Closing set forth in Section 10.01(e).
(e) Section 10.01(e) of the Transaction Agreement is hereby
amended and restated to read in its entirety as follows:
The Bayonne Consents, Camden Consents, Linden Consents and
Partnership Consents shall have been obtained; provided that
Buyer shall have the right to waive, without the consent of the
Sellers, the foregoing condition to Closing with respect to the
portion of any such consent that relates to Buyer's obtaining
financing for the Contemplated Transactions, including matters
relating to liens and intercreditor relationships.
(f) Sections 12.01(f) and 12.01(h) of the Transaction Agreement
are hereby deleted in their entirety. In addition, the reference
beginning in the eighth line of Section 7.01(a) to "the expiration of
the termination rights set forth in Sections 12.01(f) and 12.01(h)
hereof" shall be deemed to refer to the date of this Amendment.
(g) Section 12.02(a) of the Transaction Agreement is hereby
amended to delete therefrom the words in the first line "Except as set
forth in Section 12.02(b)", and Section 12.02(b) of the Transaction
Agreement is hereby deleted in its entirety.
(h) Section 13.01 of the Transaction Agreement is amended to
provide that H. Fred Levine may be notified by telecopy at (713)
532-7668, and that John P. Hansen may be notified by telecopy at (713)
735-3276.
<PAGE> 3
(i) Exhibit I of the Transaction Agreement is hereby amended to
delete therefrom the definitions of the terms "Bayonne Consent",
"Camden Bank Consent", "Camden GE Consent", "Linden Bank Consent" and
"Linden GE Consent," to change the name of the defined term "Competing
Transaction" to "Competing Proposal" and to add to such Exhibit I the
following definitions:
"BAYONNE CONSENTS" means any consents, waivers or amendments
necessary under the agreements referred to in Section
II.06(ii)(b) of the Disclosure Schedule with respect to the
Contemplated Transactions, including the proposed financing of
the Contemplated Transactions by Buyer on terms reasonably
satisfactory to Buyer (which terms shall include obtaining a lien
on the general partnership interest currently owned by NJ Inc. in
NJ Venture in favor of the Buyer Entities' lenders, together with
reasonable intercreditor agreements in connection therewith).
"CAMDEN CONSENTS" means any consents, waivers or amendments
necessary under the agreements referred to in Sections
II.04(i)(2)(e) and II.06(iii)(a), (c) and (f) of the Disclosure
Schedule with respect to the Contemplated Transactions, including
the proposed financing of the Contemplated Transactions by Buyer
on terms reasonably satisfactory to Buyer (which terms shall
include obtaining liens on the general partnership interest and
limited partnership interest in CT Camden and on the general
partner interest owned by CT Camden in Camden Cogen, each in
favor of the Buyer Entities' lenders, together with reasonable
intercreditor agreements in connection therewith).
"LINDEN CONSENTS" means any consents, waivers or amendments
necessary under the agreements referred to in Sections
II.04(i)(1)(d) and (e) and II.06(i)(b), (c), (d), (f) and (g) of
the Disclosure Schedule with respect to the Contemplated
Transactions, including the proposed financing of the
Contemplated Transactions by Buyer on terms reasonably
satisfactory to Buyer (which terms shall include obtaining liens
on the general partnership interest and limited partnership
interest in Linden Ltd. and on the general partnership interest
owned by Linden Ltd. in Linden Venture, each in favor of the
Buyer Entities' lenders, together with reasonable intercreditor
agreements in connection therewith).
(j) Sections II.04 and II.06 of the Disclosure Schedule are
hereby amended and restated to read in their entirety as set forth in
EXHIBIT A hereto.
<PAGE> 4
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.
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
<PAGE> 5
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
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
<PAGE> 6
/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
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
<PAGE> 7
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
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> 8
ANNEX 7.04-F
CONSENT AND WAIVER OF VENTURERS
(COGEN TECHNOLOGIES NJ VENTURE)
Reference is made to the Amended and Restated Joint Venture Agreement
of Cogen Technologies NJ Venture dated as of August 28, 1986 (the "Venture
Agreement") by and among Cogen Technologies NJ, Inc., a Delaware corporation
("NJ Inc."), Enron Cogeneration Five Company, a Delaware corporation ("EC5"),
CEA Bayonne, Inc., PSVO Bayonne, Inc., and Transco Cogeneration Company. All
capitalized terms used herein and not otherwise defined shall have the
respective meanings as defined in the Venture Agreement.
WHEREAS, the undersigned, NJ Inc., EC5 and American National
Power/Mission Bayonne Partnership, a _________ partnership ("ANP/Mission"), are
the current Venturers;
WHEREAS, NJ Inc. has proposed certain transactions described in more
detail below;
WHEREAS, NJ Inc. has requested that EC5 and ANP/Mission consent to the
consummation of such transactions and waive any rights under certain provisions
of the Venture Agreement that may arise in connection therewith, and EC5 and
ANP/Mission desire to grant such consent and waiver;
NOW, THEREFORE, the undersigned Venturers hereby agree as follows:
1. Each of EC5 and ANP/Mission hereby grants its consent to the
following transactions (the "Transactions") for all purposes under the Venture
Agreement and agrees that NJ Inc. and its successors and assigns may consummate
the Transactions, notwithstanding any provision of the Venture Agreement that
might otherwise restrict or prohibit such consummation, including without
limitation Section 12.1, 12.3 or the first three sentences of 12.6 thereof:
(a) the assignment by NJ Inc. of its interest in the Venture
(the "Interest") to McNair Energy Services Corporation
("MESC") pursuant to a merger of NJ Inc. into MESC, and the
admission of MESC as a substitute Managing Venturer of the
Venture;
(b) the pledge of the Interest by MESC to (i) NationsBank,
N.A., as agent, and (ii) the shareholders of MESC;
(c) the further assignment of the Interest (subject, if
applicable, to the pledges described in clause (b) above) to
one or more entities controlled 50% or more by Enron Capital &
Trade Resources Corp. ("ECT") or an Affiliate of ECT, and the
admission of any such entity as a substitute Managing Venturer
of the Venture; and
<PAGE> 9
(d) the making of an election by the Venture under section 754
of the Code.
2. ANP/Mission hereby waives any and all rights under Section 12.8 of
the Venture Agreement in connection with the Transactions.
3. EC5 and ANP/Mission hereby waive any and all rights under Sections
12.1, 12.2 and 12.9 of the Venture Agreement in connection with the
Transactions.
4. This Consent and Waiver 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.
IN WITNESS WHEREOF, the parties hereto have caused this Consent and
Waiver of Venturers to be duly executed and delivered by their proper and duly
authorized officers as of the day and year first above written
ENRON COGENERATION FIVE COMPANY
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
AMERICAN NATIONAL POWER/MISSION
BAYONNE PARTNERSHIP
By:
-----------------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
By:
-----------------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE> 10
EXHIBIT A
AMENDED AND RESTATED SECTIONS II.04 AND II.06
OF THE DISCLOSURE SCHEDULE
<PAGE> 1
EXHIBIT 10.4
AMENDMENT NO. 3 TO
TRANSACTION AGREEMENT
THIS AMENDMENT NO. 3 TO TRANSACTION AGREEMENT ("AMENDMENT") is made
effective as of the 1st day of February 1999, 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, as amended by Amendment No. 1 to Transaction
Agreement effective as of November 6, 1998 and Amendment No. 2 to Transaction
Agreement effective as of November 13, 1998 (as so amended, the "TRANSACTION
AGREEMENT"); and
WHEREAS, the parties hereto wish to further 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) Section 2.02 of the Transaction Agreement is hereby amended and
restated to read in its entirety as follows:
SECTION 2.02 Linden Acquisition. At the Closing, subject to
the terms and conditions of this Agreement:
(a) Purchase of Initial Interests.
(i) RCM Holdings will sell, assign, transfer and
convey (X) to Buyer Linden GP, 1.221% of 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) $1,466,893.64 in cash, and (ii) a number of shares of
Parent Common Stock equal to $2,501,371.13 divided by the
Parent Stock Value, and (Y) to Buyer Linden LP, 98.779%
percent of the RCM Holdings Initial Linden Interest, free and
clear of all Liens, in exchange for the delivery by Buyer
Linden LP to RCM Holdings of (i) $118,671,815.72 in cash, and
(ii) a number of shares of Parent Common Stock equal to
$202,361,128.87 divided by the Parent Stock Value. The
foregoing assignments shall be evidenced by assignments in
substantially the form attached hereto as ANNEX 2.02-A with
such changes thereto necessary to reflect the division of the
<PAGE> 2
RCM Holdings Initial Linden Interest between Buyer Linden GP
and Buyer Linden LP as described herein.
(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) $26,470,247.09 in cash, and (ii) a
number of shares of Parent Common Stock equal to
$45,137,500.00 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
subparagraphs (i) and (ii) 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.
(b) Redemption of Remaining Interests. Immediately following
the transactions contemplated in subsection 2.02(a) above:
(i) Linden Ltd. will borrow $289,391,043.55 from
Morgan Stanley & Co. Incorporated (or another third party
lender reasonably acceptable to the parties) to be used in
connection with the redemption of the RCM Holdings Remaining
Linden Interest and the CTLPJV Remaining Linden Interest as
set forth below, pursuant to a subordinated loan agreement
substantially in the form attached 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:
2
<PAGE> 3
(A) the RCM Holdings Remaining Linden
Interest in exchange for (1) the payment by Linden
Ltd. to RCM Holdings of $237,141,490.64 in cash, 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 $52,249,552.91 in cash, 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 agreements in substantially the form
set forth as ANNEX 2.02-E1 AND 2.02-E2.
(b) ANNEXES 2.02-C, 2.02-E2 AND 2.03 to the Transaction Agreement are
hereby amended and restated in their entirety to read as set forth on ANNEXES
2.02-C, 2.02-E AND 2.03 to this Amendment, respectively.
(c) It is agreed that, notwithstanding anything to the contrary in
Section 2.05 of the Transaction Agreement, all additional Consideration to be
paid to the Sellers pursuant to Section 2.05(b) shall be paid by the applicable
Buyer Entities 18.055% to CTLPJV and 81.945% to CTCI, and otherwise in the
manner contemplated by Section 2.05(c).
(d) It is agreed that at Closing, Buyer Acquisition shall pay to CT
Capital the sum of $265,500 in reimbursement for CT Capital's obtaining the
directors' and officers' liability insurance referred to in Section 7.03(c), in
full satisfaction of Buyer's obligations under Section 7.03(c).
(e) ANNEXES 7.04-B, 7.04-E1 and 7.04-E2 to the Transaction Agreement
are hereby amended and restated in their entirety to read as set forth on
ANNEXES 7.04-B, 7.04-E1 and 7.04-E2 to this Amendment, respectively.
(f) Section 7.05 of the Transaction Agreement is hereby amended and
restated to read in its entirety as follows:
SECTION 7.05 Buyer Insurance. The Buyer Entities
shall (i) cause to be put in place as of the Closing Date
insurance policies covering the Acquired Entities with
coverage amounts and containing terms and
3
<PAGE> 4
conditions that are sufficient to meet the obligations of the
Acquired Entities under their respective partnership
agreements and loan agreements, or (ii) shall cause the
insurance policies covering the Acquired Entities immediately
prior to Closing to be continued at the expense of the Buyer
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.
(g) Section 7.06 of the Transaction Agreement is hereby amended and
restated to read in its entirety as follows:
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 initially MESC (as successor to NJ Inc. in the MESC/NJ
Merger and as the successor managing venturer of NJ Venture)
will continue to perform the services 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,
and agrees to cause the other Buyer Entities not to, take any
action that would cause NJ Venture to be terminated prior to
the scheduled expiration of the NJ Venture Partnership
Agreement, or MESC to cease being the managing venturer of NJ
Venture 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.
(h) The list of Transferred Employees set forth on ANNEX 9.01 is hereby
replaced with the list set forth on ANNEX 9.01 to this Amendment.
(i) Clause (i) of Section 9.01(b) of the Transaction Agreement is
hereby amended and restated to read in its entirety as follows:
4
<PAGE> 5
(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 (provided that if any such employee benefit
plan or program precludes their participation thereunder, a
generally comparable plan or program shall be substituted
therefor) 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;
(j) Section 10.04 is hereby added to the Transaction Agreement to read
in its entirety as follows:
SECTION 10.04. Closing Conditions Relating to ISRA
Process. Notwithstanding any provision in this Article 10 to
the contrary, the conditions to closing set forth in Sections
10.02(d) or 10.03(e) of the Transaction Agreement shall be
deemed to be satisfied by the Buyer Entities and the Sellers
(i) as such conditions relate to the Bayonne Plant, by the
execution and delivery of a Remediation Agreement between the
NJDEP and Bayonne Industries, Inc. in the form attached hereto
as ANNEX 10.04 - A, so long as such agreement remains in full
force and effect and is not amended or otherwise modified
without the consent of the Buyer Entities and the Sellers, and
(ii) as such conditions relate to the Linden Plant, by the
receipt of a "remediation in progress" waiver letter from the
NJDEP in substantially the form of ANNEX 10.04 - B hereto, so
long as such letter remains in full force and effect and is
not amended or otherwise modified without the consent of the
Buyer Entities and the Sellers.
(k) It is agreed for purposes of Section 13.11 of the Transaction
Agreement that the Sellers Representatives' are authorized to certify at Closing
to Buyer's lenders on behalf of the Sellers that the conditions to the
obligations of Sellers to consummate the Contemplated Transactions have been
satisfied.
(l) Exhibit I to the Transaction Agreement is hereby amended to delete
therefrom the definitions of the terms "Linden Value" and "Receivable Amount."
(m) The references in Section III.03(a) of Exhibit III to "Buyer" shall
be deemed to refer to "Parent".
(n) Sections 1(b) and 1(d) of Amendment No. 1 to the Transaction
Agreement dated as of November 6, 1998 ("Amendment No. 1"), are hereby revoked,
so that:
5
<PAGE> 6
(i) The references in Section 2.07(a) of the original
Transaction Agreement dated October 25, 1998 to "negative
$4,932,952" are not changed as provided by Amendment No. 1;
and
(ii) Section 13.13 as added by Amendment No. 1 is deleted.
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.
6
<PAGE> 7
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/ JEFFREY MCMAHON
----------------------------------------------
Name: Jeffrey McMahon
-----------------------------------------
Title: 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
7
<PAGE> 8
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.
/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
8
<PAGE> 9
/s/ MELISSA EILEEN MCNAIR REIGHERT
-------------------------------------------------
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
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
9
<PAGE> 10
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
10
<PAGE> 11
ANNEX 2.02-C
FORM OF MORGAN STANLEY SUBORDINATED LOAN AGREEMENT
11
<PAGE> 12
ANNEX 2.02-E2
FORM OF REDEMPTION OF PARTNERSHIP INTERESTS AND
FOURTH AMENDMENT TO AGREEMENT OF LIMITED PARTNERSHIP
OF
COGEN TECHNOLOGIES LINDEN, LTD.
12
<PAGE> 13
ANNEX 2.03
FORM OF BAYONNE SELLER NOTE
PROMISSORY NOTE
$_____________ ____________ __, 1999
REFERENCE IS MADE to the Transaction Agreement (the "Transaction
Agreement") dated as of October 25, 1998, as amended, among Enron Corp., an
Oregon corporation, Enron Capital & Trade Resources Corp., a Delaware
corporation ("ECT") (and certain Affiliates thereof described therein), 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 defined
therein. This Note is one of the Bayonne Seller Notes referred to in the
Transaction Agreement.
FOR VALUE RECEIVED, McNair Energy Services Corporation, a Texas
corporation (the "Borrower"), hereby promises to pay to the order of
___________________________ (the "Holder"), upon presentation and surrender of
this Note at the principal office of the Borrower, the principal sum of
__________________________________________________ AND __/100 DOLLARS
(_____________) (the "Loan") in lawful money of the United States of America and
in immediately available funds, on _____, 1999 [insert first Business Day after
Closing] (the "Due Date"). No interest shall be paid on the Loan if the Loan is
repaid in full on or prior to the Due Date.
IF ANY principal on the Loan is not paid on or before the Due Date,
then, except as provided below, from and after the Due Date, the Holder shall be
entitled to interest on the unpaid principal amount of the Loan, at such office,
in like money and funds, from the Due Date until the Loan shall be paid in full,
a rate per annum equal to the lesser of 17.9% or the maximum amount that may
lawfully be paid under applicable law ("Maximum Interest"); provided, however,
that if there shall have occurred any event having a material adverse effect on
the Bayonne Plant (as defined in the Transaction Agreement) as a result of which
Buyer (as defined in the Transaction Agreement) or its designee shall not have
obtained a loan or loans sufficient to repay this Note in full, then the Holder
shall not be entitled to Maximum Interest and shall not be entitled to declare a
default by reason of any failure to pay principal or interest on this Note, in
each case until after the date 10 Business Days after the Due Date, but shall be
entitled to interest on the unpaid principal amount of the Loan, at such office,
in like money and funds, for any period from and after the Due Date during such
10 Business Day-period until the Loan shall be paid in full, at a rate per annum
equal to ___% [insert Base Rate on second day prior to Closing plus 1%].
THE BORROWER AGREES that until such time as this Note has been paid, it
will not incur any additional debt, will not make any distributions to its
shareholders and will not repurchase any of its shares of stock.
13
<PAGE> 14
THE BORROWER MAY ASSIGN its obligations under this Note to [Buyer
Acquisition] or its designee and [Buyer Acquisition] or its designee by its
acceptance of such assignment shall assume Borrower's obligations under this
Note (except for the Borrower's obligations set forth in the immediately
preceding paragraph).
EFFECTIVE IMMEDIATELY UPON the acquisition by ECT of all of the
outstanding capital stock of the Borrower pursuant to the Transaction Agreement,
ECT will irrevocably and unconditionally guarantee the timely payment when due
of all of Borrower's financial obligations under this Note to the extent
Borrower fails to pay such obligations when due. The foregoing guarantee is
evidenced by the execution by ECT of this Note.
IF THIS NOTE is collected by suit or through the Probate or Bankruptcy
Court, or any judicial proceeding, or if this Note is not paid pursuant to its
terms and it is placed in the hands of an attorney for collection, then the
Borrower agrees to pay such attorney's reasonable attorneys fees.
THE BORROWER waives demand, presentment for payment, notice of
nonpayment, protest, notice of protest, and all other notice, filing of suit and
diligence in collecting this Note or enforcing any of the security herefor, and
agrees that it will not be necessary for any holder hereof, in order to enforce
payment of this Note by it, to first institute suit or exhaust its remedies
against the Borrower or to enforce its rights against any security herefor.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF TEXAS.
MCNAIR ENERGY SERVICES CORPORATION
By:
---------------------------------------
Name:
Title:
For the purposes of the sixth paragraph
of this Note only:
ENRON CAPITAL & TRADE RESOURCES CORP.
By:
---------------------------------------
Name:
Title:
14
<PAGE> 15
ANNEX 7.04-B
AMENDMENT OF LIMITED PARTNERSHIP OF
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
15
<PAGE> 16
ANNEX 7.04-E1
MANAGEMENT FEE TERMINATION AGREEMENT
(CAMDEN COGEN)
16
<PAGE> 17
ANNEX 7.04-E2
MANAGEMENT FEE TERMINATION AGREEMENT
(CT CAMDEN)
17
<PAGE> 18
ANNEX 9.01
TRANSFERRED EMPLOYEES
<TABLE>
<CAPTION>
EMPLOYEE
--------
<S> <C>
1. Ain, Ross
2. Arlington, Patricia
3. Avant, Fred A.
4. Baker, Marilyn N.
5. Bollinger, Joseph M.
6. Brody, Richard D.
7. Campbell, Elaine A.
8. Capolupo, Angelo M.
9. Driscoll, Mark
10. Durbin, Tara
11. Evans, Clifford D.
12. Feinstein, Jacob
13. Flack, T. Cooper
14. Foster, Robert D.
15. Fuller, Ana I.
16. Garber, Mitchell I.
17. Granata, Laura
18. Grubel, Pamela
19. Guise, John J.
20. Harper, W. Colin
21. Hoatson, Thomas
22. Hoover, Barbara A.
23. Keevill, Gary
24. Licato, Robert J.
25. McInerney, Margaret
26. MaGee, Molly
27. Pearson, Judith
28. Peteler, Brian O.
29. Roubique, Ginger L.
30. Snell, John A.
31. Sowell, Charles L.
32. Stappenbeck, Arthur
33. Stockton, Douglas E.
34. Tobias, Charles J.
35. Toups, Joy R.
36. Tubb, Denise Marie
37. Viola, William N.
38. Warren, Suzanne
</TABLE>
18
<PAGE> 19
ANNEX 10.04 - A
REMEDIATION AGREEMENT BETWEEN BAYONNE INDUSTRIES AND NJDEP (BAYONNE PLANT)
19
<PAGE> 20
ANNEX 10.04 - B
REMEDIATION IN PROGRESS LETTER (LINDEN PLANT)
20
<PAGE> 1
EXHIBIT 10.6
AMENDED AND RESTATED
CREDIT SUPPORT AGREEMENT
DATED AS OF AUGUST 13, 1999
AMONG
EAST COAST POWER L.L.C.,
ENRON CORP.
AND
THE LENDERS SIGNATORY HERETO
<PAGE> 2
THIS AMENDED AND RESTATED CREDIT SUPPORT AGREEMENT dated as of August
13, 1999 is among EAST COAST POWER L.L.C., a Delaware limited liability company
(together with its successors and permitted assigns, "East Coast"), ENRON CORP.,
an Oregon corporation (together with its successors and permitted assigns,
"Enron"), and each Lender that is or becomes a signatory hereto pursuant to
Section 9.06 (each a "Lender" and collectively, the "Lenders").
RECITALS
A. Enron and East Coast previously entered into a Credit and
Subordination Agreement dated as of February 4, 1999 (the "Original Credit
Agreement") pursuant to which, and upon the terms and conditions stated therein,
Enron made a loan to East Coast evidenced by a promissory note in the aggregate
principal amount of $250,000,000 (the "Subordinated Note").
B. Enron assigned 100% of its interest in the Original Credit Agreement
and the Subordinated Note to Ponderosa Assets L.P., a Delaware limited
partnership and a majority indirectly owned subsidiary of Enron, pursuant to an
Assignment and Acknowledgment dated and effective as of February 4, 1999, and
thereafter Ponderosa Assets L.P., assigned 100% of its interest in the Original
Credit Agreement to Sundance Assets, L.P., a Delaware limited partnership and a
majority indirectly owned subsidiary of Enron, pursuant to an Assignment and
Acknowledgment dated and effective as of February 4, 1999.
C. On April 20, 1999, East Coast issued and delivered $850,000,000 of
its Senior Secured Notes (the "Senior Notes") pursuant to the terms of an
Indenture (as amended from time to time, the "Indenture") between East Coast and
The Bank of New York, as Trustee (the "Trustee"), and in connection therewith,
East Coast requested that Enron provide certain credit support including: (i)
causing the issuance of four irrevocable letters of credit, specifically
described on Exhibit A hereto (together with any extensions, renewals,
modifications, or replacements thereof, the "Letters of Credit") and (ii)
providing the Enron Undertaking (as defined herein).
D. East Coast also requested that Enron make available to East Coast a
credit facility to finance East Coast's obligations to reimburse Enron for any
drawings on the Letters of Credit and payments under the Enron Undertaking, and
Enron and East Coast entered into that certain Credit Support Agreement dated as
of April 20, 1999 (the "Original Credit Support Agreement"); and
F. East Coast Power Holding Company, L.L.C. and Mesquite Investors,
L.L.C. ("Mesquite") have entered into that certain Purchase Agreement dated
August 2, 1999 (the "Purchase Agreement"), whereby Mesquite agreed to purchase
certain membership interests in East Coast pursuant to the terms and conditions
thereof:
G. Enron has requested, and it is a condition of the Purchase
Agreement, that El Paso Energy Corp. share in the funding of any Loans made by
Enron under this Agreement and receive a portion of fees or other amounts
received by Enron thereunder by becoming a Lender hereunder;
-1-
<PAGE> 3
H. In consideration of the foregoing and the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined Above. As used this Agreement, the terms
"East Coast", "El Paso", "Enron", "Indenture", "Lender", "Letters of Credit",
"Mesquite", "Original Credit Agreement ", "Original Credit Support Agreement",
"Senior Notes", "Subordinated Note", "Trustee", shall have the meanings
indicated above.
Section 1.02 Defined Terms. Unless otherwise defined herein, the terms
used herein (including exhibits hereto) have the meanings specified in the
Indenture. The following terms shall have the following meanings:
"Advances" means Letter of Credit Advances and Undertaking Advances.
"Affiliate" means, as to any Person, 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.
"Agreement" means this Amended and Restated Credit Support Agreement,
as the same may from time to time be amended or supplemented.
"Business Day" shall mean any day other than a day on which commercial
banks are authorized or required to close in New York, New York or Houston,
Texas.
"Commitment" means the obligation of Lenders to make Loans to East
Coast in an aggregate principal amount at any one time outstanding not to exceed
the sum of (i) the Maximum Amount (as such term is defined In the Enron
Undertaking) and (ii) the face amount of the Letters of Credit (each as of the
date of this Agreement which Commitment may be increased or reduced in
accordance with the terms of this Agreement. As of August 13, 1999, the
Commitment is $86,257,689.
"Default Rate" means, in respect of any amount payable by any party
under this Agreement which is not paid when due (whether at stated maturity by
acceleration or otherwise), a rate per annum equal to a Market-Based Rate,
during the period commencing on the due date until such amount is paid in full
or the default is otherwise cured or waived, but in any event not to exceed the
Highest Lawful Rate.
-2-
<PAGE> 4
"Enron Undertaking" means an undertaking substantially in the form
attached as Exhibit A to the Common Security Agreement, as amended, extended or
otherwise modified in accordance with the terms thereof.
"Final Maturity Date" means August 15, 2017.
"Governmental Authority" shall mean (a) any governmental authority
wherever located, including the federal government of the United States and any
state, county, parish, municipal and political subdivisions which exercises
jurisdiction over any party hereto and (b) any court, agency, department,
commission, board, bureau or instrumentality of any of them which exercises
jurisdiction over any party hereto.
"Governmental Requirement" means, with respect to any Person, all
applicable laws, rules, regulations and orders of, and all applicable
restrictions imposed by, any Governmental Authority in respect of the conduct of
the business of such Person and the ownership of the properties of such Person.
Unless otherwise noted, references to Governmental Requirements shall mean
Governmental Requirements applicable to East Coast or its Subsidiaries.
"Highest Lawful Rate" means the maximum nonusurious interest rate, if
any, that at any time or from time to time may be contracted for, taken,
reserved, charged or received on the Notes under laws applicable to a Lender
which are presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a higher
maximum nonusurious interest rate than applicable laws now allow.
"Indemnity Matters" means any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands and
causes of action made or threatened against a Person and, in connection
therewith, all losses, liabilities, damages (including, without limitation,
consequential damages or reasonable costs and expenses of any kind or nature
whatsoever incurred by such Person whether or not caused by the sole or
concurrent negligence of such Person seeking indemnification.
"Insolvency Event" means the collective reference to the following
events: (a) East Coast or any of its Subsidiaries shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to pay
its debts generally or shall make a general assignment for the benefit of
creditors, or (b) any proceeding shall be instituted by or against East Coast or
such Subsidiary seeking (i) to adjudicate it as bankrupt or insolvent, or (ii)
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or (iii) seeking
the entry of an order for relief or the appointment of a receiver, trustee, or
other similar official for it or for any substantial part of its property and,
in the case of any such proceeding instituted against it (but not instituted by
shall remain undismisssed or unstayed for a period of 60 days, or (c) East Coast
or such Subsidiary shall take any action to authorize any of the events set
forth above in this paragraph.
"Lender Participation Amount" shall have the meaning set forth in
Section 8.01.
-3-
<PAGE> 5
"Lender Participation Percentage" means, with respect to a particular
Lender, that portion of the Commitment that is provided by such Lender,
expressed as a percentage of the Commitment, as set forth in the signature pages
hereto and in Exhibit B hereto.
"Letter of Credit Advances" means Loans by Lenders that are deemed to
occur as a result of Enron's reimbursement of any Letter of Credit Provider for
drawings made under the Letters of Credit.
"Letter of Credit Fees" means the fees, expenses and other charges
incurred by Enron in connection with the issuance and maintenance of the Letters
of Credit.
"Letter of Credit Providers" means the banks or other financial
institutions providing the Letters of Credit.
"LLC Agreement" means the Second Amended and Restated Limited Liability
Company Agreement of East Coast dated as of August 13, 1999, as it may be
amended and restated from time to time.
"Loan" and "Loans" has the meaning assigned such term in Section 2.01.
"Loan Assignor" has the meaning set forth in Section 9.06.
"Loan Participant" has the meaning set forth in Section 9.06.
"Majority Lenders" means it any time (a) prior to the Commitment
expiring or being terminated in full, Lenders holding at least 52% of the
Commitment in effect at such time, or (b) thereafter, Lenders holding at least
52% of unpaid principal amount of the Loans at such time.
"Market-Based Rate" means a market-based rate per annum agreed to by
East Coast and all of the Lenders from time to time.
"Maximum Amount" has the meaning assigned in the Enron Undertaking.
"Note" and "Notes" means the promissory note(s) provided for by Section
2.01(c), together with any and all renewals, extensions for any period,
increases, rearrangements, substitutions or modifications thereof.
"Other Taxes" shall have the meaning set forth in Section 4.03(b).
"Person" shall mean any individual, corporation, limited liability
company, 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.
"Quarterly Payment Date" means the fifteenth day of each of February,
May, August, and November, commencing on August 15, 1999.
-4-
<PAGE> 6
"Regulatory Change" means any change after the date hereof in any
Governmental Requirement or the adoption or making after such date of any
interpretations, directives or requests applying to a Lender of or under any
Governmental Requirement (whether or not having the force of law) by any
Governmental Authority charged with the interpretation or administration
thereof.
"Required Holders" means the Holders of not less than a majority in
aggregate Outstanding principal amount of the Senior Indebtedness.
"Senior Indebtedness" shall have the meaning assigned such term in
Section 6.01.
"Taxes" shall have the meaning assigned such term in Section 4.02(a).
"Undertaking Advance" means a loan by Lenders that is deemed to occur
as a result of a payment to the Paying Agent by Enron pursuant to the Enron
Undertaking.
"Undertaking Termination Date" shall mean the Termination Date as
defined in the Enron Undertaking.
All terms defined in this Article I or in other provisions of this Agreement in
the singular to have the same meanings when used in the plural and vice versa
Section 1.03 Accounting Terms and Determinations. Unless otherwise
defined or specified herein, all accounting terms shall be construed herein, all
accounting determinations hereunder shall be made and all financial records
shall be maintained in accordance with GAAP applied on a consistent basis.
ARTICLE II
CREDIT SUPPORT; LOANS
Section 2.01 The Loan, Advances, and the Notes.
(a) The Loan. Lenders agree, on and subject to the terms and conditions
of this Agreement, to make on any Business Day prior to the earlier of (a) the
Final Maturity Date or (b) the later of the Undertaking Termination Date or the
cancellation of all Letters of Credit for the benefit of East Coast, a loan (the
"Loan") to East Coast in an aggregate principal amount at any one time
outstanding up to, but not exceeding, the Commitment in effect at such time;
provided that no Lender shall be obligated to make (a) an Advance under the Loan
in excess of the product of such Lender's Lender Participation Percentage and
the relevant Advance and (b) Advances, in aggregate, in excess of the product of
such Lender's Lender Participation Percentage and the Commitment. Advances under
the Loan shall consist of Letter of Credit Advances and Undertaking Advances.
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(b) Advances Under the Loan.
(i) Letter of Credit Advances. Each drawing under a Letter of
Credit shall be deemed to be a Letter of Credit Advance made as of the
date of such drawing in an aggregate principal amount equal to such
drawing.
(ii) Undertaking Advances. Each payment by Enron to the Paying
Agent pursuant to the Enron Undertaking shall be deemed to be an
Undertaking Advance made as of the date of such payment in an aggregate
principal amount equal to such payment.
(c) Notes. The obligations of East Coast to Lenders under this
Agreement shall be evidenced by the Notes, which shall be in an aggregate
principal amount equal to the lesser of (i) the Commitment, and (ii) the
aggregate unpaid principal amount of all Advances. Each Lender shall be entitled
to a Note evidencing its Lender Participation Percentage of the Advances, and
each Lender is authorized to record on a schedule annexed to and constituting a
part of such Lender's Note, or on such Lender's books with respect to the Note,
the date and amount of such Lender's Lender Participation Percentage of (i) each
Advance, (ii) each payment of principal or interest, and (iii) each increase or
reduction in the Commitment with respect to such Note, which record shall
constitute prima facie evidence of the accuracy of the information endorsed.
Section 2.02 Fees. In accordance with Section 4.01:
(a) Undertaking Fee. East Coast shall pay to each Lender a fee on such
Lender's Lender Participation Percentage of the average daily unused amount of
the Maximum Amount of the Enron Undertaking from July 1, 1999 until the
Undertaking Termination Date, at a rate per annum equal to a Market-Based Rate,
payable quarterly in arrears on each Quarterly Payment Date and on Undertaking
Termination Date.
(b) Reimbursement of Letter of Credit Fees. East Coast shall reimburse
Enron for the Letter of Credit Fees within ten (10) Business Days of receipt of
an invoice from Enron.
Section 2.03. Increase or Reduction of Commitment.
(a) Subject to Section 2.03(b) and (c), Enron shall have the right to
increase or reduce the Commitment by (i) subject to the terms thereof, canceling
the Undertaking, in whole or in part (and the Commitment shall be reduced in the
amount by which the Undertaking shall have been canceled), or (ii) issuing
additional Letters of Credit for the benefit of East Coast, or subject to the
terms thereof, canceling or failing to renew any or all of the Letters of Credit
(and the Commitment shall be increased or reduced by the face amount of the
Letters of Credit issued or canceled or not renewed, as the case may be).
(b) Enron shall give each of East Coast and each Lender at least thirty
days' notice of its intention to reduce the Commitment on or before the proposed
effective date of such reduction. On the effective date of each change in the
Commitment, each Lender shall record on the schedules attached to its respective
Note (or any continuation thereof) such Lender's Lender Participation Percentage
of the new Commitment as of such date, and the maximum principal amount of such
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Lender's Notes shall be deemed to be amended as of such date to reflect such)
such Lender's Lender Participation Percentage of the new Commitment. In the
event that (i) Enron reduces the Commitment pursuant to Section 2.03(a) above,
(ii) East Coast is required to replace the credit support withdrawn, canceled or
terminated by Enron pursuant thereto, and (iii) the cost to East Coast of
providing such replacement credit support exceeds the cost of the credit support
that is replaced, Enron shall reimburse East Coast for the amount of such excess
cost.
(c) Enron may not increase the Commitment (or issue additional letters
of credit for the benefit of East Coast) without the prior written consent of
each Lender.
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayments of Loans. Subject to any restrictions set forth
in the Indenture and Article VI, East Coast shall repay the outstanding
principal and accrued and unpaid interest under the Loans on the earlier of (i)
the date that is ninety days after demand by Majority Lenders for such payment,
and (ii) on the Final Maturity Date.
Section 3.02 Interest.
(a) East Coast will pay to each Lender interest on the unpaid principal
amount of such Lender's Lender Participation Percentage of the Advances, for the
period commencing on the date of the first Advance to but excluding the date the
Loan is paid in full, at a rate per annum equal to a Market-Based Rate. Accrued
interest on the Advances shall be payable on each Quarterly Payment Date.
Interest on the Loans shall be computed on the basis of a year of 365/366 days
and actual days elapsed (including the first day but excluding the last day)
occurring in the period for which payable.
(b) Notwithstanding the foregoing and except to the extent non-payment
is due to the provisions of Article VI, East Coast will pay to each Lender
interest at the Default Rate on such Lender's Lender Participation Percentage of
the unpaid principal amount of the Advances, and (to the fullest extent
permitted by law) on any other amount payable by East Coast hereunder or under
the Notes which shall not be paid in full when due (whether on demand at stated
maturity, by acceleration or otherwise), for the period commencing on the due
date thereof until the same is paid in full.
Section 3.03. Prepayments.
(a) Voluntary Prepayments. East Coast may (but only to the extent not
prohibited by the provisions of Article VI) prepay the Loan in whole or in part,
without premium or penalty but with interest accrued on that portion of
principal that is prepaid.
(b) Mandatory Prepayments. If at any time the aggregate principal
amount of the Loans outstanding exceeds the Commitment, East Coast shall (but
only to the extent not prohibited by the provisions of Article VI), within three
Business Days of Majority Lenders' demand, repay the Loan
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in an amount equal to such excess, without premium or penalty but with interest
accrued on that portion of principal that is prepaid.
ARTICLE IV
PAYMENTS; COMPUTATIONS; ETC.
Section 4.01 Payments. All payments of principal, interest, fees and
other amounts to be made by East Coast under this Agreement and the Notes shall
be made not later than 11:00 a.m. (New York time) on the earlier of (i) the date
that is ninety days after demand by Majority Lenders for such payment, or (ii)
the date on which such payments shall otherwise become due hereunder (each such
payment made after such time on such due date to be deemed to have been made on
the next succeeding Business Day). All payments hereunder shall be made to the
Lenders in proportion to their respective Lender Participation Percentages. All
payments shall be made in Dollars, in immediately available funds, to Lenders in
accordance with instructions provided by Lenders from time to time to East
Coast. Such payments shall be made without (to the fullest extent permitted by
applicable law) defense, set-off or counterclaim. All payments hereunder shall
be applied first to current interest, second, to past due interest, third to
current principal, and fourth to past due principal, as applicable.
Section 4.02 Taxes.
(a) Payments Free and Clear. Any and all payments by East Coast
hereunder shall be made in accordance with Section 4.01, free and clear of, and
without deduction for, any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding taxes imposed on a Lender's income, and franchise or similar taxes
imposed on a Lender, by (i) any jurisdiction (or political subdivision thereof)
of which any Lender is a citizen or resident, (ii) the jurisdiction (or any,
political subdivision thereof) in which any Lender is organized, or (iii) any
jurisdiction (or political subdivision thereof) in which any Lender is presently
doing business which taxes are imposed solely as a result of doing business in
such jurisdiction (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If East Coast shall be required by law to deduct any Taxes from or in respect of
any sum payable hereunder to a Lender (i) the sum payable shall be increased by
the amount necessary so that after making all required deductions (including
deductions applicable to additional sums payable Under this Section 4.02), such
Lender shall receive an amount equal to the sum it would have received had no
such deductions been made, (ii) East Coast shall make such deductions and (iii)
East Coast shall pay the full amount deducted to the relevant taxing authority
or other Governmental Authority in accordance with applicable law.
(b) Other Taxes. In addition, to the fullest extent permitted by
applicable law, East Coast agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement
(hereinafter referred to as "Other Taxes").
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(c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
EAST COAST WILL INDEMNIFY EACH LENDER FOR THE FULL AMOUNT OF TAXES AND OTHER
TAXES (INCLUDING, BUT NOT LIMITED TO, ANY TAXES OR OTHER TAXES IMPOSED BY ANY
GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE UNDER THIS SECTION 4.02) PAID BY SUCH
LENDER, AND ANY LIABILITY (INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING
THEREFROM OR WITH RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE
CORRECTLY OR LEGALLY ASSERTED UNLESS THE PAYMENT OF SUCH TAXES WAS NOT CORRECTLY
OR LEGALLY ASSERTED AND SUCH LENDER'S PAYMENT OF SUCH TAXES OR OTHER TAXES WAS
THE RESULT OF ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ANY PAYMENT PURSUANT
TO SUCH INDEMNIFICATION SHALL BE MADE WITHIN THIRTY (30) DAYS AFTER THE DATE A
LENDER MAKES WRITTEN DEMAND THEREFOR. IF A LENDER RECEIVES A REFUND OR CREDIT IN
RESPECT OF ANY TAXES OR OTHER TAXES FOR WHICH SUCH LENDER HAS RECEIVED PAYMENT
FROM EAST COAST IT SHALL PROMPTLY NOTIFY EAST COAST OF SUCH REFUND OR CREDIT AND
SHALL, IF NO DEFAULT HAS OCCURRED AND IS CONTINUING, WITHIN THIRTY (30) DAYS
AFTER RECEIPT OF A REQUEST BY EAST COAST (OR PROMPTLY UPON RECEIPT, IF EAST
COAST HAS REQUESTED APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT HERETO), PAY
AN AMOUNT EQUAL TO SUCH REFUND OR CREDIT TO EAST COAST WITHOUT INTEREST (BUT
WITH ANY INTEREST SO REFUNDED OR CREDITED), PROVIDED THAT EAST COAST, UPON THE
REQUEST OF SUCH LENDER, AGREES TO RETURN SUCH REFUND OR CREDIT (PLUS PENALTIES,
INTEREST OR OTHER CHARGES) TO SUCH LENDER IN THE EVENT SUCH LENDER IS REQUIRED
TO REPAY SUCH REFUND OR CREDIT.
ARTICLE V
COVENANTS
Section 5.01 Negative Covenants. East Coast may not make, declare or
pay any distribution to any Member (as defined in the LLC Agreement) unless on
and as of the date of any such proposed distribution or payment, both before and
after giving effect thereto, no Event of Default has occurred and is continuing
Section 5.02 Affirmative Covenants. Upon receipt of the notices
required by Section 2.03, East Coast agrees that it will:
(a) Debt Service Reserve Account. At the written request of Enron,
either replace the Enron Undertaking with other Debt Service Credit Support or
cause the Debt Service Reserve Account to be funded in cash in an amount
specified by Enron, but in no event more that the Debt Service Reserve
Requirement.
(b) Replacement of Letters of Credit. At the written request of Enron,
cause the Letters of Credit to be replaced with other letters of credit which
qualify as Debt Service Credit Support.
Section 5.03 Information. East Coast agrees to provide any Lender with
any credit information regarding East Coast and its subsidiaries that such
Lender reasonably may request. When delivery of such credit information can be
handled more efficiently, such information may be made available for Lender's
inspection at Enron's offices during normal business hours in accordance with
Section 8.06.
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ARTICLE VI
SUBORDINATION
Section 6.01 Loans Subordinated to Senior Indebtedness. East Coast and
Lenders agree that the payment of the indebtedness evidenced by the Notes issued
hereunder and all other amounts to be paid hereunder (the "Subordinated
Obligations") is subordinated, to the extent and in the manner provided in this
Article, to the prior payment in full in cash or cash equivalents of all
principal and interest (including post-petition interest) and other amounts due
and payable under the Indenture and the Senior Notes (collectively, the "Senior
Indebtedness"). This Article is intended for the benefit of all Persons who
hold, or, in reliance on the provisions of this Article, become holders of, or
continue to hold, Senior Indebtedness, and each such Person shall be entitled to
enforce such provisions.
Section 6.02 East Coast Not to Make Payments with Respect to
Subordinated Obligations in Certain Circumstances.
(a) Upon the maturity of all of the principal of the Senior
Indebtedness by lapse of time, acceleration (unless rescinded or annulled) or
otherwise all Senior Indebtedness shall first be paid in full in cash or cash
equivalents, or Such payment shall be duly provided for the benefit of the
holders of the Senior Indebtedness in cash in a manner satisfactory to all of
the holders of such Senior Indebtedness, before any payment (in cash, property
or securities or by set-off or otherwise (other than Replacement Subordinated
Securities)) is made, directly or indirectly, by East Coast on account of the
Subordinated Obligations and before East Coast is entitled to acquire, directly
or indirectly, any portion of the Notes. For purposes of this Article VI,
"Replacement Subordinated Securities" means any securities or notes that are
received by Lenders in exchange for or in replacement of all or a portion of the
Notes to the extent that such exchanged or replacement securities or notes are
subordinated to the Senior Indebtedness to at least the same extent as the
Subordinated Obligations are subordinated to the Senior Indebtedness pursuant to
this Article VI.
(b) Upon the occurrence of an "Event of Default" under the Indenture
(an "Indenture Default") then, unless and until such Indenture Default shall
have been waived or cured to the reasonable satisfaction of the Required Holders
or shall have ceased to exist in the reasonable judgment of the Required
Holders, (i) no payment (whether of principal, interest, fees, or other amounts)
shall be made, directly or indirectly, by East Coast on account of the
Subordinated Obligations and (ii) East Coast shall not acquire, directly or
indirectly, the Notes. If, during the occurrence and continuance of an Event of
Default hereunder due to an Insolvency Event with respect to East Coast, the
holders of the Senior Indebtedness have been prohibited from accelerating the
Senior Indebtedness, then such prohibition shall be deemed to constitute an
Indenture Default for purposes of this Section 6.02(b).
(c) In the event that, notwithstanding the provisions of this Section
6.02, East Coast shall make any payment to any Lender on account of the
Subordinated Obligations or acquire any of the Notes or any Lender shall receive
or retain any such payment at any time when such acquisition or payment is
prohibited pursuant to clauses (a) through (b) of this Section 6.02, then such
payment shall be held by such Lender in trust for the benefit of, and shall be
paid forthwith over and delivered
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to, the holders of Senior Indebtedness (pro rate as to each of such holders on
the basis of the respective amounts of Senior Indebtedness held by them) or
their representative under the Indenture, as their respective interests may
appear, for application to the payment of all Senior Indebtedness remaining
unpaid to the extent necessary to pay in full all Senior Indebtedness in
accordance with its terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.
Section 6.03 Loan Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization for the Benefit of
Creditors of East Coast. Notwithstanding anything to the contrary set forth in
this Article VI, no Lender shall commence or join with any other creditor or
creditors of East Coast in commencing any bankruptcy, reorganization or
insolvency proceedings against East Coast. Upon any distribution of assets of
East Coast in any dissolution, winding up, liquidation or reorganization for the
benefit of creditors of East Coast (whether in bankruptcy, insolvency or
receivership proceedings or upon an assignment for the benefit of creditors or
otherwise):
(a) the holders of all Senior Indebtedness shall first be entitled to
receive payments in full of all amounts in respect of Senior Indebtedness
(including without limitation interest accruing after the commencement of any
such proceeding at the rate specified in the documentation governing the terms
of the respective Senior Indebtedness) in cash or cash equivalents or in a
manner satisfactory, to all of its holders before (i) Lenders are entitled to
receive any payment (in cash, property or securities or by set-off or otherwise
(other than Replacement Subordinated Securities)), directly or indirectly, from
East Coast on account of the Subordinated Obligations and (ii) East Coast is
entitled to acquire, directly or indirectly, any of the Notes:
(b) any payment or distribution of assets of East Coast of any kind or
character (whether in cash, property or securities or by set-off or otherwise
(other than Replacement Subordinated Securities)), to which Lenders would be
entitled except for the provisions of this Article, shall be paid by the
liquidating trustee or agent or other person making such payment or distribution
directly paid to the holders of the Senior Indebtedness or their representative
under the Indenture (pro rata as to each such holder, on the basis of the
respective amounts of unpaid Senior Indebtedness held by each), to the extent
necessary to make payment in full of all amounts in respect of the Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution to or for the benefit of the holders of such Senior Indebtedness,
except that Lenders shall be entitled to receive Replacement Subordinated
Securities; and
(c) in the event that, notwithstanding the foregoing provisions of this
Section 6.03, any direct or indirect payment or distribution of assets of East
Coast of any kind or character (whether in cash, property or securities or by
set-off or otherwise (other than Replacement Subordinated Securities)) shall be
received by any Lender on account of the Subordinated Obligations or in
connection with the acquisition of any Notes by East Coast before all Senior
Indebtedness is paid in full in cash or cash equivalents, such payment or
distribution shall be received and held in trust for the benefit of, and shall
be paid forthwith over and delivered to the holders of the Senior Indebtedness
or their representative under the Indenture (pro rata as provided in subsection
(b) above), to the extent necessary to make payment in full all unpaid Senior
Indebtedness, after giving
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effect to any concurrent payment or distribution to or for the benefit of the
holders of such Senior Indebtedness, except that Lenders shall be entitled to
receive Replacement Subordinated Securities.
(d) East Coast shall give prompt written notice to each Lender of any
dissolution, winding up, liquidation or reorganization of East Coast.
Section 6.04 Lenders to be Subrogated to Rights of Holders of Senior
Indebtedness. Subject to the payment in full, in cash or cash equivalents, of
all Senior Indebtedness, Lenders shall be subrogated equally and ratably to the
rights of the holders of the Senior Indebtedness to receive payments or
distributions of assets of East Coast (whether in cash, property or securities
or by set-off or otherwise (other than Replacement Subordinated Securities)),
applicable to the Senior Indebtedness until all amounts owing on the Senior
Indebtedness shall be paid in full, and for the purpose of such subrogation no
payments or distributions to the holders of the Senior Indebtedness by or on
behalf of East Coast or by or on behalf of Lenders by virtue of this Article
which otherwise would have been made to Lenders shall, as between East Coast,
its creditors other than holders of the Senior Indebtedness, and Lenders be
deemed to be payment by East Coast to or on account of the Subordinated
Obligations.
Section 6.05 Subordinated Obligations of East Coast Unconditional.
(a) The provisions of this Article are intended solely for the purpose
of defining the relative rights of Lenders, on the one hand and the holders of
the Senior Indebtedness, on the other hand, and nothing contained in this
Article or elsewhere in this Agreement is intended to or shall impair as between
East Coast, its creditors other than holders of Senior Indebtedness, and
Lenders, the obligation of East Coast, which is absolute and unconditional, to
pay to Lenders the principal of, interest or premium, if any, on the Loan as and
when the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of Lenders and creditors of East
Coast other than the holders of the Senior Indebtedness, nor shall anything
herein or therein prevent Lenders from exercising all remedies otherwise
permitted by applicable law upon default under this Agreement subject to the
rights, if any, under this Article VI, of the holders of Senior Indebtedness in
respect of cash, property, or securities of East Coast received upon the
exercise of such remedy. Upon any distribution of assets of East Coast referred
to in this Article, Lenders shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction in which such dissolution, winding
up, liquidation or reorganization proceedings are pending, or a certificate of
the liquidating trustee or agent or other person making any distribution of
Lenders for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Indebtedness and other indebtedness
of East Coast, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon, and all other facts pertinent thereto or to this
Article.
(b) Nothing contained in this Article VI or elsewhere in this Agreement
or in the Notes is intended to or shall affect the obligation of East Coast to
make, or prevent East Coast from making, at any time except during the pendency
of any liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of East Coast or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, and
except during the
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continuance of any Indenture Default specified in Section 6.02 (not cured or
waived), payments at any time of the principal of or interest on the Notes.
Section 6.06 Subordination Rights Not Impaired by Acts or Omissions of
East Coast or Holders of Senior Indebtedness. The right or interest of any
present or future holders of any Senior Indebtedness, and all agreements and
obligations of Lenders under this Article, shall remain in full force and effect
irrespective of: (a) any change in the time, manner or place of payment of, or
in any other term in respect of, all or any of the Senior Indebtedness, or any
amendment or waiver of any agreement or instrument related thereto; (b) any
exchange or release of, or non-perfection of any lien on or security interest
in, any collateral, or any release from, amendment or waiver of or consent to
departure from any guaranty or other obligation, for all or any of the Senior
Indebtedness; (c) any other circumstance which might otherwise constitute a
defense available to or discharge of Lenders in respect of the provisions of
this Article; or (d) any act or failure to act on the part of East Coast or by
any act or failure to act, in good faith, by any holder of the Senior
Indebtedness, or by any noncompliance by East Coast with the terms of the
Agreement, regardless of any knowledge thereof which any holder of Senior
Indebtedness may have or be otherwise charged with.
Section 6.07 Article Not to Prevent Events of Default. The failure to
make a payment on account of principal or interest by reason of any provision in
this Article shall not be construed as preventing the occurrence of an Event of
Default under this Agreement.
Section 6.08. Other Provisions Subject Hereto. Except as expressly
stated in this Article, notwithstanding anything contained in this Agreement to
the contrary, all provisions of the Agreement are subject to the provisions of
this Article. The provisions of the Article shall continue to be effective or
shall be reinstated, as the case may be, if at any time any payment in respect
of Senior Indebtedness is rescinded or must otherwise be returned on the
insolvency, bankruptcy or reorganization of East Coast or otherwise, all as
though such payment had not been made.
ARTICLE VII
EVENTS OF DEFAULT; REMEDIES
Section 7.01. Events of Default. One or more of the following events
shall constitute an "Event of Default":
(a) East Coast shall default in the payment or prepayment when due of
(i) any principal of the Notes or (ii) any interest on the Notes or any other
amount payable by East Coast hereunder and such failure to pay interest or other
amounts continues unremedied for a period of five (5) Business Days.
(b) East Coast shall default in the performance of any other covenant
on the part of East Coast to be performed hereunder, and such default continues
unremedied for a period of thirty (30) days after receipt of written notice of
such default;
(c) East Coast or any of its Subsidiaries shall suffer an Insolvency
Event;
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(d) a judgment or judgments for the payment of money in excess of
$5,000,000 net of insurance coverage in the aggregate shall be rendered by a
court against East Coast or any of its Subsidiaries and the same shall not be
discharged (or provision shall not be made for such discharge, including the
provision of adequate reserves therefor), or a stay of execution thereof shall
not be procured, within thirty (30) days from the date of entry thereof and
East Coast or such Subsidiary shall not, within said period of 30 days, or such
longer period during which execution of the same shall have been stayed, appeal
therefrom and cause the execution thereof to be stayed during such appeal; or
(e) East Coast or any of its Subsidiaries shall:
(i) fail to make any payment or payments of any Indebtedness of
East Coast or such Subsidiary when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise), and such
failure shall continue after the applicable grace period. If any,
specified in the agreement or instrument relating to such Indebtedness,
or
(ii) fail to perform or observe any term, covenant or condition on
its part to be performed or observed under any agreement or instrument
evidencing Indebtedness of East Coast or such Subsidiary (other than
any failure to perform any term contemplated by sub-clause (i) hereof)
and such failure shall continue after the applicable grace period, if
any, specified in the agreement or instrument relating to such
Indebtedness.
if, in either case, the effect of such failure to perform or observe is
to accelerate, or to permit the acceleration of, the maturity of any
Indebtedness of East Coast or such Subsidiary (other than Indebtedness
in respect of the Loan or this Agreement) in an aggregate principal
amount in excess of $5,000,000.
Section 7.02. Remedies.
(a) So long as the Senior Indebtedness has not been paid in full:
(i) Lenders shall not be entitled to accelerate the Loan except as
provided in clause (ii) of this Section 7.02(a).
(ii) If, in the event that, following the occurrence of an Event of
Default under the Senior Loan Documents, the Required Holders (or any
other agent or trustee acting on their behalf) declare the Senior
Indebtedness to be due and payable, then the Loan, all interest thereon
and all other amounts payable under this Agreement shall automatically
be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by
East Coast; provided that all Senior Indebtedness then or thereafter
due or declared to be due shall be paid in full in cash before Lenders
are entitled to receive, directly or indirectly, in cash or other
property or by set-off or in any other manner, including, without
limitation, from or by way of collateral, any payment or distribution
(including any payment which may be payable by reason of the payment of
other Indebtedness of East Coast being subordinated to the payment of
the Subordinated Obligations) from East Coast on account of the
Subordinated Obligations. In addition to the
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preceding sentence, any rights of Lenders to obtain any payment of
amounts due hereunder from East Coast after any acceleration of the
Loan pursuant to the preceding sentence shall in all events be subject
to the provisions of Article VI of this Agreement.
(b) After the Senior Indebtedness has been paid in full:
(i) In the case of an Event of Default other than one referred to
in clause (c) of Section 7.01, Majority Lenders may, by notice to East
Coast, declare the principal amount then outstanding of, and the
accrued interest on, the Loan and all other amounts payable by East
Coast hereunder and under the Notes to be forthwith due and payable,
whereupon such amounts shall be immediately due and payable without
presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other formalities of any kind, all of which are hereby
expressly waived by East Coast.
(ii) In the case of the occurrence of an Event of Default referred
to in clause (c) of Section 7.01, the principal amount then outstanding
of, and the accrued interest on, the Loan and all other amounts payable
by East Coast hereunder and under the Notes shall become automatically
immediately due and payable without presentment, demand, protest,
notice of intent to accelerate, notice of acceleration or other
formalities of any kind, all of which are hereby expressly waived by
East Coast.
(c) All proceeds received after maturity of the Loan, whether by
acceleration or otherwise, shall be applied first, to reimbursement of expenses
and indemnities provided for in this Agreement; second, to accrued interest on
the Loan; third, to principal outstanding on the Loan; and, to the extent of any
excess, to East Coast or as otherwise required by any Governmental Requirement.
ARTICLE VIII
AGREEMENTS BETWEEN ENRON AND LENDERS
Section 8.01. Notice of Advances, Payment of Participation Amount.
Enron shall promptly provide notice to each Lender of the date and amount of
each Advance (which notice may be given prior to the date of such Advance).
Within three Business Days of receipt of such notice, each Lender will pay to
Enron an amount equal to such Lender's Lender Participation Percentage
multiplied by the amount of such Advance (such amount being the "Lender
Participation Amount").
Section 8.02. Failure to Pay Participation Amount. Any portion of the
Lender Participation Amount that is not paid to Enron when due shall bear
interest at the Default Rate from and after the due date thereof until paid in
full. To the extent that any Lender is in default of its obligations under
Section 8.01, upon notice of such default, East Coast shall withhold any and all
amounts otherwise due such Lender under this Agreement and pay such amounts to
Enron, to be applied to such Lender's obligations under Section 8.01 until such
default has been cured.
Section 8.03. Payments. All payments due to Enron under this Article 8
shall be made not later than 11:00 a.m. (New York time) on the date on which
such payments shall become due (each
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such payment made after such time on such due date to be deemed to have been
made on the next succeeding Business Day). All payments shall be in Dollars, in
immediately available funds, in accordance with instructions provided to Lenders
from to time. Except as provided in Section 8.02, such payments shall be made
without (to the fullest extent permitted by applicable law) defense, set-off or
counterclaim.
Section 8.04. Sharing of Payments. If any Lender shall obtain payment
of any amount or interest thereon on any Loan through the exercise of any right
of set-off, banker's lien or counterclaim or similar right or otherwise
(including any payment made by East Coast to such Lender), and, as a result of
such payment, such Lender shall have received a greater percentage of the amount
or interest thereon than such Lender is entitled to receive hereunder, it shall
promptly (i) notify the other Lenders thereof and (ii) make such adjustments
from time to time as shall be equitable, to the end that all of the Lenders
shall share the benefit of such excess payment (net of any expenses which may be
incurred by such party in obtaining or preserving such excess payment) pro rata
in accordance with their respective Lender Participation Percentages.
Section 8.05. Rights of Lenders. Except as expressly provided herein,
nothing in this Agreement shall give to the Lenders (in their capacity as
Lenders) any rights under the Letters of Credit or the Enron Undertaking.
Section 8.06. Information and Documents Provided by Enron. Enron has
provided to Lenders such documents and available credit information on East
Coast as Lenders have requested. On a continuing basis prior to the Final
Maturity Date, Enron will endeavor to provide to Lenders the credit information
that East Coast furnishes to Enron. Alternatively, Enron may request East Coast
to provide duplicate copies of such information directly to Lenders and to Enron
and shall be entitled to assume that Lenders shall have received its copies
absent notice from Lenders or East Coast to the contrary. When delivery of such
credit information in Enron's opinion is either unduly burdensome or expensive
in relation to routine credit administration practices for comparable credits or
is voluminous or of questionable value to Lenders, Enron may (in lieu of
delivery thereof) make such information available for Lender's inspection at
Enron's offices during normal business hours.
Section 8.07. Lenders' Independent Credit Evaluation. Each Lender
agrees that it has received copies of the Letters of Credit and Enron
Undertaking, has obtained such information (including financial data or other
information acquired from East Coast) as it deems necessary, and has relied upon
its independent review thereof in deciding to enter into this Agreement and will
continue to obtain such information and make such review as it deems necessary
in making all future decisions with respect to its rights and obligations
hereunder. Accordingly, no Lender will be entitled to rely on Enron in making
its decisions, including without limitation on any investigation or analysis
performed by Enron or any other advisory communication from Enron concerning the
financial condition of East Coast. Lenders will also not rely on Enron for the
accuracy, completeness, or current status of any information or documents that
Enron may have provided or may hereafter provide to Lenders pursuant to Section
8.06 above. Enron makes no warranties or representations and assumes no
responsibility or liability as to the due execution, validity, genuineness,
enforceability, collectibility, or value of the Loans or of the Letters of
Credit, Enron Undertaking or this Agreement.
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Section 8.08. Administration and Enforcement. Enron will administer and
manage the Loans in the ordinary course of business in accordance with its usual
practices and, except as otherwise set forth herein, subject to the direction of
the Majority Lenders. Except as expressly provided herein, Enron reserves the
sole right to enforce the obligations relating to the Letters of Credit and the
Enron Undertaking and Enron may use its sole discretion in exercising or
refraining from exercising any right, taking or refraining from taking any
available action, and modifying or waiving any term or provision of the Letters
of Credit or the Enron Undertaking, Lenders shall have no right to approve any
amendment to or waiver of the Letters of Credit or this Agreement except to the
extent such amendment or waiver would (i) forgive any principal owing on the
Loans or extend the final maturity of the Loans, (ii) reduce the interest rate
(other than as a result of waiving the applicability of any post-default
increases in interest rates) or fees applicable to the Loans or postpone the
payment of any thereof, (iii) change the dates on which principal, interest, the
Undertaking Fee or any other fees or expenses are to be paid to Lenders or (iv)
change the amount of principal payable to Lenders on any date. For purposes of
this Section, Lenders shall be deemed to have consented to any amendment or
waiver upon the passage of eight (8) Business Days after written notice thereof
is given to Lenders, unless Lenders shall have previously given to Enron written
notice to the contrary. Notwithstanding anything to the contrary in this
Agreement, Enron shall not be liable to Lenders for any action taken or omitted
or for any mistake, error in judgment, or failure to perform Enron's duties
hereunder or under the Letters of Credit, Enron Undertaking or this Agreement,
except for Enron's gross negligence or willful misconduct and except for Enron's
duty to account to Lenders for Lenders' share of the proceeds of collection as
provided herein; provided that in no event shall Enron be liable for
consequential, incidental, punitive, special or exemplary damages. Any action by
Lenders required or contemplated hereunder may be taken or approved with the
consent of the Majority Lenders.
Section 8.09. Trust and Fiduciary Disclaimer. Neither this Agreement
nor the administration of the Letters of Credit, Enron Undertaking, nor any of
Enron's other rights, duties, or obligations hereunder or thereunder is intended
to be or to create, and the foregoing shall not be construed to be or to create,
any express, implied, or constructive trust or other fiduciary relationship
between Lenders and Enron. Lenders agree and stipulate that Enron is not acting
as a trustee or fiduciary for Lenders.
Section 8.10. Obligations Absolute. The obligations of Lenders under
this Agreement shall be absolute, unconditional and irrevocable and shall be
paid or performed strictly in accordance with the terms of this Agreement under
all circumstances whatsoever, including, without limitation, but only to the
fullest extent permitted by applicable law, the following circumstances: (i) any
lack of validity or enforceability of this Agreement, the Letters of Credit or
the Enron Undertaking; (ii) any amendment or waiver of, or any consent to
departure from this Agreement (except to the extent permitted by any amendment
or waiver); (iii) the existence of any claim, set-off, defense or other rights
which Lenders may have at any time against East Coast or Enron, whether in
connection with this Agreement or the transactions contemplated hereby or by any
unrelated transaction; and (iv) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing.
Section 8.11. Reduction of Obligations. Any Lender shall have the right
to reduce such Lender's Lender Participation Percentage upon thirty (30) days
prior written notice to Enron. In the event a Lender reduces its Lender
Participation Percentage, and the cost to Enron or East Coast, as
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the case may be, of providing replacement credit support (which the parties
agree need not be provided by Enron) exceeds the cost of the credit support that
is replaced, such Lender shall reimburse East Coast or Enron, as the case may
be, for the amount of such excess cost.
ARTICLE IX
MISCELLANEOUS
Section 9.01 Waiver. No failure on the part of any party to exercise,
no delay in exercising and no course of dealing with respect to, any right,
power or privilege under this Agreement or the Notes shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement or the Notes preclude any other or further
exercise thereof. The remedies provided herein are cumulative and not exclusive
of any remedies provided by law.
Section 9.02. Notices. All notices and other communications provided
for herein (including, without limitation, any modifications of, or waivers or
consents under this Agreement) shall be in writing and given or made by telex,
telecopy, courier or U.S. Mail and telexed, telecopied, mailed or delivered to
the intended recipient at the "Address for Notices" specified below its name on
the signature pages hereof or, as to any party, at such other address as shall
be designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted, if transmitted before 1:00 p.m. local time on a
Business Day (otherwise on the next succeeding Business Day) by telex or
telecopier and evidence or confirmation of receipt is obtained, when personally
delivered or, in the case of a mailed notice, when deposited in the mails,
postage prepaid, in each case given or addressed as aforesaid.
Section 9.03 Payment of Expenses, Indemnities, Etc. East Coast agrees:
(a) To pay all reasonable expenses of Enron hereunder in the
administration of, preservation of rights under, enforcement of, and
refinancing, renegotiation or restructuring of, this Agreement and any
amendment, waiver or consent relating thereto (including, without limitation,
travel, photocopy, mailing, courier, telephone and other similar expenses of
Enron, the cost of environmental audits, surveys and appraisals at reasonable
intervals, the reasonable fees and disbursements of counsel and other outside
consultants for Enron and, in the case of enforcement, the reasonable fees and
disbursements of counsel for Enron), and to reimburse promptly Enron for all
amounts expended, advanced or incurred by Enron to satisfy any obligation of
East Coast under this Agreement;
(b) TO INDEMNIFY ENRON, LENDERS AND THEIR RESPECTIVE AFFILIATES AND
PARTICIPANTS (OTHER THAN EAST COAST AND ITS SUBSIDIARIES) AND EACH OF THEIR
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS, ATTORNEYS,
ACCOUNTANTS AND EXPERTS ("INDEMNIFIED PARTIES") FROM, HOLD EACH OF THEM HARMLESS
AGAINST AND PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF THEM FOR, THE
INDEMNITY MATTERS WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF
THEM (WHETHER OR NOT ANY OF THEM IS DESIGNATED A PARTY THERETO) AS A RESULT OF,
ARISING
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<PAGE> 20
OUT OF OR IN ANY WAY RELATED TO (I) ANY ACTUAL OR PROPOSED USE BY EAST COAST OR
ANY OF ITS SUBSIDIARIES OF THE PROCEEDS OF THE LOAN, OTHER THAN INDEMNITY
MATTERS SOUGHT AGAINST THE INDEMNIFIED PARTIES BY ANY THIRD PARTY FOR USURPATION
OF A CORPORATE OPPORTUNITY OF SUCH THIRD PARTY, (II) THE EXECUTION, DELIVERY AND
PERFORMANCE OF THIS AGREEMENT, (III) THE OPERATIONS OF THE BUSINESS OF EAST
COAST OR ANY OF ITS SUBSIDIARIES, (IV) THE FAILURE OF EAST COAST OR ANY OF ITS
SUBSIDIARIES TO COMPLY WITH THE TERMS OF THIS AGREEMENT, OR WITH ANY
GOVERNMENTAL REQUIREMENT, OR (V) ANY OTHER ASPECT OF THIS AGREEMENT, INCLUDING
WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL AND ALL
OTHER EXPENSES INCURRED IN CONNECTION WITH INVESTIGATING, DEFENDING OR PREPARING
TO DEFEND ANY SUCH ACTION, SUIT, PROCEEDING (INCLUDING ANY INVESTIGATIONS,
LITIGATION OR INQUIRIES) OR CLAIM AND INCLUDING ALL INDEMNITY MATTERS ARISING BY
REASON OF THE ORDINARY NEGLIGENCE OF ANY INDEMNIFIED PARTY, BUT EXCLUDING ALL
INDEMNITY MATTERS ARISING SOLELY BY REASON OF CLAIMS OF ENRON'S OR ANY LENDERS'
SHAREHOLDERS AGAINST ENRON OR SUCH LENDER OR BY REASON OF THE GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT ON THE PART OF THE INDEMNIFIED PARTY;
(c) In the case of any indemnification hereunder, Lenders shall give
notice to East Coast of any such claim or demand being made against the
Indemnified Party, and East Coast shall have the non-exclusive right to join in
the defense against any such claim or demand provided that if East Coast
provides a defense, the Indemnified Party shall bear its own cost of defense
unless there is a conflict between East Coast and such Indemnified Party.
(d) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES
NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER
WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN
OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE
INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON
ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN INDEMNIFIED
PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL CONTINUE BUT
SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED TO HAVE OCCURRED BY
REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
INDEMNIFIED PARTY.
(e) East Coast's obligations under this Section 9.03 shall survive any
termination of this Agreement and the payment of the Loan and shall continue
thereafter in full force and effect.
Section 9.04 Amendments, Etc. No amendment, waiver, modification or
supplement of any provision of this Agreement, nor consent to any departure by
East Coast therefrom, shall in any event be effective unless the same shall be
in writing and signed by East Coast, Enron and Lenders.
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<PAGE> 21
Section 9.05 Successors and Assignees. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, and, with respect to the provisions of this
Article IX, any holder at any time of the Senior Indebtedness.
Section 9.06 Assignments and Participations.
(a) East Coast may not assign its rights or obligations hereunder or
under the Loan without the prior consent of each Lender.
(b) No Lender may transfer, assign, or convey its rights or obligations
under this Agreement except in accordance with the terms of this Section
9.06(b). Any Lender (a "Loan Assignor") may assign all or a portion of its
rights and obligations under this Agreement to any party acquiring Assignor's
(or its Affiliates') membership interest in East Coast pursuant to and in
compliance with Article III of the LLC Agreement; provided (i) that the assignee
has the financial capability to provide the credit support required by this
Agreement; and (ii) that the assignee shall expressly acknowledge to each of the
Assignor, East Coast, and the other parties hereto, in a written assignment and
assumption agreement, the assignee's agreement to assume and be bound by the
terms of this Agreement. All, assignment will become effective upon the
execution and delivery of the assignment and assumption agreement to East Coast
and the other parties hereto. Upon receipt of such executed assignment, East
Coast will, at its expense, execute and deliver new Notes to the Assignor and/or
assignee, as appropriate, in accordance with their respective interests as they
appear. Upon the effectiveness of any assignment pursuant to this Section
9.06(b), the assignee will assume the obligations of the Assignor for all
purposes of this Agreement. The Assignor shall be relieved of its obligations
hereunder to the extent of such assignment (except that its rights under
Sections 9.03 and 9.16 shall not be affected); provided, however, that the
Assignor shall not be relieved of its obligations with respect to any payments
received and retained by Assignor in contravention of the provisions contained
in Article VI hereof.
(c) Any Lender may transfer, grant or assign participations in all or
any part of its interests hereunder pursuant to this Section 9.06(c) to any
Person, provided that: (i) the party assigning such participation shall remain
obligated for all purposes of this Agreement, and the transferee of such
participation (the "Loan Participant") shall not be a party hereto and (ii) no
Loan Participant shall have rights to approve any amendment to or waiver of any
provision of this Agreement or the Notes, except to the extent such amendment or
waiver would (x) extend the Final Maturity Date or (y) reduce the interest rate
(other than as a result of waiving the applicability of any post-default
increases in interest rates) or any fees in which such Loan Participant is
participating, or postpone the payment of any thereof. In the case of any such
participation, Loan Participant shall not have any rights under this Agreement
(Loan Participant's rights against the party granting the participation in
respect of such participation to be those set forth in the agreement creating
such participation), and all amounts payable by East Coast hereunder shall be
determined as if the party granting the participation had not sold such
participation, provided that such Loan Participant shall be entitled to receive
additional amounts under Section 9.15 on the same basis as if it were the party
granting the participation and be indemnified under Section 9.03 as if it were
the party granting the participation.
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<PAGE> 22
(d) Lenders may furnish any information concerning East Coast in its
possession from time to time to assignees and participant (including prospective
assignees and participant).
Section 9.07 Invalidity. In the event that any one or more of the
provisions contained in the Agreement or the Notes shall, for any reason, be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of such
documents.
Section 9.08 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
Section 9.10 References. The words "herein," "hereof," "hereunder" and
other words of similar import when used in this Agreement refer to this
Agreement as a whole, and not to any particular article, section or subsection.
Any reference herein to a Section shall be deemed to refer to the applicable
Section of this Agreement unless otherwise stated herein. Any reference herein
to an exhibit or schedule shall be deemed to refer to the applicable exhibit or
schedule attached hereto unless otherwise stated herein.
Section 9.11 Survival. The obligations of the parties under Section
9.03 shall survive the repayment of the Loan. To the extent that any payments of
the Loan or proceeds of any collateral are subsequently invalidated, declared to
be fraudulent or preferential, set aside or required to be repaid to a trustee,
debtor in possession, receiver or other Person under any bankruptcy law, common
law or equitable cause, then to such extent, the Loan so satisfied shall be
revived and continue as if such payment or proceeds had not been received and
Lender's liens, security interests, rights, powers and remedies under this
Agreement shall continue in full force and effect.
Section 9.12 Caption. Captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
Section 9.13 NO ORAL AGREEMENTS. THIS AGREEMENT AND THE NOTES EMBODY
THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL
OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THIS AGREEMENT AND THE NOTES REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER OF
THIS AGREEMENT AND NOTES.
Section 9.14 GOVERNING LAW; WAIVERS.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
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(b) EACH OF EAST COAST AND LENDERS HEREBY (I) IRREVOCABLY WAIVES, TO
THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY LITIGATION AND SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (II) CERTIFY
THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY
HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND
(III) ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 9.14.
Section 9.15 Interest. It is the intention of the parties hereto that
each Lender shall conform strictly to usury laws applicable to it. Accordingly,
if the transactions contemplated hereby would be usurious as to any Lender under
laws applicable to it (including the laws of the United States of America or any
other jurisdiction whose laws may be mandatorily applicable to Lenders
notwithstanding the other provisions of this Agreement), then, in that event,
notwithstanding anything to the contrary in this Agreement or the Notes or any
agreement entered into in connection with or as security for the Loan, it is
agreed as follows: (i) the aggregate of all consideration which constitutes
interest under law applicable to such Lender that is contracted for, taken,
reserved, charged or received by such Lender in connection with the Loan shall
under no circumstances exceed the maximum amount allowed by such applicable law,
and any excess shall be canceled automatically and if theretofore paid shall be
credited by such Lender on the principal amount of the Loan (or, to the extent
that the principal amount of the Loan shall have been or would thereby be paid
in full, refunded by Lenders to East Coast), and (ii) in the event that the
maturity of the Loan is accelerated by reason of an election of the Majority
Lenders resulting from any Event of Default under this Agreement or otherwise,
or in the event of any required or permitted prepayment, then such consideration
that constitutes interest under law applicable to such Lender may never include
more than the maximum amount allowed by such applicable law, and excess
interest, if any, provided for in this Agreement or otherwise shall be canceled
automatically by such Lender as of the date of such acceleration or prepayment
and, if theretofore paid, shall be credited by such Lender on the principal
amount of the Indebtedness (or, to the extent that the principal amount of the
Loan shall have been or would thereby be paid in full, refunded by such Lender
to East Coast). All sums paid or agreed to be paid to Lenders for the use,
forbearance or detention of sums due hereunder shall, to the extent permitted by
law applicable to Lenders, be amortized, prorated, allocated and spread
throughout the full term of the Loan until payment in full so that the rate or
amount of interest on account of the Loan does not exceed the maximum amount
allowed by such applicable law. If at any time and from time to time (i) the
amount of interest payable to any Lender on any date shall be computed at the
Highest Lawful Rate applicable to such Lender pursuant to this Section 9.15 and
(ii) in respect of any subsequent interest computation period the amount of
interest otherwise payable to such Lender would be less than the amount of
interest payable to such Lender computed at the Highest Lawful Rate applicable
to such Lender, then the amount of interest payable to such Lender in respect of
such subsequent interest computation period shall continue to be computed at the
Highest Lawful Rate applicable to such Lender until the total amount of interest
payable to such Lender shall equal the total amount of interest which would have
been payable to such Lender if the total amount of interest had been computed
without giving effect to this Section 9.15.
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<PAGE> 24
Section 9.16 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND AGREES THAT IT
IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS AGREEMENT; THAT IT HAS
IN FACT READ THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND
KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT; AND THAT IT
RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT RESULT IN ONE PARTY
ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING
THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO
AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF
ANY EXCULPATORY PROVISION OF THIS AGREEMENT ON THE BASIS THAT THE PARTY HAD NO
NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT CONSPICUOUS.
Section 9.17 Capital Adequacy.
(a) Capital Adequacy. East Coast shall pay directly to any Lender from
time to time on request such amounts as such Lender may reasonably determine to
be necessary to compensate it or its parent or holding company for any costs
("Additional Costs") which it determines are attributable to the maintenance by
it or its parent or holding company pursuant to any Governmental Requirement
following any Regulatory Change, of capital in respect of the Loan (such
compensation to include, without limitation, an amount equal to any reduction of
the rate of return on assets or equity of such Lender or its parent or holding
company to a level below that which such Lender or its parent or holding company
could have achieved but for such Governmental Requirement). Lenders will notify
East Coast that Lenders are entitled to compensation pursuant to this Section
9.17(a) as promptly as practicable after they determine to request such
compensation.
(b) Compensation Procedure. If any Lender notifies East Coast of the
incurrence of Additional Costs under this Section 9.17, such notice to East
Coast shall set forth the basis and amount of its request for compensation.
Determinations and allocations by Lenders for purposes of this Section 9.17 of
the effect of capital maintained pursuant to Section 9.17(a), on its costs or
rate of return of maintaining the Loan, or on amounts receivable by them in
respect of the Loan, and of the amounts required to compensate Lenders under
this Section 9.17, shall be conclusive and binding for all purposes, provided
that such determinations and allocations are made on a reasonable basis. Any
request for additional compensation under this Section 9.17 shall be paid by
East Coast within thirty (30) days of the receipt by East Coast of the notice
described in this Section 9.17(b).
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<PAGE> 25
The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.
EAST COAST POWER L.L.C.
By: /s/ J. M. BOLLINGER
---------------------------------------
Name: J.M. Bollinger
-------------------------------------
Title: President -- Generating
------------------------------------
Address for Notices:
711 Louisiana Street
Houston, Texas 77002
Telecopier No.: (713) 345-7902
Telephone No.: (713) 345-9722
Attention: J. M. Bollinger
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<PAGE> 26
ENRON CORP.
By: /s/ ANDREW S. FASTOW
--------------------------------------
Name: Andrew S. Fastow
Title: Senior Vice President and
Chief Financial Officer
Address for Notices:
1400 Smith Street
Houston, Texas 77002
Telecopier No.: (713) 646-4039
Telephone No.: (713) 853-1939
Attention:
-------------------------------
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<PAGE> 27
LENDERS AND LENDER PARTICIPATION PERCENTAGES:
ENRON CORP.
By: /s/ ANDREW S. FASTOW
---------------------------------
Name: Andrew S. Fastow
Title: Senior Vice President and
Chief Financial officer
Address for Notices:
1400 Smith Street
Houston, Texas 77002
Telecopier No.: (713) 646-4039
Telephone No.: (713) 853-1939
Attention:
--------------------------
Lender Participation Percentage: 51%
EL PASO ENERGY CORPORATION
By: /s/ C. D. RICE
---------------------------------
Name: C. D. Rice
-------------------------------
Title: Vice President and Treasurer
------------------------------
Address for Notices:
Telecopier No.:
Telephone No.:
Attention:
--------------------------
Lender Participation Percentage: 49%
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<PAGE> 28
LENDERS AND LENDER PARTICIPATION PERCENTAGES:
ENRON CORP.
By:
Name: Andrew S. Fastow
Title: Senior Vice President and
Chief Financial officer
Address for Notices:
1400 Smith Street
Houston, Texas 77002
Telecopier No.: (713) 646-4039
Telephone No.: (713) 853-1939
Attention:
Lender Participation Percentage: 51%
EL PASO ENERGY CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Address for Notices:
Telecopier No.:
Telephone No.:
Attention:
-------------------------
Lender Participation Percentage: 49%
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<PAGE> 1
EXHIBIT 10.7(a)
PROMISSORY NOTE
$43,991,421.39 August 13, 1999
FOR VALUE RECEIVED, EAST COAST POWER L.L.C., a Delaware limited
liability company ("East Coast"), hereby promises to pay to the order of ENRON
CORP. or its designees ("Lender"), at New York, New York, or such other location
as Lender may hereafter specify, the principal sum of the principal amount of
the lesser of (a) $43,991,421.39 or (b) the aggregate unpaid principal amount of
all Loans made pursuant to that certain Credit Agreement, as defined below, in
lawful money of the United States of America and in immediately available funds,
on the dates and in the principal amounts provided in the Credit Agreement, and
to pay interest at such location, in like money and funds, at the rates per
annum and on the dates provided in the Credit Agreement.
In addition to and cumulative of any payments required to be made
against this Note pursuant to the Credit Agreement, this Note, including all
principal and accrued interest then unpaid, shall be due and payable, unless
otherwise specified in the Credit Agreement, on the Final Maturity Date. All
payments shall be applied in the manner set forth in the Credit Agreement.
East Coast may prepay, in whole or in part, this Note as provided in
the Credit Agreement.
This Note is one of the Notes referred to in that certain Amended and
Restated Credit Support Agreement dated August 13, 1999 (such Agreement as the
same may be amended or supplemented from time to time in accordance with its
terms, the "Credit Agreement") among East Coast, Enron Corp. and the Lenders
signatory thereto, and evidences the obligations of East Coast thereunder.
Capitalized terms used in this Note have the respective meanings assigned to
them in the Credit Agreement.
Lender is hereby authorized by East Coast to endorse on Schedule A (or
a continuation thereof) attached to this Note, the date and amount of such
Lender's Lender Participation Percentage of (i) each Advance, (ii) each payment
of principal or interest, and (iii) each increase or reduction in the Commitment
with respect to such Note, which record shall constitute prima facie evidence of
the accuracy of the information endorsed; provided that any failure by Lender to
make any such endorsement shall not affect the obligations of East Coast under
the Credit Agreement or under this Note.
This Note is issued pursuant to the Credit Agreement and is entitled to
the benefits provided for therein. All of the terms of the Credit Agreement,
including without limitation, the usury savings provisions thereof, are
incorporated herein by this reference. The Credit Agreement provides for the
acceleration of the maturity of this Note upon the occurrence of certain events,
for prepayments of this Note upon the terms and conditions specified therein and
other provisions relevant to this Note.
<PAGE> 2
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
EAST COAST POWER L.L.C.
By: /s/ J.M. BOLLINGER
-------------------------------
Name: J.M. Bollinger
-----------------------------
Title: President
----------------------------
<PAGE> 3
SCHEDULE A
<TABLE>
<CAPTION>
Principal Date of
Amount of Payment or Amount Paid Balance
Date Made Note Interest Rate Prepayment or Prepaid Outstanding
--------- ---- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$-------------
--------------
</TABLE>
<PAGE> 1
EXHIBIT 10.7(b)
PROMISSORY NOTE
$42,266,267.61 August 13, 1999
FOR VALUE RECEIVED, EAST COAST POWER L.L.C., a Delaware limited
liability company ("East Coast"), hereby promises to pay to the order of EL PASO
ENERGY CORPORATION or its designees ("Lender"), at New York, New York, or such
other location as Lender may hereafter specify, the principal sum of the
principal amount of the lesser of (a) $42,266,267.61 or (b) the aggregate unpaid
principal amount of all Loans made pursuant to that certain Credit Agreement, as
defined below, in lawful money of the United States of America and in
immediately available funds, on the dates and in the principal amounts provided
in the Credit Agreement, and to pay interest at such location, in like money and
funds, at the rates per annum and on the dates provided in the Credit Agreement.
In addition to and cumulative of any payments required to be made
against this Note pursuant to the Credit Agreement, this Note, including all
principal and accrued interest then unpaid, shall be due and payable, unless
otherwise specified in the Credit Agreement, on the Final Maturity Date. All
payments shall be applied in the manner set forth in the Credit Agreement.
East Coast may prepay, in whole or in part, this Note as provided in
the Credit Agreement.
This Note is one of the Notes referred to in that certain Amended and
Restated Credit Support Agreement dated August 13, 1999 (such Agreement as the
same may be amended or supplemented from time to time in accordance with its
terms, the "Credit Agreement") among East Coast, Enron Corp. and the Lenders
signatory thereto, and evidences the obligations of East Coast thereunder.
Capitalized terms used in this Note have the respective meanings assigned to
them in the Credit Agreement.
Lender is hereby authorized by East Coast to endorse on Schedule A (or
a continuation thereof) attached to this Note, the date and amount of such
Lender's Lender Participation Percentage of (i) each Advance, (ii) each payment
of principal or interest, and (iii) each increase or reduction in the Commitment
with respect to such Note, which record shall constitute prima facie evidence of
the accuracy of the information endorsed; provided that any failure by Lender to
make any such endorsement shall not affect the obligations of East Coast under
the Credit Agreement or under this Note.
This Note is issued pursuant to the Credit Agreement and is entitled to
the benefits provided for therein. All of the terms of the Credit Agreement,
including without limitation, the usury savings provisions thereof, are
incorporated herein by this reference. The Credit Agreement provides for the
acceleration of the maturity of this Note upon the occurrence of certain events,
for prepayments of this Note upon the terms and conditions specified therein and
other provisions relevant to this Note.
<PAGE> 2
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
EAST COAST POWER L.L.C.
By: /s/ J.M. BOLLINGER
----------------------------
Name: J.M. Bollinger
--------------------------
Title: President
-------------------------
<PAGE> 3
SCHEDULE A
<TABLE>
<CAPTION>
Principal Date of
Amount of Payment or Amount Paid Balance
Date Made Note Interest Rate Prepayment or Prepaid Outstanding
--------- ---- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$-----------
------------
</TABLE>
<PAGE> 1
EXHIBIT 10.8(b)
ASSIGNMENT OF POWER PURCHASE AGREEMENT
THIS ASSIGNMENT dated as of July 21, 1989, between COGEN TECHNOLOGIES,
INC., a Texas corporation ("Cogen"), and COGEN TECHNOLOGIES LINDEN, LTD., a
Texas limited partnership (the "Partnership") (together, the "Parties" and
each, a "Party"),
W I T N E S S E T H:
WHEREAS, Cogen has entered into that certain Agreement of Limited
Partnership of Cogen Technologies Linden, Ltd., dated as of June 28, 1989 (the
"Partnership Agreement"), under which Partnership Agreement the Texas limited
partnership known as Cogen Technologies Linden, Ltd. was created; and
WHEREAS, under the Partnership Agreement, Cogen agreed to assign to
the Partnership all of Cogen's rights, titles and interests in and to the Power
Purchase Agreement dated April 14, 1989 by and between Cogen and Consolidated
Edison Company of New York, Inc. (the "Power Purchase Agreement"); and
WHEREAS, the Power Purchase Agreement provides by its terms that
Cogen, without the necessity of obtaining the consent of Consolidated Edison
Company of New York, Inc., may assign the Power Purchase Agreement to a
partnership in which Cogen is a partner; and
WHEREAS, Cogen is the sole general partner of the Partnership and,
thus, Cogen may so assign the Power Purchase
<PAGE> 2
Agreement in accordance with the terms thereof to the Partnership;
NOW, THEREFORE, in furtherance of the foregoing and for Ten Dollars
($10.00) and other good and valuable consideration, the Parties agree as
follows:
ARTICLE 1
ASSIGNMENT OF RIGHTS, TITLES AND INTERESTS
IN THE POWER PURCHASE AGREEMENT
Cogen hereby assigns, transfers, conveys and sets over to the
Partnership all of Cogen's rights, titles and interests in, to and under the
Power Purchase Agreement and all proceeds thereof, including without
limitation:
(a) all payments due and to become due under the Power
Purchase Agreement, whether as contractual obligations, damages
payable to Cogen for any breach thereunder, or otherwise;
(b) all of Cogen's claims, rights, powers or privileges and
remedies under the Power Purchase Agreement; and
(c) all of Cogen's rights under the Power Purchase Agreement
(i) to enforce the Power Purchase Agreement, (ii) to make
determinations, (iii) to exercise any elections (including, but not
limited to, election of remedies) or options, (iv) to amend, modify or
supplement the Power Purchase Agreement, (v) to enforce or execute any
checks, or other
-2-
<PAGE> 3
instruments or orders, (vi) to file any claims and (vii) to take any
action which (in the opinion of the Partnership) may be necessary or
advisable in connection with any of the foregoing.
ARTICLE 2
ASSUMPTION OF OBLIGATIONS UNDER
THE POWER PURCHASE AGREEMENT AND OF
POWER PURCHASE AGREEMENT INDEBTEDNESS
The Partnership hereby assumes (i) any and all of Cogen's obligations
and liabilities under the Power Purchase Agreement and (ii) any and all of
Cogen's obligations and liabilities to pay the "Power Purchase Agreement
Indebtedness (as defined in the Partnership Agreement), and undertakes to
punctually perform any and all of Cogen's obligations under the Power Purchase
Agreement and to punctually pay on or before the due date thereof, all of such
Power Purchase Agreement Indebtedness.
ARTICLE 3
INDEMNIFICATION
3.1 Indemnification of the Partnership. Cogen shall indemnify and hold
the Partnership and its successors and assigns harmless from and against all
damages, losses or expenses suffered or paid as a result of any claims,
demands, suits, causes of action, proceedings, judgments and liabilities,
including reasonable counsel fees incurred in litigation or otherwise,
assessed, incurred or sustained by or
-3-
<PAGE> 4
against the Partnership and its successors and assigns with respect to or
arising out of an act or omission of Cogen, its employees, subcontractors,
agents or representatives, in connection with the Power Purchase Agreement,
which act or omission occurred prior to the date of this Assignment.
3.2 Indemnification of Cogen. The Partnership shall indemnify and hold
Cogen and its successors and assigns harmless from and against all damages,
losses or expenses suffered or paid as a result of any claims, demands, suits,
causes of action, proceedings, judgments and liabilities, including reasonable
counsel fees incurred in litigation or otherwise, assessed, incurred or
sustained by or against Cogen and its successors and assigns with respect to or
arising out of an act or omission of the Partnership, its employees,
subcontractors, agents or representatives, in connection with the Power
Purchase Agreement, which act or omission occurred subsequent to the date of
this Assignment.
ARTICLE 4
MISCELLANEOUS
4.1 Approval Required. The Partnership acknowledges that it has been
advised by Cogen that the Power Purchase Agreement must be approved by the
State of New York Public Service Commission, which approval has been requested
but has not yet been obtained.
4.2 Notices. All notices, requests, demands or other communications to
or upon the respective Parties hereto shall
-4-
<PAGE> 5
mail, postage prepaid, or in the case of telex, telegraphic or cable notice,
twenty-four (24) hours after being sent, or in the case of personal delivery,
upon receipt, addressed as follows:
Cogen Technologies, Inc.
1600 Smith Street Building
1600 Smith Street, Suite 5000
Houston, Texas 77002
Attn: Robert C. McNair
Cogen Technologies Linden, Ltd.
1600 Smith Street Building
1600 Smith Street, Suite 5000
Houston, Texas 77002
Attn: Robert C. McNair
or to such other addresses as a Party may hereafter specify to others in
writing.
4.3 No Waiver; Cumulative Remedies. No failure to exercise, and no
delay in exercising, any right, power or privilege hereunder, shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder preclude or require any other or future exercise thereof
or the exercise of any other right, power or privilege. All rights, powers and
remedies granted to any Party hereto and all other agreements, instruments and
documents executed in connection with this Assignment shall be cumulative, may
be exercised singly or concurrently and shall not be exclusive of any rights or
remedies provided by law.
-5-
<PAGE> 6
4.4 Headings. The section and subsection headings used in this
Assignment are for convenience only and shall not affect the construction of
this Assignment.
4.5 Severability. In case any one or more of the provisions contained
in this Assignment shall be invalid, illegal or unenforceable in any respect
under any law, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby.
4.6 Execution of Counterparts. This Assignment may be executed in any
number of counterparts. All such counterparts shall be deemed to be originals
and shall together constitute but one and the same instrument.
4.7 Binding Effect. This Assignment shall be binding upon and inure to
the benefit of each of the Parties hereto and their respective successors and
assigns.
4.8 GOVERNING LAW. THIS ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
EXCLUSIVE OF ITS CONFLICTS OF LAWS PRINCIPLES.
IN WITNESS WHEREOF, this Assignment has been executed and delivered as
of the date and year first above written.
COGEN TECHNOLOGIES, INC.
By /s/ ROBERT C. MCNAIR
------------------------------------
ROBERT C. McNAIR (print name)
------------------------
PRESIDENT (title)
------------------------
[Signatures continued]
-6-
<PAGE> 7
COGEN TECHNOLOGIES LINDEN, LTD.
By Cogen Technologies, Inc.,
General Partner
By /s/ ROBERT C. McNAIR
--------------------
Robert C. McNair (print name)
President (title)
<PAGE> 1
EXHIBIT 10.8C
ASSIGNMENT OF POWER PURCHASE AGREEMENT
THIS ASSIGNMENT dated as of December 22, 1989, between COGEN
TECHNOLOGIES LINDEN, LTD., a Texas limited partnership ("Cogen"), and COGEN
TECHNOLOGIES LINDEN VENTURE, L.P., a Delaware limited partnership (the
"Partnership") (together, the "Parties" and each, a "Party"),
W I T N E S S E T H:
WHEREAS, Cogen has entered into that certain Agreement of Limited
Partnership of Cogen Technologies Linden Venture, L.P. dated as of December 4,
1989 (the "Partnership Agreement"), under which Partnership Agreement the
Delaware limited partnership known as Cogen Technologies Linden Venture, L.P.
was created; and
WHEREAS, Cogen has agreed to assign to the Partnership all of Cogen's
rights, titles and interests in and to the Power Purchase Agreement dated April
14, 1989 by and between Cogen Technologies, Inc., a Texas corporation, and
Consolidated Edison Company of New York, Inc. (the "Power Purchase Agreement"),
which Power Purchase Agreement heretofore, with the approval of Consolidated
Edison Company of New York, Inc., was assigned by Cogen Technologies, Inc. to
Cogen; and
WHEREAS, the Power Purchase Agreement provides by its terms that it
may be assigned to an entity controlling, controlled by, or under common
control with Cogen Technologies,
<PAGE> 2
Inc. ("Affiliates") or to a partnership in which Cogen Technologies, Inc. or
any of its Affiliates is a partner, without the necessity of obtaining the
consent of Consolidated Edison Company of New York, Inc.; and
WHEREAS, since the Partnership is an Affiliate of Cogen Technologies,
Inc. and since the Partnership is a partnership in which an Affiliate of Cogen
Technologies, Inc. is a partner, Cogen may assign the Power Purchase Agreement
in accordance with the terms thereof to the Partnership;
NOW, THEREFORE, in furtherance of the foregoing and for Ten Dollars
($10.00) and other good and valuable consideration, the Parties agree as
follows:
ARTICLE 1
ASSIGNMENT OF RIGHTS, TITLES AND INTERESTS
IN THE POWER PURCHASE AGREEMENT
Cogen hereby assigns, transfers, conveys and sets over to the
Partnership all of Cogen's rights, titles and interests in, to and under the
Power Purchase Agreement and all proceeds thereof, including without
limitation:
(a) all payments due and to become due under the Power
Purchase Agreement, whether as contractual obligations, damages
payable to Cogen for any breach thereunder, or otherwise;
(b) all of Cogen's claims, rights, powers or privileges and
remedies under the Power Purchase Agreement; and
-2-
<PAGE> 3
(c) all of Cogen's rights under the Power Purchase Agreement
(i) to enforce the Power Purchase Agreement, (ii) to make
determinations, (iii) to exercise any elections (including, but not
limited to, election of remedies) or options, (iv) to amend, modify or
supplement the Power Purchase Agreement, (v) to enforce or execute any
checks, or other instruments or orders, (vi) to file any claims and
(vii) to take any action which (in the opinion of the Partnership) may
be necessary or advisable in connection with any of the foregoing.
ARTICLE 2
ASSUMPTION OF OBLIGATIONS UNDER
THE POWER PURCHASE AGREEMENT AND OF
POWER PURCHASE AGREEMENT INDEBTEDNESS
The Partnership hereby assumes (i) any and all of Cogen's obligations
and liabilities under the Power Purchase Agreement and (ii) any and all
obligations assumed by Cogen pursuant to the Assignment of Power Purchase
Agreement dated July 21, 1989 by and between Cogen Technologies, Inc. and Cogen
(under which the Power Purchase Agreement was assigned to Cogen) and undertakes
to punctually perform any and all of Cogen's obligations under the Power
Purchase Agreement and to punctually pay on or before the due date thereof,
all other indebtedness and obligations assumed by Cogen under said Assignment
of Power Purchase Agreement dated July 21, 1989.
-3-
<PAGE> 4
ARTICLE 3
INDEMNIFICATION
3.1 Indemnification of the Partnership. Cogen shall indemnify and hold
the Partnership and its successors and assigns harmless from and against all
damages, losses or expenses suffered or paid as a result of any claims,
demands, suits, causes of action, proceedings, judgments and liabilities,
including reasonable counsel fees incurred in litigation or otherwise,
assessed, incurred or sustained by or against the Partnership and its
successors and assigns with respect to or arising out of an act or omission of
Cogen, its employees, subcontractors, agents or representatives, in connection
with the Power Purchase Agreement, which act or omission occurred prior to the
date of this Assignment.
3.2 Indemnification of Cogen. The Partnership shall indemnify and hold
Cogen and its successors and assigns harmless from and against all damages,
losses or expenses suffered or paid as a result of any claims, demands, suits,
causes of action, proceedings, judgments and liabilities, including reasonable
counsel fees incurred in litigation or otherwise, assessed, incurred or
sustained by or against Cogen and its successors and assigns with respect to or
arising out of an act or omission of the Partnership, its employees,
subcontractors, agents or representatives, in connection with the Power
Purchase Agreement, which act or omission occurred on or subsequent to the date
of this Assignment.
-4-
<PAGE> 5
ARTICLE 4
MISCELLANEOUS
4.1 Notices. All notices, requests, demands or other communications to
or upon the respective Parties hereto shall be deemed to have been duly given
or made two (2) calendar days after being deposited in the mails, registered or
certified mail, postage prepaid, or in the case of telex, telegraphic or cable
notice, twenty-four (24) hours after being sent, or in the case of personal
delivery, upon receipt, addressed as follows:
Cogen Technologies Linden Venture, L.P.
1600 Smith Street Building
1600 Smith Street, Suite 5000
Houston, Texas 77002
Attn: Robert C. McNair
Cogen Technologies Linden, Ltd.
1600 Smith Street Building
1600 Smith Street, Suite 5000
Houston, Texas 77002
Attn: Robert C. McNair
or to such other addresses as a Party may hereafter specify to the other in
writing.
4.3 No Waiver; Cumulative Remedies. No failure to exercise, and no
delay in exercising, any right, power or privilege hereunder, shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder preclude or require any other or future exercise thereof
or the exercise of any other right, power or privilege. All rights, powers and
remedies granted to any
-5-
<PAGE> 6
Party hereto and all other agreements, instruments and documents executed in
connection with this Assignment shall be cumulative, may be exercised singly or
concurrently and shall not be exclusive of any rights or remedies provided by
law.
4.4 Headings. The section and subsection headings used in this
Assignment are for convenience only and shall not affect the construction of
this Assignment.
4.5 Severability. In case any one or more of the provisions contained
in this Assignment shall be invalid, illegal or unenforceable in any respect
under any law, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby.
4.6 Execution of Counterparts. This Assignment may be executed in any
number of counterparts. All such counterparts shall be deemed to be originals
and shall together constitute but one and the same instrument.
4.7 Binding Effect. This Assignment shall be binding upon and inure to
the benefit of each of the Parties hereto and their respective successors and
assigns.
4.8 Governing Law. This Assignment shall be governed by, and construed
and interpreted in accordance with, the internal laws of the State of New York.
-6-
<PAGE> 7
IN WITNESS WHEREOF, this Assignment has been executed and delivered as
of the date and year first above written.
COGEN TECHNOLOGIES LINDEN, LTD.
By COGEN TECHNOLOGIES, INC.,
General Partner
By /s/ ROBERT C. MCNAIR
------------------------------------
Robert C. McNair (print name)
------------------------
President (title)
------------------------
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
By COGEN TECHNOLOGIES LINDEN,
LTD., General Partner
By Cogen Technologies, Inc.,
General Partner
By /s/ ROBERT C. MCNAIR
------------------------------------
Robert C. McNair (print name)
------------------------
President (title)
------------------------
-7-
<PAGE> 1
EXHIBIT 10.12
NOTE: This document is an electronic draft and should not be relied on in lieu
of the version that was executed by Cogen Technologies and Infineum on February
4, 1999. Any questions regarding the terms of the contracts should be addressed
by referral to the executed documents.
AGREEMENT
BETWEEN
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
(d/b/a COGEN TECHNOLOGIES LINDEN VENTURE, LIMITED PARTNERSHIP)
AND
EXXON CORPORATION
FOR THE SALE OF STEAM
AUGUST 1, 1990
AS AMENDED AND RESTATED
BY AND BETWEEN
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
(d/b/a/ COGEN TECHNOLOGIES LINDEN VENTURE, LIMITED PARTNERSHIP)
AND
INFINEUM USA L.P.
FEBRUARY 4, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS 2
ARTICLE 1
DEFINITIONS
1.1 "Affiliate" 5
1.2 "Agreement" 5
1.3 "Annual Period" 5
1.4 "Base Term" 5
1.5 "Bayway Refining Company" 5
1.6 "Btu" 5
1.7 "Cogeneration Facility" 5
1.8 "Commercial Operation" 6
1.9 "Date of Initial Commercial Operation" 6
1.10 "Demised Premises" 6
1.11 "Infineum's Complex" 6
1.12 "Infineum's External Steam Requirements" 6
1.13 "Infineum's Property" 6
1.14 "ExxonTurbo Oil" 7
1.15 "Financier" 7
1.16 "Force Majeure" 7
1.17 "Governmental Authorizations" 8
1.18 "Ground Lease" 8
1.19 "Ground Lease Agreement" 8
1.20 "Improvements Removal Period" 8
1.20A "Infineum's Technology Center" 8
1.21 "K lbs." 8
1.21A "Owner Trust" 8
1.22 "Party" 9
1.23 "Points of Delivery of Steam" 9
1.24 "psig" 9
1.25 "Steam" 9
1.26 "Steam Interconnection Facilities" 9
1.27 "Weighted Average Cost of Gas" 9
</TABLE>
- i -
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE 2
TERM
<S> <C>
2.1 Base Term of Agreement 10
2.2 Renewal of Agreement 10
2.3 Cut-Off Date 10
ARTICLE 3
SALE OF STEAM
3.1 General 11
3.2 Reduced Deliveries 14
3.3 Routine Scheduling 16
3.4 Quality of Steam 16
3.5 Points of Delivery 17
ARTICLE 4
COST OF STEAM
4.1 Monthly Steam Charge 17
4.2 Annual Steam Adjustment 17
4.3 Monthly Initial Steam Commitment Credit 18
4.4 Annual Initial Steam Commitment Credit Adjustment 18
4.5 Cumulative Adjustments and Credits 18
ARTICLE 5
OTHER RIGHTS AND OBLIGATIONS OF PARTIES
5.1 Rights and Obligations of Cogen 19
5.2 Rights and Obligations of Infineum 19
ARTICLE 6
MEASUREMENT AND METERING
6.1 Units of Measurement 21
6.2 Cogen's Measuring Equipment 21
6.3 Infineum's Measuring Equipment 22
6.4 Means of Measurement and Notice to Cogen 22
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<S> <C>
6.5 Testing and Corrections 23
A. Testing of Cogens Meters 24
B. Testing of Infineum's Meters 24
C. Other Testing of Meters 24
D. Costs of Testing 24
E. Corrections of Measuring Equipment 24
6.6 Maintenance 25
ARTICLE 7
BILLING AND RECORDS
7.1 Billing 26
A. Monthly Bill to Infineum 26
B. Annual Adjustments 26
C. Other Adjustments 27
7.2 Payment and Penalties 27
A. Payment 27
B. Interest 27
7.3 Disputes 28
7.4 Records 28
ARTICLE 8
TAXES 28
ARTICLE 9
AUTHORITY
9.1 Authority of Infineum 29
9.2 Authority of Cogen 29
ARTICLE 10
FORCE MAJEURE
10.1 Definition 30
10.2 Burden of Proof 31
10.3 Condition 31
10.4 Labor Disputes 32
10.5 Termination for Force Majeure 32
10.6 Cogen's Right to Temporary Cure 32
</TABLE>
- iii -
<PAGE> 5
<TABLE>
<CAPTION>
ARTICLE 11
<S> <C>
BREACH OF CONTRACT AND TERMINATION
11.1 Infineum's Right to Terminate 35
11.2 Cogen's Right to Terminate 36
11.3 Automatic Termination 38
11.4 Notice to the Financier, Lenders and Mortgagees 39
11.5 Effective Date of Termination 40
11.6 Transition 42
ARTICLE 12
LIABILITY
12.1 Limitation on Liability for Damages 43
12.2 Damages 45
12.3 Specific Performance 45
ARTICLE 13
NONWAIVER 46
ARTICLE 14
NOTICE AND SERVICE
14.1 Notice 46
14.2 Date of Service 46
A. Mail 46
B. Telegram 47
C. Personal Service 47
14.3 Addresses 47
A. Cogen 47
B. Infineum 47
ARTICLE 15
AMENDMENTS 48
ARTICLE 16
SUCCESSORS AND ASSIGNS
16.1 Assignment by Infineum 48
16.2 Assignment by Cogen 48
16.3 Continuing Obligations 49
16.4 [Intentionally Omitted] 50
16.5 Transfers of Part of Infineum's Complex 50
</TABLE>
- iv -
<PAGE> 6
<TABLE>
<S> <C>
16.6 [Intentionally Omitted] 52
16.7 Rights of the Financier and Other Lenders 52
16.8 Status Certificates 58
ARTICLE 17
CHOICE OF LAW 58
ARTICLE 18
RENEGOTIATION 58
ARTICLE 19
CONSENT NOT TO BE UNREASONABLY WITHHELD 59
ARTICLE 20
OTHER AGREEMENTS 59
ARTICLE 21
CAPTIONS 60
ARTICLE 22
COUNTERPARTS 60
</TABLE>
- v -
<PAGE> 7
<TABLE>
<CAPTION>
EXHIBIT A
<S> <C>
PART 1: CALCULATION OF MONTHLY STEAM CHARGE 62
PART 2: CALCULATION OF ANNUAL STEAM ADJUSTMENT 64
PART 3: CALCULATION OF MONTHLY INITIAL STEAM
COMMITMENT CREDIT 65
PART 4: CALCULATION OF ANNUAL INITIAL STEAM
COMMITMENT CREDIT ADJUSTMENT 66
EXHIBIT B
DESCRIPTION OF POINTS OF DELIVERY OF STEAM 69
EXHIBIT C
PRO FORMA MONTHLY INVOICE 70
EXHIBIT D
[INTENTIONALLY OMITTED] 71
EXHIBIT E
EXAMPLE OF PRO RATA ALLOCATION OF STEAM 72
EXHIBIT F
[INTENTIONALLY OMITTED] 76
EXHIBIT G-1
ASSUMPTION AGREEMENT 77
EXHIBIT G-2
ASSUMPTION AGREEMENT 79
EXHIBIT G-3
ASSUMPTION AGREEMENT 81
</TABLE>
- vi -
<PAGE> 8
<TABLE>
<CAPTION>
EXHIBIT H
<S> <C>
CONSENT TO ASSIGNMENT 84
EXHIBIT I
RECOGNITION AGREEMENT 87
</TABLE>
- vii -
<PAGE> 9
AGREEMENT
BETWEEN
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
(d/b/a COGEN TECHNOLOGIES LINDEN VENTURE, LIMITED PARTNERSHIP)
AND
EXXON CORPORATION
FOR THE SALE OF STEAM
AUGUST 1, 1990
AS AMENDED AND RESTATED
BY AND BETWEEN
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
(d/b/a/ COGEN TECHNOLOGIES LINDEN VENTURE, LIMITED PARTNERSHIP
AND
INFINEUM USA L.P.
An AGREEMENT was made and entered into effective August 1, 1990, by and
between Cogen Technologies Linden Venture, L.P., doing business in New Jersey as
Cogen Technologies Linden Venture, Limited Partnership ("Cogen"), a Delaware
limited partnership, and Exxon Corporation ("Exxon"), a New Jersey corporation
and on January 1, 1999, Exxon assigned all of its right, title and interest in
that Agreement to Infineum USA L.P., a Delaware limited partnership
("Infineum"). Cogen and Infineum (collectively "Parties") desires to and do
hereby amend and restate that Agreement as of January 1, 1999, in its entirety
as follows.
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RECITALS
WHEREAS, RCM Holdings, Inc. (previously known as Cogen Technologies,
Inc.), has entered into a Power Purchase Agreement dated April 14, 1989 ("Power
Purchase Agreement") with Consolidated Edison Company of New York, Inc.
("Consolidated Edison"), under which RCM Holdings, Inc. sells to Consolidated
Edison electricity from a cogeneration facility ("Cogeneration Facility")
located in Linden, New Jersey. The Power Purchase Agreement was approved by the
Public Service Commission of the State of New York and became effective in
September, 1989 and has been assigned to Cogen. The Cogeneration Facility is a
qualifying cogeneration facility as defined in Section 3(18) of the Federal
Power Act and the regulations thereunder. Cogen and Consolidated Edison
contemplate that the Power Purchase Agreement will remain in force for
twenty-five (25) years from the "Date of Initial Commercial Operation" (as
defined in Article 1.8 below) and possibly for two (2) additional five (5) year
renewal terms;
WHEREAS, Infineum owns, operates and maintains "Infineum's Complex" (as
defined in Article 1.11 below) which is located at Linden, New Jersey and which
utilizes steam for industrial purposes;
WHEREAS, Cogen has constructed and owns, operates, and maintains the
Cogeneration Facility on the "Demised Premises" (as defined in Article 1.10
below) upon which the Cogeneration Facility is located;
WHEREAS, the Demised Premises are located near Infineum's Complex;
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WHEREAS, Cogen desires to sell steam to Infineum from the Cogeneration
Facility for use at Infineum's Complex and Infineum desires to purchase such
steam from Cogen;
WHEREAS, Exxon and Cogen desired to set forth in writing their
respective rights and obligations with respect to the matters set forth above
and therefore on August 1, 1990 entered into an Agreement for the Sale of Steam
(the "Original Agreement") for Cogen's sale to Exxon of steam produced by
Cogen's Cogeneration Facility;
WHEREAS, Exxon and Cogen subsequently entered into a Letter Agreement
("Letter Agreement") dated September 27, 1991, and a Recognition Agreement
("Recognition Agreement") dated September 17, 1992, both amending the Original
Agreement;
WHEREAS, On January 1, 1999, Exxon assigned to Infineum all of its
right, title, and interest in and to the Original Agreement, the Letter
Agreement and the Recognition Agreement and Infineum assumed all obligations and
liabilities thereunder arising on or after January 1, 1999;
WHEREAS, Exxon and Cogen previously entered into a Ground Lease
Agreement dated August 1, 1990 (the "Ground Lease Agreement") for Cogen's lease
from Exxon of certain real property located at the site of the Bayway Refinery
for Cogen's construction and operation of the Cogeneration Facility;
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WHEREAS, Exxon sold its interest in the Bayway Refinery to Bayway
Refining Company on April 8, 1993, and no longer has any steam requirements for
the Bayway Refinery;
WHEREAS, Exxon entered into an Assignment of Lease with Bayway Refining
Company on April 8, 1993, wherein Exxon assigned to Bayway Refining Company all
of Exxon's interest in and to the Ground Lease Agreement;
WHEREAS, the Agreement and the Ground Lease Agreement are no longer
interdependent;
WHEREAS, Cogen simultaneously herewith is entering into an agreement
with Bayway Refining Company for Cogen's sale to Bayway Refining Company of
steam produced by the Cogeneration Facility for use at the Bayway Refinery,
replacing, in part, Cogen's sale of such steam to Exxon under the Original
Agreement;
WHEREAS, the "Points of Delivery of Steam" (as defined in the
Agreement) are located at the site of the Bayway Refinery and are no longer
directly connected to facilities owned by Infineum for the receipt of Cogen's
steam; and
WHEREAS, in light of the matters set forth above, the Parties desire to
amend and restate their respective rights and obligations in their entirety and
to reflect such further amendments in the Agreement as are contained herein;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other valuable consideration, receipt and sufficiency of which are
hereby
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acknowledged, the Parties hereby amend and restate the Agreement in its entirety
follows:
ARTICLE 1
DEFINITIONS
The following terms when used herein shall have the following meanings:
1.1 "Affiliate" means a corporation or other entity that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, another corporation or other entity.
1.2 "Agreement" means this contract, including all exhibits and
amendments thereto that may be made from time to time.
1.3 "Annual Period" means any one of a succession of consecutive twelve
(12) month periods, the first of which shall begin on the Date of Initial
Commercial Operation.
1.4 "Base Term" of this Agreement has the meaning set forth in Article
2.1.
1.5 "Bayway Refining Company" means the Bayway Refining Company as well
as its successors and assigns.
1.6 "Btu" means British Thermal Unit.
1.7 "Cogeneration Facility" means the cogeneration facility constructed
by Cogen on the Demised Premises. The Cogeneration Facility excludes the
cogeneration unit which might be installed by Bayway Refining Company on the
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Demised Premises, as more fully described in Section 7.1 of the Ground Lease
Agreement.
1.8 "Commercial Operation" means the production of electricity by
Cogen at the Cogeneration Facility upon the completion of such testing of the
Cogeneration Facility as Cogen determines is required by prudent electrical
practices, and the supply of Steam at the Points of Delivery of Steam.
1.9 "Date of Initial Commercial Operation" means the first day of the
month which immediately follows the date Cogen designates in writing to
Consolidated Edison as the initial date of Commercial Operation of its
Cogeneration Facility, which first day of the month occurred on May 1, 1992.
1.10 "Demised Premises" means those two parcels of land which total
approximately 12.36 acres on the site of Bayway Refining Company's refinery and
which were leased to Cogen pursuant to the Ground Lease Agreement, as described
more particularly in Article 1 and Exhibit B of the Ground Lease Agreement.
1.11 "Infineum's Complex" means Infineum's chemical plant (formerly
Exxon Chemical Company's Chemical Plant) located at Linden, New Jersey.
1.12 "Infineum's External Steam Requirements" means the quantity of
steam used by Infineum to operate Infineum's Complex and Infineum's Technology
Center.
1.13 "Infineum's Property" means the real property interests, if any,
and of whatever nature in and to the land upon which Infineum's Complex is
located.
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1.14 "Exxon Turbo Oil" means Exxon Company, U.S.A., Turbo Oil located
at Linden, New Jersey.
1.15 "Financier" initially means the Owner Trust, and may also mean any
other entity subsequently extending credit to Cogen for the construction,
operation, maintenance, repair, replacement, or removal of the Cogeneration
Facility and other "Improvements" (as defined in Article 1 of the Ground Lease
Agreement), or any entity subsequently providing funds for the refinancing or
taking-out of such loans, and the nominees or designees of any such entities;
provided that, at no time will Infineum be obligated to recognize more than one
such entity as the Financier to whom duties are owed, or rights are granted,
under this Agreement and the Ground Lease Agreement. Infineum will recognize as
the Financier for purposes of this Agreement and the Ground Lease Agreement (i)
the Owner Trust, until such time as the Owner Trust or the Lender's Agent (as
set forth in the recognition agreement executed and delivered to the Owner Trust
by Infineum) notifies Infineum in writing that such other party should be
considered to be the Financier, and (ii) thereafter, the designated party, until
such time as such designated party, notifies Infineum in writing that Cogen has
the right to designate another entity as the Financier, and (iii) thereafter,
such other entity as Cogen may designate in writing from time to time.
1.16 "Force Majeure" has the meaning set forth in Article 10.1.
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1.17 "Governmental Authorizations" means any and all licenses, permits,
certificates and other authorizations required by applicable federal, state, or
local law.
1.18 "Ground Lease" means the creation of a leasehold estate in the
Demised Premises, as set forth in Article 1 of the Ground Lease Agreement.
1.19 "Ground Lease Agreement" means the agreement of August 1, 1990
between Cogen and Exxon for the lease of the Demised Premises to Cogen,
including all exhibits and amendments thereto that may be made from time to
time, as such agreement was assigned by Exxon to Bayway Refining Company by that
certain Assignment of Lease dated April 8, 1993.
1.20 "Improvements Removal Period" means that part of the term of the
Ground Lease for the removal of certain "Improvements" (as defined in Article 1
of the Ground Lease Agreement), including the Cogeneration Facility, as set
forth in Article 1 of the Ground Lease Agreement.
1.20A "Infineum's Technology Center" means Infineum's Technology Center
(formerly Exxon's Technology Center) located at Linden, New Jersey.
1.21 "K lbs." means 1,000 pounds of steam mass.
1.21A "Owner Trust" means the trust established pursuant to the Trust
Agreement dated as of December 28, 1990, between State Street Bank and Trust
Company of Connecticut, National Association, and Linden Owner Partnership, as
the same may be amended from time to time.
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1.22 "Party" means Cogen or Infineum, as the case may be, and its
permitted successors and assigns.
1.23 "Points of Delivery of Steam" means the points where Cogen's steam
supply system connects to Bayway Refining Company's steam pipeline at Bayway
Refining Company's existing steam headers, as indicated on Exhibit B.
1.24 "psig" means pound per square inch gauge.
1.25 "Steam" means steam for Infineum's Complex meeting the
specifications set out in Article 3.4 of this Agreement.
1.26 "Steam Interconnection Facilities" means Cogen's facilities
required for the delivery of Steam to the Points of Delivery of Steam, including
service stop valves, meter stop valves, primary and secondary service pressure
reducing valves, meter supports, protection devices, meters, pipe systems,
pipelines, venting, and other facilities required to connect the Cogeneration
Facility to the Points of Delivery of Steam in order to effectuate the purposes
of this Agreement.
1.27 "Weighted Average Cost of Gas" means the average cost of natural
gas of Consolidated Edison and Public Service Electric and Gas Company (or their
successors) based upon volumes of natural gas purchased by such utilities during
the month in question as set forth in Consolidated Edison's Operating and
Financial Report filed monthly with the Public Service Commission of the State
of New York, and as set forth in Public Service Electric and Gas Company's
Commodity Charge Applicable to Cogeneration Interruptible Service filed monthly
with the State of New Jersey Board of Public Utilities.
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ARTICLE 2
TERM
2.1 Base Term of Agreement. This Agreement shall be effective August 1,
1990 and will continue thereafter until April 30, 2017 (the "Base Term"), unless
sooner terminated in accordance with the terms of this Agreement.
2.2 Renewal of Agreement. This Agreement shall be automatically renewed
for two (2) periods of five (5) additional Annual Periods each, commencing with
the expiration of the Base Term pursuant to Article 2.1, unless either Party
elects to terminate this Agreement at the expiration of the Base Term or at the
expiration of the first five (5) year renewal term. Termination by Infineum
shall be valid only if Infineum provides Cogen written notice of its intent to
terminate at least five and one-half (5 1/2) years prior to the expiration of
the Base Term or at least five and one-half (5 1/2) years prior to the
expiration of the first five (5) year renewal term, as the case may be.
Termination by Cogen shall be valid only if Cogen provides Infineum written
notice of its intent to terminate at least four (4) years prior to the
expiration of the Base Term or at least four (4) years prior to the expiration
of the first five (5) year renewal term, as the case may be.
2.3 Cut-Off Date. In no event shall this Agreement extend beyond
January 1, 2033, without the written consent of both Parties.
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ARTICLE 3
SALE OF STEAM
3.1 General.
A. Commencing on January 1, 1999, Cogen shall sell to Infineum and
deliver to the Points of Delivery of Steam, Steam for Infineum's Complex and
Infineum's Technology Center up to a maximum rate of 181 K lbs. per hour for the
months October through and including May, and up to a maximum rate of 109 K lbs.
per hour for the months June through and including September. This delivery of
Steam shall be uninterrupted. Cogen will have met its obligation to sell to
Infineum and deliver uninterrupted Steam for Infineum's Complex and Infineum's
Technology Center to the Points of Delivery of Steam, if it maintains pressure
and flow (to the extent that flow is within Cogen's control and flow is not
otherwise requested to be interrupted by Bayway Refining Company, provided that
Cogen immediately notifies Infineum of any such request by Bayway Refining
Company) at the Points of Delivery of Steam as determined by the Cogeneration
Facility's control equipment. In the event of an upset or other emergency at
Infineum's Complex or Infineum's Technology Center during the months June
through and including September, Cogen shall sell to Infineum and deliver to the
Points of Delivery of Steam, Steam for Infineum's Complex and Infineum's
Technology Center up to a maximum rate of 181 K lbs. per hour for the duration
of such upset or emergency. In addition, if at any time Infineum requests Steam
at Infineum's Complex and
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Infineum's Technology Center in excess of 181 K lbs. per hour during the months
October through and including May, or in excess of 109 K lbs. per hour during
the months June through and including September, Cogen shall meet such request
to the extent Cogen is able to do so, provided that Cogen is not materially
adversely affected under the Power Purchase Agreement or Cogen's other
agreements to sell steam to other steam users.
B. Infineum shall purchase and use from Cogen at least 158,556 K
lbs. of Infineum's External Steam Requirements in each Annual Period. Infineum
may at any time take steam subject to Infineum's obligations set forth in the
preceding sentence, from any other source upon reasonable notice to Cogen.
C. Infineum's External Steam Requirements at Infineum's Complex
and Infineum's Technology Center are presently estimated, but not guaranteed, to
be 843,460 K lbs. per Annual Period. Cogen recognizes that Infineum may reduce,
terminate, or change the nature of its operations at Infineum's Complex or
Infineum's Technology Center and that Infineum's External Steam Requirements
might be reduced below 158,556 K lbs. per Annual Period or eliminated as a
result. However, if Infineum elects to cease all or substantially all industrial
operations in Infineum's Complex (other than because of Force Majeure) with the
results described in Article 11.2E, Cogen may elect to terminate this Agreement
pursuant to Article 11.2E.
D. If Infineum, during the term of this Agreement, decides to make
substantial changes in the nature of its industrial operations in Infineum's
Complex
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(other than because of Force Majeure) with the probable result that Infineum's
maximum rate of Steam taken from Cogen under Articles 3.1A and 3.1B would
permanently fall below both 127 K lbs. per hour for the months October through
and including May and 72 K lbs. per hour for the months June through and
including September, Infineum shall give Cogen prompt written notice of such
decision. In that event, if Cogen so requests, Infineum and Cogen shall work
together to revise Cogen's obligations as defined in Article 3.1A, so that Cogen
shall continue to be obligated to provide to Infineum the Steam which Infineum
needs for its changed operations and so that Cogen shall have the opportunity to
seek and obtain other customers for the volume of Infineum's External Steam
Requirements no longer needed by Infineum.
E. If Infineum is impacted by Force Majeure which causes
Infineum's External Steam Requirements from Cogen under this Agreement to fall
below 79,278 K lbs. of Steam for any consecutive six (6) month period (an
average of 18 K lbs. of Steam per hour on a six (6) month basis), and if Cogen,
with Infineum's Steam take from Cogen in combination with the steam take from
Cogen's other steam customers, would be unable, in Cogen's reasonable judgment,
to maintain the status of the Cogeneration Facility as a "qualifying
cogeneration facility" (as defined in Section 3(18) of the Federal Power Act and
the regulations thereunder) for at least five (5) gas turbines, Cogen, by prompt
written notice to Infineum, may reduce its obligation in Article 3.1A to provide
181 K lbs. of Steam per hour to 145 K lbs. of Steam per hour. The purpose of
this reduction in Cogen's
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obligation in Article 3.1A would be to give Cogen a reasonable opportunity to
maintain the status of the Cogeneration Facility as a "qualifying cogeneration
facility" by obtaining other customers for up to 36 K lbs. per hour of its steam
from October through and including May and, during upsets or emergencies, from
June through and including September. If Cogen's obligation to sell and deliver
Steam to Infineum is reduced as described in this Article 3.1E, and if
subsequently the Force Majeure impacting Infineum abates, Infineum may request
Cogen to reinstate the original rate of 181 K lbs. of Steam per hour under
Article 3.1A. Cogen's obligation under this Article 3.1E shall revert to the
original rate of 181 K lbs. of Steam per hour under Article 3.1A twenty-four
(24) months following Cogen's receipt of a written notice from Infineum
requesting such reversion, unless the Parties mutually agree upon an earlier
date for such reversion.
3.2 Reduced Deliveries.
A. Should Cogen be unable to deliver and sell the quantity of
Steam required to be delivered and sold to Infineum under Article 3.1A due to a
reduction in the amount of steam being generated by the Cogeneration Facility
due to Force Majeure, Infineum shall have the right to a pro rata allocation of
steam being generated, delivered and sold from the Cogeneration Facility in
relation to Cogen's delivery of steam to Bayway Refining Company and American
Cyanamid Company ("Cyanamid") pursuant to an agreement between Cogen and Bayway
Refining Company for the sale of steam, and a potential agreement between Cogen
and Cyanamid for the sale of steam to be executed at a future date. Such pro
rata
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allocation shall be based on Infineum's, Bayway Refining Company's and
Cyanamid's previous twenty-four (24) hours of demand for steam from the
Cogeneration Facility at the time of reduction of the amount of steam being
generated and available for delivery and sale.
B. Should Cogen fail for any reason to deliver to Infineum the
Steam that Cogen is required to deliver to Infineum under Article 3.1, Infineum
shall have the right immediately to obtain, and shall not be deemed in breach of
this Agreement if it obtains, replacement steam from any other source (within or
external to Infineum's Complex) for the duration of Cogen's failure to provide
the Steam. If Cogen does fail for any reason (other than because of Force
Majeure) to deliver to Infineum the Steam that Cogen is required to deliver to
Infineum under this Article 3, and if Infineum obtains replacement steam from
any other source, Cogen shall reimburse Infineum for any difference between
Infineum's reasonable cost for the replacement of such steam and the cost
Infineum would have incurred in buying Steam under Articles 3 and 4. To the
extent that Cogen's failure to deliver Steam is excused by Force Majeure, Cogen
shall owe Infineum no money for any such difference in cost. The cost which
Infineum would have incurred in buying Steam under Articles 3 and 4 shall be
calculated as provided in Article 10.6B.
C. Notwithstanding Article 5.2A of this Agreement, Infineum shall
not be liable to Cogen for Steam actually delivered by Cogen to the Points of
Delivery of Steam in accordance with Article 3.1A of this Agreement, but that is
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not received by Infineum; provided that such failure to receive Steam was not
caused by Infineum in contravention of this Agreement. Cogen shall not be liable
to Infineum (including liability for replacement Steam) due to Infineum's
failure to receive Steam if such failure is due to Bayway Refining Company's
failure or refusal to deliver such Steam to Infineum.
3.3 Routine Scheduling. Commencing with the Date of Initial Commercial
Operation, Infineum shall, at any time upon Cogen's request, give Cogen its best
estimate of its expected requirements for Steam from the Cogeneration Facility
hereunder (including the hourly delivery rates) in such detail as follows:
A. For each calendar year, at least by December 1 of the preceding
calendar year on a monthly basis; and
B. For each month, at least ten (10) days prior to the end of the
preceding month, on a weekly basis.
Notwithstanding the foregoing, Infineum shall advise Cogen of any significant
changes in its expected requirements for Steam from the Cogeneration Facility as
soon as reasonably practicable.
3.4 Quality of Steam. All Steam shall meet either of the following
specifications: for high pressure level not less than 700 psig nor more than 740
psig at 700"-740"F, and for low pressure level not less than 130 psig nor more
than 150 psig at 440"-480"F, and for both the high pressure level and the low
pressure level, total dissolved solids and the oxygen present shall not exceed
the amounts recommended by standard industrial practices for 1500 psig steam
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systems. At Infineum's option and subject to the limits of Article 3.1A,
Infineum shall specify and Cogen shall deliver to the Points of Delivery of
Steam the amounts of high pressure and low pressure Steam that Infineum desires;
provided, however, that Cogen shall not be obligated to supply Infineum with
more than 19 K lbs. per hour of Steam at the high pressure level at any time
(except to the extent that Cogen is able to provide more than 19 K lbs. per hour
at the high pressure level, Cogen shall do so, provided that Cogen is not
materially adversely affected under the Power Purchase Agreement or Cogen's
other agreements to sell steam to other steam users) or 226 K lbs. per hour of
Steam at the low pressure level at any time (except to the extent that Cogen is
able to provide more than 226 K lbs. per hour at the low pressure level, Cogen
shall do so, provided that Cogen is not materially adversely affected under the
Power Purchase Agreement or Cogen's other agreements to sell steam to other
steam users).
3.5 Points of Delivery. Cogen shall pay for the installation and
maintenance of all Steam Interconnection Facilities.
ARTICLE 4
COST OF STEAM
4.1 Monthly Steam Charge. Infineum shall pay to Cogen the monthly steam
charge (MS) calculated pursuant to Part 1 of Exhibit A.
4.2 Annual Steam Adjustment. Subject to Article 4.5, Cogen shall
calculate and credit to Infineum the annual steam adjustment (ASA) according to
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Part 2 of Exhibit A. This adjustment reflects differences in Steam charges to
Infineum when quantities delivered to Infineum are calculated on an annualized
basis versus a monthly basis.
4.3 Monthly Initial Steam Commitment Credit. Subject to Article 4.5,
Cogen shall calculate and credit to Infineum as assignee of Exxon of the
Original Agreement, the monthly initial steam commitment credit (MC) according
to Part 3 of Exhibit A. This credit is provided because of Exxon's commitment to
purchase Steam at the initial planning stage of the development of the
Cogeneration Facility and reflects a change from Cogen's previous plan to
provide electricity to Exxon.
4.4 Annual Initial Steam Commitment Credit Adjustment. Subject to
Article 4.5, Cogen shall calculate and credit to Infineum the annual initial
steam commitment credit adjustment (ACA) according to Part 4 of Exhibit A. This
adjustment reflects differences in the monthly initial steam commitment credit
when quantities of Steam delivered to Infineum are calculated on an annualized
basis versus a monthly basis.
4.5 Cumulative Adjustments and Credits. The cumulative adjustments and
credits pursuant to Articles 4.2, 4.3 and 4.4 in any Annual Period shall not
exceed the cumulative monthly steam charge under Article 4.1 in any Annual
Period.
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ARTICLE 5
OTHER RIGHTS AND OBLIGATIONS OF PARTIES
5.1 Rights and Obligations of Cogen. In addition to the rights and
obligations of Cogen specified in Article 3 and Article 4, Cogen shall:
A. Have the right to sell any and all electric power generated at
the Cogeneration Facility in excess of the amounts Cogen is obligated
to sell to Consolidated Edison under the Power Purchase Agreement, to
any third person under such terms and conditions as Cogen, in its sole
discretion, determines to be appropriate.
B. Have the right to sell any and all steam produced at the
Cogeneration Facility that is first offered to but not purchased by
Infineum under Article 3 to any other person on such terms and
conditions as Cogen and such person shall agree, without interference
by Infineum, except that such sale shall not be conducted in such
manner as to interfere with Cogen's provision of Steam under Article 3
or with Infineum's reasonable and normal operation of Infineum's
Complex or Infineum's Technology Center.
C. Design, construct, operate, and maintain the Cogeneration
Facility to meet reliability and safety standards consistent with steam
supply to a major industrial complex and will work with Infineum so
that such reliability and safety standards are adequately addressed.
5.2 Rights and Obligations of Infineum. In addition to the rights and
obligations of Infineum specified in Article 3 and Article 4, Infineum shall:
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A. Receive Cogen's delivery of Steam under this Agreement in a
manner consistent with safety standards generally applicable to receipt
and use of steam at a major industrial complex, and make the necessary
arrangements for the delivery of Steam sold hereunder from the Points
of Delivery of Steam to Infineum at Infineum's Complex and Infineum's
Technology Center.
B. [INTENTIONALLY OMITTED]
C. Have the right to sell and deliver Steam purchased from Cogen to
any person who owns or operates facilities within Infineum's Complex,
at Infineum's Technology Center, at Exxon Turbo Oil, or on property
transferred by Exxon to Bayway Refining Company as part of the purchase
by Bayway Refining Company of Exxon's Refinery; provided, however, that
Infineum shall first provide Cogen with a declaratory order of the New
Jersey Board of Public Utilities or other official assurances
satisfactory to Cogen that such sale and delivery would not cause or
would not be likely to cause the Cogeneration Facility to cease to be a
"qualifying cogeneration facility" as defined in Section 3(18) of the
Federal Power Act and the regulations thereunder, and that such sale
and delivery would not result in Cogen, or any person having an
ownership interest in Cogen, or the Cogeneration Facility, or any
person operating the Cogeneration Facility, or any Affiliate of Cogen
or any such persons, becoming subject to or affected by regulation
under the Federal Power Act, the Public Utility Holding Company Act of
1935, or state
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laws and regulations respecting the regulation of utilities, except
reporting or safety requirements that are non-burdensome in nature. In
the event that the State of New Jersey by law, regulation or order,
does not subject the sale or delivery of steam to public utility-type
regulation (other than reporting or safety requirements that are
non-burdensome in nature), such a law, regulation or order shall
constitute an official assurance satisfactory to Cogen, for purposes of
this clause (C) of this Section 5.2; provided, that such proposed sale
or delivery of Steam meets all requirements specified in such law,
regulation or order. To the extent additional information is reasonably
required to determine if such sale or delivery of Steam meets the
requirements specified in such law, regulation or order, Cogen may
request such further information from Infineum.
ARTICLE 6
MEASUREMENT AND METERING
6.1 Units of Measurement. For the purposes of this Agreement, Steam
shall be measured in K lbs. of steam mass.
6.2 Cogen's Measuring Equipment. Cogen shall design, install, operate,
maintain, and own all measuring equipment necessary for an accurate
determination of the quantity of Steam delivered to the Points of Delivery of
Steam. Except as provided in Article 6.4, Cogen's meters shall be used for
quantity measurements under this Agreement.
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6.3 Infineum's Measuring Equipment. Infineum may design, install,
operate, maintain, and own, at its sole expense, steam measuring equipment,
provided that Infineum shall not interfere with Cogen's steam supply system or
with Cogen's measuring equipment.
6.4 Means of Measurement and Notice to Cogen. Infineum shall be
required to measure the quantity of Steam received by Infineum. Such measurement
shall be determined by one or a combination of the following methods:
A. Using the registration of any meter or meters of Infineum, if
installed and accurately registering; or
B. In the absence of an installed and accurately registering meter
of Infineum, making a calibration test or mathematical calculation, if
the percentage of error is ascertainable; or
C. In the absence of both an installed and accurately registering
meter of Infineum and an ascertainable percentage of error, estimating
by reference to quantities measured during periods under similar
conditions when Infineum's meter was registering accurately. Infineum
shall repair and recalibrate any inaccurate meter in a timely manner;
or
D. In the absence of an ability to use any of the above methods of
measurement, estimating by reference to Infineum's operating records
for
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Infineum's Complex and Infineum's Technology Center for the period in
question.
Commencing on the first day of the second calendar month subsequent to the date
Cogen first sells Steam to Infineum under this amended and restated Agreement,
and thereafter on the first day of each calendar month during the term of this
Agreement, Infineum shall determine the quantities of Steam delivered to
Infineum during the immediately preceding calendar month, and notify Cogen in
writing of such quantities on or before the seventh day of the month. Cogen
shall have the right to verify the quantities of Steam delivered to Infineum by
comparison to reports by Bayway Refining Company regarding the quantities of
Steam delivered to Infineum. In the event of any discrepancy between the
quantities of Steam delivered to Infineum as reported by Infineum and those
reported by Bayway Refining Company, Cogen shall rely, for purposes of this
Agreement, on Infineum's reported quantities pending reconciliation among Cogen,
Infineum and Bayway Refining Company of the reported quantities. In the event
that such reconciliation between the Infineum and Bayway Refining Company
reported quantities results in a revision of the reported quantities of Steam
delivered to Infineum, such revisions shall be reflected in an adjusted invoice
pursuant to Article 7.1C of this Agreement.
6.5 Testing and Corrections. All meters used by either Cogen or
Infineum for measuring the quantity of Steam received by Infineum shall be
maintained under the following procedures:
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A. Testing of Cogen's Meters. The accuracy of Cogen's measuring
equipment shall be tested and verified by Cogen at quarterly intervals
in Infineum's presence. The calibration procedure to be used under this
Article 6.5A shall be mutually agreed to by the Parties prior to the
time Cogen first delivers Steam to Infineum.
B. Testing of Infineum's Meters. The accuracy of Infineum's
measuring equipment shall be tested and verified by Infineum at
quarterly intervals in Cogen's presence. The calibration procedure to
be used under this Article 6.5B shall be the same procedure as is used
under Article 6.5A.
C. Other Testing of Meters. In the event that either Party notifies
the other that it desires a test of its own or of the other Party's
measuring equipment, the Parties shall cooperate to secure a prompt
verification of the accuracy of such equipment.
D. Costs of Testing. Each party shall bear the cost of the testing
and any required adjustments of its measuring equipment done at
quarterly intervals. In the event that one party requests a testing of
the other party's measuring equipment at other than quarterly
intervals, the requesting party shall bear the cost of the testing
unless such equipment is found to be inaccurate by greater than two
percent (2%).
E. Corrections of Measuring Equipment. If, upon testing, any
measuring equipment is found to be inaccurate by less than two percent
(2%) at a flow rate corresponding to the average hourly flow rate for
Steam
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supplied by Cogen for Infineum's Complex and Infineum's Technology
Center for the period since the last preceding test, previous
recordings of such equipment shall be considered accurate in computing
deliveries of Steam hereunder, but such equipment shall be promptly
adjusted to record correctly to the extent possible. If, upon testing,
any measuring equipment shall be found to be inaccurate by greater than
two percent (2%) at a flow rate corresponding to the average hourly
flow rate for Steam supplied by Cogen for Infineum's Complex or
Infineum's Technology Center for the period since the last preceding
test, then such equipment shall be promptly adjusted to record
properly, to the extent possible, and any previous recordings by such
equipment shall be corrected to zero error, to the extent possible, and
Cogen shall promptly send to Infineum, pursuant to Article 7, billing
adjustments based on such corrected recordings. If no reliable
information exists as to when the equipment became inaccurate, it shall
be assumed for correction purposes hereunder that such inaccuracy began
at a point in time midway between the testing date and the last
previous date on which the equipment was tested and found to be
accurate or adjusted to be accurate.
6.6 Maintenance. Each Party shall have the right to be present whenever
the other Party reads, cleans, changes, repairs, inspects, tests, calibrates, or
adjusts its measuring equipment. Each Party shall give timely notice to the
other Party in advance of taking any of such actions.
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ARTICLE 7
BILLING AND RECORDS
7.1 Billing.
A. Monthly Bill to Infineum. On or before the tenth (10th) day of
each month, Cogen shall prepare and deliver to Infineum an invoice setting forth
the monthly steam charge and the monthly initial steam commitment credit, as set
forth in Articles 4.1 and 4.3, for the preceding month. Such invoice shall also
set forth the other information called for in Exhibit C and shall be in the form
shown in Exhibit C. If Cogen from time to time does not know its actual cost of
fuel for purposes of Exhibit A calculations for the month in question when Cogen
prepares an invoice pursuant to this Article 7.1A, Cogen may estimate such cost
using all available data. To the extent that an estimate is provided and used
for purposes of determination of Cogen's actual cost of fuel in Exhibit A, Cogen
shall provide Infineum a statement of Cogen's actual cost of fuel as soon as
available to Cogen, and Cogen shall make the appropriate adjustment as well as
any adjustment as a result of Cogen's actual cost of fuel exceeding the cap in
Note 1 to Exhibit A, in the following month's invoice.
B. Annual Adjustments. Within thirty (30) days following the end
of each Annual Period, Cogen shall prepare and deliver to Infineum an invoice
setting forth any credits due as a result of the annual steam adjustments as set
forth in Article 4.2 and the annual initial steam commitment credit adjustment
as
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set forth in Article 4.4. Such invoice shall also set forth the other
information called for in Exhibit C and shall be in the form shown in Exhibit C.
C. Other Adjustments. Cogen shall promptly prepare and deliver to
Infineum an invoice setting forth any adjustments for discrepancies in billing
identified through meter verifications pursuant to Article 6.5E, through other
means pursuant to Article 6.4, or for any other reason which would result in
reimbursement of billed amounts to Infineum or additional payments by Infineum
to Cogen.
7.2 Payment and Penalties.
A. Payment. Infineum shall, within fifteen (15) days of the
receipt of Cogen's invoice setting forth the monthly bill to Infineum pursuant
to Article 7.1A, pay Cogen for all amounts billed. Cogen shall, within fifteen
(15) days after issuing its invoice setting forth annual reconciliation credits
due Infineum pursuant to Article 7.1B, pay Infineum all amounts due.
Reimbursements or additional payments pursuant to Article 7.1C shall be paid
within thirty (30) days of receipt of the billing adjustment invoice.
B. Interest. If Infineum fails to pay timely all or a portion of
the amounts billed pursuant to Article 7.1A or either Party fails to make timely
reimbursements or additional payments pursuant to Article 7.1B or 7.1C within
the time stated in this Article 7, interest on the unpaid portion shall accrue
from the date due until paid at two percent (2%) over the bank prime loan rate
as reported in Federal Reserve Statistical Release H.15 (or a successor
publication of similar
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authority, if Statistical Release H.15 is discontinued) for the day the payment
becomes due; provided, however, in no event shall this rate of interest exceed
the maximum rate of interest permissible under the laws of the State of New
Jersey.
7.3 Disputes. If any invoice or adjustment under Article 7.1 is
disputed by either Party and subsequently resolved, there shall be added to the
amount determined to be due Cogen or credited to the amount due Infineum, if
Infineum is due a refund, interest calculated in the same manner as for late
payments under Article 7.2B.
7.4 Records. Both Cogen and Infineum shall keep all invoices, receipts,
charts, computer printouts, punch cards, magnetic tapes, and other records
related to the volume and price of Steam sales made under this Agreement,
including Cogen's cost of fuel and Infineum's Steam metering records along with
all calculations based on such records.
Such records shall be made available for inspection and copying by
either Party or their representatives upon reasonable notice.
Each Party shall keep all such materials for a minimum of three (3)
years from the date of their preparation.
ARTICLE 8
TAXES
Infineum shall be solely responsible for any sales, use, gross
receipts, transfer, and similar taxes that may be imposed on the sale of Steam
by Cogen to
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Infineum under this Agreement and any such taxes that may be imposed on the sale
of Steam by Infineum to any other party. Cogen shall be solely responsible for
any taxes that may be imposed on the manufacture of steam by Cogen under this
Agreement.
ARTICLE 9
AUTHORITY
9.1 Authority of Infineum. Infineum hereby represents and warrants to
Cogen as follows:
A. Infineum is a limited partnership duly organized and existing in
good standing under the laws of the State of Delaware, and is qualified
to do business in the State of New Jersey.
B. Infineum possesses all requisite power and authority to enter
into and perform this Agreement and to carry out the transactions
contemplated herein.
C. No suit, action or arbitration, or legal, administrative or
other proceeding is pending against Infineum or its Affiliates that
would affect the validity or enforceability of this Agreement or the
ability of Infineum to materially fulfill its commitments hereunder.
9.2 Authority of Cogen. Cogen hereby represents and warrants to
Infineum as follows:
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A. Cogen is a limited partnership duly organized and existing under
the laws of the State of Delaware and is duly qualified to do business
in the State of New Jersey.
B. Cogen possesses all requisite power and authority to enter into
and perform this Agreement and to carry out the transactions
contemplated herein.
C. No suit, action or arbitration, or legal, administrative or
other proceeding is pending against Cogen or its Affiliates that would
affect the validity or enforceability of this Agreement or the ability
of Cogen to materially fulfill its commitments hereunder.
ARTICLE 10
FORCE MAJEURE
10.1 Definition. Except for the obligations of a Party to make payments
when due under this Agreement, the Parties shall be excused from delays in
performance or failures to perform their respective obligations hereunder and
shall not be liable in damages or otherwise, if and only to the extent that such
delays or failures are caused by Force Majeure. The term "Force Majeure" means
any cause beyond the reasonable control of the affected Party, including,
without limitation, storm, flood, lightning, drought, earthquake, fire,
explosion, civil disturbance, labor dispute, act of God or the public enemy, or
action of a court or governmental authority. Financial distress of either Party,
late delivery of materials or equipment
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(unless itself caused by Force Majeure), or inadequate performance by
contractors (unless itself caused by Force Majeure) shall not be considered
Force Majeure.
10.2 Burden of Proof. The burden of proof as to whether a Force Majeure
event or condition has occurred shall be upon the Party claiming that it should
be excused from performing its obligations hereunder due to the occurrence of
such an event or condition.
10.3 Condition. If either Party relies on Force Majeure as a basis for
being excused from performance of its obligations under this Agreement, then the
Party relying on Force Majeure shall:
A. Provide prompt oral notice to the other Party, confirmed
promptly in writing, of the occurrence of the event or condition, with
an estimate of its expected duration and the probable impact on the
performance of its obligations hereunder;
B. Exercise all reasonable efforts to continue to perform its
obligations hereunder;
C. Expeditiously take action to correct or cure the event or
condition excusing performance to the extent reasonably practicable;
D. Exercise all reasonable efforts to mitigate or limit damages to
the other Party; and
E. Provide prompt oral notice to the other Party, confirmed
promptly in writing, of the cessation of the event or condition giving
rise to its excusal from performance.
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10.4 Labor Disputes. This Article 10 shall not require the settlement
of any strike, walkout, lockout, or other labor dispute on terms which, at the
discretion of the Party involved, are contrary to its interests. The settlement
of such labor disputes shall be at the sole discretion of the Party involved.
10.5 Termination for Force Majeure. If, after the Date of Initial
Commercial Operation, Cogen is excused from performing its obligations hereunder
due to Force Majeure, and such Force Majeure continues in effect for a period of
six (6) months after the initial event or condition of Force Majeure, subject to
Article 10.6, Infineum may terminate this Agreement, effective on the last day
of such six (6) month period or thereafter, by giving Cogen and the Financier
identified in Article 11.4 at least thirty (30) days' prior written notice.
Failure by Cogen to perform its obligations due to Force Majeure or the failure
by Cogen to implement one of the alternatives described in subparagraph (i),
(ii), or (iii) of Article 10.6A shall not be considered a breach of this
Agreement by Cogen.
10.6 Cogen's Right to Temporary Cure.
A. If after the Date of Initial Commercial Operation Cogen is
prevented for a period of six (6) months by Force Majeure from delivering to
Infineum Steam in accordance with Article 3 from the Cogeneration Facility,
Cogen, at its option, may prevent Infineum from terminating this Agreement
pursuant to Article 10.5, and will be in compliance with this Agreement, by:
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(i) supplying Steam from temporary boilers or otherwise
to Infineum's Complex and Infineum's Technology
Center in an amount, quality, and at a cost as
provided in Articles 3 and 4; or
(ii) paying to Infineum the cost of procurement and
installation by Infineum of temporary boilers to
supply steam to Infineum's Complex and Infineum's
Technology Center in an amount and quality as
provided in Article 3 and paying Infineum any
difference between the cost to Infineum of generating
such steam and the cost Infineum would have incurred
in buying Steam under Articles 3 and 4, provided that
this option shall not apply unless Infineum is
reasonably able to procure, install, and operate such
temporary boilers; or
(iii) paying to Infineum any difference between Infineum's
cost for steam purchased from Public Service Electric
and Gas Company (or its successor) or any company
from whom Infineum buys steam and the cost Infineum
would have incurred in buying Steam under Articles 3
and 4;
from the end of the six (6) month period described in Article 10.5 until either
the Force Majeure no longer prevents Cogen from delivering Steam in accordance
with Article 3 from the Cogeneration Facility, or until twenty-four (24) months
after Cogen gives Infineum written notice that Cogen does not intend to continue
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pursuant to subparagraph (i), (ii), or (iii) above. If Cogen elects to continue
the Agreement in force by implementing one of the alternatives described in
subparagraph (i), (ii), or (iii) above, it must give Infineum at least ninety
(90) days' prior written notice to that effect and such notice must specify
which alternative Cogen elects. In the event that Cogen subsequently gives
Infineum such written notice that it does not intend to continue pursuant to
subparagraph (i), (ii), or (iii) above, the termination of this Agreement
pursuant to Article 10.5 shall be effective twenty-four (24) months after Cogen
gives Infineum such written notice.
B. For purposes of determining the cost which Infineum would have
incurred in buying Steam under Articles 3 and 4, the cost of Cogen's fuel for
the Exhibit A calculations shall conclusively be deemed to be the Weighted
Average Cost of Gas. Additionally, the cost which Infineum would have incurred
in buying Steam under Articles 3 and 4 shall include payments or credits to
Infineum for the annual steam adjustment, monthly initial steam commitment
credit, and annual initial steam commitment credit adjustment.
C. The implementation by Cogen of one of the alternatives
described in subparagraphs (i), (ii), and (iii) of Article 10.6A and subsequent
termination of this Agreement by Cogen on twenty-four (24) months' prior written
notice to Infineum shall not be considered a breach of this Agreement by Cogen.
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ARTICLE 11
BREACH OF CONTRACT AND TERMINATION
11.1 Infineum's Right to Terminate. Subject to Article 11.4, Infineum
shall have the right, at its option, to terminate this Agreement upon the
occurrence of any of the following events:
A. Cogen breaches this Agreement by failing to substantially
perform any material obligation under this Agreement, which failure
continues for a period of sixty (60) days after Infineum gives Cogen
and the Financier identified in Article 11.4 written notice of such
breach; provided, however, that if such breach may not reasonably be
cured within such sixty (60) day period, Infineum may not terminate
this Agreement pursuant to this Article 11.1A if Cogen diligently
commences to cure such breach within such sixty (60) day period, and
this Agreement shall remain in effect for so long as Cogen diligently
continues such efforts, unless such breach continues uncured for six
(6) months after Infineum's written notice of breach to Cogen and the
Financier identified in Article 11.4; or
B. Cogen fails to commence Commercial Operation by July 1, 1993
(as such date may be extended by Force Majeure pursuant to the terms of
Article 2.3A), or to initiate any of the alternative arrangements
described in Article 2.3B, and Infineum gives Cogen and the Financier
identified in Article 11.4 thirty (30) days' prior written notice of
termination pursuant to Article 2.3A; or
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<PAGE> 44
C. Cogen claims that it is excused after the Date of Initial
Commercial Operation from failing to deliver Steam to Infineum from the
Cogeneration Facility due to Force Majeure and does not within six (6)
months either resume full performance or initiate one of the
alternative arrangements described in Article 10.6, and Infineum gives
Cogen and the Financier identified in Article 11.4 thirty (30) days'
prior written notice of termination pursuant to Article 10.5; or
D. Infineum elects to terminate this Agreement at the expiration
of the Base Term or at the expiration of the first five (5) year
renewal term, as the case may be, by giving to Cogen and the Financier
identified in Article 11.4 five and one-half (5-1/2) years' prior
written notice of termination, as provided in Article 2.2.
11.2 Cogen's Right To Terminate. Cogen shall have the right, at its
option, to terminate this Agreement upon the occurrence of any of the following
events:
A. Infineum breaches this Agreement by failing to make timely
payment to Cogen of the monthly Steam charges pursuant to Article 7,
which failure continues for a period of thirty (30) days after Cogen
gives Infineum written notice of such failure to pay; or
B. Infineum breaches this Agreement by failing to substantially
perform any material obligation under this Agreement, other than
payment of amounts due as described in Article 11.2A, which failure
continues for a period of sixty (60) days after Cogen gives Infineum
written notice of such
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breach; provided, however, that if such breach may not reasonably be
cured within such sixty (60) day period, Cogen may not terminate this
Agreement pursuant to this Article 11.2B, if Infineum diligently
commences to cure such breach within such sixty (60) day period, and
this Agreement shall remain in effect for so long as Infineum
diligently continues such efforts, unless the breach continues uncured
for six (6) months after Cogen's written notice of breach to Infineum;
or
C. Cogen fails to commence Commercial Operation by the date
specified in Article 2.3A, but initiates one of the alternative
arrangements described in Article 2.3B, and subsequently gives Infineum
twenty-four (24) months' prior written notice under Article 2.3B that
Cogen does not intend to continue such arrangement; or
D. Cogen claims that it is excused from failing to perform its
obligations under this Agreement due to Force Majeure, initiates one of
the alternative arrangements described in Article 10.6, and
subsequently gives Infineum twenty-four (24) months' prior written
notice under Article 10.6 that Cogen does not intend to continue such
arrangement; or
E. Infineum's External Steam Requirements from Cogen under this
Agreement fall below 57,080 K lbs. of Steam in any Annual Period (other
than because of Force Majeure) and Cogen, with Infineum's External
Steam Requirements from Cogen in combination with the steam demand from
Cogen's other steam customers, is unable to maintain the status of the
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Cogeneration Facility as a "qualifying cogeneration facility" (as
defined in Section 3(18) of the Federal Power Act and the regulations
thereunder) for at least two (2) gas turbines, and Cogen subsequently
gives Infineum six (6) month's prior written notice of termination of
this Agreement; or
F. Cogen elects to terminate this Agreement at the expiration of
the Base Term or at the expiration of the first five (5) year renewal
term, as the case may be, by giving to Infineum four (4) years' prior
written notice of termination, as provided in Article 2.2.
Any notice from Cogen to Infineum of termination of this Agreement will be
effective only if such notice either (i) is joined in by the Financier in
writing, if there is a Financier then in existence, or (ii) certifies on its
face that there is no Financier.
11.3 Automatic Termination. This Agreement shall automatically
terminate as of the effective date set forth in Article 11.5 below if:
A. The Ground Lease terminates under Section 16.3B of the Ground
Lease Agreement (relating to full taking of the Demised Premises);
B. The Ground Lease enters the Improvements Removal Period or
terminates for any other reason; or
C. This Agreement continues in effect until January 1, 2033, and
is not extended by the written consent of the Parties.
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11.4 Notice to the Financier, Lenders and Mortgagees.
A. Infineum shall have no right to terminate this Agreement for
breach pursuant to Article 11.1A, 11.1B, or 11.1C, until Infineum (i) has
provided the Financier substantially the same notice which Infineum is obligated
to provide Cogen pursuant to Article 11.1A, 11.1B, 11.1C, or 11.5A; (ii) has
provided the Financier the same right to cure such breach as Cogen; and (iii) in
the case of breach which is susceptible of being cured only if the Financier has
access to the Demised Premises, the "Improvements," the "Interconnection Areas,"
the "Utility Areas," and the "Access Rights of Way," in each case as defined in
the Ground Lease Agreement (and only in the case of such breach), has provided
the Financier six (6) additional months subsequent to the end of the period in
Article 11.1A for the cure of any such breach, without extension for any period
contemplated in Article 10, to cure such breach; provided that the Financier has
pursued and continues to pursue with diligence, continuity and good faith all
actions to enable the Financier to obtain access in order to cure, and to cure,
such breach; provided, further, that in respect of any such breach which is the
failure to deliver to Infineum Steam from the Cogeneration Facility in
accordance with Article 3, the Financier must also pay to Infineum, for so long
as such breach continues during such additional period, any difference between
Infineum's reasonable cost for replacement steam from any other source and the
cost Infineum would have incurred in buying Steam under Articles 3 and 4.
Infineum may in its discretion obtain such replacement steam from any source
(within or external to Infineum's
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Complex) it deems appropriate. All payments by the Financier to Infineum
pursuant to the above provision will be made, to the account specified by
Infineum in writing, monthly within ten (10) days of receipt by the Financier of
a written statement from Infineum setting forth the amount due and in reasonable
detail the basis for the amount due. The cost which Infineum would have incurred
in buying Steam under Articles 3 and 4 shall be calculated as provided in
Article 10.6B.
B. Cogen shall have no right to terminate this Agreement pursuant
to Article 11.2 until Cogen (i) has provided any mortgagee holding a mortgage on
all or any part of Infineum's Property substantially the same notices which
Cogen is obligated to provide Infineum pursuant to Article 11.2, and (ii) has
provided such lender or mortgagee the same right to cure as Infineum, provided
that Infineum has previously given Cogen actual notice of the appropriate
contact person and address for any such lender or mortgagee. If Cogen gives
Infineum written notice of its termination of this Agreement, Infineum shall
notify the Financier that Infineum has received such notice.
11.5 Effective Date of Termination.
A. If a breach described in Article 11.1A occurs and the time
period described in Article 11.1A has expired, Infineum may promptly give Cogen
a second written notice, which notice shall, when given, terminate this
Agreement.
B. If the event described in Article 11.1B occurs, this Agreement
shall terminate on the date described in Article 2.3A.
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C. If the events described in Article 11.1C occur, this Agreement
shall terminate at the end of the thirty (30) day period referred to in Article
10.5.
D. If the events described in Article 11.1D occur, this Agreement
shall terminate at the expiration of the Base Term or at the expiration of the
first five (5) year renewal term, as the case may be.
E. If a breach described in Article 11.2A or 11.2B occurs and the
applicable time period described in Article 11.2A or 11.2B has expired, Cogen
may promptly give Infineum a second written notice, which notice shall, when
given, terminate this Agreement.
F. If the events described in Article 11.2C occur, this Agreement
shall terminate upon the expiration of the twenty-four (24) month notice period
described in Article 2.3B.
G. If the events described in Article 11.2D occur, this Agreement
shall terminate upon the expiration of the twenty-four (24) month notice period
described in Article 10.6A.
H. If the events described in Article 11.2E occur, this Agreement
shall terminate upon the expiration of the six (6) month notice period described
in Article 11.2E; provided that, if Infineum does not need Steam from Cogen for
all of such six (6) month period, Infineum shall promptly advise Cogen in
writing and the Parties may accelerate the termination date of this Agreement by
mutual written consent.
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<PAGE> 50
I. If the events described in Article 11.2F occur, this Agreement
shall terminate at expiration of the Base Term or at the expiration of the first
five (5) year renewal term, as the case may be.
J. If any of the events described in Article 11.3A occurs, this
Agreement shall automatically terminate when the Ground Lease terminates. If the
Ground Lease terminates for any other reason, this Agreement shall automatically
terminate pursuant to Article 11.3B when the Improvements Removal Period
commences or, if there is no Improvements Removal Period, when the Ground Lease
terminates.
K. If the event described in Article 11.3C occurs, this Agreement
shall terminate at 12:01 a.m. on January 1, 2033.
11.6 Transition.
A. If this Agreement is terminated for any reason, the Parties
shall work together to achieve a smooth transition. Unless and until this
Agreement has been terminated, neither Party shall refuse to make any of the
payments or perform any of the other obligations required under this Agreement
on the basis of any anticipated termination of this Agreement, or any actual or
alleged breach by the other Party, subject to the exception described in Article
11.6B below.
B. If Cogen terminates the Ground Lease under Sections 16.2D
(relating to termination of the Power Purchase Agreement), 16.2E (relating to
inability of Cogen to receive or maintain Governmental Authorizations), 16.2F
(relating to inability of the Demised Premises and other areas to be used for
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Cogen's purposes), or 16.2G (relating to partial taking) of the Ground Lease
Agreement, thus triggering subsequent automatic termination of this Agreement
under Article 11.3, it is understood that Cogen may not be able to continue to
provide Steam to Infineum under this Agreement. In such event, Cogen shall: (i)
use its best efforts to continue to supply Steam to Infineum, as would otherwise
be required by Article 3.1A, until the commencement of the Improvements Removal
Period, or (ii) if Cogen cannot supply such Steam, permit Infineum to operate
and maintain the Cogeneration Facility to supply steam to Infineum's Complex and
Infineum's Technology Center until the commencement of the Improvements Removal
Period, provided that in neither event shall Cogen be required to make capital
expenditures or to incur out-of-pocket operating and maintenance costs net of
revenues in order to keep the Cogeneration Facility operational, unless Infineum
fully and promptly reimburses Cogen for such capital expenditures and
out-of-pocket operating costs net of revenues.
ARTICLE 12
LIABILITY
12.1 Limitation on Liability for Damages.
A. Cogen, and its officers, directors, partners, agents,
employees, Affiliates, successors and assigns shall not be liable under this
Agreement to Infineum or its officers, directors, partners, agents, employees,
Affiliates, or their successors or assigns, for any punitive, indirect, or
consequential damages,
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including loss of profits, however caused; provided that this limitation shall
not apply to any damages under this Agreement caused by Cogen's intentional
provision of steam to another entity with the result that Infineum does not
receive the amounts of Steam it is entitled to under this Agreement.
B. Infineum, and its officers, directors, partners, agents,
employees, Affiliates, successors and assigns shall not be liable under this
Agreement to Cogen or its officers, directors, partners, agents, employees,
Affiliates, or their successors or assigns, for any punitive, indirect, or
consequential damages, including loss of profits, however caused; provided that
this limitation shall not apply to any damages under this Agreement caused by
Infineum's intentional purchase and acceptance of steam for industrial purposes
at Infineum's Complex or Infineum's Technology Center from an entity other than
Cogen, or caused by Infineum's provision to itself of steam for industrial
purposes when Infineum has not purchased Steam from Cogen in such amounts as
specified in Article 3.1B and Cogen is otherwise able to provide such amounts of
Steam to the Points of Delivery of Steam. The parties acknowledge that Cogen's
steam sold to Infineum for Infineum's Complex and Infineum's Technology Center
is delivered into steam delivery facilities that are owned by Bayway Refining
Company and that the facilities deliver steam to Infineum and Bayway Refining
Company. The parties also acknowledge that steam produced by Bayway Refining
Company is also delivered into the said steam delivery facilities commingling
with Steam provided by Cogen. Therefore, the parties agree that if Infineum, in
accepting Steam provided by Cogen
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under this Agreement, inadvertently accepts steam produced by Bayway Refining
Company, then such acceptance of steam by Infineum shall not deprive Infineum of
the limitation on liability provided by this Article 12.1B.
C. Nothing in this Article 12.1 shall prohibit or prevent Cogen
from making the allocations of Steam described in Article 3.2A, nor shall
anything in this Article 12.1 prohibit or prevent Infineum from obtaining steam
from alternate sources pursuant to and under the circumstances described in
Article 3.2B, which activities shall not be deemed breaches of this Agreement.
D. In the event this Agreement is terminated pursuant to Article
11.1B, 11.1C, 11.1D, 11.2C, 11.2D, 11.2E, 11.2F, 11.3C, or in the event this
Agreement is terminated pursuant to Article 11.3A or 11.3B because the Ground
Lease Agreement was terminated pursuant to Section 16.1D, 16.1F, 16.2C, 16.2D,
16.2E, 16.2F, 16.2G, 16.2H, 16.3A or 16.3B, both Parties shall be discharged
from all obligations under this Agreement other than those which accrued before
the effective date of such termination of this Agreement.
12.2 Damages. If either Party breaches this Agreement, the aggrieved
Party shall be entitled to seek damages as available at law except as may be
limited pursuant to Article 12.1.
12.3 Specific Performance. In addition to the right of termination
referred to in Article 11, Infineum and Cogen shall each have the right to seek
the specific performance by the other Party of any of its obligations under this
Agreement.
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<PAGE> 54
ARTICLE 13
NONWAIVER
The various rights, remedies, options, and elections of Infineum and
Cogen as expressed herein are cumulative, and the failure of Infineum or Cogen
to enforce strict performance by the other Party of the provisions of this
Agreement or to exercise any right, election, or option or to resort or have
recourse to any remedy herein conferred will not be construed or deemed to be a
waiver or a relinquishment of the future enforcement by Infineum or Cogen of any
such provisions, rights, options, elections, or remedies, but the same will
continue in full force and effect.
ARTICLE 14
NOTICE AND SERVICE
14.1 Notice. All notices, requests, demands and other communications
required or permitted under the terms of this Agreement shall be sufficient in
form if in writing and shall be deemed to be duly given if delivered by personal
service, telegram, or mailed certified or registered first class mail, postage
prepaid, properly addressed to the Party entitled to receive such notice
pursuant to Article 14.3.
14.2 Date of Service.
A. Mail. If a notice is sent by registered or certified mail, it
shall be deemed given within three (3) days, excluding Saturdays, Sundays, or
legal holidays of the State of New Jersey, after deposit of the same in the
United States mail, postage prepaid, except as otherwise demonstrated by a
signed receipt.
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B. Telegram. If a notice is served by telegram, it shall be deemed
given eighteen (18) hours after delivery to the telegram company.
C. Personal Service. If a notice is served by personal service, it
shall be deemed given upon the date of actual delivery to the address of the
Party to be notified.
14.3 Addresses. Notices may be sent to the Parties at the following
addresses:
A. Cogen: Cogen Technologies Linden Venture, L.P.
c/o RCM Holdings, Inc.
33rd Floor
711 Louisiana Street
Houston, Texas 77002
Attn.: Mr. Robert C. McNair
President
with a copy to:
Cogen Technologies Linden Venture, L.P.
1095 Cranbury South River Road
Suite 10
Jamesburg, New Jersey 08831
Attn: Director of Operations
B. Infineum Infineum USA L.P.
1900 East Linden Avenue
Linden, New Jersey 07036
Attn: Procurement Manager,
Services/Contracts
or to such other and different persons or addresses as may be
designated by the Parties.
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<PAGE> 56
ARTICLE 15
AMENDMENTS
No amendment or modification of the terms of this Agreement shall be
binding on either Infineum or Cogen unless reduced to writing and signed by both
Parties.
ARTICLE 16
SUCCESSORS AND ASSIGNS
16.1 Assignment by Infineum. At any time Infineum may sell or transfer
all or any part of Infineum's Complex, Infineum's Technology Center or
Infineum's Property to any Affiliate of Infineum or any third party. If Infineum
sells or otherwise transfers all of Infineum's Complex to any entity, this
Agreement shall automatically be assigned to such entity and shall be binding on
and inure to the benefit of any such entity. If Infineum sells or otherwise
transfers to any entity any part of Infineum's Complex which has consumed steam
since April 8, 1993, such transferee and Cogen shall enter into the separate
agreement described in Article 16.5 for the continued provision of Steam to that
part of Infineum's Complex.
16.2 Assignment by Cogen. Cogen shall not assign, transfer, pledge, or
hypothecate this Agreement at any time, except that:
A. Cogen may at any time assign, pledge, or hypothecate this
Agreement, provided that, in accordance with the terms of the Ground
Lease
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<PAGE> 57
Agreement, the Ground Lease Agreement is simultaneously assigned,
pledged, or hypothecated to the same entity by Cogen; and
B. Following two (2) years after the Date of Initial Commercial
Operation, Cogen may assign or transfer this Agreement to an unrelated
entity, provided that such unrelated entity shall also assume Cogen's
rights and obligations under the Ground Lease Agreement, and (i) first
deliver to Infineum its written assumption agreement substantially in
the form of Exhibit G-1 to be bound by all of the provisions of this
Agreement and the Ground Lease Agreement; (ii) have the personnel,
experience, equipment and other resources reasonably required to
perform its obligations under this Agreement and the Ground Lease
Agreement; (iii) be financially capable based upon reasonable standards
of performing its obligations under this Agreement and the Ground Lease
Agreement; and (iv) be in other respects reasonably acceptable to
Infineum. Subject to Article 16.7, this Agreement shall be binding on
and inure to the benefit of the successors and assigns of Cogen.
16.3 Continuing Obligations. No assignment of this Agreement by
Infineum or Cogen shall operate to relieve Infineum or Cogen of any obligations
under this Agreement which have accrued prior to the effective date of the
assignment. An obligation shall be deemed to have accrued before the effective
date of an assignment only if all the substantive elements of the obligation
have accrued by that date. An assignment of this Agreement shall relieve the
assignor of any
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<PAGE> 58
obligations to the other Party under this Agreement which have not accrued
before the effective date of the assignment; provided, however, that the
assignor shall continue to be obligated under this Agreement if any such
assignment shall be ineffective.
16.4 [INTENTIONALLY OMITTED]
16.5 Transfers of Part of Infineum's Complex.
A. If Infineum sells or otherwise transfers to any entity any part
of Infineum's Complex which has consumed steam since January 1, 1988, such
transferee shall be obligated to enter into a separate agreement with Cogen
covering the provision of Steam to such entity. In such event, Infineum's
obligations to purchase Steam and Cogen's obligations to provide Steam under
this Agreement shall be reduced pursuant to Article 16.5B, and the formulas for
calculating the monthly steam charge and annual steam adjustment under this
Agreement shall be adjusted pursuant to Article 16.5C. The provisions of any
separate agreement shall be substantially similar to those of this Agreement,
with the transferee assuming the rights and obligations of Infineum for the
remaining term of this Agreement with respect to the transferee's part of
Infineum's Complex, except that (i) Article 2 shall reflect, as appropriate,
that some of the Base Term of the Agreement will have passed; (ii) Article 3
shall incorporate reduced rates of Steam according to Article 16.5B below; (iii)
Exhibit A, Parts 1 and 2, shall be amended according to Article 16.5C below; and
(iv) Exhibits B and C shall be amended as appropriate.
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<PAGE> 59
B. Should Infineum sell or otherwise transfer any part of
Infineum's Complex, with the result that the transferee enters into a separate
agreement covering the provision of Steam to such entity pursuant to Article
16.5A, the rates of Steam set forth in Articles 3.1A, 3.1B, 3.1D, 3.1E and 11.2E
of such separate agreement shall be reduced on a pro rata basis by multiplying
the rate in question by a/b, where a is the total amount of Steam provided by
Cogen to the part of Infineum's Complex subject to transfer during the last
twenty-four (24) month period of continuous steam use at such part of Infineum's
Complex subsequent to April 8, 1993 (or a reasonable estimate of the same if the
data is unavailable) and b is the total amount of Steam provided by Cogen during
the same period of time to Infineum's Complex and Infineum's Technology Center.
The rates of Steam set forth in Articles 3.1A, 3.1B, 3.1D, 3.1E and 11.2E of
this Agreement shall thereafter be reduced on a pro rata basis by multiplying
the rate in question by (b-a)/b. An example of a pro rata allocation of Steam is
set forth in Exhibit E. If a is zero (i.e., the part of Infineum's Complex to be
transferred has not used steam for a continuous twenty-four (24) month period
since April 8, 1993), the transferee shall have no obligation to enter into any
separate agreement with Cogen. If part of Infineum's Complex to be transferred
has been removed from operation requiring steam prior to and at the time of
transfer and if the transferee has no intention of using steam at that part of
Infineum's Complex and will affirm the same to Cogen in writing, then neither
the transferee nor Cogen will have any obligation to enter into any separate
agreement pursuant to Article 16.5A and this Agreement shall
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<PAGE> 60
not be modified pursuant to Article 16.5A. The rates of high pressure level and
low pressure level Steam set forth in Article 3.4 shall also be pro rated. These
pro rations shall be based on high pressure level and low pressure level Steam
use and shall be calculated using methods similar to the methods described above
as illustrated in the example set forth in Exhibit E.
C. Should Infineum sell or otherwise transfer any part of
Infineum's Complex with the result that the transferee enters into a separate
agreement covering the provision of Steam to such entity pursuant to Article
16.5A, Exhibit A, Parts 1 and 2, of such separate agreement shall be amended by
multiplying the number "27" in those places where it appears by the fraction a/b
determined under Article 16.5B and Exhibit A, Parts 3 and 4, will be deleted.
Furthermore, this Agreement will be amended by multiplying the number "27" in
Exhibit A, Parts 1 and 2, by the fraction (b-a)/b, but Exhibit A, Parts 3 and 4,
shall remain unchanged. An example of an amendment to the number "27" in Exhibit
A is set forth in Exhibit E.
16.6 [INTENTIONALLY OMITTED]
16.7 Rights of the Financier and Other Lenders.
A. Infineum has executed and delivered to the Owner Trust, as
Financier, a recognition agreement substantially in the form shown in Exhibit I.
Hereafter, if Cogen assigns, pledges, or hypothecates this Agreement to secure a
loan from another Financier to be recognized as the Financier by Infineum for
purposes of this Agreement, pursuant to Article 16.2 above, in connection
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<PAGE> 61
therewith Infineum shall execute a consent to any such assignment, in
substantially the form shown in Exhibit H, as may be reasonably requested by the
other Financier and Infineum shall give the information specified in Article
16.8 below.
B. On instructions from the Financier, unless otherwise directed
by a court of competent jurisdiction, Infineum shall make all payments due Cogen
under this Agreement in accordance with the written instructions of the
Financier in conformity with its documentation with Cogen, and in such event
Infineum shall not be liable to Cogen for such payments.
C. If the general partner of Cogen becomes in default under its
partnership agreement with the Owner Trust, the Owner Trust may designate a new
general partner of Cogen, provided that such new general partner has the
personnel, experience, equipment and other resources reasonably required to
perform its obligations under this Agreement and the Ground Lease Agreement and
is in other respects reasonably acceptable to Infineum. Infineum agrees that
General Electric Company and General Electric Capital Corporation meet the
requirements of Article 16.7C(ii), (iii), and (iv) (and the comparable
requirements of Article 16.7F(ii)(b), (c), and (d)). Similarly, if Cogen becomes
in default under any loan documentation with the Financier or any successor or
assign of Financier holding a collateral assignment, pledge, or hypothecation of
Cogen's interest in this Agreement, the Financier or such successor or assign
may assume or cause a third party to assume Cogen's rights and obligations under
this Agreement at any time, provided that the Financier or such successor,
assign, or third party must first give
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<PAGE> 62
Infineum reasonable written notice of such assumption, which notice shall
contain a request (which specifically references this Article 16.7C) for a list
of all defaults of Cogen under this Agreement and the Ground Lease Agreement, at
least thirty (30) days in advance and must first (i) enter into an agreement
with Infineum agreeing to assume Cogen's rights and obligations thereafter
accruing under this Agreement and the Ground Lease Agreement and to cure all
existing defaults of Cogen under this Agreement and the Ground Lease Agreement
that can be cured (including without limitation paying all amounts owed by Cogen
to Infineum, subject to the caps set forth in Exhibit G-3, if applicable)
pursuant to and as provided in an assumption agreement substantially in the form
of Exhibit G-2; provided that the Financier or any nominee or designee of the
Financier holding the interest in this Agreement for the benefit of the
Financier may enter into such an assumption agreement substantially in the form
of Exhibit G-3; (ii) have the personnel, experience, equipment, and other
resources reasonably required to perform its obligations under this Agreement
and the Ground Lease Agreement; (iii) be financially capable based upon
reasonable standards of performing its obligations under this Agreement and the
Ground Lease Agreement, and (iv) be in the other respects reasonably acceptable
to Infineum. In such event, Infineum will accept performance by such Financier,
successor, assign, or third party.
D. Following the assumption of Cogen's rights and obligations
under this Agreement by the Financier or its successor, assign, or a third party
pursuant to Article 16.7C, such Financier, successor, assign, or third party may
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<PAGE> 63
assign its rights and obligations under this Agreement to any entity, provided
that such Financier, successor, assign, or third party must first give Infineum
reasonable written notice of such assignment at least thirty (30) days in
advance and must first meet the requirements of Article 16.7C(i), (ii), (iii),
and (iv). Any such entity may, with reasonable written notice to Infineum at
least thirty (30) days in advance, assign its rights and obligations under this
Agreement to other entities meeting the requirements of Article 16.7C(i), (ii),
(iii), and (iv). In such event, Infineum will accept performance by such entity.
E. Notwithstanding any other provision of this Agreement, after
the Financier or any successor, assign, third party or other entity referred to
in Article 16.7C or 16.7D above assumes Cogen's rights and obligations under
this Agreement, Infineum will retain all of its rights under this Agreement,
including without limitation the right to terminate this Agreement for any of
the reasons specified in Article 11. Furthermore, Cogen and the Financier (and
its successors and assigns) will give Infineum concurrent notice of any default
by Cogen and the exercise by Financier (and its successors and assigns) of any
remedy under any of the documentation between Cogen and Financier (and its
successors and assigns) pertaining to the Cogeneration Facility.
F. In the event of the rejection of this Agreement and the Ground
Lease Agreement prior to their stated expiration dates pursuant to Section 365
of the Bankruptcy Code of 1978, as amended, or any successor provision thereto,
in a case wherein Cogen is the debtor, Infineum will enter a new steam sale
agreement
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<PAGE> 64
with the Financier or the same nominee or designee of the Financier for the
remainder of the term of this Agreement (assuming no rejection had occurred),
effective, in each case, as of the date of such rejection and upon substantially
the same covenants, agreements, terms, provisions, and limitations herein
contained and therein contained (in each case, excluding a provision equivalent
to this Article 16.7F), provided:
(i) the Financier delivers a written request to Infineum for such
new steam sale agreement within thirty (30) days from the date
of such rejection, which written request is accompanied by
payment to Infineum of all amounts due to Infineum under this
Agreement and unpaid as of the date of such request and which
request identifies the party to act as supplier under the new
steam sale agreement.
(ii) the Financier or such nominee or designee who is to act as
supplier under the new steam sale agreement must (a) cure all
existing defaults of Cogen under this Agreement that can be
cured and that would exist but for such rejection (including
without limitation paying all amounts owed by Cogen to
Infineum (b) have the personnel, experience, equipment, and
other resources reasonably required to perform its obligations
under the new steam sale agreement (c) be financially capable
based upon reasonable standards of performing its obligations
under the new steam sale agreement, and (d) be in the other
respects reasonably acceptable to Infineum;
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<PAGE> 65
(iii) such new steam sale agreement will expressly provide that
Infineum will not be required to deliver actual possession of
the Demised Premises on the date of execution and delivery
thereof free of lessees, tenants, or other occupants;
(iv) such new steam sale agreement will expressly provide that with
respect to all representations, warranties, and covenants of
Infineum under the new steam sale agreement that refer to the
"date hereof" or "effective date of this Agreement" or words
or phrases or provisions of similar import, the same refer to
the date of this Agreement, and not the date of execution and
delivery of such new steam sale agreement and it is agreed
that Infineum will not be obligated to remove any liens placed
on the Demised Premises or any other part of Infineum's
Property subsequent to the date hereof; and
(v) the Financier or such nominee or designee enters into a new
steam sale agreement unless this Agreement has been previously
terminated in accordance with its terms other than in the
event this Agreement is rejected pursuant to Section 365 of
the Bankruptcy Code of 1978, as amended, or any successor
provision thereto, in a case wherein Cogen is the debtor.
G. So long as there exists a Financier, Infineum and Cogen shall
not, without the prior written consent of the Financier (which consent shall not
be
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<PAGE> 66
unreasonably delayed or withheld) enter into a written amendment of this
Agreement.
16.8 Status Certificates. Either Party from time to time at the request
of the other Party shall sign promptly a written certificate confirming that
this Agreement has been duly authorized, is valid, and does not conflict with
the articles of incorporation, by-laws, or partnership agreement of the Party in
question, and stating whether the Agreement is in full force and effect; whether
it has been modified or amended, and if so, the substance of such modification
or amendment; whether there have been any uncured breaches; whether there are
any offsets, counterclaims, or defenses to be asserted by that Party against the
other under this Agreement; and such other information as may be reasonably
requested.
ARTICLE 17
CHOICE OF LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey.
ARTICLE 18
RENEGOTIATION
Should any term or provision of this Agreement be found invalid by any
court or regulatory body having jurisdiction thereover, the Parties shall
immediately
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<PAGE> 67
renegotiate in good faith such term or provision of the Agreement to eliminate
such invalidity, consistent with the intent of this Agreement.
ARTICLE 19
CONSENT NOT TO BE UNREASONABLY WITHHELD
Whenever either Party requests any consent, permission, or approval
which may be required or desired by that Party pursuant to the provisions of
this Agreement, the other Party shall not unreasonably withhold or postpone the
grant of such consent, permission, or approval.
ARTICLE 20
OTHER AGREEMENTS
This Agreement supersedes all prior oral and written agreements and
understandings of the Parties relating to the subject matters hereof. This
Agreement constitutes the entire agreement and understanding of the Parties
relating to the subject matter hereof. Infineum acknowledges that it has no
rights as Lessor under the Ground Lease Agreement as assigned to Bayway Refining
Company and that for purposes of construing the rights and obligations of the
Parties under this Agreement, Infineum may not allege any default of Cogen under
this Agreement arising from or in connection with the exercise or non-exercise,
or the performance or the non-performance, by Cogen of its rights or obligations
under the Ground Lease Agreement. Nothing in this Agreement shall diminish: (i)
the
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<PAGE> 68
rights of Cogen that are exercisable in connection with the Ground Lease
Agreement, and (ii) the validity of any provisions of this Agreement that are
effective without further action of either Party, including the automatic
termination of this Agreement upon termination of the Ground Lease Agreement as
provided in Article 11.3; provided, however, that for purposes of this
Agreement, the Ground Lease Agreement shall not be deemed terminated if the
primary reason for any such termination is to enable Cogen to avoid its
obligations under this Agreement, or if the reason for the termination is the
purchase by Cogen, or any other entity, of all or a portion of the land that is
the subject of the Ground Lease.
ARTICLE 21
CAPTIONS
All indices, titles, subject headings, section titles, and similar
items are provided for the purpose of reference and convenience and are not
intended to be inclusive, definitive, or to control the meaning, content, or
scope of this Agreement.
ARTICLE 22
COUNTERPARTS
This Agreement may be executed in any number of counter parts, and each
executed counterpart shall have the same force and effect as an original
instrument.
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<PAGE> 69
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement, as
amended and restated in its entirety, to be signed by their respective officers
thereunto duly authorized as of the day and year first set forth above.
ATTEST: COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
(d/b/a COGEN TECHNOLOGIES LINDEN VENTURE,
LIMITED PARTNERSHIP)
By: COGEN TECHNOLOGIES LINDEN, LTD.
(d/b/a COGEN TECHNOLOGIES LINDEN,
LIMITED PARTNERSHIP), ITS SOLE
GENERAL PARTNER
By:
RCM HOLDINGS, INC.
ITS SOLE GENERAL PARTNER
By: /s/ ROSS D. AIN
----------------------------------------
Name: Ross D. Ain
----------------------------------
Title: Senior Vice President
---------------------------------
ATTEST: INFINEUM USA L.P.
By: /s/ JAMES F. JOHNSON
----------------------------------------
Name: James F. Johnson
----------------------------------
Title: President
---------------------------------
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<PAGE> 70
EXHIBIT A
PART 1 - CALCULATION OF MONTHLY STEAM CHARGE
Definitions
F = Cogen's actual cost of fuel for the month, $/MBtu. (Note 1)
CPI(b) = Base Consumer Price Index for all Urban Consumers for the
New York-Northern New Jersey Area as computed by the United
States Department of Labor, Bureau of Labor Statistics
("CPI"), for the month in which the Date of Initial
Commercial Operation occurs.
CPI(c) = Current (latest available monthly) CPI (or if such index
shall no longer be published, such other index as the
Parties shall reasonably determine to be most nearly
comparable to such index for the Metropolitan New York
Area).
H = Hours in the month, Hr.
PS(1) = Price of first increment of steam, $/K lb.
PS(2) = Price of remaining steam, $/K lb.
DLP = Low-pressure (140 psig) steam discount, $/K lb.
S = Total monthly steam take, K lb.
S(1) = Total monthly steam take at price PS(1), K lb.
S(2) = Total monthly steam take at price PS(2), K lb.
SLP = Total monthly take of low-pressure (140 psig) steam, K lb.
MS = Monthly steam charge, $.
Formulas
PS(1) = 0.88F + 0.45 (CPI(c)/CPI(b)) (1)
PS(2) = 0.95F + 0.45 (CPI(c)/CPI(b)) (2)
DLP = 0.22F - 0.13 (3)
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<PAGE> 71
S(1) = S or (27 x H), whichever is less (4)
S(2) = S - S(1) (5)
MS = (S(1) x PS(1)) + (S(2) x PS(2)) - (SLP x DLP) (6)
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<PAGE> 72
PART 2 - CALCULATION OF ANNUAL STEAM ADJUSTMENT
Definitions
F = Cogen's actual cost of fuel for the month, $/MBtu. (Note 1)
H = Hours in the month, Hr.
S = Total monthly steam take, K lb.
[DELTA]S = Difference between total monthly steam take (S) and
allowable steam take at first increment pricing
(27 K lb./Hr. x H), K lb.
[sum][DELTA]S(p) = Sum of all positive [DELTA]S's for entire Annual Period, K
lb.
[sum][DELTA]S(n) = Absolute value of the sum of all negative [DELTA]S's for
entire Annual Period, K lb.
SAQ = Quantity of steam eligible for Annual Period adjustment, K
lb.
FAVG = Average of all monthly fuel costs (F) for the entire Annual
Period, $/MBtu.
ASA = Annual Period steam adjustment, $.
Formulas
[DELTA]S = S - (27 x H) for each month in Annual Period (1)
SAQ = [sum][DELTA]S(n), if [sum][DELTA]S(p) greater than
or equal to [sum][DELTA]S(n) (2A)
SAQ = [sum][DELTA]S(p), if [sum][DELTA]S(p) less than
[sum][DELTA]S(n) (2B)
ASA = 0.07 x FAVG x SAQ (3)
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<PAGE> 73
PART 3 - CALCULATION OF MONTHLY INITIAL STEAM COMMITMENT CREDIT
Definitions
F = Cogen's actual cost of fuel for the month, $/MBtu. (Note 1)
CPI(b) = Base Consumer Price Index for all Urban Consumers for the
New York-Northern New Jersey Area as computed by the United
States Department of Labor, Bureau of Labor Statistics
("CPI"), for the month in which the Date of Initial
Commercial Operation occurs.
CPI(c) = Current (latest available monthly) CPI (or if such index
shall no longer be published, such other index as the
Parties shall reasonably determine to be most nearly
comparable to such index for the Metropolitan New York
Area).
H = Hours in the month, Hr.
S = Total monthly steam take, K lb.
HTS = Public Service Electric and Gas Company (or its successor)
subtransmission high-tension service rate (or equivalent)
for prior month, including capacity, energy, and energy
adjustment, $/MW-Hr.
FP = Cogen's actual cost of fuel for the prior month, $/MBtu.
(Note 1) For the first month FP shall be the Weighted
Average Cost of Gas for the prior month ($/MBtu).
PCT = Fraction of monthly initial steam commitment credit
allowed.
MC = Monthly initial steam commitment credit, $.
Formulas
PCT = [S/(100 x H)] or 1.0, whichever is less (1)
MC = 19 x PCT x H x [HTS - [9.43FP + 7.11 +
1.43 (CPI(c)/CPI(b))]], or 0.0, whichever is greater (2)
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<PAGE> 74
PART 4
CALCULATION OF ANNUAL INITIAL STEAM COMMITMENT CREDIT ADJUSTMENT
Definitions
F = Cogen's actual cost of fuel for the month, $/MBtu. (Note 1)
H = Hours in the month, Hr.
S = Total monthly steam take, K lb.
[DELTA]S = Difference between total monthly steam take (S) and
required steam take for full initial steam commitment
credit (100 K lb./Hr. x H), K lb.
[sum][DELTA]S'(p) = Sum of all positive [DELTA]S"s for entire Annual Period, K
lb.
[sum][DELTA]S'(n) = Absolute value of the sum of all negative [DELTA]S"s for
entire Annual Period, K lb.
IAQ = Quantity of steam eligible for Annual Period initial steam
commitment credit adjustment, K lb.
FAVG = Average of all monthly fuel costs (F) for the entire Annual
Period, $/MBtu.
HTS = Public Service Electric and Gas Company (or its successor)
subtransmission service rate (or equivalent) for prior
month, including capacity, energy, and energy adjustment,
$/MW-Hr.
HTSAVG = Average of monthly subtransmission high-tension service
rates (HTS) for the entire Annual Period, $/MW-Hr.
CPI(b) = Base Consumer Price Index for all Urban Consumers for the
New York-Northern New Jersey Area as computed by the United
States Department of Labor, Bureau of Labor Statistics
("CPI"), for the month in which the Date of Initial
Commercial Operation occurs.
CPI(c) = Current (latest available monthly) CPI (or if such index
shall no longer be published, such other index as the
Parties shall reasonably determine to be most nearly
comparable to such index for the Metropolitan New York
Area).
CPIAVG = Average of monthly CPIc's for entire Annual Period.
ACA = Annual Period initial steam commitment credit adjustment,
$.
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<PAGE> 75
Formulas
[DELTA]S' = S - (100 x H) for each month in Annual Period (1)
IAQ = [sum][DELTA]S(n)', if [sum][DELTA]S(p)'
greater than or equal to [sum][DELTA]S(n)' (2a)
IAQ = [sum][DELTA]S(p)', if [sum][DELTA]S(p)'
less than [sum][DELTA]S(n)' (2b)
ACA = 19 x (IAQ/100) x [HTSAVG - [9.43 FAVG + 7.11 +
1.43 (CPIAVG/CPI(b))]], or 0.0, whichever is greater (3)
- 67 -
<PAGE> 76
NOTES TO EXHIBIT A
1) Fuel cost will be Cogen's actual cost for fuel (as supported by
invoices) equal to the sum of all costs incurred in such month by Cogen
with respect to fuel acquired for use in the Cogeneration Facility
(including fuel commodity, transportation, and storage costs and any
costs related thereto), but such fuel cost shall not be greater than
105 percent of the Weighted Average Cost of Gas.
2) It is possible under some circumstances for the monthly initial steam
commitment credit (MC) to exceed the monthly steam charge (MS). When
this occurs, the amount which MC exceeds MS shall be accrued during
each Annual Period in a commitment credit accrual account. Each month
during the course of each Annual Period, Infineum shall be entitled to
receive a refund from the commitment credit accrual account to the
extent Cogen's total Annual Period revenues from Infineum are not
reduced below zero and there is a positive balance in the account. The
account shall be reset to zero at the end of each Annual Period.
3) The sum of the annual steam adjustment (ASA) and annual initial steam
commitment credit (ACA) shall not exceed Cogen's total Annual Period
revenues from Infineum after the application of Note 2 above.
- 68 -
<PAGE> 77
EXHIBIT B
DESCRIPTION OF POINTS OF DELIVERY OF STEAM
- 69 -
<PAGE> 78
EXHIBIT C
PRO FORMA MONTHLY INVOICE
- 70 -
<PAGE> 79
EXHIBIT D
[INTENTIONALLY OMITTED]
- 71 -
<PAGE> 80
EXHIBIT E
EXAMPLE OF PRO RATA ALLOCATION OF STEAM
Assume Infineum sells any portion of Infineum's Complex and twenty-four (24)
months prior to the date of such sale the average Steam supply provided by Cogen
was as follows:
<TABLE>
<CAPTION>
High Pressure Low Pressure
Total K lbs./yr Level K lbs./yr Level K lbs./yr
--------------- --------------- ---------------
<S> <C> <C> <C>
Portion of Complex
retained by Infineum 608,400 36,360 572,040
Portion of Complex
sold 180,000 60,000 120,000
------- ------ -------
Total 788,400 96,360 692,040
</TABLE>
o Pro Rata allocation of steam rights and obligations to new owner of
portion of Infineum's Complex:
Portion Sold to New Owner = 180,000 = .228
------------------------- -------
Total 788,400
o Pro Rata allocation of Infineum's continuing rights and obligations
under Agreement:
Portion Retained by Infineum = 608,400 = .772
---------------------------- -------
Total 788,400
- 72 -
<PAGE> 81
o Pro Rata allocation of high pressure level steam rights and obligations
to new owner:
Portion Sold to New Owner = 60,000 = .623
------------------------- -------
Total 96,360
o Pro Rata allocation of Infineum's continuing rights and obligations to
high pressure level steam under Agreement:
Portion Retained by Infineum = 36,360 = .377
---------------------------- -------
Total 96,360
o Pro Rata allocation of low pressure level steam rights and obligations
to new owner:
Portion Sold to New Owner = 120,000 = .173
------------------------- -------
Total 692,040
o Pro Rata allocation of Infineum's continuing rights and obligations to
low pressure level steam under Agreement:
Portion Retained by Infineum = 572,040 = .827
---------------------------- -------
Total 692,040
- 73 -
<PAGE> 82
o Pro Rata allocation results:
<TABLE>
<CAPTION>
Allocation Allocation
Total To New Owner To Infineum
----- ------------ -------------
<S> <C> <C> <C>
Article 3.1A
Max Supply
Oct. - May 181 K lbs./hr 36 K lbs./hr 145 K lbs./hr
Max Supply
June - Sept. 109 K lbs./hr 21 K lbs./hr 88 K lbs./hr
Max Upset/Emerg.
Supply
June - Sept. 181 K lbs./hr 36 K lbs./hr 145 K lbs./hr
Article 3.1B
Annual External
Steam Reqmts. 158,556 K lbs. 106,000 K lbs. 52,556 K lbs
Article 3.1D
Max Rate
Oct. - May 127 K lbs./hr 25 K lbs./hr 102 K lbs./hr
Max Rate
June - Sept. 72 K lbs./hr 14 K lbs./hr 58 K lbs./hr
Article 3.1E
External Steam
Reqmts. for 6
month period 79,278 K lbs. 15,504 K lbs. 63,774 K lbs
Reduced Steam
Obligation 145 K lbs./hr 29 K lbs./hr 116 K lbs./hr
</TABLE>
- 74 -
<PAGE> 83
<TABLE>
<S> <C> <C> <C>
Max Sale to
other Customers 36 K lbs./hr 7 K lbs./hr 29 K lbs./hr
Article 3.4
High Pressure
Level Steam 19 K lbs./hr 12 K lbs./hr 7 K lbs./hr
Low Pressure
Level Steam 226 K lbs./hr 33 K lbs./hr 193 K lbs./hr
Article 11.2E
Annual Steam Reqs. 57,080 K lbs 11,217 K lbs 45,863 K lbs
Exhibit A
Number "27" 27 5 22
</TABLE>
- 75 -
<PAGE> 84
EXHIBIT F
[INTENTIONALLY OMITTED]
- 76 -
<PAGE> 85
EXHIBIT G-1
ASSUMPTION AGREEMENT
[Date]
_______________, a _____________ corporation (the "Assignee"), hereby
declares, covenants, agrees and binds itself as follows:
(1) Except as otherwise set forth herein, capitalized terms
used herein are used with the meanings given to them in the Ground
Lease Agreement, dated as of August 1, 1990, between, Exxon
Corporation, a New Jersey corporation, and Cogen Technologies Linden
Venture, L.P., doing business in New Jersey as Cogen Technologies
Linden Venture, Limited Partnership, a Delaware limited partnership, as
amended to the date hereof and assigned by Exxon Corporation to Bayway
Refining Company, a Delaware Corporation by an assignment agreement
dated as of April 8, 1993 and effective as of April 8, 1993 (the
"Ground Lease Agreement").
(2) The Assignee hereby (a) assumes and agrees to pay and
perform each and every duty and obligation of Cogen hereafter accruing
under the Ground Lease Agreement and the Steam Sale Agreement between
Cogen and Infineum USA L.P. ("Infineum") as assignee of Exxon
Corporation dated April 8, 1993 (the "Steam Sale Agreement"), (b)
agrees from and after the date hereof to comply with and be bound by
the terms and provisions of the Ground Lease Agreement and the Steam
Sale Agreement applicable to Cogen, (c) confirms that from and after
the date hereof it shall be deemed "Cogen" for the purposes of the
Ground Lease Agreement and the Steam Sale Agreement, and (d) agrees to
cure as soon as reasonably practicable (which, in the case of payments
due by Cogen to Infineum, shall be deemed to require immediate payment
by the Assignee) all defaults of Cogen under the Ground Lease Agreement
and the Steam Sale Agreement.
(3) The Assignee hereby represents that:
(a) it is a corporation duly organized existing in good
standing under the laws of the State of __________; and
(b) it possesses all requisite power and authority to
enter into and perform this Agreement, the Ground Lease Agreement and
the Steam Sale Agreement and to carry out the transactions contemplated
herein and therein.
- 77 -
<PAGE> 86
(4) All notices and other communications hereunder shall be in
writing (including telecopier, telegraphic, telex or cable
communication) and mailed, telecopied, telegraphed, telexed, cabled or
delivered if to, Infineum, at its address at Infineum USA L.P.,1900
East Linden Avenue, Linden, New Jersey 07036, Attn: Procurement
Manager, Services/Contracts, Telecopy No.: 1-908-474-7437; and if to
the Assignee, at its address at ____________________, Attention:
_______________, Telecopy No.: _____________; or, as to each such
person, at such other address as shall be designated by such person in
a written notice to such other person. All such notices and
communications shall be effective within five days (excluding
Saturdays, Sundays or legal holidays in the State of New Jersey) of
mailing, when mailed to the address specified above, postage prepaid,
and upon receipt of an answer back or confirmation, when sent by
telecopy, telegraph, telex or cable.
(5) This Agreement shall be binding upon the Assignee, its
successors and assigns.
(6) This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the Assignee has caused this Agreement to
be executed as of date first above written.
[NAME OF ASSIGNEE]
By
--------------------------------------
Title:
Consented and Agreed by:
Infineum USA L.P.
By
----------------------------------
Title:
- 78 -
<PAGE> 87
EXHIBIT G-2
ASSUMPTION AGREEMENT
[Date]
_________________, a _________________ corporation (the
"Assignee"), hereby declares, covenants, agrees and binds itself as follows:
(1) Except as otherwise set forth herein, capitalized terms
used herein are used with the meanings given them in the Ground Lease
Agreement, dated as of August 1, 1990, between Exxon Corporation, a New
Jersey corporation, and Cogen Technologies Linden Venture, L.P., doing
business in New Jersey as Cogen Technologies Linden Venture, Limited
Partnership, a Delaware limited partnership, as amended to the date
hereof and assigned by Exxon Corporation to Bayway Refining Company, a
Delaware corporation ("Infineum") by an assignment agreement dated as
of April 8, 1993 and effective as of April 8, 1993 (the "Ground Lease
Agreement").
(2) The Assignee hereby (a) assumes and agrees to pay and
perform each and every duty and obligation of Cogen hereafter accruing
under the Ground Lease Agreement and the Steam Sale Agreement between
Cogen and INFINEUM U.S.A L.P. ("Infineum") as assignee of Exxon
Corporation dated April 8, 1993 (the "Steam Sale Agreement"), (b)
agrees from and after the date hereof to comply with and be bound by
the terms and provisions of the Ground Lease Agreement and the Steam
Sale Agreement applicable to Cogen, (c) confirms that from and after
the date hereof it shall be deemed "Cogen" for the purposes of the
Ground Lease Agreement and the Steam Sale Agreement, and (d) agrees to
cure as soon as reasonably practicable (which, in the case of payments
due by Cogen to Infineum, shall be deemed to require immediate payment
by the Assignee) all defaults of Cogen under the Ground Lease Agreement
and the Steam Sale Agreement of which Infineum has previously given
written notice to the Financier in accordance with Section 20.4C of the
Ground Lease Agreement (including, without limitation, making all
payments due by Cogen to Infineum of which such notice has been given,
subject to Article 10 of the Ground Lease Agreement).
(3) The Assignee hereby represents that:
(a) it is a corporation duly organized existing in good
standing under the laws of the State of __________; and
- 79 -
<PAGE> 88
(b) it possesses all requisite power and authority to
enter into and perform this Agreement, the Ground Lease Agreement and
the Steam Sale Agreement and to carry out the transactions contemplated
herein and therein.
(4) All notices and other communications hereunder shall be in
writing (including telecopier, telegraphic, telex or cable
communication) and mailed, telecopied, telegraphed, telexed, cabled or
delivered if to, Infineum, at its address at Infineum USA L.P.,1900
East Linden Avenue,Linden, New Jersey 07036, Attn: Procurement Manager,
Services/Contracts, Telecopy No.: 1-908-474-7437;; and if to the
Assignee, at its address at ____________________, Attention:
_______________, Telecopy No.: _____________; or, as to each such
person, at such other address as shall be designated by such person in
a written notice to such other person. All such notices and
communications shall be effective within five days (excluding
Saturdays, Sundays or legal holidays in the State of New Jersey) of
mailing, when mailed to the address specified above, postage prepaid,
and upon receipt of an answerback or confirmation, when sent by
telecopy, telegraph, telex or cable.
(5) This Agreement shall be binding upon the Assignee, its
successors and assigns.
(6) This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the Assignee has caused this Agreement to
be executed as of date first above written.
[NAME OF ASSIGNEE]
By
--------------------------------------
Title:
Consented and Agreed by:
Infineum USA L.P.
By
----------------------------------
Title:
- 80 -
<PAGE> 89
EXHIBIT G-3
ASSUMPTION AGREEMENT
[Date]
_________________, a _________________ corporation (the
"Assignee"), hereby declares, covenants, agrees and binds itself as follows:
(1) Except as otherwise set forth herein, capitalized terms
used herein are used with the meanings given them in the Ground Lease
Agreement, dated as of August 1, 1990, between Exxon Corporation, a New
Jersey corporation, and Cogen Technologies Linden Venture, L.P., doing
business in New Jersey as Cogen Technologies Linden Venture, Limited
Partnership, a Delaware limited partnership, as amended to the date
hereof and assigned by Exxon Corporation to Bayway Refining Company, a
Delaware Corporation by an assignment agreement dated as of April 8,
1993 and effective as of April 8, 1993 (the "Ground Lease Agreement").
(2) The Assignee hereby (a) assumes and agrees to pay and
perform each and every duty and obligation of Cogen hereafter accruing
under the Ground Lease Agreement and the Steam Sale Agreement between
Cogen and INFINEUM U.S.A. L.P. ("Infineum") as assignee of Exxon
Corporation dated April 8, 1993 (the "Steam Sale Agreement"), (b)
agrees from and after the date hereof to comply with and be bound by
the terms and provisions of the Ground Lease Agreement and the Steam
Sale Agreement applicable to Cogen, (c) confirms that from and after
the date hereof it shall be deemed "Cogen" for the purposes of the
Ground Lease Agreement and the Steam Sale Agreement; provided that:
(i) the Assignee shall have the right to deliver a notice
of termination of the Ground Lease Agreement and the Steam
Sale Agreement to Infineum on or before the 90th day after the
date hereof and, in the event such a notice is timely received
by Infineum, the Ground Lease Agreement and the Steam Sale
Agreement shall terminate on the 30th day after such notice is
received by Infineum; provided, however, that the obligations
of the Assignee in the Ground Lease Agreement and the Steam
Sale Agreement in respect of any action, inaction, event or
circumstance occurring prior to the date of termination of
such agreements shall survive such termination (subject to
Article 10 of the Ground Lease Agreement and Section (2)(iii)
hereof);
- 81 -
<PAGE> 90
(ii) by executing this Agreement, the Assignee agrees to
cure as soon as reasonably practicable (which, in the case of
payments due by Cogen to Infineum, shall be deemed to require
immediate payment by Assignee) all defaults of Cogen under the
Ground Lease Agreement and the Steam Sale Agreement of which
Infineum has previously given written notice to the Financier
in accordance with Section 20.4C of the Ground Lease Agreement
(including, without limitation, making all payments due by
Cogen to Infineum of which such notice has been given, subject
to Article 10 of the Ground Lease Agreement and Section
(2)(iii) hereof);
(iii) if the Assignee shall exercise the right to
terminate the Ground Lease Agreement and the Steam Sale
Agreement pursuant to Section (2)(i) hereof, the aggregate
liability of the Assignee to Infineum in respect of its
obligations hereunder and under the Ground Lease Agreement and
the Steam Sale Agreement, whether arising pursuant to the
provisions of such agreements or by operation of law, as to
all matters provided for in such agreements, together with the
aggregate of all amounts paid pursuant to all letters of
credit issued as contemplated in Section 10.8 of the Ground
Lease Agreement, shall not in any event exceed $10,000,000 in
respect of any action, inaction, event or circumstance
occurring prior to the date of termination of the Ground Lease
Agreement and the Steam Sale Agreement; and
(iv) it is expressly acknowledged and agreed that Infineum
shall retain all of its rights under the Ground Lease
Agreement and the Steam Sale Agreement, including without
limitation, the right to terminate either such agreement as
provided by the terms thereof, including, without limitation,
the right to terminate either such agreement in respect of an
uncured payment default thereunder even if the Assignee has
paid to Infineum an aggregate of $10,000,000 or more.
(3) The Assignee hereby represents that:
(a) it is a corporation duly organized existing in good
standing under the laws of the State of __________; and
(b) it possesses all requisite power and authority to
enter into and perform this Agreement, the Ground Lease Agreement and
the Steam Sale Agreement and to carry out the transactions contemplated
herein and therein.
- 82 -
<PAGE> 91
(4) All notices and other communications provided for herein
shall be in writing (including telecopier, telegraphic, telex or cable
communication) and mailed, telecopied, telegraphed, telexed, cabled or
delivered if to, Infineum, at its address Infineum USA L.P.,1900 East
Linden Avenue,Linden, New Jersey 07036, Attn: Procurement Manager,
Services/Contracts, Telecopy No.: 1-908-474-7437;; and if to the
Assignee, at its address at ____________________, Attention:
_______________, Telecopy No.: _____________; or, as to each such
person, at such other address as shall be designated by such person in
a written notice to such other person. All such notices and
communications shall be effective within five days (excluding
Saturdays, Sundays or legal holidays in the State of New Jersey) of
mailing, when mailed to the address specified above, postage prepaid,
and upon receipt of an answerback or confirmation, when sent by
telecopy, telegraph, telex or cable.
(5) This Agreement shall be binding upon the Assignee, its
successors and assigns.
(6) This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the Assignee has caused this Agreement to
be executed as of date first above written.
[NAME OF ASSIGNEE]
By
--------------------------------------
Title:
Consented and Agreed by:
Infineum USA L.P.
By
----------------------------------
Title:
- 83 -
<PAGE> 92
EXHIBIT H
CONSENT TO ASSIGNMENT
CONSENT TO ASSIGNMENT, dated as of __________, ____, by Infineum USA
L.P., a ________________ limited partnership ("Infineum"), in favor of
__________________ (the "Lender"), under that certain_________________________,
dated as of ________ __, ____ (the "Loan Agreement"), among Cogen Technologies
Linden Venture, L.P., doing business in New Jersey as Cogen Technologies Linden
Venture, Limited Partnership, a Delaware limited partnership ("Cogen"), and the
Lender.
WHEREAS, Infineum has been informed that pursuant to the Loan
Agreement, the Lender has agreed to make certain loans to Cogen to refinance the
loans made to Cogen for the construction of the Cogeneration Facility (as
hereinafter defined); and
WHEREAS, the term "Financier" in the Steam Sale Agreement (as
hereinafter defined) includes any person providing funds for the refinancing or
taking out of any loans made to Cogen for the construction of the Cogeneration
Facility and the nominees or designees of any such persons; and
WHEREAS, Infineum has been informed that Cogen has assigned to the
Lender Cogen's rights, title and interest in the Steam Sale Agreement as
collateral security for, among other things, Cogen's obligations under the Loan
Agreement;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt of which is acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
1.01. Defined Terms. Unless the context shall otherwise require and
except as otherwise specified herein, capitalized terms used herein shall have
the meanings assigned to them in the Agreement, dated as of January 1, 1999,
between Cogen and Infineum for the sale of steam (the "Steam Sale Agreement")
attached as Schedule A hereto.
- 84 -
<PAGE> 93
ARTICLE II
CONSENT TO ASSIGNMENT
2.01. Consents. Infineum hereby consents to (A) the assignment by Cogen
to the Lender of Cogen's right, title and interest in the Steam Sale Agreement,
which is attached hereto as Schedule A and made a part hereof (the right, title
and interest of Cogen in the Steam Sale Agreement being hereinafter referred to
as the "Assigned Rights") as collateral security, and (B) agrees that the Lender
is the Financier recognized by Infineum for purposes of the Steam Sale Agreement
and as such, shall have all of the rights of a Financier under the Steam Sale
Agreement until such time as Infineum is notified pursuant to the Steam Sale
Agreement that the Lender is no longer to be the Financier recognized by
Infineum thereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01. Assurance. Infineum agrees and confirms to the Lender, as
security assignee of the Assigned Rights, that on the date hereof, the Steam
Sale Agreement has not been terminated or modified in contravention of Section
16.7G thereof.
3.02. Representations and Warranties. Infineum repeats and reaffirms
for the benefit of the Lender as security assignee of the Assigned Rights the
representations and warranties made in Section 9.1 of the Steam Sale Agreement.
- 85 -
<PAGE> 94
ARTICLE IV
MISCELLANEOUS
4.01. Severability. If any provision of this Consent to Assignment
shall be held to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
4.02. Governing Law. This Consent to Assignment shall be governed by
and construed in accordance with the laws of the State of New Jersey.
4.03. Headings. The headings hereof are for convenience only and are
not intended to affect the meaning of interpretation of this Consent to
Assignment.
4.04. Successors and Assigns. This Consent to Assignment shall be
binding upon, inure to the benefit of, and be enforceable by, Infineum and the
Lender and their respective successors and assigns.
IN WITNESS WHEREOF, the undersigned has caused this Consent to
Assignment to be duly executed by its officer thereunto duly authorized as of
the day and year first above written.
Infineum USA L.P.
By:
-------------------------------------
Title:
----------------------------------
Address: 1900 East Linden Avenue
Linden, New Jersey 07036
Attn: Procurement Manager,
Services/Contracts
- 86 -
<PAGE> 95
EXHIBIT I
RECOGNITION AGREEMENT
- 87 -
<PAGE> 1
EXHIBIT 10.13
NOTE: This document is an electronic draft and should not be relied on in lieu
of the version that was executed by Cogen Technologies and Bayway Refining on
February 4, 1999. Any questions regarding the terms of the contracts should be
addressed by referral to the executed documents.
AGREEMENT
BETWEEN
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
(D/B/A COGEN TECHNOLOGIES LINDEN VENTURE, LIMITED PARTNERSHIP)
AND
BAYWAY REFINING COMPANY
FOR THE SALE OF STEAM
AS OF APRIL 8, 1993
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS.....................................................................1
ARTICLE 1
DEFINITIONS
1.1 "Affiliate"........................................................3
1.2 "Agreement"........................................................3
1.3 "Annual Period"....................................................3
1.4 "Base Term"........................................................3
1.5 "Bayway Refinery"..................................................3
1.6 "BRC's External Steam Requirements"................................4
1.7 "BRC's Property"...................................................4
1.8 "Btu"..............................................................4
1.9 "Cogeneration Facility" ...........................................4
1.10 "Demised Premises".................................................4
1.11 "Exxon"............................................................4
1.12 "Exxon's Complex"..................................................4
1.13 "Financier"........................................................5
1.14 "Force Majeure"....................................................5
1.15 "Governmental Authorizations"......................................6
1.16 "Ground Lease".....................................................6
1.17 "Ground Lease Agreement"...........................................6
1.18 "Improvements Removal Period"......................................6
1.19 "K lbs."...........................................................6
1.20 "Owner Trust"......................................................6
1.21 "Party"............................................................7
1.22 "Points of Delivery of Steam"......................................7
1.22A "Protective Relay Test"............................................7
1.23 "psig".............................................................7
1.24 "Steam"............................................................7
1.25 "Steam Interconnection Facilities".................................7
1.26 "Weighted Average Cost of Gas".....................................7
ARTICLE 2
TERM
2.1 Base Term of Agreement.............................................8
2.2 Renewal of Agreement...............................................8
2.3 Cut-Off Date.......................................................9
</TABLE>
-i-
<PAGE> 3
<TABLE>
ARTICLE 3
SALE OF STEAM
<S> <C>
3.1 General.................................................................9
3.2 Reduced Deliveries.....................................................12
3.3 Routine Scheduling.....................................................14
3.4 Quality of Steam.......................................................14
3.5 Points of Delivery.....................................................15
ARTICLE 4
COST OF STEAM
4.1 Monthly Steam Charge...................................................16
4.2 Annual Steam Adjustment................................................16
4.3 Cumulative Adjustments.................................................16
ARTICLE 5
OTHER RIGHTS AND OBLIGATIONS OF PARTIES
5.1 Rights and Obligations of Cogen........................................16
5.2 Rights and Obligations of BRC..........................................17
ARTICLE 6
MEASUREMENT AND METERING
6.1 Units of Measurement...................................................20
6.2 Cogen's Measuring Equipment............................................21
6.3 BRC's Measuring Equipment..............................................21
6.4 Alternative Means of Measurement.......................................21
6.5 Testing and Corrections................................................22
A. Testing.......................................................22
B. Costs of Testing..............................................22
C. Corrections of Measuring Equipment............................22
6.6 Maintenance............................................................23
6.7 Measurement/Notice.....................................................23
6.8 Measurement/Notice of Steam delivered
to Exxon by BRC.....................................................24
ARTICLE 7
BILLING AND RECORDS
7.1 Billing................................................................24
A. Monthly Bill to BRC...........................................24
B. Annual Adjustments............................................25
C. Other Adjustments.............................................25
7.2 Payment and Penalties..................................................26
A. Payment.......................................................26
B. Interest......................................................26
7.3 Disputes...............................................................26
7.4 Records................................................................27
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE 8
TAXES.......................................................................27
ARTICLE 9
AUTHORITY
9.1 Authority of BRC.......................................................27
9.2 Authority of Cogen.....................................................28
ARTICLE 10
FORCE MAJEURE
10.1 Definition............................................................29
10.2 Burden of Proof.......................................................29
10.3 Condition.............................................................29
10.4 Labor Disputes........................................................30
10.5 Termination for Force Majeure.........................................30
10.6 Cogen's Right to Temporary Cure.......................................31
ARTICLE 11
BREACH OF CONTRACT AND TERMINATION
11.1 BRC's Right to Terminate..............................................33
11.2 Cogen's Right to Terminate............................................34
11.3 Automatic Termination.................................................36
11.4 Notice to the Financier, Lenders and Mortgagees.......................36
11.5 Effective Date of Termination.........................................38
11.6 Transition............................................................40
ARTICLE 12
LIABILITY
12.1 Limitation on Liability for Damages...................................41
12.2 Damages...............................................................43
12.3 Specific Performance..................................................43
ARTICLE 13
NONWAIVER...................................................................44
ARTICLE 14
NOTICE AND SERVICE
14.1 Notice................................................................44
14.2 Date of Service.......................................................45
A. Mail..........................................................45
B. Telegram......................................................45
C. Personal Service..............................................45
14.3 Addresses.............................................................45
A. Cogen.........................................................45
B. BRC...........................................................45
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE 15
AMENDMENTS..................................................................46
ARTICLE 16
SUCCESSORS AND ASSIGNS
16.1 Assignment by BRC.....................................................46
16.2 Assignment by Cogen...................................................47
16.3 Continuing Obligations................................................47
16.4 Ground Lease Agreement................................................48
16.5 Transfers of Part of the Bayway Refinery..............................48
16.6 Selected Transfers....................................................51
16.7 Rights of the Financier and Other Lenders.............................51
16.8 Status Certificates...................................................57
ARTICLE 17
CHOICE OF LAW...............................................................58
ARTICLE 18
RENEGOTIATION...............................................................58
ARTICLE 19
CONSENT NOT TO BE UNREASONABLY WITHHELD.....................................58
ARTICLE 20
OTHER AGREEMENTS............................................................59
ARTICLE 21
CAPTIONS....................................................................59
ARTICLE 22
COUNTERPARTS................................................................59
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<S> <C>
EXHIBIT A
PART 1: CALCULATION OF MONTHLY STEAM CHARGE...............................61
PART 2: CALCULATION OF ANNUAL STEAM ADJUSTMENT............................62
EXHIBIT B
DESCRIPTION OF POINTS OF DELIVERY OF STEAM..................................64
EXHIBIT C
PRO FORMA MONTHLY INVOICE...................................................65
EXHIBIT D
EXISTING PROCESS STEAM SOURCES AT THE BAYWAY REFINERY.......................66
EXHIBIT E
EXAMPLE OF PRO RATA ALLOCATION OF STEAM.....................................68
EXHIBIT F
PORTIONS OF THE BAYWAY REFINERY NOT SUBJECT TO
PRO RATA ALLOCATION.........................................................70
EXHIBIT G-1
ASSUMPTION AGREEMENT........................................................71
EXHIBIT G-2
ASSUMPTION AGREEMENT........................................................73
EXHIBIT G-3
ASSUMPTION AGREEMENT........................................................75
EXHIBIT H
RECOGNITION AGREEMENT.......................................................78
EXHIBIT I
CONSENT TO ASSIGNMENT.......................................................79
</TABLE>
-v-
<PAGE> 7
AGREEMENT
BETWEEN
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
(d/b/a COGEN TECHNOLOGIES LINDEN VENTURE, LIMITED PARTNERSHIP)
AND
BAYWAY REFINING COMPANY
FOR THE SALE OF STEAM
This AGREEMENT is made and entered into effective as of April 8, 1993,
by and between Cogen Technologies Linden Venture, L.P., doing business in New
Jersey as Cogen Technologies Linden Venture, Limited Partnership ("Cogen"), a
Delaware limited partnership, and Bayway Refining Company ("BRC"), a Delaware
corporation (collectively "Parties").
RECITALS
WHEREAS, RCM Holdings, Inc. (previously known as Cogen Technologies,
Inc.), has entered into a Power Purchase Agreement dated April 14, 1989 ("Power
Purchase Agreement") with Consolidated Edison Company of New York, Inc.
("Consolidated Edison"), under which RCM Holdings, Inc. sells to Consolidated
Edison electricity from a cogeneration facility ("Cogeneration Facility")
located in Linden, New Jersey. The Power Purchase Agreement was approved by the
Public Service Commission of the State of New York and became effective in
September, 1989 and has been assigned to Cogen. The Cogeneration Facility is
contemplated, but not required, to be a qualifying cogeneration facility as
defined in Section 3(18) of the Federal Power Act and the regulations
thereunder. Cogen and Consolidated Edison contemplate that the Power Purchase
Agreement will remain in
<PAGE> 8
-2-
force for twenty-five (25) years from May 1, 1992 and possibly for two (2)
additional five (5) year renewal terms;
WHEREAS, BRC owns, operates and maintains the "Bayway Refinery" (as
defined in Article 1.5 below) in Linden, New Jersey, which utilizes steam for
industrial purposes;
WHEREAS, Cogen owns, operates, and maintains the Cogeneration Facility
on part of the land on which the Bayway Refinery is located and leases from BRC
the "Demised Premises" (as defined in Article 1.10 below) upon which the
Cogeneration Facility is located. BRC has leased the Demised Premises to Cogen
and has granted Cogen such easements and rights-of-way as are reasonably
necessary for the operation, maintenance, repair, replacement, and removal of
the Cogeneration Facility and related improvements in partial consideration of
Cogen's entering into this Agreement for the sale of steam to BRC from the
Cogeneration Facility for use at the Bayway Refinery. The parties to this
Agreement and the "Ground Lease Agreement" (as defined in Article 1.15 below)
acknowledge and agree that both such agreements are interdependent, as provided
in both such agreements;
WHEREAS, the sale of steam to BRC from the Cogeneration Facility for
use at the Bayway Refinery under this Agreement is intended to replace, in
part, Cogen's sale of such steam to Exxon Corporation under a separate
agreement between Cogen and Exxon Corporation, and reflects BRC's acquisition
from Exxon of the Bayway Refinery; and
<PAGE> 9
-3-
WHEREAS, the Parties desire to set forth in writing their respective
rights and obligations with respect to the matters set forth above.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other valuable consideration, receipt and sufficiency of which are
hereby acknowledged, the Parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
The following terms when used herein shall have the following
meanings:
1.1 "Affiliate" means a corporation or other entity that directly or
indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, another corporation or other entity.
1.2 "Agreement" means this contract, including all exhibits and
amendments thereto that may be made from time to time.
1.3 "Annual Period" means any one of a succession of consecutive
twelve (12) month periods, the first of which shall begin on May 1, 1992.
1.4 "Base Term" of this Agreement has the meaning set forth in Article
2.1.
1.5 "Bayway Refinery" means BRC's Bayway Refinery and Marketing
Terminal, both located at Linden, New Jersey.
<PAGE> 10
-4-
1.6 "BRC's External Steam Requirements" means the quantity of steam
used by BRC to operate the Bayway Refinery over and above those quantities
provided by BRC's internal sources identified in Exhibit D hereto.
1.7 "BRC's Property" means the land upon which the Bayway Refinery is
located, as described more particularly in Article 1 and Exhibit A of the
Ground Lease Agreement.
1.8 "Btu" means British Thermal Unit.
1.9 "Cogeneration Facility" means the cogeneration facility owned by
Cogen and located upon the Demised Premises.
1.10 "Demised Premises" means those two parcels of land which total
approximately 12.36 acres on the site of the Bayway Refinery and which were
leased to Cogen pursuant to the Ground Lease Agreement, as described more
particularly in Article 1 and Exhibit B of the Ground Lease Agreement.
1.11 "Exxon" means the Exxon Corporation as well as its successors and
assigns. For purposes of the agreement between Cogen Technologies Linden
Venture, L.P. (d/b/a Cogen Technologies Linden Venture, Limited Partnership)
and Exxon Corporation for the Sale of Steam dated August 1, 1990, INFINEUM USA
L.P. became assignee of Exxon as of January 1, 1999.
1.12 "Exxon's Complex" means Exxon Chemical Company's Chemical Plant
(which plant has been transferred to INFINEUM USA L.P. as of January 1, 1999);
Exxon Company, U.S.A., Turbo Oil; and Exxon's Technology Center (which
Technology Center has been transferred to INFINEUM USA L.P. as of January 1,
1999) all
<PAGE> 11
-5-
located at Linden, New Jersey, and all of which are facilities owned by Exxon
or an affiliate thereof.
1.13 "Financier" initially means the Owner Trust, and may also mean
any other entity subsequently extending credit to Cogen for the construction,
operation, maintenance, repair, replacement, or removal of the Cogeneration
Facility and other "Improvements" (as defined in Article 1 of the Ground Lease
Agreement), or any entity subsequently providing funds for the refinancing or
taking-out of such loans, and the nominees or designees of any such entities;
provided that, at no time will BRC be obligated to recognize more than one such
entity as the Financier to whom duties are owed, or rights are granted, under
this Agreement and the Ground Lease Agreement. BRC will recognize as the
Financier for purposes of this Agreement and the Ground Lease Agreement (i) the
Owner Trust, until such time as the Owner Trust or the Lenders' Agent (as set
forth in the recognition agreement executed and delivered to the Owner Trust by
BRC) notifies BRC in writing that such other party should be considered to be
the Financier, and (ii) thereafter, the designated party, until such time as
such designated party notifies BRC in writing that Cogen has the right to
designate another entity as the Financier, and (iii) thereafter, such other
entity as Cogen may designate in writing from time to time.
1.14 "Force Majeure" has the meaning set forth in Article 10.1.
<PAGE> 12
-6-
1.15 "Governmental Authorizations" means any and all licenses,
permits, certificates and other authorizations required by applicable federal,
state, or local law.
1.16 "Ground Lease" means the creation of a leasehold estate in the
Demised Premises, as set forth in Article 1 of the Ground Lease Agreement.
1.17 "Ground Lease Agreement" means the Ground Lease Agreement dated
August 1, 1990, between Cogen and Exxon for the lease of the Demised Premises
to Cogen, including all amendments thereto that may be made from time to time
and as amended by letter agreement dated September 27, 1991, and further
amended by Amendment to Ground Lease Agreement dated July 31, 1992 and
subsequently amended by the Second Amendment to Ground Lease Agreement dated
April 13, 1994, which Ground Lease Agreement has been assigned by Exxon to BRC.
1.18 "Improvements Removal Period" means that part of the term of the
Ground Lease for the removal of certain "Improvements" (as defined in Article 1
of the Ground Lease Agreement), including the Cogeneration Facility, as set
forth in Article 1 of the Ground Lease Agreement.
1.19 "K lbs." means 1,000 pounds of steam mass.
1.20 "Owner Trust" means the trust established pursuant to the Trust
Agreement dated as of December 28, 1990, between State Street Bank and Trust
Company of Connecticut, National Association, and Linden Owner Partnership, as
the same may be amended from time to time.
<PAGE> 13
-7-
1.21 "Party" means Cogen or BRC, as the case may be, and its permitted
successors and assigns.
1.22 "Points of Delivery of Steam" means the points where Cogen's
steam supply system connects to BRC's steam pipeline at BRC's existing steam
headers, as indicated on Exhibit B.
1.22A "Protective Relay Test" means Consolidated Edison's or its
successor's functional testing of protective relays of the Cogeneration
Facility the duration of which begins at the time the interconnect is
de-energized and ends at the time the interconnect is returned to full service
and which typically is performed once every eighteen (18) to twenty-four (24)
months.
1.23 "psig" means pound per square inch gauge.
1.24 "Steam" means steam delivered to BRC by Cogen, as measured at
Cogen's meters at the Points of Delivery of Steam.
1.25 "Steam Interconnection Facilities" means Cogen's facilities
required for the delivery of Steam to the Points of Delivery of Steam,
including service stop valves, meter stop valves, primary and secondary service
pressure reducing valves, meter supports, protection devices, meters, pipe
systems, pipelines, venting, and other facilities required to connect the
Cogeneration Facility to the Points of Delivery of Steam in order to effectuate
the purposes of this Agreement.
1.26 "Weighted Average Cost of Gas" means the average cost of natural
gas of Consolidated Edison and Public Service Electric and Gas Company (or
their successors) based upon volumes of natural gas purchased by such utilities
during the month in question as set forth in Consolidated Edison's Operating
and
<PAGE> 14
-8-
Financial Report filed monthly with the Public Service Commission of the State
of New York, and as set forth in Public Service Electric and Gas Company's
Commodity Charge Applicable to Cogeneration Interruptible Service filed monthly
with the State of New Jersey Board of Public Utilities.
ARTICLE 2
TERM
2.1 Base Term of Agreement. This Agreement shall be effective as of
April 8, 1993 and will continue for a period of twenty-four (24) Annual Periods
(the "Base Term"), unless sooner terminated in accordance with the terms of
this Agreement.
2.2 Renewal of Agreement. This Agreement shall be automatically
renewed for two (2) periods of five (5) additional Annual Periods each,
commencing with the expiration of the Base Term pursuant to Article 2.1, unless
either Party elects to terminate this Agreement at the expiration of the Base
Term or at the expiration of the first five (5) year renewal term. Termination
by BRC shall be valid only if BRC provides Cogen written notice of its intent
to terminate at least five and one-half (5 1/2) years prior to the expiration
of the Base Term or at least five and one-half (5 1/2) years prior to the
expiration of the first five (5) year renewal term, as the case may be.
Termination by Cogen shall be valid only if Cogen provides BRC written notice
of its intent to terminate at least four (4) years prior to the expiration of
the Base Term or at least four (4)
<PAGE> 15
-9-
years prior to the expiration of the first five (5) year renewal term, as the
case may be.
2.3 Cut-Off Date. In no event shall this Agreement extend beyond
January 1, 2033, without the written consent of both Parties.
ARTICLE 3
SALE OF STEAM
3.1 General.
A. Commencing on April 8, 1993, Cogen shall sell and deliver to
BRC Steam at the Bayway Refinery up to a maximum rate of 819 K lbs. per hour
for the months October through and including May, and up to a maximum rate of
491 K lbs. per hour for the months June through and including September. This
delivery of Steam shall be uninterrupted. In the event of an upset or other
emergency at the Bayway Refinery during the months June through and including
September, Cogen shall sell and deliver to BRC Steam at the Bayway Refinery up
to a maximum rate of 819 K lbs. per hour for the duration of such upset or
emergency. In addition, if at any time BRC requests Steam at the Bayway
Refinery in excess of 819 K lbs. per hour during the months October through and
including May, or in excess of 491 K lbs. per hour during the months June
through and including September, Cogen shall meet such request to the extent
Cogen is able to do so, provided that Cogen is not materially adversely
affected under the Power Purchase Agreement or Cogen's other
<PAGE> 16
-10-
agreements to sell steam to other steam users. During the months of June
through and including September, BRC's request under the preceding sentence, up
to a maximum total consumption of 691K lbs. per hour, shall take priority over
any other request for Steam by any other Steam user, except the amounts up to
109K lbs. per hour supplied to Exxon under any steam agreement in effect at
that time.
B. BRC shall purchase and use from Cogen at least 717,444 K lbs.
of BRC's External Steam Requirements in each Annual Period. BRC may at any time
take steam from the sources described in Exhibit D and, subject to BRC's
obligations set forth in the preceding sentence, from any other source upon
reasonable notice to Cogen.
C. BRC's External Steam Requirements at the Bayway Refinery are
presently estimated, but not guaranteed, to be 3,816,540 K lbs. per Annual
Period. Cogen recognizes that BRC may reduce, terminate, or change the nature
of its operations at the Bayway Refinery and that BRC's External Steam
Requirements might be reduced below 717,444 K lbs. per Annual Period or
eliminated as a result. However, if BRC elects to cease all or substantially
all industrial operations at the Bayway Refinery (other than because of Force
Majeure) with the results described in Article 11.2D, Cogen may elect to
terminate this Agreement pursuant to Article 11.2D.
D. If BRC, during the term of this Agreement, decides to make
substantial changes in the nature of its industrial operations at the Bayway
Refinery (other than because of Force
<PAGE> 17
-11-
Majeure) with the probable result that BRC's maximum rate of Steam taken from
Cogen under Articles 3.1A and 3.1B would permanently fall below both 573 K lbs.
per hour for the months October through and including May and 328 K lbs. per
hour for the months June through and including September, BRC shall give Cogen
prompt written notice of such decision. In that event, if Cogen so requests,
BRC and Cogen shall work together to revise Cogen's obligations as defined in
Article 3.1A, so that Cogen shall continue to be obligated to provide to BRC
the Steam which BRC needs for its changed operations and so that Cogen shall
have the opportunity to seek and obtain other customers for the volume of BRC's
External Steam Requirements no longer needed by BRC.
E. If BRC is affected by Force Majeure which causes BRC's External
Steam Requirements from Cogen under this Agreement to fall below 358,722 K lbs.
of Steam for any consecutive six (6) month period (an average of 82 K lbs. of
Steam per hour on a six (6) month basis), and if Cogen, with BRC's Steam take
from Cogen in combination with the steam take from Cogen's other steam
customers, would be unable, in Cogen's reasonable judgment, to maintain the
status of the Cogeneration Facility as a "qualifying cogeneration facility" (as
defined in Section 3(18) of the Federal Power Act and the regulations
thereunder) for at least five (5) gas turbines, Cogen, by prompt written notice
to BRC, may reduce its obligation in Article 3.1A to provide 819 K lbs. of
Steam per hour to 655 K lbs. of Steam per hour. The purpose of this reduction
in Cogen's obligation in Article 3.1A would be to give Cogen a reasonable
opportunity to maintain the status of
<PAGE> 18
-12-
the Cogeneration Facility as a "qualifying cogeneration facility" by obtaining
other customers for up to 164 K lbs. per hour of its steam from October through
and including May and, during upsets or emergencies, from June through and
including September. If Cogen's obligation to sell and deliver Steam to BRC is
reduced as described in this Article 3.1E, and if subsequently the Force
Majeure affecting BRC abates, BRC may request Cogen to reinstate the original
rate of 819 K lbs. of Steam per hour under Article 3.1A. Cogen's obligation
under this Article 3.1E shall revert to the original rate of 819 K lbs. of
Steam per hour under Article 3.1A twenty-four (24) months following Cogen's
receipt of a written notice from BRC requesting such reversion, unless the
Parties mutually agree upon an earlier date for such reversion.
3.2 Reduced Deliveries.
A. Should Cogen be unable to deliver and sell the quantity of
Steam required to be delivered and sold to BRC under Article 3.1A due to a
reduction in the amount of steam being generated by the Cogeneration Facility
due to Force Majeure, BRC shall have the right to a pro rata allocation of
steam being generated, delivered and sold from the Cogeneration Facility in
relation to Cogen's delivery of steam to Exxon and American Cyanamid Company
("Cyanamid") pursuant to an existing agreement between Cogen and Exxon for the
sale of steam, and an agreement between Cogen and Cyanamid for the sale of
steam to be executed at a future date. Such pro rata allocation shall be based
on BRC's, Exxon's, and Cyanamid's previous twenty-four (24) hours of demand for
steam from the Cogeneration Facility at the time of
<PAGE> 19
-13-
reduction of the amount of steam being generated and available for delivery
and sale.
B. Should Cogen fail for any reason to deliver to BRC the Steam
that Cogen is required to deliver to BRC under Article 3.1, BRC shall have the
right immediately to obtain, and shall not be deemed in breach of this
Agreement if it obtains, replacement steam from any other source (within or
external to the Bayway Refinery) for the duration of Cogen's failure to provide
the Steam. If Cogen does fail for any reason (other than because of Force
Majeure) to deliver to BRC the Steam that Cogen is required to deliver to BRC
under this Article 3, and if BRC obtains replacement steam from any other
source, Cogen shall reimburse BRC for any difference between BRC's reasonable
cost for the replacement of such steam and the cost BRC would have incurred in
buying Steam under Articles 3 and 4. To the extent that Cogen's failure to
deliver Steam is excused by Force Majeure, Cogen shall owe BRC no money for any
such difference in cost. The cost which BRC would have incurred in buying Steam
under Articles 3 and 4 shall be calculated as provided in Article 10.6B.
C. During any Protective Relay Test, provided it is operationally
possible to do so, Cogen shall sell and deliver up to 500 K lbs. per hour of
Steam for BRC's Steam requirements by operating three turbines of the
Cogeneration Facility in a full speed/no-load condition, unless mutually agreed
otherwise by both parties. The price for such Steam up to 500 K lbs. per hour
shall be in accordance with the pricing terms of this Agreement.
<PAGE> 20
-14-
In addition, as requested by BRC, Cogen shall sell and deliver additional steam
to BRC above the 500 K lbs. per hour described in the immediately preceding
sentence, but only to the extent Cogen is reasonably able to supply such
volumes. The price for such additional Steam above 500 K lbs. per hour shall be
subject to the mutual agreement of the parties.
3.3 Routine Scheduling. Commencing on April 8, 1993, BRC shall, at any
time upon Cogen's request, give Cogen its best estimate of its expected
requirements for Steam from the Cogeneration Facility hereunder (including the
hourly delivery rates) in such detail as follows:
A. For each calendar year, at least by December 1 of the preceding
calendar year on a monthly basis; and
B. For each month, at least ten (10) days prior to the end of the
preceding month, on a weekly basis.
Notwithstanding the foregoing, BRC shall advise Cogen of any significant
changes in its expected requirements for Steam from the Cogeneration Facility
as soon as reasonably practicable.
3.4 Quality of Steam. All Steam shall meet either of the following
specifications: for high pressure level not less than 700 psig nor more than
740 psig at 700(degree)-740(degree)F, and for low pressure level not less than
130 psig nor more than 150 psig at 440(degree)-480(degree)F, and for both the
high pressure level and the low pressure level, total dissolved solids and the
oxygen present shall not exceed the amounts recommended by standard industrial
practices for 1500 psig steam systems. Cogen and BRC acknowledge that either
Party may desire temporary changes in the temperature
<PAGE> 21
-15-
or the pressure of the Steam from time to time. If either Party requests such a
change, the Party to which the request is made shall not unreasonably deny such
request; provided that Cogen shall not be required to take any action by which
it would be materially adversely affected under the Power Purchase Agreement or
Cogen's other agreements to sell steam to other steam users. At BRC's option
and subject to the limits of Article 3.1A, BRC shall specify and Cogen shall
deliver to BRC the amounts of high pressure and low pressure Steam that BRC
desires; provided, however, that Cogen shall not be obligated to supply BRC
with more than 581 K lbs. per hour of Steam at the high pressure level at any
time (except to the extent that Cogen is able to provide more than 581 K lbs.
per hour at the high pressure level, Cogen shall do so, provided that Cogen is
not materially adversely affected under the Power Purchase Agreement or Cogen's
other agreements to sell steam to other steam users) or 374 K lbs. per hour of
Steam at the low pressure level at any time (except to the extent that Cogen is
able to provide more than 374 K lbs. per hour at the low pressure level, Cogen
shall do so, provided that Cogen is not materially adversely affected under the
Power Purchase Agreement or Cogen's other agreements to sell steam to other
steam users).
3.5 Points of Delivery. Cogen shall pay for the installation and
maintenance of all Steam Interconnection Facilities.
<PAGE> 22
-16-
ARTICLE 4
COST OF STEAM
4.1 Monthly Steam Charge. BRC shall pay to Cogen the monthly steam
charge (MS) calculated pursuant to Part 1 of Exhibit A.
4.2 Annual Steam Adjustment. Subject to Article 4.3, Cogen shall
calculate and credit to BRC the annual steam adjustment (ASA) according to Part
2 of Exhibit A. This adjustment reflects differences in Steam charges to BRC
when quantities delivered to BRC are calculated on an annualized basis versus a
monthly basis.
4.3 Cumulative Adjustments. The cumulative adjustments pursuant to
Article 4.2 in any Annual Period shall not exceed the cumulative monthly steam
charge under Article 4.1 in any Annual Period.
ARTICLE 5
OTHER RIGHTS AND OBLIGATIONS OF PARTIES
5.1 Rights and Obligations of Cogen. In addition to the rights and
obligations of Cogen specified in Article 3 and Article 4, Cogen shall:
A. Have the right to sell any and all electric power generated at
the Cogeneration Facility in excess of the amounts Cogen is obligated
to sell to Consolidated
<PAGE> 23
-17-
Edison under the Power Purchase Agreement, to any third person under
such terms and conditions as Cogen, in its sole discretion, determines
to be appropriate.
B. Have the right to sell any and all steam produced at the
Cogeneration Facility that is first offered to but not purchased by
BRC under Article 3 to any other person on such terms and conditions
as Cogen and such person shall agree, without interference by BRC,
except that such sale shall not be conducted in such manner as to
interfere with Cogen's provision of Steam under Article 3 or with
BRC's reasonable and normal operation of the Bayway Refinery.
C. Design, construct, operate, and maintain the Cogeneration
Facility to meet reliability and safety standards consistent with
steam supply to a major industrial complex and will work with BRC so
that such reliability and safety standards are adequately addressed.
D. Have the right to receive, for Steam accounting purposes, meter
recordings or other transfer documentation for BRC's steam delivery to
Exxon.
5.2 Rights and Obligations of BRC. In addition to the
rights and obligations of BRC specified in Article 3 and
Article 4, BRC shall:
A. Receive Cogen's delivery of Steam under this Agreement in a
manner consistent with safety standards generally applicable to
receipt and use of steam at a major industrial complex.
<PAGE> 24
-18-
B. Have the right to review and approve any "Improvements" (as
defined in Article 1 of the Ground Lease Agreement) installed after
the date hereof within any easements granted by BRC to Cogen under the
Ground Lease Agreement from the perspective of maintenance access,
emergency access and impact on existing or future equipment and
improvements of BRC, which approval shall not be unreasonably
withheld.
C. Have the right to sell and deliver Steam purchased from Cogen
to any person who owns or operates facilities within, or closely
proximate to, the Bayway Refinery; provided, however, that BRC shall
first provide Cogen with a declaratory order of the New Jersey Board
of Public Utilities or other official assurances satisfactory to Cogen
that such sale and delivery would not cause or would not be likely to
cause the Cogeneration Facility to cease to be a "qualifying
cogeneration facility" as defined in Section 3(18) of the Federal
Power Act and the regulations thereunder, and that such sale and
delivery would not result in Cogen, or any person having an ownership
interest in Cogen, or the Cogeneration Facility, or any person
operating the Cogeneration Facility, or any Affiliate of Cogen or any
such persons, becoming subject to or affected by regulation under the
Federal Power Act, the Public Utility Holding Company Act of 1935, or
other federal or state laws or regulations respecting the regulation
of utilities, except reporting or safety requirements that are
non-burdensome in
<PAGE> 25
-19-
nature. In the event that the State of New Jersey by law, regulation
or order, does not subject the sale or delivery of steam to public
utility-type regulation (other than reporting or safety requirements
that are non-burdensome in nature), such a law, regulation or order
shall constitute an official assurance satisfactory to Cogen, for
purposes of this clause (C) of this Section 5.2; provided, that such
proposed sale or delivery of Steam meets all requirements specified in
such law, regulation or order. To the extent additional information is
reasonably required to determine if such sale or delivery of Steam
meets the requirements specified in such law, regulation or order,
Cogen may request such further information from BRC.
D. Receive at the Points of Delivery of Steam Cogen's delivery of
Steam to Exxon and distribute such Steam to Exxon's Complex located
proximate to the Bayway Refinery in accordance with the provisions of
the Joint Services Contract Between BRC and Exxon dated as of April 2,
1993 as may be amended, modified or terminated; provided however that
such receipt and distribution shall not result in BRC or any person or
entity having an ownership interest in BRC or the Bayway Refinery, or
operating the Bayway Refinery, or any Affiliate of BRC or any such
persons, becoming subject to or affected by regulation under the
Federal Power Act, the Public Utility Holding Company Act of 1935 or
other federal or state laws or regulations respecting the regulation
of utilities, except for reporting
<PAGE> 26
-20-
or safety requirements which are non-burdensome in nature. In the
event the laws or regulations described in this paragraph 5.2D result
in BRC ceasing to deliver Steam to Exxon, BRC agrees to work with
Exxon on a mutually cooperative basis to develop an alternative means
for Exxon to receive Steam from Cogen. BRC agrees that in the event
the laws or regulations described in this paragraph 5.2D result in BRC
ceasing to deliver Cogen's Steam to Exxon and an alternative means for
Exxon to receive Steam from Cogen is not reasonably available, BRC
shall increase the External Steam Requirements in each Annual Period
provided for under paragraph 3.1B to 876,000 K lbs. In the event any
claim is brought by Exxon against BRC or an Affiliate of BRC relating
to BRC's failure to deliver Steam to Exxon, BRC shall not be entitled
to seek relief or a claim against Cogen relating to such failure to
deliver such Steam to Exxon. In the event any claim is brought by
Exxon against Cogen or an Affiliate of Cogen relating to Cogen's
failure to sell Steam or to make Steam available for delivery to the
Points of Delivery of Steam for Exxon ("Exxon's Claim"), Cogen shall
not be entitled to hold BRC liable for Exxon's Claim.
ARTICLE 6
MEASUREMENT AND METERING
6.1 Units of Measurement. For the purposes of this Agreement, Steam
shall be measured in K lbs. of steam mass.
<PAGE> 27
-21-
6.2 Cogen's Measuring Equipment. Cogen shall design, install, operate,
maintain, and own all measuring equipment necessary for an accurate
determination of the quantity of Steam. Except as provided in Article 6.4,
Cogen's meters shall be used for quantity measurements under this Agreement.
6.3 BRC's Measuring Equipment. BRC may design, install, operate,
maintain, and own, at its sole expense, steam measuring equipment, provided
that BRC shall not interfere with Cogen's steam supply system or with Cogen's
measuring equipment.
6.4 Alternative Means of Measurement. In the event Cogen's measuring
equipment is out of service or registers inaccurately, measurement shall be
determined by:
A. Using the registration of any meter or meters of BRC, if
installed and accurately registering; or
B. In the absence of an installed and accurately registering meter
of BRC, making a calibration test or mathematical calculation, if the
percentage of error is ascertainable; or
C. In the absence of both an installed and accurately registering
meter of BRC and an ascertainable percentage of error, estimating by
reference to quantities measured during periods under similar
conditions when Cogen's meter was registering accurately; or
D. In the absence of an ability to use any of the above methods of
measurement, estimating by reference to BRC's operating records for
the Bayway Refinery for the period in question.
<PAGE> 28
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6.5 Testing and Corrections.
A. Testing. The accuracy of Cogen's measuring equipment shall be
tested and verified by Cogen at quarterly intervals in BRC's presence. The
calibration procedure to be used under this Article 6.5A shall be mutually
agreed to by the Parties prior to the time Cogen first delivers Steam to BRC.
In the event that either Party notifies the other that it desires a test of its
own or of the other Party's measuring equipment, the Parties shall cooperate to
secure a prompt verification of the accuracy of such equipment.
B. Costs of Testing. Cogen shall bear the cost of the testing and
any required adjustments of Cogen's measuring equipment done at quarterly
intervals. In the event that BRC requests a testing of Cogen's measuring
equipment at other than quarterly intervals, BRC shall bear the cost of the
testing unless such equipment is found to be inaccurate by greater than two
percent (2%).
C. Corrections of Measuring Equipment. If, upon testing, any
measuring equipment is found to be inaccurate by less than two percent (2%) at
a flow rate corresponding to the average hourly flow rate for Steam supplied by
Cogen to BRC for the Bayway Refinery for the period since the last preceding
test, previous recordings of such equipment shall be considered accurate in
computing deliveries of Steam hereunder, but such equipment shall be promptly
adjusted to record correctly to the extent possible. If, upon testing, any
measuring equipment shall be found to be inaccurate by greater than two percent
(2%) at a
<PAGE> 29
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flow rate corresponding to the average hourly flow rate for Steam supplied by
Cogen to BRC for the Bayway Refinery for the period since the last preceding
test, then such equipment shall be promptly adjusted to record properly, to the
extent possible, and any previous recordings by such equipment shall be
corrected to zero error, to the extent possible, and Cogen shall promptly send
to BRC, pursuant to Article 7, billing adjustments based on such corrected
recordings. If no reliable information exists as to when the equipment became
inaccurate, it shall be assumed for correction purposes hereunder that such
inaccuracy began at a point in time midway between the testing date and the
last previous date on which the equipment was tested and found to be accurate
or adjusted to be accurate.
6.6 Maintenance. Each Party shall have the right to be present
whenever the other Party reads, cleans, changes, repairs, inspects, tests,
calibrates, or adjusts its measuring equipment. Each Party shall give timely
notice to the other Party in advance of taking any of such actions.
6.7 Measurement/Notice. Commencing on the first day of the second
calendar month subsequent to the date Cogen first sells Steam to BRC and
thereafter on the first day of each calendar month during the term of this
Agreement, Cogen shall cause Cogen's measuring equipment to be read, determine
the quantities of Steam delivered to BRC during the immediately preceding
calendar month, and promptly notify BRC in writing of such quantities.
<PAGE> 30
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6.8 Measurement/Notice of Steam delivered to Exxon by BRC. Commencing
on the first day of the second calendar month subsequent to the date Cogen
first sells Steam to BRC, and thereafter on the first day of each calendar
month during the term of this Agreement, BRC shall determine the quantities of
Steam delivered to Exxon by BRC during the immediately preceding calendar
month, and notify Cogen in writing of such quantities on or before the seventh
day of the month. In the event of any discrepancy between the quantities of
Steam delivered to Exxon by BRC as reported by BRC and those reported by Exxon,
Cogen shall rely, for the purposes of this Agreement, on BRC's reported
quantities pending reconciliation among Cogen, BRC and Exxon of the reported
quantities. In the event that such reconciliation between the Exxon and BRC
reported quantities results in a revision of the reported quantities of Steam
delivered to Exxon by BRC, such revisions shall be reflected in an adjusted
invoice pursuant to Article 7.1C of this Agreement.
ARTICLE 7
BILLING AND RECORDS
7.1 Billing.
A. Monthly Bill to BRC. On or before the tenth (10th) day of each
month, Cogen shall prepare and deliver to BRC an invoice setting forth the
monthly steam charge as set forth in Article 4.1 for the preceding month. Such
invoice shall also set forth the other information called for in Exhibit C and
shall be
<PAGE> 31
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in the form shown in Exhibit C. If Cogen from time to time does not know its
actual cost of fuel for purposes of Exhibit A calculations for the month in
question when Cogen prepares an invoice pursuant to this Article 7.1A, Cogen
may estimate such cost using all available data. To the extent that an estimate
is provided and used for purposes of determination of Cogen's actual cost of
fuel in Exhibit A, Cogen shall provide BRC a statement of Cogen's actual cost
of fuel as soon as available to Cogen, and Cogen shall make the appropriate
adjustment as well as any adjustment as a result of Cogen's actual cost of fuel
exceeding the cap in Note 1 to Exhibit A, in the following month's invoice.
B. Annual Adjustments. Within thirty (30) days following the end
of each Annual Period, Cogen shall prepare and deliver to BRC an invoice
setting forth any credits due as a result of the annual steam adjustments as
set forth in Article 4.2. Such invoice shall also set forth the other
information called for in Exhibit C and shall be in the form shown in Exhibit
C.
C. Other Adjustments. Cogen shall promptly prepare and deliver to
BRC an invoice setting forth any adjustments for discrepancies in billing
identified through meter verifications pursuant to Article 6.5C, through other
means pursuant to Article 6.4, or for any other reason which would result in
reimbursement of billed amounts to BRC or additional payments by BRC to Cogen.
<PAGE> 32
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7.2 Payment and Penalties.
A. Payment. BRC shall, within fifteen (15) days of the receipt of
Cogen's invoice setting forth the monthly bill to BRC pursuant to Article 7.1A,
pay Cogen for all amounts billed. Cogen shall, within fifteen (15) days after
issuing its invoice setting forth annual reconciliation credits due BRC
pursuant to Article 7.1B, pay BRC all amounts due. Reimbursements or additional
payments pursuant to Article 7.1C shall be paid within thirty (30) days of
receipt of the billing adjustment invoice.
B. Interest. If BRC fails to pay timely all or a portion of the
amounts billed pursuant to Article 7.1A or either Party fails to make timely
reimbursements or additional payments pursuant to Article 7.1B or 7.1C within
the time stated in this Article 7, interest on the unpaid portion shall accrue
from the date due until paid at two percent (2%) over the bank prime loan rate
as reported in Federal Reserve Statistical Release H.15 (or a successor
publication of similar authority, if Statistical Release H.15 is discontinued)
for the day the payment becomes due; provided, however, in no event shall this
rate of interest exceed the maximum rate of interest permissible under the laws
of the State of New Jersey.
7.3 Disputes. If any invoice or adjustment under Article 7.1 is
disputed by either Party and subsequently resolved, there shall be added to the
amount determined to be due Cogen or credited to the amount due BRC, if BRC is
due a refund, interest calculated in the same manner as for late payments under
Article 7.2B.
<PAGE> 33
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7.4 Records. Both Cogen and BRC shall keep all invoices, receipts,
charts, computer printouts, punchcards, magnetic tapes, and other records
related to the volume and price of Steam sales made under this Agreement,
including Cogen's cost of fuel and all calculations based on such records. Such
records shall be made available for inspection and copying by either Party or
their representatives upon reasonable notice. Each Party shall keep all such
materials for a minimum of three (3) years from the date of their preparation.
ARTICLE 8
TAXES
BRC shall be solely responsible for any sales, use, gross receipts,
transfer, and similar taxes that may be imposed on the sale of Steam by Cogen
to BRC under this Agreement. Cogen shall not be responsible for any sales, use,
gross receipts, transfer and similar taxes which may be imposed on the sale of
Steam to any other party by BRC. Cogen shall be solely responsible for any
taxes that may be imposed on the manufacture of steam by Cogen under this
Agreement.
ARTICLE 9
AUTHORITY
9.1 Authority of BRC. BRC hereby represents and warrants to Cogen as
follows:
<PAGE> 34
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A. BRC is a corporation duly organized and existing in good
standing under the laws of the State of Delaware.
B. BRC possesses all requisite power and authority to enter into
and perform this Agreement and to carry out the transactions
contemplated herein.
C. No suit, action or arbitration, or legal, administrative or
other proceeding is pending against BRC or its Affiliates that would
affect the validity or enforceability of this Agreement or the ability
of BRC to materially fulfill its commitments hereunder.
9.2 Authority of Cogen. Cogen hereby represents and warrants to BRC as
follows:
A. Cogen is a limited partnership duly organized and existing
under the laws of the State of Delaware and is duly qualified to do
business in the State of New Jersey.
B. Cogen possesses all requisite power and authority to enter into
and perform this Agreement and to carry out the transactions
contemplated herein.
C. No suit, action or arbitration, or legal, administrative or
other proceeding is pending against Cogen or its Affiliates that would
affect the validity or enforceability of this Agreement or the ability
of Cogen to materially fulfill its commitments hereunder.
<PAGE> 35
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ARTICLE 10
FORCE MAJEURE
10.1 Definition. Except for the obligations of a Party to make
payments when due under this Agreement, the Parties shall be excused from
delays in performance or failures to perform their respective obligations
hereunder and shall not be liable in damages or otherwise, if and only to the
extent that such delays or failures are caused by Force Majeure. The term
"Force Majeure" means any cause beyond the reasonable control of the affected
Party, including, without limitation, storm, flood, lightning, drought,
earthquake, fire, explosion, civil disturbance, labor dispute, act of God or
the public enemy, or action of a court or governmental authority. Financial
distress of either Party, late delivery of materials or equipment (unless
itself caused by Force Majeure), or inadequate performance by contractors
(unless itself caused by Force Majeure) shall not be considered Force Majeure.
10.2 Burden of Proof. The burden of proof as to whether a Force
Majeure event or condition has occurred shall be upon the Party claiming that
it should be excused from performing its obligations hereunder due to the
occurrence of such an event or condition.
10.3 Condition. If either Party relies on Force Majeure as a basis for
being excused from performance of its obligations under this Agreement, then
the Party relying on Force Majeure shall:
<PAGE> 36
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A. Provide prompt oral notice to the other Party, confirmed
promptly in writing, of the occurrence of the event or condition, with
an estimate of its expected duration and the probable impact on the
performance of its obligations hereunder;
B. Exercise all reasonable efforts to continue to perform its
obligations hereunder;
C. Expeditiously take action to correct or cure the event or
condition excusing performance to the extent reasonably practicable;
D. Exercise all reasonable efforts to mitigate or limit damages to
the other Party; and
E. Provide prompt oral notice to the other Party, confirmed
promptly in writing, of the cessation of the event or condition giving
rise to its excusal from performance.
10.4 Labor Disputes. This Article 10 shall not require the settlement
of any strike, walkout, lockout, or other labor dispute on terms which, at the
discretion of the Party involved, are contrary to its interests. The settlement
of such labor disputes shall be at the sole discretion of the Party involved.
10.5 Termination for Force Majeure. If Cogen is excused from
performing its obligations hereunder due to Force Majeure, and such Force
Majeure continues in effect for a period of six (6) months after the initial
event or condition of Force Majeure, subject to Article 10.6, BRC may terminate
this Agreement, effective on the last day of such six (6) month period or
thereafter, by giving Cogen and the Financier identified in
<PAGE> 37
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Article 11.4 at least thirty (30) days' prior written notice. Failure
by Cogen to perform its obligations due to Force Majeure or the
failure by Cogen to implement one of the alternatives described in
subparagraph (i), (ii), or (iii) of Article 10.6A shall not be
considered a breach of this Agreement by Cogen.
10.6 Cogen's Right to Temporary Cure.
A. If Cogen is prevented for a period of six (6) months by Force
Majeure from delivering to BRC Steam in accordance with Article 3 from the
Cogeneration Facility, Cogen, at its option, may prevent BRC from terminating
this Agreement pursuant to Article 10.5, and will be in compliance with this
Agreement, by:
(i) supplying Steam from temporary boilers or otherwise to the
Bayway Refinery in an amount, quality, and at a cost as
provided in Articles 3 and 4; or
(ii) paying to BRC the cost of procurement and installation by
BRC of temporary boilers to supply steam to the Bayway
Refinery in an amount and quality as provided in Article 3
and paying BRC any difference between the cost to BRC of
generating such steam and the cost BRC would have incurred
in buying Steam under Articles 3 and 4, provided that this
option shall not apply unless BRC is reasonably able to
procure, install, and operate such temporary boilers; or
<PAGE> 38
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(iii) paying to BRC any difference between BRC's cost for steam
purchased from Public Service Electric and Gas Company (or
its successor) and the cost BRC would have incurred in
buying Steam under Articles 3 and 4;
from the end of the six (6) month period described in Article 10.5 until either
the Force Majeure no longer prevents Cogen from delivering Steam in accordance
with Article 3 from the Cogeneration Facility, or until twenty-four (24) months
after Cogen gives BRC written notice that Cogen does not intend to continue
pursuant to subparagraph (i), (ii), or (iii) above. If Cogen elects to continue
the Agreement in force by implementing one of the alternatives described in
subparagraph (i), (ii), or (iii) above, it must give BRC at least ninety (90)
days' prior written notice to that effect and such notice must specify which
alternative Cogen elects. In the event that Cogen subsequently gives BRC such
written notice that it does not intend to continue pursuant to subparagraph
(i), (ii), or (iii) above, the termination of this Agreement pursuant to
Article 10.5 shall be effective twenty-four (24) months after Cogen gives BRC
such written notice.
B. For purposes of determining the cost which BRC would have
incurred in buying Steam under Articles 3 and 4, the cost of Cogen's fuel for
the Exhibit A calculations shall conclusively be deemed to be the Weighted
Average Cost of Gas. Additionally, the cost which BRC would have incurred in
buying
<PAGE> 39
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Steam under Articles 3 and 4 shall include payments or credits to BRC for the
annual steam adjustment.
C. The implementation by Cogen of one of the alternatives
described in subparagraphs (i), (ii), and (iii) of Article 10.6A and subsequent
termination of this Agreement by Cogen on twenty-four (24) months' prior
written notice to BRC shall not be considered a breach of this Agreement by
Cogen.
ARTICLE 11
BREACH OF CONTRACT AND TERMINATION
11.1 BRC's Right to Terminate. Subject to Article 11.4, BRC shall have
the right, at its option, to terminate this Agreement upon the occurrence of
any of the following events:
A. Cogen breaches this Agreement by failing to substantially
perform any material obligation under this Agreement, which failure
continues for a period of sixty (60) days after BRC gives Cogen and
the Financier identified in Article 11.4 written notice of such
breach; provided, however, that if such breach may not reasonably be
cured within such sixty (60) day period, BRC may not terminate this
Agreement pursuant to this Article 11.1A if Cogen diligently commences
to cure such breach within such sixty (60) day period, and this
Agreement shall remain in effect for so long as Cogen diligently
continues such efforts, unless such breach continues uncured for six
(6) months
<PAGE> 40
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after BRC's written notice of breach to Cogen and the Financier
identified in Article 11.4; or
B. Cogen claims that it is excused from failing to deliver Steam
to BRC from the Cogeneration Facility due to Force Majeure and does
not within six (6) months either resume full performance or initiate
one of the alternative arrangements described in Article 10.6, and BRC
gives Cogen and the Financier thirty (30) days' prior written notice
of termination pursuant to Article 10.5; or
C. BRC elects to terminate this Agreement at the expiration of the
Base Term or at the expiration of the first five (5) year renewal
term, as the case may be, by giving to Cogen and the Financier five
and one-half (5-1/2) years' prior written notice of termination, as
provided in Article 2.2.
11.2 Cogen's Right To Terminate. Cogen shall have the right, at its
option, to terminate this Agreement upon the occurrence of any of the following
events:
A. BRC breaches this Agreement by failing to make timely payment
to Cogen of the monthly Steam charges pursuant to Article 7, which
failure continues for a period of thirty (30) days after Cogen gives
BRC written notice of such failure to pay; or
B. BRC breaches this Agreement by failing to substantially perform
any material obligation under this Agreement, other than payment of
amounts due as described in Article 11.2A, which failure continues for
a period of sixty
<PAGE> 41
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(60) days after Cogen gives BRC written notice of such breach;
provided, however, that if such breach may not reasonably be cured
within such sixty (60) day period, Cogen may not terminate this
Agreement pursuant to this Article 11.2B, if BRC diligently commences
to cure such breach within such sixty (60) day period, and this
Agreement shall remain in effect for so long as BRC diligently
continues such efforts, unless the breach continues uncured for six
(6) months after Cogen's written notice of breach to BRC; or
C. Cogen claims that it is excused from failing to perform its
obligations under this Agreement due to Force Majeure, initiates one
of the alternative arrangements described in Article 10.6, and
subsequently gives BRC twenty-four (24) months' prior written notice
under Article 10.6 that Cogen does not intend to continue such
arrangement; or
D. BRC's External Steam Requirements from Cogen under this
Agreement fall below 258,280 K lbs. of Steam in any Annual Period
(other than because of Force Majeure) and Cogen, with BRC's External
Steam Requirements from Cogen in combination with the steam demand
from Cogen's other steam customers, is unable to maintain the status
of the Cogeneration Facility as a "qualifying cogeneration facility"
(as defined in Section 3(18) of the Federal Power Act and the
regulations thereunder) for at least two (2) gas
<PAGE> 42
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turbines, and Cogen subsequently gives BRC six (6) month's
prior written notice of termination of this Agreement; or
E. Cogen elects to terminate this Agreement at the expiration of
the Base Term or at the expiration of the first five (5) year renewal
term, as the case may be, by giving to BRC four (4) years' prior
written notice of termination, as provided in Article 2.2.
Any notice from Cogen to BRC of termination of this Agreement will be effective
only if such notice either (i) is joined in by the Financier T in writing, if
there is a Financier then in existence, or (ii) certifies on its face that
there is no Financier.
11.3 Automatic Termination. This Agreement shall automatically
terminate as of the effective date set forth in Article 11.5 below if:
A. The Ground Lease terminates under Section 16.3B of the Ground
Lease Agreement (relating to full taking of the Demised Premises);
B. The Ground Lease enters the Improvements Removal Period or
terminates for any other reason; or
C. This Agreement continues in effect until January 1, 2033, and
is not extended by the written consent of the Parties.
11.4 Notice to the Financier, Lenders and Mortgagees.
A. BRC shall have no right to terminate this Agreement for breach
pursuant to Article 11.1A or 11.1B, until BRC (i) has provided the Financier
substantially the same notice
<PAGE> 43
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which BRC is obligated to provide Cogen pursuant to Article 11.1A, 11.1B, or
11.5A; (ii) has provided the Financier the same right to cure such breach as
Cogen; and (iii) in the case of breach which is susceptible of being cured only
if the Financier has access to the Demised Premises, the "Improvements," the
"Interconnection Areas," the "Utility Areas," and the "Access Rights of Way,"
in each case as defined in the Ground Lease Agreement (and only in the case of
such breach), has provided the Financier six (6) additional months subsequent
to the end of the period in Article 11.1A for the cure of any such breach,
without extension for any period contemplated in Article 10, to cure such
breach; provided that the Financier has pursued and continues to pursue with
diligence, continuity and good faith all actions to enable the Financier to
obtain access in order to cure, and to cure, such breach; provided, further,
that in respect of any such breach which is the failure to deliver to BRC Steam
from the Cogeneration Facility in accordance with Article 3, the Financier must
also pay to BRC, for so long as such breach continues during such additional
period, any difference between BRC's reasonable cost for replacement steam from
any other source and the cost BRC would have incurred in buying Steam under
Articles 3 and 4. BRC may in its discretion obtain such replacement steam from
any source (within or external to the Bayway Refinery) it deems appropriate.
All payments by the Financier to BRC pursuant to the above provision will be
made, to the account specified by BRC in writing, monthly within ten (10) days
of receipt by the Financier of a written statement from BRC setting forth the
<PAGE> 44
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amount due and in reasonable detail the basis for the amount due. The cost
which BRC would have incurred in buying Steam under Articles 3 and 4 shall be
calculated as provided in Article 10.6B.
B. Cogen shall have no right to terminate this Agreement pursuant
to Article 11.2 until Cogen (i) has provided any lender to whom BRC has
assigned the Ground Lease Agreement to secure a loan and has provided any
mortgagee holding a mortgage on all or any part of BRC's Property substantially
the same notices which Cogen is obligated to provide BRC pursuant to Article
11.2, and (ii) has provided such lender or mortgagee the same right to cure as
BRC, provided that BRC has previously given Cogen actual notice of the
appropriate contact person and address for any such lender or mortgagee. If
Cogen gives BRC written notice of its termination of this Agreement, BRC shall
notify the Financier that BRC has received such notice.
11.5 Effective Date of Termination.
A. If a breach described in Article 11.1A occurs and the time
period described in Article 11.1A has expired, BRC may promptly give Cogen a
second written notice, which notice shall, when given, terminate this
Agreement.
B. If the events described in Article 11.1B occur, this Agreement
shall terminate at the end of the thirty (30) day period referred to in Article
10.5.
C. If the events described in Article 11.1C occur, this Agreement
shall terminate at the expiration of the Base Term
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or at the expiration of the first five (5) year renewal term, as the case may
be.
D. If a breach described in Article 11.2A or 11.2B occurs and the
applicable time period described in Article 11.2A or 11.2B has expired, Cogen
may promptly give BRC a second written notice, which notice shall, when given,
terminate this Agreement.
E. If the events described in Article 11.2C occur, this Agreement
shall terminate upon the expiration of the twenty-four (24) month notice period
described in Article 10.6A.
F. If the events described in Article 11.2D occur, this Agreement
shall terminate upon the expiration of the six (6) month notice period
described in Article 11.2D; provided that, if BRC does not need Steam from
Cogen for all of such six (6) month period, BRC shall promptly advise Cogen in
writing and the Parties may accelerate the termination date of this Agreement
by mutual written consent.
G. If the events described in Article 11.2E occur, this Agreement
shall terminate at expiration of the Base Term or at the expiration of the
first five (5) year renewal term, as the case may be.
H. If any of the events described in Article 11.3A occurs, this
Agreement shall automatically terminate when the Ground Lease terminates. If
the Ground Lease terminates for any other reason, this Agreement shall
automatically terminate pursuant to Article 11.3B when the Improvements Removal
Period
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commences or, if there is no Improvements Removal Period, when the Ground
Lease terminates.
I. If the event described in Article 11.3C occurs, this Agreement
shall terminate at 12:01 a.m. on January 1, 2033.
11.6 Transition.
A. If this Agreement is terminated for any reason, the Parties
shall work together to achieve a smooth transition. Unless and until this
Agreement has been terminated, neither Party shall refuse to make any of the
payments or perform any of the other obligations required under this Agreement
on the basis of any anticipated termination of this Agreement, or any actual or
alleged breach by the other Party, subject to the exception described in
Article 11.6B below.
B. If Cogen terminates the Ground Lease under Sections 16.2D
(relating to termination of the Power Purchase Agreement), 16.2E (relating to
inability of Cogen to receive or maintain Governmental Authorizations), 16.2F
(relating to inability of the Demised Premises and other areas to be used for
Cogen's purposes), or 16.2G (relating to partial taking) of the Ground Lease
Agreement, thus triggering subsequent automatic termination of this Agreement
under Article 11.3, it is understood that Cogen may not be able to continue to
provide Steam to BRC under this Agreement. In such event, Cogen shall: (i) use
its best efforts to continue to supply Steam to BRC, as would otherwise be
required by Article 3.1A, until the commencement of the Improvements Removal
Period, or (ii) if Cogen cannot supply such Steam, permit BRC to operate and
maintain the
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Cogeneration Facility to supply steam to the Bayway Refinery until the
commencement of the Improvements Removal Period, provided that in neither event
shall Cogen be required to make capital expenditures or to incur out-of-pocket
operating and maintenance costs net of revenues in order to keep the
Cogeneration Facility operational, unless BRC fully and promptly reimburses
Cogen for such capital expenditures and out-of-pocket operating costs net of
revenues.
ARTICLE 12
LIABILITY
12.1 Limitation on Liability for Damages.
A. Cogen, and its officers, directors, partners, agents,
employees, Affiliates, successors and assigns shall not be liable under this
Agreement to BRC or its officers, directors, partners, agents, employees,
Affiliates, or their successors or assigns, for any punitive, indirect, or
consequential damages, including loss of profits, however caused; provided that
this limitation shall not apply to any damages under this Agreement caused by
Cogen's intentional provision of steam to another entity with the result that
BRC does not receive the amounts of Steam it is entitled to under this
Agreement.
B. BRC and its officers, directors, partners, agents, employees,
Affiliates, successors and assigns shall not be liable under this Agreement to
Cogen or its officers, directors, partners, agents, employees, Affiliates, or
their
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successors or assigns, for any punitive, indirect, or consequential damages,
including loss of profits, however caused; provided that this limitation shall
not apply to any damages under this Agreement caused by BRC's intentional
purchase and acceptance of steam for industrial purposes at the Bayway Refinery
from an entity other than Cogen, or caused by BRC's provision to itself of
steam for industrial purposes from steam sources other than those described in
Exhibit D, when BRC has not purchased Steam from Cogen in such amounts as
specified in Article 3.1B and Cogen is otherwise able to provide such amounts
of Steam.
C. Nothing in this Article 12.1 shall prohibit or prevent Cogen
from making the allocations of Steam described in Article 3.2A, nor shall
anything in this Article 12.1 prohibit or prevent BRC from obtaining steam from
alternate sources pursuant to and under the circumstances described in Article
3.2B, which activities shall not be deemed breaches of this Agreement.
D. In the event this Agreement is terminated pursuant to Article
11.1B, 11.1C, 11.2C, 11.2D, 11.2E, 11.3C hereof, or in the event this Agreement
is terminated pursuant to Article 11.3A or 11.3B because the Ground Lease
Agreement was terminated pursuant to Section 16.1D, 16.1F, 16.2C, 16.2D, 16.2E,
16.2F, 16.2G, 16.2H, 16.3A or 16.3B of the Ground Lease Agreement, both Parties
shall be discharged from all obligations under this Agreement other than those
which accrued before the effective date of such termination of this Agreement.
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12.2 Damages.
A. If either Party breaches this Agreement, the aggrieved Party
shall be entitled to seek damages as available at law except as may be limited
pursuant to Article 12.1.
B. Subject to the limitations in Article 12.1 above and in Section
14.1 of the Ground Lease Agreement, if either Party terminates the Ground Lease
Agreement because of default by the other Party under the Ground Lease
Agreement, the aggrieved Party shall be entitled to seek damages under both the
Ground Lease Agreement and this Agreement (which will automatically terminate
under Article 11.3B), but shall not be entitled to double recovery of damages,
that is, recovery of the same damages under both agreements.
C. Termination of this Agreement shall not automatically trigger
termination of the Ground Lease Agreement. However, subject to the limitations
in Article 12.1 above and in Section 14.1 of the Ground Lease Agreement, if
either Party terminates this Agreement because of breach by the other Party
under this Agreement and subsequently terminates the Ground Lease Agreement
(under Sections 16.1C or 16.2B of the Ground Lease Agreement, as applicable)
based on the termination of this Agreement, the aggrieved Party shall be
entitled to seek damages under both this Agreement and the Ground Lease
Agreement, but shall not be entitled to double recovery of damages, that is,
recovery of the same damages under both agreements.
12.3 Specific Performance. In addition to the right of termination
referred to in Article 11, BRC and Cogen shall each
<PAGE> 50
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have the right to seek the specific performance by the other Party of any of
its obligations under this Agreement.
ARTICLE 13
NONWAIVER
The various rights, remedies, options, and elections of BRC and Cogen
as expressed herein are cumulative, and the failure of BRC or Cogen to enforce
strict performance by the other Party of the provisions of this Agreement or to
exercise any right, election, or option or to resort or have recourse to any
remedy herein conferred will not be construed or deemed to be a waiver or a
relinquishment of the future enforcement by BRC or Cogen of any such
provisions, rights, options, elections, or remedies, but the same will continue
in full force and effect.
ARTICLE 14
NOTICE AND SERVICE
14.1 Notice. All notices, requests, demands and other communications
required or permitted under the terms of this Agreement shall be sufficient in
form if in writing and shall be deemed to be duly given if delivered by
personal service, telegram, or mailed certified or registered first class mail,
postage prepaid, properly addressed to the Party entitled to receive such
notice pursuant to Article 14.3.
<PAGE> 51
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14.2 Date of Service.
A. Mail. If a notice is sent by registered or certified mail, it
shall be deemed given within three (3) days, excluding Saturdays, Sundays, or
legal holidays of the State of New Jersey, after deposit of the same in the
United States mail, postage prepaid, except as otherwise demonstrated by a
signed receipt.
B. Telegram. If a notice is served by telegram, it shall be deemed
given eighteen (18) hours after delivery to the telegram company.
C. Personal Service. If a notice is served by personal service, it
shall be deemed given upon the date of actual delivery to the address of the
Party to be notified.
14.3 Addresses. Notices may be sent to the Parties at the following
addresses:
A. Cogen: Cogen Technologies Linden Venture, L.P.
c/o RCM Holdings, Inc.
33rd Floor
711 Louisiana St.
Houston, Texas 77002
Attn.: Mr. Robert C. McNair
President
with a copy to: Cogen Technologies Linden Venture, L.P.
1095 Cranbury South River Rd.
Suite 10
Jamesburg, New Jersey 08831
Attn: Director of Operations
B. BRC: Bayway Refining Company
1400 Park Avenue
Linden, New Jersey 07036
Attn.: Mr. Dwight Wiggins
President
<PAGE> 52
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with a copy to: Bayway Refining Company
1400 Park Avenue
Linden, New Jersey 07036
Attn.: Refinery Manager
or to such other and different persons or addresses as may be designated by
the Parties.
ARTICLE 15
AMENDMENTS
No amendment or modification of the terms of this Agreement shall be
binding on either BRC or Cogen unless reduced to writing and signed by both
Parties.
ARTICLE 16
SUCCESSORS AND ASSIGNS
16.1 Assignment by BRC. At any time BRC may sell or transfer all or
any part of the Bayway Refinery or BRC's Property to any Affiliate of BRC or
any third party. If BRC sells or otherwise transfers all of the Bayway Refinery
to any entity, this Agreement shall automatically be assigned to such entity
and shall be binding on and inure to the benefit of any such entity. Subject to
Article 16.6, if BRC sells or otherwise transfers to any entity any part of the
Bayway Refinery which has consumed Steam since April 8, 1993, such transferee
and Cogen shall enter into the separate agreement described in Article 16.5 for
the continued provision of Steam to that part of the Bayway Refinery
<PAGE> 53
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for such transferee's use and, if applicable, for delivery to Exxon.
16.2 Assignment by Cogen. Cogen shall not assign, transfer, pledge, or
hypothecate this Agreement at any time, except that:
A. Cogen may at any time assign, pledge, or hypothecate this
Agreement, provided that, in accordance with the terms of the Ground
Lease Agreement, the Ground Lease Agreement is simultaneously
assigned, pledged, or hypothecated to the same entity by Cogen; and
B. Cogen may at any time assign or transfer this Agreement to an
unrelated entity, provided that such unrelated entity shall also
assume Cogen's rights and obligations under the Ground Lease
Agreement, and (i) first deliver to BRC its written assumption
agreement substantially in the form of Exhibit G-1 to be bound by all
of the provisions of this Agreement and the Ground Lease Agreement;
(ii) have the personnel, experience, equipment and other resources
reasonably required to perform its obligations under this Agreement
and the Ground Lease Agreement; (iii) be financially capable based
upon reasonable standards of performing its obligations under this
Agreement and the Ground Lease Agreement; and (iv) be in other
respects reasonably acceptable to BRC. Subject to Article 16.7, this
Agreement shall be binding on and inure to the benefit of the
successors and assigns of Cogen.
16.3 Continuing Obligations. No assignment of this Agreement by BRC or
Cogen shall operate to relieve BRC or Cogen
<PAGE> 54
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of any obligations under this Agreement which have accrued prior to the
effective date of the assignment. An obligation shall be deemed to have accrued
before the effective date of an assignment only if all the substantive elements
of the obligation have accrued by that date. An assignment of this Agreement
shall relieve the assignor of any obligations to the other Party under this
Agreement which have not accrued before the effective date of the assignment;
provided, however, that the assignor shall continue to be obligated under this
Agreement if any such assignment shall be ineffective.
16.4 Ground Lease Agreement. No assignment of this Agreement by BRC or
Cogen shall operate to relieve BRC or Cogen of any of their obligations under
the Ground Lease Agreement, including without limitation any environmental
obligations and obligations with respect to the New Jersey Environmental
Cleanup Responsibility Act, N.J.S.A. 13:1K-6 et seq., together with related
regulations, as such Act and regulations may be amended from time to time, as
those obligations are defined in the Ground Lease Agreement.
16.5 Transfers of Part of the Bayway Refinery.
A. Subject to Article 16.6, if BRC sells or otherwise transfers to
any entity any part of the Bayway Refinery which has consumed Steam since April
8, 1993, such transferee shall be obligated to enter into a separate agreement
with Cogen covering the provision of Steam to such entity. In such event, BRC's
obligations to purchase Steam and Cogen's obligations to provide Steam under
this Agreement shall be reduced pursuant to
<PAGE> 55
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Article 16.5B, and the formulas for calculating the monthly steam charge and
annual steam adjustment under this Agreement shall be adjusted pursuant to
Article 16.5C. The provisions of any separate agreement shall be substantially
similar to those of this Agreement, with the transferee assuming the rights and
obligations of BRC for the remaining term of this Agreement with respect to the
transferee's part of the Bayway Refinery, except that (i) Article 2 shall
reflect, as appropriate, that some of the Base Term of the Agreement will have
passed; (ii) Article 3 shall incorporate reduced rates of Steam according to
Article 16.5B below; (iii) Exhibit A shall be amended according to Article
16.5C below; (iv) Exhibits B, C and D shall be amended as appropriate; and (v)
the references to the Ground Lease Agreement may or may not continue to apply,
depending on whether the transferee succeeds to BRC's interest in the Ground
Lease Agreement.
B. Subject to Article 16.6, should BRC sell or otherwise transfer
any part of the Bayway Refinery, with the result that the transferee enters
into a separate agreement covering the provision of Steam to such entity
pursuant to Article 16.5A, the rates of Steam set forth in Articles 3.1A, 3.1B,
3.1D, 3.1E and 11.2D of such separate agreement shall be reduced on a pro rata
basis by multiplying the rate in question by a/b, where a is the total amount
of Steam provided by Cogen to the part of the Bayway Refinery subject to
transfer during the last twenty-four (24) month period of continuous steam use
at such part of the Bayway Refinery subsequent to April 8, 1993 (or
<PAGE> 56
-50-
a reasonable estimate of the same if the data is unavailable) and b is the
total amount of Steam provided by Cogen during the same period of time to the
Bayway Refinery (excluding those parts of the Bayway Refinery identified in
Exhibit F). The rates of Steam set forth in Articles 3.1A, 3.1B, 3.1D, 3.1E and
11.2D of this Agreement shall thereafter be reduced on a pro rata basis by
multiplying the rate in question by (b-a)/b. An example of a pro rata
allocation of Steam is set forth in Exhibit E. If a is zero (i.e., the part of
the Bayway Refinery to be transferred has not used steam other than from the
sources described in Exhibit D for a continuous twenty-four (24) month period
since April 8, 1993), the transferee shall have no obligation to enter into any
separate agreement with Cogen. If part of the Bayway Refinery to be transferred
has been removed from operation requiring steam prior to and at the time of
transfer and if the transferee has no intention of using steam at that part of
the Bayway Refinery and will affirm the same to Cogen in writing, then neither
the transferee nor Cogen will have any obligation to enter into any separate
agreement pursuant to Article 16.5A and this Agreement shall not be modified
pursuant to Article 16.5A. The rates of high pressure level and low pressure
level Steam set forth in Article 3.4 shall also be pro rated. These pro rations
shall be based on high pressure level and low pressure level Steam use and
shall be calculated using methods similar to the methods described above as
illustrated in the example set forth in Exhibit E.
<PAGE> 57
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C. Should BRC sell or otherwise transfer any part of the Bayway
Refinery with the result that the transferee enters into a separate agreement
covering the provision of Steam to such entity pursuant to Article 16.5A,
Exhibit A of such separate agreement shall be amended by multiplying the number
"123" in those places where it appears by the fraction a/b determined under
Article 16.5B. Furthermore, this Agreement will be amended by multiplying the
number "123" in Exhibit A by the fraction (b- a)/b. An example of an amendment
to the number "123" in Exhibit A is set forth in Exhibit E.
16.6 Selected Transfers. BRC may freely sell or otherwise transfer
those parts of the Bayway Refinery identified in Exhibit F (the Rahway Tank
Field and the Forty-Acre Tank Field) or any new facilities constructed after
April 8, 1993 and Cogen shall be under no obligation to supply Steam to the
transferee and the transferee shall be under no obligation to take Steam from
Cogen.
16.7 Rights of the Financier and Other Lenders.
A. BRC has executed and delivered to the Owner Trust, as
Financier, a recognition agreement substantially in the form shown in Exhibit
H. Hereafter, if Cogen assigns, pledges, or hypothecates this Agreement to
secure a loan from another Financier to be recognized as the Financier by BRC
for purposes of this Agreement, pursuant to Article 16.2 above, in connection
therewith BRC shall execute a consent to any such assignment, in substantially
the form shown in Exhibit I, as may be reasonably
<PAGE> 58
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requested by the other Financier and BRC shall give the information specified
in Article 16.8 below.
B. On instructions from the Financier, unless otherwise directed
by a court of competent jurisdiction, BRC shall make all payments due Cogen
under this Agreement in accordance with the written instructions of the
Financier in conformity with its documentation with Cogen, and in such event
BRC shall not be liable to Cogen for such payments.
C. If the general partner of Cogen becomes in default under its
partnership agreement with the Owner Trust, the Owner Trust may designate a new
general partner of Cogen, provided that such new general partner has the
personnel, experience, equipment and other resources reasonably required to
perform its obligations under this Agreement and the Ground Lease Agreement and
is in other respects reasonably acceptable to BRC. BRC agrees that General
Electric Company and General Electric Capital Corporation meet the requirements
of Article 16.7C(ii), (iii), and (iv) (and the comparable requirements of
Article 16.7F(ii)(b), (c), and (d)). Similarly, if Cogen becomes in default
under any loan documentation with the Financier or any successor or assign of
Financier holding a collateral assignment, pledge, or hypothecation of Cogen's
interest in this Agreement, the Financier or such successor or assign may
assume or cause a third party to assume Cogen's rights and obligations under
this Agreement at any time, provided that the Financier or such successor,
assign, or third party must first give BRC reasonable written notice of such
assumption, which notice shall contain a
<PAGE> 59
-53-
request (which specifically references this Article 16.7C) for a list of all
defaults of Cogen under this Agreement and the Ground Lease Agreement, at least
thirty (30) days in advance and must first: (i) enter into an agreement with
BRC agreeing to assume Cogen's rights and obligations thereafter accruing under
this Agreement and the Ground Lease Agreement and to cure all existing defaults
of Cogen under this Agreement and the Ground Lease Agreement that can be cured
(including without limitation paying all amounts owed by Cogen to BRC, subject
to the caps set forth in Exhibit G-3, if applicable) pursuant to and as
provided in an assumption agreement substantially in the form of Exhibit G-2;
provided that the Financier or any nominee or designee of the Financier holding
the interest in this Agreement for the benefit of the Financier may enter into
such an assumption agreement substantially in the form of Exhibit G-3; (ii)
have the personnel, experience, equipment, and other resources reasonably
required to perform its obligations under this Agreement and the Ground Lease
Agreement; (iii) be financially capable based upon reasonable standards of
performing its obligations under this Agreement and the Ground Lease Agreement;
and (iv) be in other respects reasonably acceptable to BRC. In such event, BRC
will accept performance by such Financier, successor, assign, or third party.
D. Following the assumption of Cogen's rights and obligations
under this Agreement by the Financier or its successor, assign, or a third
party pursuant to Article 16.7C, such Financier, successor, assign, or third
party may assign its
<PAGE> 60
-54-
rights and obligations under this Agreement to any entity, provided that such
Financier, successor, assign, or third party must first give BRC reasonable
written notice of such assignment at least thirty (30) days in advance and must
first meet the requirements of Article 16.7C(i), (ii), (iii), and (iv). Any
such entity may, with reasonable written notice to BRC at least thirty (30)
days in advance, assign its rights and obligations under this Agreement to
other entities meeting the requirements of Article 16.7C(i), (ii), (iii), and
(iv). In such event, BRC will accept performance by such entity.
E. Notwithstanding any other provision of this Agreement, after
the Financier or any successor, assign, third party or other entity referred to
in Article 16.7C or 16.7D above assumes Cogen's rights and obligations under
this Agreement, BRC will retain all of its rights under this Agreement,
including without limitation the right to terminate this Agreement for any of
the reasons specified in Article 11. Furthermore, Cogen and the Financier (and
its successors and assigns) will give BRC concurrent notice of any default by
Cogen and the exercise by Financier (and its successors and assigns) of any
remedy under any of the documentation between Cogen and Financier (and its
successors and assigns) pertaining to the Cogeneration Facility.
F. In the event of the rejection of this Agreement and the Ground
Lease Agreement prior to their stated expiration dates pursuant to Section 365
of the Bankruptcy Code of 1978, as amended, or any successor provision thereto,
in a case wherein Cogen is the debtor, BRC will enter into both a new steam
sale
<PAGE> 61
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agreement and a new ground lease of the Demised Premises with the Financier or
the same nominee or designee of the Financier for the remainder of the term of
this Agreement and the Ground Lease Agreement, respectively (assuming no
rejection had occurred), effective, in each case, as of the date of such
rejection and upon substantially the same covenants, agreements, terms,
provisions, and limitations herein contained and therein contained (in each
case, excluding a provision equivalent to this Article 16.7F), provided:
(i) the Financier delivers a written request to BRC for such new
steam sale agreement and new ground lease within thirty (30) days
from the date of such rejection, which written request is
accompanied by payment to BRC of all amounts due to BRC under
this Agreement and the Ground Lease Agreement and unpaid as of
the date of such request and which request identifies the party
to act as supplier under the new steam sale agreement and lessee
under such new ground lease;
(ii) the Financier or such nominee or designee who is to act as
supplier under the new steam sale agreement and lessee under such
new ground lease must (a) cure all existing defaults of Cogen
under this Agreement and the Ground Lease Agreement that can be
cured and that would exist but for such rejection (including
without limitation paying all amounts owed by Cogen to BRC,
subject to the limitations of recovery set forth in
<PAGE> 62
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Article 10 of the Ground Lease Agreement), (b) have the
personnel, experience, equipment, and other resources reasonably
required to perform its obligations under the new steam sale
agreement and the new ground lease agreement, (c) be financially
capable based upon reasonable standards of performing its
obligations under the new steam sale agreement and the new ground
lease agreement, and (d) be in other respects reasonably
acceptable to BRC;
(iii) such new steam sale agreement and new ground lease agreement will
expressly provide that BRC will not be required to deliver actual
possession of the Demised Premises on the date of execution and
delivery thereof free of lessees, tenants, or other occupants;
(iv) such new steam sale agreement and new ground lease agreement will
expressly provide that with respect to all representations,
warranties, and covenants of BRC under the new steam sale
agreement and new ground lease agreement that refer to the "date
hereof" or "effective date of this Agreement" or words or phrases
or provisions of similar import, the same refer to the date of
this Agreement and the assignment of the Ground Lease Agreement,
respectively, and not the date of execution and delivery of such
new steam sale agreement and new ground lease agreement and it is
agreed that BRC will not be obligated to remove any liens placed
on
<PAGE> 63
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the Demised Premises or any other part of BRC's Property
subsequent to the date hereof;
(v) the last sentence of Section 8.2 of such new ground lease
agreement will expressly exclude Cogen, the Ground Lease
Agreement and persons claiming by, through or under Cogen or its
successors and assigns under the Ground Lease Agreement (and
actions or omissions of such persons) and claims and actions of
the same from the operation thereof; and
(vi) the Financier or such nominee or designee enters into both a new
steam sale agreement and a new ground lease agreement, unless
this Agreement has been previously terminated in accordance with
its terms other than in the event this Agreement is rejected
pursuant to Section 365 of the Bankruptcy Code of 1978, as
amended, or any successor provision thereto, in a case wherein
Cogen is the debtor.
G. So long as there exists a Financier, BRC and Cogen shall not,
without the prior written consent of the Financier (which consent shall not be
unreasonably delayed or withheld) enter into a written amendment of this
Agreement.
16.8 Status Certificates. Either Party from time to time at the
request of the other Party shall sign promptly a written certificate confirming
that this Agreement has been duly authorized, is valid, and does not conflict
with the articles of incorporation, by-laws, or partnership agreement of the
Party in question, and stating whether the Agreement is in full force and
<PAGE> 64
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effect; whether it has been modified or amended, and if so, the substance of
such modification or amendment; whether there have been any uncured breaches;
whether there are any offsets, counterclaims, or defenses to be asserted by
that Party against the other under this Agreement; and such other information
as may be reasonably requested.
ARTICLE 17
CHOICE OF LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey.
ARTICLE 18
RENEGOTIATION
Should any term or provision of this Agreement be found invalid by any
court or regulatory body having jurisdiction thereover, the Parties shall
immediately renegotiate in good faith such term or provision of the Agreement
to eliminate such invalidity, consistent with the intent of this Agreement.
ARTICLE 19
CONSENT NOT TO BE UNREASONABLY WITHHELD
Whenever either Party requests any consent, permission, or approval
which may be required or desired by that Party pursuant to the provisions of
this Agreement, the other Party shall not
<PAGE> 65
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unreasonably withhold or postpone the grant of such consent, permission, or
approval.
ARTICLE 20
OTHER AGREEMENTS
This Agreement and the Ground Lease Agreement supersede all prior oral
and written agreements and understandings of the Parties relating to the
subject matters hereof. This Agreement and the Ground Lease Agreement
constitute the entire agreement and understanding of the Parties relating to
the subject matters hereof.
ARTICLE 21
CAPTIONS
All indices, titles, subject headings, section titles, and similar
items are provided for the purpose of reference and convenience and are not
intended to be inclusive, definitive, or to control the meaning, content, or
scope of this Agreement.
ARTICLE 22
COUNTERPARTS
This Agreement may be executed in any number of counter parts, and
each executed counterpart shall have the same force and effect as an original
instrument.
<PAGE> 66
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be signed by their respective officers thereunto duly authorized as of the day
and year first set forth above.
ATTEST: COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
(d/b/a COGEN TECHNOLOGIES LINDEN VENTURE,
LIMITED PARTNERSHIP)
By: COGEN TECHNOLOGIES LINDEN, LTD.
(d/b/a COGEN TECHNOLOGIES LINDEN,
LIMITED PARTNERSHIP), ITS SOLE
GENERAL PARTNER
By: RCM HOLDINGS, INC.
ITS SOLE GENERAL PARTNER
By: /s/ ROSS D. AIN
-------------------------------------
Name: Ross D. Ain
-------------------------------
Title: Senior Vice President
------------------------------
ATTEST: BAYWAY REFINING COMPANY
By: /s/ DWIGHT L. WIGGINS
-------------------------------------
Name: Dwight L. Wiggins
-------------------------------
Title: President
------------------------------
<PAGE> 67
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EXHIBIT A
PART 1 - CALCULATION OF MONTHLY STEAM CHARGE
<TABLE>
<CAPTION>
Definitions
- -----------
<S> <C> <C>
F = Cogen's actual cost of fuel for the month in dollars
per million Btu, $/MMBtu. See Notes 1 and 2.
CPI(b) = Base Consumer Price Index for all Urban Consumers for
the New York-Northern New Jersey Area as computed by
the United States Department of Labor, Bureau of Labor
Statistics ("CPI"), for the month of May, 1992.
CPI(c) = Current (latest available monthly) CPI (or if such
index shall no longer be published, such other index
as the Parties shall reasonably determine to be most
nearly comparable to such index for the New York-
Northern New Jersey Area).
H = Hours in the month, Hr.
PS(1) = Price of first increment of steam, $/K lb.
PS(2) = Price of remaining steam, $/K lb.
DLP = Low-pressure (140 psig) steam discount, $/K lb.
S = Total monthly steam take, K lb.
S(1) = Total monthly steam take at price PS1, K lb.
S(2) = Total monthly steam take at price PS2, K lb.
SLP = Total monthly take of low-pressure (140 psig) steam,
K lb.
MS = Monthly steam charge, $.
</TABLE>
<TABLE>
<CAPTION>
Formulas
- --------
<S> <C> <C> <C>
PS(1) = 0.88F + 0.45 (CPI(c)/CPI(b)) (1)
PS(2) = 0.95F + 0.45 (CPI(c)/CPI(b)) (2)
DLP = 0.22F - 0.13 (3)
S(1) = S or (123 x H), whichever is less (4)
S(2) = S - S(1) (5)
MS = (S(1) x PS(1)) + (S(2) x PS(2)) - (SLP x DLP) (6)
</TABLE>
<PAGE> 68
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PART 2 - CALCULATION OF ANNUAL STEAM ADJUSTMENT
<TABLE>
<CAPTION>
Definitions
- -----------
<S> <C> <C>
F = Cogen's actual cost of fuel for the month in dollars
per million Btu, $/MMBtu. See Notes 1 and 2.
H = Hours in the month, Hr.
S = Total monthly steam take, K lb.
[DELTA]S = Difference between total monthly steam take (S) and
allowable steam take at first increment pricing (123
K lb./Hr. x H), K lb.
[sum][DELTA]S(p) = Sum of all positive [DELTA]S's for entire Annual
Period, K lb.
[sum][DELTA]S(n) = Absolute value of the sum of all negative [DELTA]S's
for entire Annual Period, K lb.
SAQ = Quantity of steam eligible for Annual Period
adjustment, K lb.
FAVG = Average of all monthly fuel costs (F) for the entire
Annual Period, $/MMBtu.
ASA = Annual Period steam adjustment, $.
</TABLE>
<TABLE>
<CAPTION>
Formulas
- --------
<S> <C> <C>
[DELTA]S = S - (123 x H) for each month in Annual Period (1)
SAQ = [sum][DELTA]S(n), if [sum][DELTA]S(p) greater than
or equal to [sum][DELTA]S(n) (2A)
SAQ = [sum][DELTA]S(p), if [sum][DELTA]S(p) greater than
or equal to [sum][DELTA]S(n) (2B)
ASA = 0.07 x FAVG x SAQ (3)
</TABLE>
<PAGE> 69
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NOTES TO EXHIBIT A
Note 1 Fuel cost will be Cogen's actual cost for fuel (as supported by
invoices) equal to the sum of all costs incurred in such month by Cogen with
respect to fuel acquired for use in the Cogeneration Facility (including fuel
commodity, transportation, and storage costs and any costs related thereto),
but such fuel cost shall not be greater than 105 percent of the Weighted
Average Cost of Gas.
Note 2 All steam volumes used in the formulas above shall equal the total
delivery to BRC of Steam as measured at Cogen's meters at the Points of
Delivery minus the volume of Steam reported by BRC as delivered to Exxon.
<PAGE> 70
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EXHIBIT B
DESCRIPTION OF POINTS OF DELIVERY OF STEAM
<PAGE> 71
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EXHIBIT C
PRO FORMA MONTHLY INVOICE
<PAGE> 72
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EXHIBIT D
EXISTING PROCESS STEAM SOURCES AT THE BAYWAY REFINERY
<TABLE>
<CAPTION>
Unit Description Typical K lbs./hr. Max. K lbs./hr.
- ---- ----------- ------------------ ---------------
<S> <C> <C> <C>
700 psig Steam
- --------------
FCBW CO Boiler #1 200 325
FCBW CO Boiler #2 170 300
150 psig Steam
- --------------
7 P/S D-753 Steam Drum for E-758 A-B-C
and E-759 A-B 40 105
DSU-2 D-405 Steam Drum for E-401 A-B-C-D
and F-401 29 50
FCBW D-3 COB #1 Blowdown Drum 15 25
FCBW D-22 Steam Drum for E-22 A-B-C-D 75 125
FCBW D-102 COB #2 Blowdown Drum 15 25
FCBW E-601 Steam Gen'r Downstream COB #1 50 90
SRU-A B-1A Waste Heat Boiler 10 18
SRU-B B-1B Waste Heat Boiler 10 18
SRU-C E-101 Waste Heat Boiler 28 40
TGCU E-301 Waste Heat Boiler 3 12
50 psig Steam
- -------------
SRU-A B-2A Sulfur Condenser 3 8
SRU-B B-2B Sulfur Condenser 3 8
SRU-C E-103 2nd Sulfur Condenser 4 8
SRU-C E-104 3rd Sulfur Condenser 3 8
20 psig Steam
- -------------
FCBW D-8 COB Blowdown Drum 20 40
FCBW D-20 Steam Drum for E-20 A-B-C-D 21 40
</TABLE>
<PAGE> 73
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NOTE TO EXHIBIT D
BRC may repair, maintain, modify or replace the sources listed above and such
sources shall still be considered BRC's internal sources for purposes of this
Agreement, provided that the maximum steam production figures listed above for
each source shall define the maximum amounts of steam which BRC may take from
these Exhibit D sources for purposes of determining BRC's External Steam
Requirements under Article 3.1B.
<PAGE> 74
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EXHIBIT E
EXAMPLE OF PRO RATA ALLOCATION OF STEAM
Assume BRC sells any portion of the Bayway Refinery and twenty-four (24) months
prior to the date of such sale the average Steam supply provided by Cogen was
as follows:
<TABLE>
<CAPTION>
High Pressure Low Pressure
Total K lbs./yr Level K lbs./yr Level K lbs./yr
--------------- --------------- ----------------
<S> <C> <C> <C>
Portion of Bayway
Refinery retained
by BRC 2,274,880 1,785,680 489,200
Portion of Bayway
Refinery sold 2,000,000 1,000,000 1,000,000
--------- --------- ---------
Total 4,274,880 2,785,680 1,489,200
</TABLE>
o Pro Rata allocation of steam rights and obligations to new owner of
portion of Bayway Refinery:
<TABLE>
<S> <C> <C>
Portion Sold to New Owner = 2,000,000 = .468
------------------------- ---------
Total 4,274,880
</TABLE>
o Pro Rata allocation of BRC's continuing rights and obligations under
Agreement:
<TABLE>
<S> <C> <C>
Portion Retained by BRC = 2,274,880 = .532
------------------------- ---------
Total 4,274,880
</TABLE>
o Pro Rata allocation of high pressure level steam rights and
obligations to new owner:
<TABLE>
<S> <C> <C>
Portion Sold to New Owner = 1,000,000 = .359
------------------------- ---------
Total 2,785,680
</TABLE>
o Pro Rata allocation of BRC's continuing rights and obligations to high
pressure level steam under Agreement:
<TABLE>
<S> <C> <C>
Portion Retained by BRC = 1,785,680 = .641
------------------------- ---------
Total 2,785,680
</TABLE>
o Pro Rata allocation of low pressure level steam rights and obligations
to new owner:
<PAGE> 75
-69-
<TABLE>
<S> <C> <C>
Portion Sold to New Owner = 1,000,000 = .672
------------------------- ---------
Total 1,489,200
</TABLE>
o Pro Rata allocation of BRC's continuing rights and obligations to low
pressure level steam under Agreement:
<TABLE>
<S> <C> <C>
Portion Retained by BRC = 489,200 = .328
----------------------- ---------
Total 1,489,200
</TABLE>
o Pro Rata allocation results:
<TABLE>
<CAPTION>
Allocation Allocation
Total To New Owner To BRC
----- ------------ ----------
<S> <C> <C> <C>
Article 3.1A
- ------------
Max Supply
Oct. - May 819 K lbs./hr 383 K lbs./hr 436 K lbs./hr
Max Supply
June - Sept. 491 K lbs./hr 230 K lbs./hr 261 K lbs./hr
Max Upset/Emerg.
Supply
June - Sept. 819 K lbs./hr 383 K lbs./hr 436 K lbs./hr
Article 3.1B
- ------------
Annual External
Steam Reqmts. 717,444 K lbs. 348,385 K lbs. 369,059 K lbs.
Article 3.1D
- ------------
Max Rate
Oct. - May 573 K lbs./hr 269 K lbs./hr 304 K lbs./hr
Max Rate
June - Sept. 328 K lbs./hr 153 K lbs./hr 175 K lbs./hr
Article 3.1E
- ------------
External Steam
Reqmts. for 6
month period 358,722 K lbs. 167,882 K lbs. 190,840 K lbs
Reduced Steam
Obligation 655 K lbs./hr 307 K lbs./hr 348 K lbs./hr
Max Sale to
other Customers 164 K lbs./hr 77 K lbs./hr 87 K lbs./hr
Article 3.4
- ------------
High Pressure
Level Steam 581 K lbs./hr 208 K lbs./hr 373 K lbs./hr
Low Pressure
Level Steam 374 K lbs./hr 252 K lbs./hr 122 K lbs./hr
Article 11.2D
- ------------
Annual Steam
Reqs. 258,280 K lbs 120,875 K lbs 137,405 K lbs
Exhibit A
- ------------
Number "123" 123 57 66
</TABLE>
<PAGE> 76
-70-
EXHIBIT F
PORTIONS OF THE BAYWAY REFINERY
NOT SUBJECT TO PRO RATA ALLOCATION
<PAGE> 77
-71-
EXHIBIT G-1
ASSUMPTION AGREEMENT
[Date]
_______________, a _____________ corporation (the "Assignee"),
hereby declares, covenants, agrees and binds itself as follows:
(1) Except as otherwise set forth herein, capitalized terms
used herein are used with the meanings given to them in the Ground
Lease Agreement, dated as of August 1, 1990, between, Exxon
Corporation, a New Jersey corporation, and Cogen Technologies Linden
Venture, L.P., doing business in New Jersey as Cogen Technologies
Linden Venture, Limited Partnership, a Delaware limited partnership,
as amended to the date hereof and assigned by Exxon Corporation to
Bayway Refining Company, a Delaware corporation ("BRC") by an
assignment agreement dated as of April 8, 1993 and effective as of
April 8, 1993 (the "Ground Lease Agreement").
(2) The Assignee hereby (a) assumes and agrees to pay and
perform each and every duty and obligation of Cogen hereafter accruing
under the Ground Lease Agreement and the Steam Sale Agreement between
Cogen and BRC dated April 8, 1993 (the "Steam Sale Agreement"), (b)
agrees from and after the date hereof to comply with and be bound by
the terms and provisions of the Ground Lease Agreement and the Steam
Sale Agreement applicable to Cogen, (c) confirms that from and after
the date hereof it shall be deemed "Cogen" for the purposes of the
Ground Lease Agreement and the Steam Sale Agreement, and (d) agrees to
cure as soon as reasonably practicable (which, in the case of payments
due by Cogen to BRC, shall be deemed to require immediate payment by
the Assignee) all defaults of Cogen under the Ground Lease Agreement
and the Steam Sale Agreement.
(3) The Assignee hereby represents that:
(a) it is a corporation duly organized existing in good
standing under the laws of the State of __________; and
(b) it possesses all requisite power and authority to
enter into and perform this Agreement, the Ground Lease Agreement and
the Steam Sale Agreement and to carry out the transactions
contemplated herein and therein.
(4) All notices and other communications hereunder shall be
in writing (including telecopier, telegraphic, telex or cable
communication) and mailed, telecopied,
<PAGE> 78
-72-
telegraphed, telexed, cabled or delivered if to, Bayway Refining
Company, at its address at 1400 Park Avenue, Linden, New Jersey 07036,
Attention: _______________, Telecopy No.: _____________; and if to the
Assignee, at its address at ____________________, Attention:
_______________, Telecopy No.: _____________; or, as to each such
person, at such other address as shall be designated by such person in
a written notice to such other person. All such notices and
communications shall be effective within five days (excluding
Saturdays, Sundays or legal holidays in the State of New Jersey) of
mailing, when mailed to the address specified above, postage prepaid,
and upon receipt of an answer back or confirmation, when sent by
telecopy, telegraph, telex or cable.
(5) This Agreement shall be binding upon the Assignee, its
successors and assigns.
(6) This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the Assignee has caused this Agreement to
be executed as of date first above written.
[NAME OF ASSIGNEE]
By
-------------------------
Title:
Consented and Agreed by:
BAYWAY REFINING COMPANY
By
-----------------------
Title:
<PAGE> 79
-73-
EXHIBIT G-2
ASSUMPTION AGREEMENT
[Date]
_________________, a _________________ corporation (the
"Assignee"), hereby declares, covenants, agrees and binds itself as follows:
(1) Except as otherwise set forth herein, capitalized terms
used herein are used with the meanings given them in the Ground Lease
Agreement, dated as of August 1, 1990, between Exxon Corporation, a
New Jersey corporation, and Cogen Technologies Linden Venture, L.P.,
doing business in New Jersey as Cogen Technologies Linden Venture,
Limited Partnership, a Delaware limited partnership, as amended to the
date hereof and assigned by Exxon Corporation to Bayway Refining
Company, a Delaware corporation ("BRC") by an assignment agreement
dated as of April 8, 1993 and effective as of April 8, 1993 (the
"Ground Lease Agreement").
(2) The Assignee hereby (a) assumes and agrees to pay and
perform each and every duty and obligation of Cogen hereafter accruing
under the Ground Lease Agreement and the Steam Sale Agreement between
Cogen and BRC dated April 8, 1993 (the "Steam Sale Agreement"), (b)
agrees from and after the date hereof to comply with and be bound by
the terms and provisions of the Ground Lease Agreement and the Steam
Sale Agreement applicable to Cogen, (c) confirms that from and after
the date hereof it shall be deemed "Cogen" for the purposes of the
Ground Lease Agreement and the Steam Sale Agreement, and (d) agrees to
cure as soon as reasonably practicable (which, in the case of payments
due by Cogen to BRC, shall be deemed to require immediate payment by
the Assignee) all defaults of Cogen under the Ground Lease Agreement
and the Steam Sale Agreement of which BRC has previously given written
notice to the Financier in accordance with Section 20.4C of the Ground
Lease Agreement (including, without limitation, making all payments
due by Cogen to BRC of which such notice has been given, subject to
Article 10 of the Ground Lease Agreement).
(3) The Assignee hereby represents that:
(a) it is a corporation duly organized existing in good
standing under the laws of the State of __________; and
(b) it possesses all requisite power and authority to
enter into and perform this Agreement, the
<PAGE> 80
-74-
Ground Lease Agreement and the Steam Sale Agreement and to carry out
the transactions contemplated herein and therein.
(4) All notices and other communications hereunder shall be
in writing (including telecopier, telegraphic, telex or cable
communication) and mailed, telecopied, telegraphed, telexed, cabled or
delivered if to, Bayway Refining Company, at its address at 1400 Park
Avenue, Linden, New Jersey 07036, Attention: _______________, Telecopy
No.: _____________; and if to the Assignee, at its address at
____________________, Attention: _______________, Telecopy No.:
_____________; or, as to each such person, at such other address as
shall be designated by such person in a written notice to such other
person. All such notices and communications shall be effective within
five days (excluding Saturdays, Sundays or legal holidays in the State
of New Jersey) of mailing, when mailed to the address specified above,
postage prepaid, and upon receipt of an answerback or confirmation,
when sent by telecopy, telegraph, telex or cable.
(5) This Agreement shall be binding upon the Assignee, its
successors and assigns.
(6) This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the Assignee has caused this Agreement to
be executed as of date first above written.
[NAME OF ASSIGNEE]
By
-------------------------
Title:
Consented and Agreed by:
BAYWAY REFINING COMPANY
By
-----------------------
Title:
<PAGE> 81
-75-
EXHIBIT G-3
ASSUMPTION AGREEMENT
[Date]
_________________, a _________________ corporation (the
"Assignee"), hereby declares, covenants, agrees and binds itself as follows:
(1) Except as otherwise set forth herein, capitalized terms
used herein are used with the meanings given them in the Ground Lease
Agreement, dated as of August 1, 1990, between Exxon Corporation, a
New Jersey corporation, and Cogen Technologies Linden Venture, L.P.,
doing business in New Jersey as Cogen Technologies Linden Venture,
Limited Partnership, a Delaware limited partnership, as amended to the
date hereof and assigned by Exxon Corporation to Bayway Refining
Company, a Delaware corporation ("BRC") by an assignment agreement
dated as of April 8, 1993 and effective as of April 8, 1993 (the
"Ground Lease Agreement").
(2) The Assignee hereby (a) assumes and agrees to pay and
perform each and every duty and obligation of Cogen hereafter accruing
under the Ground Lease Agreement and the Steam Sale Agreement between
Cogen and BRC dated April 8, 1993 (the "Steam Sale Agreement"), (b)
agrees from and after the date hereof to comply with and be bound by
the terms and provisions of the Ground Lease Agreement and the Steam
Sale Agreement applicable to Cogen, (c) confirms that from and after
the date hereof it shall be deemed "Cogen" for the purposes of the
Ground Lease Agreement and the Steam Sale Agreement; provided that:
(i) the Assignee shall have the right to deliver a notice
of termination of the Ground Lease Agreement and the Steam
Sale Agreement to BRC on or before the 90th day after the
date hereof and, in the event such a notice is timely
received by BRC, the Ground Lease Agreement and the Steam
Sale Agreement shall terminate on the 30th day after such
notice is received by BRC; provided, however, that the
obligations of the Assignee in the Ground Lease Agreement and
the Steam Sale Agreement in respect of any action, inaction,
event or circumstance occurring prior to the date of
termination of such agreements shall survive such termination
(subject to Article 10 of the Ground Lease Agreement and
Section (2)(iii) hereof);
(ii) by executing this Agreement, the Assignee agrees to
cure as soon as reasonably practicable (which, in the case of
payments due by Cogen to BRC,
<PAGE> 82
-76-
shall be deemed to require immediate payment by Assignee) all
defaults of Cogen under the Ground Lease Agreement and the
Steam Sale Agreement of which BRC has previously given
written notice to the Financier in accordance with Section
20.4C of the Ground Lease Agreement (including, without
limitation, making all payments due by Cogen to BRC of which
such notice has been given, subject to Article 10 of the
Ground Lease Agreement and Section (2)(iii) hereof);
(iii) if the Assignee shall exercise the right to
terminate the Ground Lease Agreement and the Steam Sale
Agreement pursuant to Section (2)(i) hereof, the aggregate
liability of the Assignee to BRC in respect of its
obligations hereunder and under the Ground Lease Agreement
and the Steam Sale Agreement, whether arising pursuant to the
provisions of such agreements or by operation of law, as to
all matters provided for in such agreements, together with
the aggregate of all amounts paid pursuant to all letters of
credit issued as contemplated in Section 10.8 of the Ground
Lease Agreement, shall not in any event exceed $10,000,000 in
respect of any action, inaction, event or circumstance
occurring prior to the date of termination of the Ground
Lease Agreement and the Steam Sale Agreement; and
(iv) it is expressly acknowledged and agreed that BRC
shall retain all of its rights under the Ground Lease
Agreement and the Steam Sale Agreement, including without
limitation, the right to terminate either such agreement as
provided by the terms thereof, including, without limitation,
the right to terminate either such agreement in respect of an
uncured payment default thereunder even if the Assignee has
paid to BRC an aggregate of $10,000,000 or more.
(3) The Assignee hereby represents that:
(a) it is a corporation duly organized existing in good
standing under the laws of the State of __________; and
(b) it possesses all requisite power and authority to
enter into and perform this Agreement, the Ground Lease Agreement and
the Steam Sale Agreement and to carry out the transactions
contemplated herein and therein.
(4) All notices and other communications provided for herein
shall be in writing (including telecopier, telegraphic, telex or cable
communication) and mailed, telecopied, telegraphed, telexed, cabled or
delivered if to, Bayway Refining Company, at its address at 1400 Park
Avenue,
<PAGE> 83
-77-
Linden, New Jersey 07036, Attention: _______________,
Telecopy No.: _____________; and if to the Assignee, at its
address at ____________________, Attention: _______________,
Telecopy No.: _____________; or, as to each such person, at
such other address as shall be designated by such person in
a written notice to such other person. All such notices and
communications shall be effective within five days
(excluding Saturdays, Sundays or legal holidays in the State
of New Jersey) of mailing, when mailed to the address
specified above, postage prepaid, and upon receipt of an
answerback or confirmation, when sent by telecopy,
telegraph, telex or cable.
(5) This Agreement shall be binding upon the Assignee, its
successors and assigns.
(6) This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the Assignee has caused this Agreement to
be executed as of date first above written.
[NAME OF ASSIGNEE]
By
-------------------------
Title:
Consented and Agreed by:
BAYWAY REFINING COMPANY
By
-----------------------
Title:
<PAGE> 84
-78-
EXHIBIT H
RECOGNITION AGREEMENT
<PAGE> 85
-79-
EXHIBIT I
CONSENT TO ASSIGNMENT
CONSENT TO ASSIGNMENT, dated as of ________ __, ____, by Bayway
Refining Company, a Delaware corporation ("BRC"), in favor of
__________________ (the "Lender"), under that certain
_____________________________, dated as of ________ __, ____ (the "Loan
Agreement"), among Cogen Technologies Linden Venture, L.P., doing business in
New Jersey as Cogen Technologies Linden Venture, Limited Partnership, a
Delaware limited partnership ("Cogen"), and the Lender.
WHEREAS, BRC has been informed that pursuant to the Loan Agreement,
the Lender has agreed to make certain loans to Cogen to refinance the loans
made to Cogen for the construction of the Cogeneration Facility (as hereinafter
defined); and
WHEREAS, the term "Financier" in the Steam Sale Agreement (as
hereinafter defined) includes any person providing funds for the refinancing or
taking out of any loans made to Cogen for the construction of the Cogeneration
Facility and the nominees or designees of any such persons; and
WHEREAS, BRC has been informed that Cogen has assigned to the Lender
Cogen's rights, title and interest in the Steam Sale Agreement as collateral
security for, among other things, Cogen's obligations under the Loan Agreement;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt of which is acknowledged, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01. Defined Terms. Unless the context shall otherwise require and
except as otherwise specified herein, capitalized terms used herein shall have
the meanings assigned to them in the Agreement, dated as of April 8, 1993,
between Cogen and BRC for the sale of steam (the "Steam Sale Agreement")
attached as Schedule A hereto.
<PAGE> 86
-80-
ARTICLE II
CONSENT TO ASSIGNMENT
2.01. Consents. BRC hereby consents to (A) the assignment by Cogen to
the Lender of Cogen's right, title and interest in the Steam Sale Agreement,
which is attached hereto as Schedule A and made a part hereof (the right, title
and interest of Cogen in the Steam Sale Agreement being hereinafter referred to
as the "Assigned Rights") as collateral security, and (B) agrees that the
Lender is the Financier recognized by BRC for purposes of the Steam Sale
Agreement and as such, shall have all of the rights of a Financier under the
Steam Sale Agreement until such time as BRC is notified pursuant to the Steam
Sale Agreement that the Lender is no longer to be the Financier recognized by
BRC thereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01. Assurance. BRC agrees and confirms to the Lender, as security
assignee of the Assigned Rights, that on the date hereof, the Steam Sale
Agreement has not been terminated or modified in contravention of Section 16.7G
thereof.
3.02. Representations and Warranties. BRC repeats and reaffirms for
the benefit of the Lender as security assignee of the Assigned Rights the
representations and warranties made in Section 9.1 of the Steam Sale Agreement.
<PAGE> 87
-81-
ARTICLE IV
MISCELLANEOUS
4.01. Severability. If any provision of this Consent to Assignment
shall be held to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
4.02. Governing Law. This Consent to Assignment shall be governed by
and construed in accordance with the laws of the State of New Jersey.
4.03. Headings. The headings hereof are for convenience only and are
not intended to affect the meaning of interpretation of this Consent to
Assignment.
4.04. Successors and Assigns. This Consent to Assignment shall be
binding upon, inure to the benefit of, and be enforceable by, BRC and the
Lender and their respective successors and assigns.
IN WITNESS WHEREOF, the undersigned has caused this Consent to
Assignment to be duly executed by its officer thereunto duly authorized as of
the day and year first above written.
BAYWAY REFINING COMPANY
By:
-------------------------------
Title:
----------------------------
Address: 1400 Park Avenue
Linden, New Jersey 07036
Attention:
Telecopy:
<PAGE> 88
-82-
SCHEDULE A TO CONSENT TO ASSIGNMENT
[Copy of Steam Sale Agreement]
<PAGE> 1
EXHIBIT 10.15(b)
EXXON COMPANY, U.S.A.
POST OFFICE BOX 2180 - HOUSTON, TEXAS 77252-2180
REFINING DEPARTMENT
LETTER AGREEMENT
September 27, 1991
Cogen Technologies Linden Venture, L.P.
c/o Cogen Technologies, Inc.
1600 Smith Building
Suite 5000 - 50th Floor
Houston, Texas 77002
Attention: Robert C. McNair
President
Gentlemen:
We refer to (i) the Ground Lease Agreement (the "Ground Lease
Agreement") and (ii) the Agreement for the Sale of Steam (the "Steam Sale
Agreement"), each dated August 1, 1990, and each between Exxon Corporation, a
New Jersey corporation ("Exxon"), and Cogen Technologies Linden Venture, L.P.,
a Delaware limited partnership ("you" or "Cogen"). Unless otherwise defined
herein, the terms defined in the Ground Lease Agreement shall be used herein as
therein defined.
General Electric Power Funding Corporation, a Delaware
corporation ("GEPFC"), has represented that it is in the process of syndicating
its commitment to provide financing for the construction of the Cogeneration
Facility and that to facilitate such syndication it has requested this letter
agreement with respect to the Ground Lease Agreement and the Steam Sale
Agreement. On the terms and conditions set forth herein, Exxon is willing to
accommodate GEPFC's request.
GEPFC has also represented that it is affiliated with that
certain trust (the "Owner Trust") established by the Linden Owner Partnership,
a Delaware general partnership (the "Owner Partnership"), pursuant to the Trust
Agreement
<PAGE> 2
2
dated as of December 28, 1990 between the Owner Partnership and State Street
Bank and Trust Company of Connecticut, National Association and that certain
financing for the Cogeneration Facility will be provided by a group of banks
whose agent (the "Lenders' Agent") is the Union Bank of Switzerland, New York
Branch. GEPFC has further represented that the Owner Trust is the designated
Affiliate of GEPFC referred to in the definition of "Financier" in the Ground
Lease Agreement and the Steam Sale Agreement and should be recognized by Exxon
as the Financier under such agreements and that the Owner Trust intends to
designate the Lenders' Agent as its designee to be recognized by Exxon as the
Financier under such agreements.
Effective as of the date first above written, the Ground Lease
Agreement and the Steam Sale Agreement are amended so that:
(a) Exhibit I to the Steam Sale Agreement shall read as set
forth in Exhibit I hereto; and
(b) Exhibit J to the Ground Lease Agreement shall read as set
forth in Exhibit J hereto.
With reference to Section 16.4.B of the Ground Lease Agreement,
Exxon hereby agrees that, while the Owner Trust is recognized by Exxon as the
Financier and subsequently while the Lenders' Agent is recognized by Exxon as
the Financier, in each case under the Ground Lease Agreement, in the event
Cogen defaults pursuant to the terms of the first sentence of Section 10.4 to
the Ground Lease Agreement, Exxon will not terminate the Ground Lease if the
Financier, within sixty days after receiving notice of such default, pays to
Exxon the sums provided for in such first sentence of Section 10.4 and takes
appropriate steps to foreclose upon or otherwise obtain title to or possession
of the Cogeneration Facility or designates a new managing general partner of
Cogen; provided that such new managing general partner is not affiliated with
Cogen Technologies, Inc. and has the personnel, experience, equipment and other
resources reasonably required to perform its obligations under the Ground Lease
Agreement and the Steam Sale Agreement and is in other respects reasonably
acceptable to Exxon; and provided that to the extent the Financier has used and
continues to use its best efforts to accomplish such designation as soon as
reasonably practicable, at the request of the Financier, the sixty day period
for the designation of a new managing general partner shall be extended for a
period of up to one year from the date the Financier received the notice of
such default specified above.
<PAGE> 3
3
On and after the effective date of this letter agreement, each
reference in the Ground Lease Agreement and the Steam Sale Agreement,
respectively, to "this Agreement", "hereunder", "hereof" or words of like
import referring to such agreement, shall mean and be a reference to such
agreement as amended by this letter agreement. Each of the Ground Lease
Agreement and the Steam Sale Agreement, as amended by this letter agreement, is
and shall continue to be in full force and effect and is hereby in all respects
ratified and confirmed. This letter agreement is effective only for the
specific purpose given as set forth above.
If you agree to the terms and provisions hereof, please
evidence such agreement by executing and returning at least two counterparts of
this letter agreement to Exxon Company, U.S.A., P. 0. Box 2180, Houston, Texas
77001, Attention of Mr. Joe R. Lewis. This letter agreement shall become
effective as of the date first above written when and if a counterpart of this
letter agreement shall have been executed by you. This letter agreement is
subject to the provisions of Section 24.1 of the Ground Lease Agreement and
Article 15 of the Steam Sale Agreement.
This letter agreement may be executed in any number of
counterparts and by any combination of the parties hereto in separate
counterparts, each of which counterparts shall be an original and all of which
taken together shall constitute one and the same letter agreement.
[INTENTIONALLY LEFT BLANK]
<PAGE> 4
4
THIS LETTER AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY.
Very truly yours,
EXXON CORPORATION
By /s/ [ILLEGIBLE]
---------------------------------
Title: Technical Manager
Agreed as of the date
first above written:
COGEN TECHNOLOGIES
LINDEN VENTURE, L.P.
By: Cogen Technologies Linden, Ltd.
its general partner
By: Cogen Technologies, Inc.
its general partner
By /s/ [ILLEGIBLE]
--------------------------
Title: Vice President
Consented as of the date
first above written:
GENERAL ELECTRIC POWER
FUNDING CORPORATION, as
Agent under that certain
Construction Loan Agreement,
dated as of February 15, 1990
among Cogen Technologies Linden
Venture, L.P. and the lenders
parties thereto
By /s/ [ILLEGIBLE]
--------------------------
Title: President
<PAGE> 1
EXHIBIT 10.15(c)
AMENDMENT TO GROUND LEASE AGREEMENT
This Amendment to Ground Lease Agreement (this "Lease Amendment") is made
and entered into on the 31st day of July, 1992, by and between Exxon
Corporation, a New Jersey corporation ("Exxon"), and Cogen Technologies Linden
Venture, L.P., doing business in New Jersey as Cogen Technologies Linden
Venture, Limited Partnership, a Delaware limited partnership ("Cogen").
W I T N E S S E T H:
WHEREAS, Exxon and Cogen entered into that certain Ground Lease Agreement
dated effective August 1, 1990 (the "Lease") relating to the Demised Premises
(as defined in the Lease), comprised of two certain tracts or parcels of land
situated in the City of Linden, Union County, New Jersey as more fully
described on Exhibit B to the Lease; and
WHEREAS, the Demised Premises included that certain 1.1605 acre tract or
parcel of land described on Exhibit B to the Lease as Tract II; and
WHEREAS, the Lease at time of execution contemplated redefining the
precise boundaries of Tract II in order to facilitate the placement of certain
water tanks that are part of the Cogeneration Facility; and
WHEREAS, Exxon and Cogen desire to evidence their agreement to amend the
Lease by redefining the description of Tract II on Exhibit B to the Lease;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, Exxon and Cogen agree that the Lease is amended as follows:
<PAGE> 2
The description of Tract II in Exhibit B to the Lease is
hereby replaced by the description of Tract II found in
Exhibit A attached hereto and made a part hereof for all
purposes.
As amended by this Lease Amendment, the Lease is ratified and confirmed
to be in full force and effect.
EXECUTED in multiple original counterparts as of the 31st day of July,
1992.
ATTESTED BY: EXXON CORPORATION
/s/ J. T. CRAWFORD
- -----------------------------------
Name: J. T. CRAWFORD By: /s/ R. W. UPCHURCH, JR.
----------------------------- -----------------------------------
Assistant Secretary Name: R. W. Upchurch, Jr.
Title: Vice President of
Exxon Company, U.S.A.,
a Division of
Exxon Corporation
COGEN TECHNOLOGIES LINDEN
VENTURE, L.P. d/b/a COGEN
TECHNOLOGIES LINDEN VENTURE,
LIMITED PARTNERSHIP
By: COGEN TECHNOLOGIES LINDEN
LTD. (D/B/A COGEN
TECHNOLOGIES LINDEN,
LIMITED PARTNERSHIP)
GENERAL PARTNER
ATTESTED BY: By: COGEN TECHNOLOGIES, INC.
GENERAL PARTNER
/s/ MARY ANN MCLENDON
- ----------------------------------- By: /s/ J. M. BOLLINGER
Title: Assistant Secretary ----------------------------------
----------------------------- Name: J. M. Bollinger
---------------------------------
Title: Sr. V. P.
--------------------------------
<PAGE> 3
EXHIBIT A
TRACT II
BEING A PARCEL OF LAND SITUATED IN THE CITY OF LINDEN, UNION COUNTY, NEW
JERSEY, BEING A PORTION OF TAX LOT 6, BLOCK 520 AS SHOWN ON THE CURRENT CITY OF
LINDEN TAX MAP AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING at the terminus of the 20th course of Tract I as described
above and running; thence the following two (2) courses to the True Point and
Place of Beginning:
(A) Along said 20th course as recited above in reverse, North forty-eight
degrees, four minutes, fifty seconds West (N 48 degrees 04' 50" W),
eighty-three and fifty-five hundredths (83.55') feet to a point in the
same; thence
(B) Leaving the aforementioned 20th course, at right angles, crossing Railroad
Avenue, North forty-one degrees, fifty-five minutes, ten seconds East (N 41
degrees 55' 10" E), four hundred forty and sixty-three hundredths (440.63')
feet to the true point and Place of Beginning, and running thence along a
new line the following five (5) courses through the said Tax Lot 6, Block
520.
1. North forty-one degrees, fifty-five minutes, ten seconds East (N 41
degrees 55' 10" E), one hundred sixty-two and zero hundredths
(123.00') feet to an angle point in same; thence
2. South forty-eight degrees, four minutes, fifty seconds East (S 48
degrees 04' 50" E), one hundred twenty-three and zero hundredths
(162.00') feet to an angle point in same; thence
3. South eighteen degrees, thirty-one minutes, thirty-six and seven
hundredths seconds East (S 18 degrees 31' 36.7" E), one hundred
eleven and 5078 ten-thousandths (111.5078') feet to an angle point in
same; thence
4. South forty-one degrees, fifty-five minutes, ten seconds West (S 41
degrees 55' 10" W), one hundred seven and zero hundredths (107.00')
feet to an angle point in same; thence
5. North forth-eight degrees, four minutes, fifty seconds West (N 48
degrees 04' 50" W), two hundred twenty and zero hundredths (220.00')
feet to the Point and Place of Beginning.
CONTAINING: 0.7569 Acs.
ALL IN ACCORDANCE with "Linden Cogeneration Plant, Block 520, Lot 6,
Existing Conditions and Survey of Proposed Lease Line, City of Linden, Union
County, New Jersey". Sheet 1 of 1 as prepared by Keller & Kirkpatrick,
Parsippany, New Jersey, dated October 24, 1989, revised to July 1, 1992.
<PAGE> 4
ACKNOWLEDGMENT
STATE OF TEXAS :
: ss.
COUNTY OF HARRIS :
BE IT REMEMBERED, That on this 31st day of July, 1992, before me, the
subscriber, a notary public, personally appeared J.E. Crawford, who being by me
duly sworn on his oath, deposed and made proof to my satisfaction that he is an
Assistant Secretary of Exxon Corporation, the Corporation named in the within
instrument; that R.W. Upchurch, Jr. is Vice President of Exxon Company, U.S.A.,
a division of Exxon Corporation; that the execution, as well as the making of
this instrument, has been duly authorized pursuant to a resolution of the Board
of Directors of Exxon Corporation; that the deponent well knows the corporate
seal of Exxon Corporation; and that the seal affixed to said instrument is the
proper corporate seal and was thereto affixed and said instrument signed and
delivered by R.W. Upchurch, Jr., as and for the voluntary act and deed of Exxon
Corporation, in presence of deponent, who thereupon subscribed his name thereto
as attesting witness.
Given under my hand and seal of office this 31st day of July, 1992.
/s/ VIRGINIA G. BASS
---------------------------------
Notary Public in and for
Harris County, Texas
Commission expires: 3-12-96
---------
[SEAL]
<PAGE> 5
ACKNOWLEDGMENT
STATE OF TEXAS :
: ss.
COUNTY OF HARRIS :
BE IT REMEMBERED, that on this 31st day of July, 1992, before me, the
subscriber, a notary public, personally appeared J. M. BOLLINGER who is the
Senior Vice President of Cogen Technologies, Inc., General Partner of Cogen
Technologies Linden, Ltd., (D/B/A Cogen Technologies Linden, Limited
Partnership), which is the General Partner of Cogen Technologies Linden Venture,
L.P. (D/B/A Cogen Technologies Linden Venture, Limited Partnership), a Delaware
limited partnership, who I am satisfied is the person who signed this
instrument, and he acknowledged that he signed, sealed with the corporate seal,
and delivered the same as such officer aforesaid, and that this instrument is
the voluntary act and deed of such corporation, on behalf of Cogen Technologies
Linden Venture, L.P.
Given under my hand and seal of office this 31st day of July, 1992.
[SEAL] /s/ ELAINE A. CAMPBELL
-----------------------------------
Notary Public of and for
Harris County, Texas
My Commission expires: 7-27-93
---------
<PAGE> 1
EXHIBIT 10.15(d)
ASSIGNMENT OF COGEN LEASE
THIS ASSIGNMENT OF LEASES (the "Assignment") is made as of the
8th day of April, 1993 by EXXON CORPORATION, a New Jersey corporation, having a
principal office at 800 Bell Street, Houston, Texas 77002 ("Assignor") to BAYWAY
REFINING COMPANY, a Delaware corporation, having a principal office at 1400 Park
Avenue, Linden, New Jersey 07036 ("Assignee").
W I T N E S S E T H:
WHEREAS, Assignor owns the Bayway Refinery and certain related
facilities and assets in Linden, New Jersey (the "Refinery");
WHEREAS, Assignor is this date conveying to Assignee the
Refinery; and
WHEREAS, in furtherance of the conveyance of the Refinery and
such additional assets, Assignor desires to assign to Assignee and Assignee
desires to accept from Assignor all of Assignor's interest in and to that
certain Lease Agreement; as set forth on Exhibit A annexed hereto (the "Lease
Agreement").
NOW, THEREFORE, in consideration of the mutual promises
contained herein and other good and valuable consideration, Assignor and
Assignee hereby agree as follows:
1. Assignor hereby assigns to Assignee, and Assignee hereby
accepts from Assignor the Lease Agreement, a true and
<PAGE> 2
complete copy of which is attached hereto as Exhibit A, together with any
security deposit as set forth on Exhibit B.
2. From and after the date hereof, Assignee hereby agrees to
assume and fulfill in all respects Assignor's obligations accruing after the
date hereof with respect to the Lease Agreement, except for those obligations
set forth in the Letter, as hereinafter defined. Except as otherwise expressly
provided for herein, Assignee shall indemnify, defend and hold harmless Assignor
from and against any Damages arising out of or in any way connected with the
Lease Agreement and accruing from and after the date hereof, and Assignor shall
indemnify, defend and hold harmless Assignee from and against any Damages
arising out of or in any way connected with the Lease Agreement and accruing
prior to the date hereof. For purposes hereof, "Damages" shall mean any
liability, obligation, cost, damage, fine, penalty, charge or expense, including
reasonable legal fees and cost of defending any claim, to the extent not
prohibited by law.
3. Notwithstanding the assignment of the Lease Agreement from
Assignor to Assignee, from and after the date hereof, Assignor shall remain
obligated to apply in Assignee's name to the State of New Jersey for a riparian
grant as to the Riparian Sweep Parcels (as such term is defined in that certain
letter dated August 31, 1992 from Dwight Wiggins of Exxon Company, U.S.A. to
Cogen Technologies Linden Venture, L.P. and Chicago Title Insurance Company (the
"Letter"), a copy of which is attached hereto as
- 2 -
<PAGE> 3
Exhibit C. Assignor shall perform all of the obligations required of it in the
Letter, provided, however, that Assignee shall cooperate with Assignor in all
respects regarding the application, including permitting the application to be
made in Assignee's name, signing the application and providing a certificate of
title, further provided that said cooperation is at nominal expense to Assignee.
Assignor further agrees to indemnify, defend and hold harmless Assignee from and
against any Damages arising out of or in any way connected with the Letter as a
result of Assignor's failure, to obtain the riparian grant as to the Riparian
Sweep Parcels, as provided herein.
4. This Assignment shall be governed by and construed in
accordance with the laws of the State of New Jersey.
5. This Assignment shall inure to the benefit of and be
binding upon the parties hereto and their respective legal representatives,
successors and assigns.
IN WITNESS WHEREOF, Assignor and Assignee have executed this
Assignment the day and year first above written.
EXXON CORPORATION, A New
Jersey corporation, Assignor
By: /s/ ROBERT W. UPCHURCH
--------------------------------------
Name (printed): Robert W. Upchurch
Title: Agent and Attorney in Fact
BAYWAY REFINING COMPANY, a
Delaware corporation, Assignee
By: /s/ DWIGHT WIGGINS
--------------------------------------
Name (printed): Dwight Wiggins
Title: President
- 3 -
<PAGE> 4
EXHIBIT A
True copy of Exxon Corporation and Cogen Technologies Linden
Venture, L.P. lease agreement entered into on or about August 9, 1990.
-4-
<PAGE> 5
01359
CONFIRMATION OF ASSIGNMENT OF COGEN LEASE
This Confirmation of Assignment of Cogen Lease ("Confirmation") by and
between Exxon Corporation, a New Jersey Corporation, having a principal
office at 800 Bell Street, Houston, Texas 77002 ("Exxon") and Bayway
Refining Company, a Delaware Corporation, having an office at 1400 Park
Avenue, Linden, New Jersey 07036 ("Bayway").
W I T N E S S E T H:
WHEREAS, under date of April 8, 1993, Exxon and Bayway executed that
certain Assignment of Cogen Lease (the "Original Assignment") pursuant to
which Exxon assigned to Bayway that certain Lease Agreement dated
effective August 1, 1990 between Exxon, as lessor and Cogen Technologies
Linden Venture, L.P., as lessee, covering certain property located in
Union County, New Jersey (the "Assigned Lease"); and
WHEREAS, under date of April 8, 1993, Exxon and Bayway also executed
that certain Memorandum of Assignment of Cogen Lease, recorded on April
14, 1993 with the Union County Register's Office at Deed Book 3950, Page
251 et seq. (the "Original Memorandum of Lease"), in order to evidence of
record the assignment of the Assigned Lease; and
WHEREAS, the Original Assignment inadvertently failed to mention a
certain Letter Agreement dated September 27, 1991 between Exxon
Corporation and Cogen Technologies Linden Venture, L.P. (the "Parties")
and an Amendment to Ground Lease Agreement dated as of July 31, 1992,
between such Parties; and
<PAGE> 6
WHEREAS, the Original Memorandum of Lease inadvertently failed to refer to
the Letter Agreement dated September 27, 1991.
NOW, THEREFORE, Exxon and Bayway hereby confirm that the definition of
Lease Agreement as set forth in the Original Assignment and the Original
Memorandum of Lease includes the Letter Agreement dated September 27, 1991
between Exxon Corporation and Cogen Technologies Linden Venture, L.P. and the
Amendment to Ground Lease Agreement dated as of July 31, 1992 between such
Parties.
IN WITNESS WHEREOF, Exxon and Bayway have executed this Confirmation as of
April 8, 1993.
EXXON CORPORATION, a New Jersey
corporation
By: /s/ ROBERT W. UPCHURCH
--------------------------------
Name: Robert W. Upchurch
-----------------------------
Title: Agent and Attorney in Fact
-----------------------------
BAYWAY REFINING COMPANY, a Delaware
corporation
By: /s/ DWIGHT L. WIGGINS
-------------------------------
Name: Dwight L. Wiggins
----------------------------
Title: President
----------------------------
<PAGE> 7
STATE OF TEXAS :
:
COUNTY OF HARRIS :
I CERTIFY as follows:
1. On December 20, 1993, Robert W. Upchurch personally appeared before me;
2. I am satisfied that this person is the person who executed the attached
instrument as Agent and Attorney in fact of EXXON CORPORATION, a New Jersey
corporation; and
3. This person stated that (he/she) was authorized to execute the
instrument on behalf of EXXON CORPORATION, a New Jersey corporation, and that
(he/she) executed the instrument as the act of such corporation.
[SEAL]
SUSAN H. CRUTCHFIELD
NOTARY PUBLIC /s/ SUSAN H. CRUTCHFIELD
STATE OF TEXAS ---------------------------------------
EXPIRES 5-7-96 A Notary Public of Texas
STATE OF NEW JERSEY :
:
COUNTY OF :
I CERTIFY as follows:
1. On December 30, 1993, Dwight L. Wiggins personally appeared before me;
2. I am satisfied that this person is the person who executed the attached
instrument as President of BAYWAY REFINING COMPANY, a Delaware corporation; and
3. This person stated that (he/she) was authorized to execute the
instrument on behalf of BAYWAY REFINING COMPANY, a Delaware corporation, and
that (he/she) executed the instrument as the act of such corporation.
/s/ BETTY CARBONARO
---------------------------------------
A Notary Public of New Jersey
BETTY CARBONARO
NOTARY PUBLIC OF NEW JERSEY
My Commission Expires Oct. 20, 1996
<PAGE> 1
EXHIBIT 10.15(e)
SECOND AMENDMENT TO GROUND LEASE AGREEMENT
This Second Amendment to Ground Lease Agreement (this "Lease
Amendment") is made and entered into as of the 13th day of April, 1994, by and
between Bayway Refining Company, a Delaware corporation ("BRC"), and Cogen
Technologies Linden Venture, L.P., doing business in New Jersey as Cogen
Technologies Linden Venture, Limited Partnership, a Delaware limited partnership
("Cogen").
W I T N E S S E T H:
WHEREAS, Exxon Corporation ("Exxon") and Cogen entered into that
certain Ground Lease Agreement dated effective August 1, 1990 covering certain
land situated in the City of Linden, Union County, New Jersey, and
WHEREAS, Exxon and Cogen entered into an Amendment to Ground Lease
Agreement dated as of July 31, 1992, pursuant to which the description of the
"Demised Premises," as defined in the Ground Lease Agreement, was amended, and
further entered into a letter agreement dated September 27, 1991, pursuant to
which the Ground Lease Agreement was amended in certain other respects (the
Ground Lease Agreement, as so amended is hereafter called the "Lease"),
WHEREAS, Exxon has conveyed the Demised Premises to BRC pursuant to
that certain Deed dated as of April 8, 1993 recorded in the Office of the
Registry of Union County, New Jersey in Deed Book 3950, Page 65 et seq. and has
assigned the Lease to BRC pursuant to a certain Assignment of Cogen Lease dated
April 8, 1993, a Memorandum of which was recorded in the Office of the Registry
of Union County, New Jersey in Deed Book 3950, Page 251 et seq., as amended by
that certain Confirmation of Assignment of Cogen Lease dated as of April 8, 1993
between Exxon
<PAGE> 2
and BRC, which Confirmation has been or will be recorded in the Office of the
Registry of Union County, New Jersey; and
WHEREAS, BRC and Cogen desire to further amend the Lease in accordance
with the terms hereof;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, BRC and Cogen agree that the Lease is amended as follows:
1. The following sentences are hereby inserted after the end of the
second sentence of Section 2.2 of the Lease:
"The area beyond the perimeter of the Demised Premises so
affected by the air cooling towers is more fully described in
Exhibit C-1 attached hereto and made a part hereof. Additionally,
BRC, as successor to Exxon, grants to Cogen a nonexclusive easement
and right-of-way to construct, operate, maintain, repair, replace
and remove water pipes, water meters and related equipment and
structures to house the same, on, over, under and across the area so
designated for use for water line and water meter building purposes
on Exhibit C-2 attached hereto and made a part hereof and as more
fully described on Exhibit C-3 attached hereto and made a part
hereof."
2. The property descriptions attached as Exhibit C-1, Exhibit C-2 and
Exhibit C-3 are hereby incorporated and made Exhibit C-1, Exhibit C-2 and
Exhibit C-3 to the Lease.
3. Exhibit D to the Lease is hereby deleted in its entirety and the map
attached hereto as Exhibit D is substituted in lieu thereof. Exhibit D depicts
the general location of certain easements granted to Cogen pursuant to the
Lease. The parties now desire to more specifically define and locate certain of
such easements. In that regard, the parties hereby agree that the description
for the "Interconnection Area" (as defined in the Lease) intended for steam line
interconnection shall be that attached hereto as Exhibit D-1 and made a part
hereof; the "Utility Area" (as defined in the
-2-
<PAGE> 3
Lease) between the two parcels of land comprising the Demised Premises shall be
that attached hereto as Exhibit D-2 and made a part hereof; and the description
for the Utility Area intended for sanitary sewer and wastewater discharge shall
be that attached hereto as Exhibit D-3 and made a part hereof.
4. The following sentence is hereby inserted at the end of Section 2.3
of the Lease:
"The Interconnection Area intended for steam line
interconnection is more particularly described in Exhibit D-1
attached hereto and made a part hereof."
5. The following sentence is hereby inserted at the end of Section 2.4
of the Lease:
"The Utility Area between the two parcels comprising the
Demised Premises is more specifically described in Exhibit D-2
attached hereto and made a part hereof. The Utility Area intended
for sanitary sewer and wastewater discharge is more particularly
described in Exhibit D-3 attached hereto and made a part hereof."
6. It is hereby agreed that the "Date of Initial Commercial Operation"
(as defined in the Lease) occurred on May 1, 1992.
As amended by this Lease Amendment, the Lease is ratified and confirmed
to be in full force and effect.
EXECUTED in multiple original counterparts as of the 13th day of April,
1994.
ATTESTED BY: BAYWAY REFINING COMPANY
/s/ L.C. STEINHAUSER By: /s/ THOMAS J. NIMBLEY
- ------------------------------------ ---------------------------------
Name: L.C. Steinhauser Name: Thomas J. Nimbley
------------------------------- -------------------------------
Assistant Secretary Title: Vice President
------------------------------
-3-
<PAGE> 4
COGEN TECHNOLOGIES LINDEN
VENTURE, L.P. (D/B/A COGEN
TECHNOLOGIES LINDEN VENTURE,
LIMITED PARTNERSHIP
By: COGEN TECHNOLOGIES LINDEN,
LTD. (D/B/A COGEN
TECHNOLOGIES LINDEN,
LIMITED PARTNERSHIP),
General Partner
By: COGEN TECHNOLOGIES, INC.
ATTESTED BY: General Partner
/s/ ELAINE A. CAMPBELL By: /s/ JOE BOLLINGER
- ------------------------------- --------------------------
Name: Elaine A. Campbell Name: Joe Bollinger
-------------------------- ------------------------
Assistant Secretary Title: Senior Vice President
-----------------------
-4-
<PAGE> 5
ACKNOWLEDGEMENT
STATE OF NEW JERSEY )
)
COUNTY OF UNION )
BE IT REMEMBERED, that on this 13th day of April, 1994, before me, the
subscriber, a notary public, personally appeared Thomas J. Nimbley, who is
the Vice President of Bayway Refining Company, a Delaware corporation, who
I am satisfied is the person who signed this instrument, and he
acknowledged that he signed, sealed with the corporate seal, and delivered
the same as such officer aforesaid, and that this instrument is the
voluntary act and deed of such corporation, on behalf of Bayway Refining
Company.
Given under my hand and seal of office this 13th day of April, 1994.
/s/ MARY PHILLIPS
--------------------------------
Notary Public in and for
Union County, New Jersey
My Commission Expires:
----------
MARY PHILLIPS
NOTARY PUBLIC OF NEW JERSEY
MY COMMISSION EXPIRES OCT. 20, 1998
-5-
<PAGE> 6
ACKNOWLEDGMENT
--------------
STATE OF TEXAS )
COUNTY OF HARRIS )
BE IT REMEMBERED, that on this 1st day of March, 1994, before me, the
subscriber, a notary public, personally appeared J. M. Bollinger who is the Sr.
Vice President of Cogen Technologies, Inc., General Partner of Cogen
Technologies Linden, Ltd., (D/B/A Cogen Technologies Linden, Limited
Partnership), which is the General Partner of Cogen Technologies Linden Venture,
L.P. (D/B/A Cogen Technologies Linden Venture, Limited Partnership), a Delaware
limited partnership, who I am satisfied is the person who signed this
instrument, and he acknowledged that he signed, sealed with the corporate seal,
and delivered the same as such officer aforesaid, and that this instrument is
the voluntary act and deed of such corporation, on behalf of Cogen Technologies
Linden Venture, L.P.
Given under my hand and seal of office this 1st day of March, 1994.
/s/ ELAINE A. CAMPBELL
------------------------------------
Notary Public in and for the
State of Texas
My Commission Expires: July 27, 1997
[NOTARY SEAL]
<PAGE> 1
EXHIBIT 10.19
SECOND AMENDMENT UNDER
GP TERM LOAN AGREEMENT
Second Amendment, dated as of February 4, 1999 (the "Second
Amendment"), to the Amended and Restated Term Loan Agreement, dated as of
September 15, 1992 (as amended, supplemented or otherwise modified from time to
time, the "GP Term Loan Agreement"), between COGEN TECHNOLOGIES LINDEN, LTD.
(the "Borrower") and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, not in its individual capacity except to the extent
expressly set forth herein but as trustee (in such capacity, the "Owner
Trustee") under a Trust Agreement, dated as of December 28, 1990 (as amended,
supplemented and modified from time to time, the "Trust Agreement").
W I T N E S S E T H:
WHEREAS, pursuant to the GP Term Loan Agreement, the Owner Trustee has
agreed to make, and has made, certain loans and other extensions of credit to
the Borrower;
WHEREAS, the Borrower has requested (i) a certain consent and waiver
of even date herewith executed by RCM Holdings, Inc., as a general partner of
the Borrower, and the Owner Trustee (the "Consent and Waiver (RCM)"), (ii) a
certain consent and waiver of even date herewith executed by JEDI Linden GP,
L.L.C., as a general partner of the Borrower, and the Owner Trustee (the
"Consent and Waiver (JEDI Linden)") and (iii) this Second Amendment, and upon
this Second Amendment becoming effective, the Owner Trustee has agreed, that
certain provisions of the GP Term Loan Agreement be amended in the manner
provided for in this Second Amendment;
NOW, THEREFORE, the parties hereto hereby agree as follows:
I. Definitions.
1. Section 1.1 of the GP Term Loan Agreement shall be amended by:
(i) deleting the definitions "Amended and Restated
Partnership Agreement", "Fixed Charge Coverage Ratio," and
"Partnership Agreement" and substituting in lieu thereof the
following definitions:
"'Fixed Charge Coverage Ratio': shall mean, for each
year during the Preferred Distribution Period, the ratio of:
(a) the pro forma EBDIT of the Limited Partnership
for such year to
<PAGE> 2
(b) the sum of (i) the aggregate Preferred Cash
Distributions required to be made during such year, plus (ii)
the aggregate amount of interest payable on the Loans during
such year, plus (iii) the aggregate amount of scheduled
repayments to be made on the Post-Completion Note during such
year, plus (iv) the aggregate amount of interest and principal
payments to be made during such year on any Additional Debt
(including the Intercompany Subordinated Loan) incurred by the
Borrower as permitted by subsection 7.2(b); provided, however,
that, for purposes of and only for purposes of Section 4.01(d)
of the Security Deposit Agreement, so long as the Fixed Charge
Coverage Ratio, calculated with the inclusion of payments on
the Intercompany Subordinated Loan, is no less than 1.1 to
1.0, the Fixed Charge Coverage Ratio shall be calculated
without including payments on the Intercompany Subordinated
Loan."
"'Linden Partnership Agreement': shall mean the
Agreement of Limited Partnership of the Borrower, dated as of
June 28, 1989, as amended, supplemented or otherwise modified
from time to time."
"'Project Partnership Agreement': shall mean the
Amended and Restated Agreement of Limited Partnership of
Cogen Technologies Linden Venture, L.P., dated as of
September 15, 1992, as amended, supplemented or otherwise
modified from time to time."
and
(ii) adding the following new definitions:
"'Acceptable Bank': shall mean any commercial bank
which has a long-term senior unsecured debt rating of "A" or
better by both Standard & Poor's Rating Services and Moody's
Investors Services, Inc. and has a branch office in New York
City, New York."
"'East Coast': shall mean East Coast Power L.L.C., a
Delaware limited liability company."
"'GP Term Loan Shortfall Amount': shall mean any
amount due and payable by the Borrower hereunder which is
unpaid."
"'Intercompany Subordinated Loan': shall mean the
subordinated intercompany loan to be made on February 5, 1999
by East Coast to the Borrower in order for the Borrower to
pay in full the Redemption Subordinated Loan."
-2-
<PAGE> 3
"'Letter of Credit': shall mean the letter of
credit, dated as of February 4, 1999, made by Bank of America
NT & SA in favor of the Owner Trustee, in an amount equal to
$22,250,000 as the same may be replaced, renewed, amended,
supplemented or otherwise modified from time to time."
"'Letter of Credit Proceeds': shall mean the
proceeds from any drawing by the Lender under the Letter of
Credit."
"'Letter of Credit Proceeds Interest Amount': shall
mean, at any time after a drawing under the Letter of Credit,
any interest, dividends, gain and the like that have accrued
or been earned (but only to the extent that they have
actually accrued or been earned) as of such time on the
excess, from time to time, of (i) the Letter of Credit
Proceeds (together with any interest, dividends, gains and
the like accrued or earned thereon) over (ii) the sum of the
Project PA Shortfall Amount and GP Term Loan Shortfall
Amount."
"'Linden, Inc.': shall mean JEDI Linden, Inc., a
Delaware corporation."
"'Project PA Shortfall Amount': shall be an amount
equal to $0 as of February 4, 1999 and shall be (x)
increased, at the time of any monthly distribution under
subsection 4.3(a) of the Project Partnership Agreement, by
the excess, if any, of the amount specified in such
subsection 4.3(a) to be distributed with respect to the
Preferred Limited Partnership Interest and the Common Limited
Partnership Interest (both as defined in the Project
Partnership Agreement) for such month over the amount
actually distributed pursuant to such subsection with respect
to the Preferred Limited Partnership Interest and the Common
Limited Partnership Interest for such month, and (y)
decreased, at the time of any distribution under subsection
4.5 of the Project Partnership Agreement, by distributions
with respect to the Preferred Limited Partnership Interest
and the Common Limited Partnership Interest pursuant to such
subsection 4.5."
"'Redemption and Amendment Agreement': shall mean
the Redemption of Partnership Interests and Amendment to
Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd., dated as of February 4, 1999, by and among JEDI
Linden GP, L.L.C., JEDI Linden LP, L.L.C., RCM Management
Services, L.P., Cogen Technologies Limited Partners Joint
Venture and the Borrower."
"'Redemption Subordinated Loan': shall mean a
subordinated bridge loan from Morgan Stanley & Co.
Incorporated to the Borrower on February 4, 1999, the
proceeds of which were used or will be used by the Borrower
for the redemption by
-3-
<PAGE> 4
the Borrower of certain partnership interests in the Borrower
owned by RCM Holdings, Inc. (formerly known as Cogen
Technologies, Inc.) and Cogen Technologies Limited Partners
Joint Venture pursuant to the Redemption and Amendment
Agreement."
"'Security Agreement' shall mean the Collateral
Security Account and Pledge Agreement, dated as of September
17, 1992, by and among the Owner Trustee, UBS, AG, Linden
Owner Partnership, as Beneficiary and United States Trust
Company of New York, as amended, supplemented and modified
from time to time."
2. Section 1.1 of the GP Term Loan Agreement shall be amended by
inserting the words ", the Letter of Credit" in the sixth line of the
definition of "Collateral Security Documents" after the words "Deposit
Agreement" and before the words "and any".
3. Unless otherwise defined herein, terms defined in the GP Term
Loan Agreement and used herein shall have the meanings given to them in the GP
Term Loan Agreement.
4. After the effective date of this Second Amendment (i) any
reference to "the General Partner" in the GP Term Loan Agreement shall mean
JEDI Linden GP, L.L.C., a Delaware limited liability company and its successors
and assigns, (ii) any reference to "the Limited Partner" in the GP Term Loan
Agreement shall mean JEDI Linden LP, L.L.C., a Delaware limited liability
company and its successors and assigns, (iii) any reference to "the Amended and
Restated Partnership Agreement" in the GP Term Loan Agreement shall mean the
Project Partnership Agreement, and (iv) any reference to "the Partnership
Agreement" in the GP Term Loan Agreement shall mean the Linden Partnership
Agreement.
II. Amendment to the GP Term Loan Agreement.
1. Each of the Borrower and the Owner Trustee hereby consents
and agrees to amend Section 2.7(d) of the GP Term Loan Agreement by inserting
the words "the Letter of Credit," in the thirteenth line after the words "this
Agreement," and before the words "the Security Deposit Agreement".
2. Each of the Borrower and the Owner Trustee hereby consents
and agrees to amend Section 3.11 of the GP Term Loan Agreement by deleting ";
provided, however, that the Lender shall have full recourse to the Borrower and
all of its assets in an amount equal to 10% of the then outstanding Obligations
less the amount of cash or cash equivalents in the Working Capital Fund" in the
fifth line through ninth line thereof.
3. Each of the Borrower and the Owner Trustee hereby consents
and agrees to amend Section 6.1 of the GP Term Loan Agreement by (i) deleting
the reference to New York in clause (ii) of the first sentence thereof and (ii)
deleting the last sentence thereof and replacing it with the following
sentences:
"The General Partner (i) will be the sole general partner of the
Borrower and engage solely
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in the business of the performance of the Borrower's obligations
pursuant to the Transaction Documents and (ii) will preserve and
maintain in full force and effect its existence as a limited liability
company under the laws of the State of Delaware and its qualification
to do business in the States of Texas and New Jersey and in each other
jurisdiction in which the conduct of its business requires such
qualification. Linden, Inc. will preserve and maintain in full force
and effect its existence as a corporation under the laws of the State
of Delaware and its qualification to do business in the States of
Texas and New Jersey and in each other jurisdiction in which the
conduct of its business requires such qualification. East Coast will
preserve and maintain in full force and effect its existence as a
limited liability company under the laws of the State of Delaware and
its qualification to do business in the States of Texas and New Jersey
and in each other jurisdiction in which the conduct of its business
requires such qualification."
4. Each of the Borrower and the Owner Trustee hereby consents
and agrees to amend Section 6.6 of the GP Term Loan Agreement by adding the
following as subsection (c):
"(c) Each of the General Partner, Linden, Inc. and East Coast
shall comply with all applicable laws, rules, regulations and orders,
and shall from time to time obtain and comply with all Government
Approvals as shall now or hereafter be necessary under applicable law
or regulation, except any thereof the non-compliance with which could
not reasonably be expected to (i) have a material adverse affect on
the business, operations, property or condition (financial or other)
of the Borrower or the General Partner or the rights or interests of
the Lender or (ii) materially adversely affect the Borrower's or the
General Partner's ability to perform its obligations under the
Transaction Documents to which it is a party."
5. Each of the Borrower and the Owner Trustee hereby consents and
agrees to amend the GP Term Loan Agreement by adding the following Section
6.18:
"6.18 Certain Covenants Relating to the General Partner,
Linden, Inc. and East Coast.
(a) Each of the General Partner, Linden, Inc. and
East Coast will observe all procedures required by their
respective organizational documents and the laws of the State
of Delaware as they apply to limited liability companies with
respect to the General Partner and East Coast and to
corporations with respect to Linden, Inc.
(b) The business and affairs of the General Partner
will be managed by or under the direction of its manager in
accordance with the limited liability company agreement of
the General Partner. Subject to the provisions of the General
Partner's limited liability agreement, Linden, Inc. and East
Coast will have the normal rights
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of a member of the General Partner under Delaware law.
(c) The funds of the General Partner will be
deposited in a bank account or accounts of the General
Partner. No other entity will have an interest in such
account or accounts; provided, however, that such account or
accounts may be part of a "cash concentration" system with a
bank; such accounts will be accounted for and tracked
separately.
(d) Each of the General Partner, Linden, Inc. and
East Coast will be responsible for its own expenses.
(e) Each of the General Partner, Linden, Inc. and
East Coast will conduct its business solely in its own name
and through its duly authorized officers or agents, in each
case so as not to mislead others as to its identity, assets
or liabilities. The General Partner will have its own
telephone listing and an identifiable principal place of
business. The General Partner, Linden, Inc. and East Coast
will have separate stationery, check stock and other business
forms.
(f) The General Partner will maintain separate
financial statements, separately identifying its own assets,
liabilities and operations. The annual financial statements
of the General Partner, of Linden, Inc. and of East Coast
will be prepared in accordance with generally accepted
accounting principles and, in particular, will clearly
reflect each of their respective separate assets and
liabilities and the fact that the general partnership
interest in the Borrower is owned by the General Partner.
6. Each of the Borrower and the Owner Trustee hereby consents
and agrees to amend Section 7.5 of the GP Term Loan Agreement by deleting the
last sentence thereof and replacing it with the following sentence:
"The General Partner will (i) be the sole general partner of
the Borrower and (ii) engage solely in the business of the
performance of the Borrower's obligations pursuant to the
Transaction Documents. Linden, Inc. will (i) be a member of
the General Partner and holding no less than 1% membership
interest in the General Partner and (ii) engage solely in the
business of the performance of the General Partner's
obligations pursuant to the Transaction Documents."
7. Each of the Borrower and the Owner Trustee hereby consents
and agrees to amend Section 7.7 of the GP Term Loan Agreement by adding the
following sentence at the end thereof:
"The General Partner shall not make any investments (whether
by purchase of stock,
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bonds, notes or other securities, loan, advance or otherwise)
other than Permitted Investments and investments in general
partnership interests in the Borrower."
8. Each of the Borrower and the Owner Trustee hereby consents
and agrees to amend Section 7.12 of the GP Term Loan Agreement by adding the
following sentence at the end thereof:
"The General Partner shall not, directly or indirectly,
purchase, acquire, exchange or lease any property from or
sell, transfer or lease any property to, or borrow any money
from, or otherwise enter into any transaction or arrangement
with, any Affiliate or any officer, director or employee of
East Coast, except for (a) the transactions contemplated by
the Transaction Documents, and (b) transactions upon fair and
reasonable terms no less favorable than the General Partner
could obtain or could become entitled to, in an arm's length
transaction with a Person which is not an Affiliate."
9. Each of the Borrower and the Owner Trustee hereby consents
and agrees to amend the GP Term Loan Agreement by deleting Section 7.15
thereof.
10. Each of the Borrower and the Owner Trustee hereby consents
and agrees to amend paragraph (b) of Section 8 of the GP Term Loan Agreement by
inserting the following words in the twelfth line after the words "(other than
any Project Document)," and before the word "shall":
"or any representation, warranty or statement by the Borrower
on behalf of the General Partner, Linden, Inc. or East Coast
to the Lender in the Amendment under the GP Term Loan
Agreement, dated February 4, 1999, between the Borrower and
the Lender."
11. Each of the Borrower and the Owner Trustee hereby consents
and agrees to amend paragraph (c) of Section 8 of the GP Term Loan Agreement by
adding at the end thereof the following clause:
"(iii) (A) the General Partner shall fail to perform or
observe Sections 1.04, 2.01, 2.06, 5.03, 4.01 or 5.04 of its
limited liability company agreement, or (B) Linden, Inc.
shall fail to perform or observe Articles III, VIII.2, VIII.3
or XI.1 of its Certificate of Incorporation; or (iv)(A) the
General Partner shall fail to perform or observe any
provisions of its limited liability company agreement (other
than provisions enumerated in clause (iii)(A) above of this
paragraph (c)), or (B) Linden, Inc. shall fail to perform or
observe any provisions of its certificate of incorporation
(other than provisions enumerated in clause (iii)(B) above of
this paragraph (c)), and in each case in this clause (iv)
such failure shall continue unremedied for a period of
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30 days after written notice thereof from the Lender to the
General Partner and the Borrower; provided, however, that
such 30 day period shall be extended for such period of time
(not to exceed 60 days) during which the General Partner or
Linden, Inc. or the Borrower on behalf of the General Partner
or Linden, Inc. shall be diligently using its best efforts to
cure such default; or"
12. Each of the Borrower and the Owner Trustee hereby consents
and agrees to restate in its entirety paragraph (k) of Section 8 of the GP Term
Loan Agreement to read as follows:
"(k) An entity with a net worth of at least $100,000,000
shall fail to own and control, directly or indirectly, a
beneficial interest of at least 8.2% in the Borrower."
13. Each of the Borrower and the Owner Trustee hereby consents
and agrees to amend paragraph (t) of Section 8 of the GP Term Loan Agreement by
inserting the words "or its successors or assigns" after the word "Exxon" and
before the word "shall" on the first line of such paragraph (t).
14. Each of the Borrower and the Owner Trustee hereby consents
and agrees to amend the address of the Borrower in Section 9.2 of the GP Term
Loan Agreement to read as follows:
"Cogen Technologies Linden, Ltd.
1400 Smith Street, EB 2407
Houston, Texas 77002
Attention: Donna Lowry, Compliance Department
Telecopy: (713) 646-4039"
15. Each of the Borrower and the Owner Trustee hereby consents
and agrees to amend the GP Term Loan Agreement by adding the following Section
9.19:
"Section 9.19 Payment under Letter of Credit. To the
extent the Lender shall draw payment under the Letter of
Credit, the Letter of Credit Proceeds (plus any Letter of
Credit Proceeds Interest Amount) shall constitute additional
cash collateral for the Obligations of the Borrower to the
Lender hereunder, and shall not constitute a payment or
prepayment of principal of or interest on the Loans until the
final scheduled principal payment of and interest on the
Loans; provided, however, that (1) if the Letter of Credit
Proceeds (plus any Letter of Credit Proceeds Interest Amount)
exceeds the amount of the final scheduled principal payment
of and interest on the Loans, such excess amount shall be
applied to the scheduled principal and interest payment of
the Loans in the inverse order of maturity, starting from the
second to the last scheduled principal payment of and
interest on the Loans, (2) if the
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<PAGE> 9
Loans are accelerated pursuant to the terms hereof, any
Letter of Credit Proceeds (plus any Letter of Credit Proceeds
Interest Amount) which has not been applied pursuant to other
provisions of this Section 9.19 shall be applied to the
Borrower's Obligations hereunder and (3) the Letter of Credit
Proceeds (plus any Letter of Credit Proceeds Interest
Amount), after deposit into the Required Payment Account (as
defined in the Security Agreement) pursuant to the Security
Agreement, may be used pursuant to Section 4.01(b) thereof
without affecting the Borrower's obligations hereunder or the
Limited Partnership's obligations under the Project
Partnership Agreement."
III. Representations and Warranties.
In order to induce the Lender to enter into this Second Amendment, the
Borrower represents and warrants to the Lender that as of the effective date
hereof:
(a) Organization; Existence. The General Partner is a limited
liability company duly organized and validly existing under the laws
of the State of Delaware. Linden, Inc. is corporation duly organized
and validly existing under the laws of the State of Delaware. East
Coast is a limited liability company duly organized and validly
existing under the laws of the State of Delaware. Each of the General
Partner, Linden, Inc. and East Coast maintains its existence and its
good standing under the laws of the State of Delaware.
(b) Compliance with Laws. Each of the General Partner,
Linden, Inc. and East Coast is in compliance with all Requirements of
Law.
(c) Capitalization. The General Partner is adequately
capitalized for the business in which it will engage.
(d) Conduct and Communications. Each of the General Partner,
Linden, Inc. and East Coast conducts its business solely in its own
name and through its duly authorized members or agents, in each case
so as not to mislead others as to its identity, assets or liabilities.
The General Partner has its own telephone listing and an identifiable
principal place of business. The General Partner, Linden, Inc. and
East Coast have separate stationery, check stock and other business
forms.
(e) Arm's Length. The General Partner has not entered into
any transaction or arrangements with any Affiliate or any officer,
director or employee of East Coast or Linden, Inc. except for (a) the
transactions contemplated by the Transaction Documents or this Second
Amendment or the Consent and Waiver (JEDI Linden), and (b)
transactions upon fair and reasonable terms no less favorable than the
General Partner could obtain or could
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<PAGE> 10
become entitled to, in an arm's length transaction with a Person which
is not an Affiliate.
IV. Conditions to Effectiveness.
This Second Amendment shall become effective on the date on which:
(a) the Borrower and the Owner Trustee shall have duly
executed and delivered counterparts of (i) the Consent and Waiver
(RCM), (ii) the Consent and Waiver (JEDI Linden), (iii) this Second
Amendment, and (iv) the Second Amendment to the Project Partnership
Agreement.
(b) the General Partner shall have in effect a certificate of
formation substantially in the form of Exhibit A hereto and a limited
liability company agreement substantially in the form of Exhibit B
hereto, and Linden, Inc. shall be a member of the General Partner with
a membership interest of at least 1% in the General Partner and shall
be a Delaware corporation with certificate of incorporation and bylaws
in effect substantially in the form of Exhibit C, and the Owner
Trustee shall have received copies of all such documents duly
certified by the Secretary of State of the State of Delaware in the
case of the certificate of formation of JEDI Linden GP, L.L.C. and the
certificate of incorporation of Linden, Inc. and otherwise duly
certified by appropriate officers of Linden GP, L.L.C. or Linden,
Inc., as the case may be.
(c) an Acceptable Bank shall have duly executed and delivered
the Letter of Credit substantially in the form of Exhibit D hereto,
accompanied by an opinion of counsel and other documentation
reasonably satisfactory to the Owner Trustee, the Tranche A Banks and
the Tranche B Lenders regarding the enforceability of the Letter of
Credit and such other matters as reasonably requested by such persons;
(d) the Owner Trustee, the Tranche A Banks and the Tranche B
Lenders shall have received an opinion from counsel to East Coast, in
form and substance acceptable to such persons;
(e) the Owner Trustee, the Tranche A Banks and the Tranche B
Lenders shall have received a certificate from East Coast, in form and
substance acceptable to such persons, representing and warranting that
(i) neither East Coast nor any entity owned or controlled by East
Coast is in default of its obligations under any of the Operative
Documents, and East Coast is not aware of any such default by any
other party under the Transaction Documents or any of the Operative
Documents, (ii) all third party consents (other than the consent of
the Owner Trustee) and government approvals and notifications required
for these transactions have been obtained or made or are being granted
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<PAGE> 11
simultaneously herewith, (iii) the transactions will not have a
material adverse effect on the Project or the ability of any entity to
perform its obligations under the Transaction Documents or any of the
Operative Documents, (iv) the transactions contemplated by this Second
Amendment, the Consent and Waiver (RCM) and the Consent and Waiver
(JEDI Linden) will not cause the Project to lose its status as a
"qualifying facility" under PURPA or any similar statute of the State
of New Jersey, (v) neither the Owner Trustee nor the Beneficiary nor
any of their respective Affiliates will be deemed to be, or be subject
to the regulation as, an "electric utility," an "electric utility
holding company," a "public utility" or a "public utility holding
company" or any similar entity under any existing law, rule or
regulation of any Governmental Authority and (vi) such other matters
as may be reasonably requested by such persons; and
(f) the Owner Trustee, the Tranche A Banks and the Tranche B
Lenders shall have received a duly executed copy, in form and
substance acceptable to such person and its counsel, of each of (i)
the GP Term Loan Securities Accounts Control Agreement among the
Borrower, the Owner Trustee, and PNC Bank, N.A. in substantially the
same form as Exhibit E, (ii) the Tranche A and B Securities Accounts
Control Agreement among the Owner Trustee, the Collateral Agent and
United States Trust Company of New York in substantially the same form
as Exhibit F, and (iii) the Letter of Credit Proceeds Agreement,
between the Owner Trustee and Linden Owner Partnership in
substantially the same form as Exhibit G.
V. General
1. Payment of Expenses. The Borrower agrees to pay or reimburse
the Owner Trustee for all of its out-of-pocket costs and reasonable expenses of
the Owner Trustee incurred in connection with this Second Amendment, any other
documents prepared in connection herewith and the transactions contemplated
hereby, including, without limitation, the reasonable fees and disbursements of
its counsel.
2. No Other Amendments; Confirmation. Except as expressly set
forth herein, the provisions of the GP Term Loan Agreement are and shall remain
in full force and effect.
3. Governing Law; Counterparts.
(a) This Second Amendment shall be construed in accordance
with and governed by the laws of the State of New York.
(b) This Second Amendment may be executed by one or more of
the parties to this Second Amendment on any number of separate counterparts,
and all of said counterparts taken
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<PAGE> 12
together shall be deemed to constitute one and the same instrument. A set of
the copies of this Second Amendment signed by all the parties shall be lodged
with each of the Borrower and the Owner Trustee.
IN WITNESS WHEREOF, the parties have caused this Second Amendment to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
COGEN TECHNOLOGIES LINDEN, LTD.
By: JEDI Linden GP, L.L.C., a Delaware
limited liability company, as the general
partner
By: /s/ JEREMY BLACHMAN
----------------------------------------
Name: Jeremy Blachman
---------------------------------------
Title: Attorney in fact
--------------------------------------
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION, not in its individual capacity,
but as Owner Trustee
By: /s/ GERALD R. WHEELER
----------------------------------------
Name: Gerald R. Wheeler
---------------------------------------
Title: Vice President
--------------------------------------
Exhibits:
A- Form of GP Certificate of Formation
B- Form of GP Limited Liability Agreement
C- Form of Member Certificate of Incorporation
D- Form of Letter of Credit
E- GP Term Loan Securities Accounts Control Agreement
F- Tranche AB Securities Accounts Control Agreement
G- Letter of Credit Proceeds Agreement
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<PAGE> 13
EXHIBIT A
FORM OF GP CERTIFICATE OF FORMATION
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<PAGE> 14
EXHIBIT B
FORM OF GP LIMITED LIABILITY AGREEMENT
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<PAGE> 15
EXHIBIT C
FORM OF MEMBER CERTIFICATE OF INCORPORATION
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<PAGE> 16
EXHIBIT D
FORM OF LETTER OF CREDIT
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<PAGE> 17
EXHIBIT E
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<PAGE> 18
EXHIBIT F
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<PAGE> 19
EXHIBIT G
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<PAGE> 1
EXHIBIT 10.22
SECOND AMENDMENT OF THE
AGREEMENT OF LIMITED PARTNERSHIP
OF
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
THIS SECOND AMENDMENT OF THE AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF COGEN TECHNOLOGIES LINDEN VENTURE, L.P. (this "Amendment
Agreement") is made and entered into as of the 4th day of February, 1999 by and
between Cogen Technologies Linden, Ltd., a Texas limited partnership (the
"General Partner"), and State Street Bank and Trust Company of Connecticut,
National Association, not in its individual capacity but as trustee (in such
capacity, the "Owner Trustee") under a Trust Agreement dated as of December 28,
1990 between the Owner Trustee and Linden Owner Partnership, a Delaware
partnership. Unless otherwise noted, all defined terms used herein shall have
the same meaning given to such terms in the Agreement of Limited Partnership of
Cogen Technologies Linden Venture, L.P. dated September 15, 1992 (as heretofore
amended, the "Agreement").
WITNESSETH:
WHEREAS, the General Partner and the Owner Trustee are parties to the
Agreement;
WHEREAS, pursuant to the Agreement, the limited partnership known as
Cogen Technologies Linden Venture, L.P. (the "Partnership") was formed pursuant
to the Partnership Act; and
WHEREAS, the General Partner and the Owner Trustee desire to amend the
Agreement in order to reflect the termination of the Partnership's obligation to
pay certain management fees and to reflect certain other agreements between and
among the Partners.
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings contained herein, the parties hereto hereby agree as follows:
1. ARTICLE I of the Agreement shall be amended as follows:
(a) The definitions of "Management Fee," "Cost Portion" and
"Profit Portion" shall be deleted, and all references to such terms
shall be deleted or, where the context requires, such terms shall each
be redefined to mean "zero dollars."
(b) The following new defined terms shall be added:
"Second Amendment" shall mean the Second Amendment of the
Agreement of Limited Partnership of Cogen Technologies Linden
Venture, L.P., dated as of February 4, 1999.
<PAGE> 2
"Buy-Out Agreements" shall mean that certain
Termination Agreement dated as of the date of the
Second Amendment, executed by the Partnership and the
General Partner and that certain Termination
Agreement dated as of the October 25, 1998, executed
by H. Fred Levine and Cogen Technologies Capital
Company, L.P., copies of which are attached to the
Amendment as Exhibits A and B, respectively.
"Final Determination" (i) the execution of a final
and binding settlement agreement by the Partnership
and the taxing authority, (ii) the entering of a
final unappealable decision by any court of competent
jurisdiction.
"Tax Indemnity Distribution Date" shall mean (i) with
respect to any Tax Indemnity Event arising out of the
transactions contemplated by means the Transaction
Agreement among Enron Corp., Enron Capital & Trade
Resources Corp., East Coast Power L.L.C., JEDI Camden
GP, L.L.C., JEDI Camden LP, L.L.C., JEDI Linden GP,
L.L.C., JEDI Linden GP, L.L.C. 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 Amendment No. 1 dated as of November 6,
1998, as amended by Amendment No. 2 dated as of
November 13, 1998 and Amendment No. 3 dated as of
February 4, 1999 (the "1999 Transactions"), the
earlier of the end of the month during which (a)
either the Common Limited Partner or the Preferred
Limited Partner is required to pay additional federal
income tax as a result of a Final Determination
relating to a Tax Indemnity Event, or (b) the
following have all occurred (1) the Partnership
receives a revenue agent's report or Final
Partnership Administrative Adjustments that proposes
adjustments that would result in a Tax Indemnity
Event, (2) the Partnership exhausts its
administrative remedies with the Appeals Division of
the Internal Revenue Service with respect to such
adjustments, and (3) the Limited Partner receives an
opinion of counsel that a Tax Indemnity Event has
occurred and additional federal income tax will be
owed by such Partner and (ii) with respect to any
other Tax Indemnity Event, the earlier of (a) the end
of the month during which either the Common Limited
Partner or the
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<PAGE> 3
Preferred Limited Partner is required to pay
additional federal income taxes as a result of a Tax
Indemnity Event or (b) the date that the Limited
Partner reasonably determines (based on the advice of
tax counsel) that a Tax Indemnity Event has occurred
and additional federal income taxes will be owed by
either the Common Limited Partner or the Preferred
Limited Partner.
"Linden GP LLC" shall mean JEDI Linden GP, L.L.C., a
Delaware limited liability company.
"Linden GP, Inc." shall mean JEDI Linden, Inc., a
Delaware corporation.
(c) The definition of "Capital Account" shall be
amended to insert "5.9," after the word "subsections" in the
10th line of clause (ii).
(d) The definition of "Distributable Cash" shall be
amended to (i) delete ", and the Cost Portion of the
Management Fee" from the 17th line of the definition and (ii)
delete the second sentence in its entirety.
(e) The definition of "Tax Indemnity Event" shall be
amended to insert (i) "or its partners" in the second line
after the words "General Partner" and before the word "not"
and (ii) "(excluding Section 10.1(a) hereof)" in the third
line after the word "Agreement" and before the word "that."
2. The following Section 3.4 shall be added to ARTICLE III of the
Agreement:
3.4 Contribution to Fund Buy-Out Agreements. The General
Partner shall make Capital Contributions equal to all funds
required to be paid by the Partnership pursuant to the Buy-Out
Agreements.
3. Section 4.3(b) of the Agreement shall be amended to delete that
portion of the section beginning after the words "Schedules 5 of 7 hereto" on
the sixth line of Section 4.3(b).
4. Section 4.5 of the Agreement shall be amended to delete "or amounts
that would otherwise have been paid to the General Partner as the Management
Fee," from the sixth and seventh lines of Section 4.5.
5. Section 4.6 of the Agreement shall be amended to replace the
existing provision with the following:
Tax Indemnity. (a) Notwithstanding anything else
contained herein other than the following sentence,
if a Tax Indemnity
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<PAGE> 4
Event occurs, then on and after the Tax Indemnity
Distribution Date, an amount of Distributable Cash
that would otherwise have been distributed to the
General Partner under this Article IV for any month
shall instead be distributed to the Preferred Limited
Partner or the Common Limited Partner, as the case
may be, until the balance of the Tax Indemnity Amount
equals zero. Notwithstanding the preceding sentence,
if the Tax Indemnity Amount is in excess of
$5,000,000 and relates solely to the 1999
Transactions, the General Partner may elect the
following alternative distribution mechanism. On and
after the Tax Indemnity Distribution Date an amount
of Distributable Cash that would have otherwise been
distributed to the General Partner under this Article
IV shall instead be distributed to the Preferred
Limited Partner or the Common Limited Partner, as the
case may be, until such Limited Partner has received
an amount of Distributable Cash pursuant to this
subsection 4.6 equal to the amount of net additional
taxes (including penalties and interest thereon)
payable with respect to such period and all prior
periods (such amount compounded at the Implicit Rate
from the Tax Indemnity Distribution Date until the
date of final distribution) plus the amount of all
income taxes payable by such Limited Partner as a
result of the allocation of income to such Limited
Partner in connection with such distributions (which
allocation will take into account all of the elements
of the Tax Indemnity Amount, including the
calculation of the income taxes payable) and
thereafter Schedules 5 and 7 to this Agreement shall
be revised to increase the aggregate amounts to be
distributed pursuant to subsection 4.3(a) to pay the
remaining Tax Indemnity Amount (as adjusted to
reflect installment distributions compounded at the
Implicit Rate) in monthly installments during the
period following the month during which the revisions
are calculated and ending on the Flip Date. Such
calculation shall take into account the Tax
Assumption set forth on Schedule 2 as adjusted to
reflect any revisions thereto resulting from the Tax
Indemnity Event and all of the elements of the Tax
Indemnity Amount, including the calculation of income
taxes payable.
(b) If a distribution is made to a Limited Partner
pursuant to Section 4.6(a) based upon clause (ii) of
the definition of "Tax Indemnity Distribution Date"
and it is later determined that the Tax Indemnity
Event on which the payment was based did
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<PAGE> 5
not occur, such Limited Partner shall pay to the
General Partner within 30 days of such determination
an amount of cash equal to such distribution, plus
any interest actually received from the Internal
Revenue Service with respect to taxes relating to
such Tax Indemnity Event; provided, however, that
such payment obligation shall be subject to the terms
of the subordination provisions attached hereto as
Annex A.
6. Section 5.2(d) of the Agreement shall be amended to delete that
portion of the section beginning after the word "hereof" on the sixth line of
Section 5.2(d).
7. Section 5.9 of the Agreement shall be amended as follows:
(a) The title of said section shall be expanded by
adding the words "and Deductions Attributable to Buy-Out" to
the end of such title.
(b) The existing text of Section 5.9 shall become
subparagraph (a) of Section 5.9 and the following provision
shall be added as subparagraph (b) of Section 5.9:
(b) All deductions attributable to the payments made
under the Buy-Out Agreements shall be allocated to
the General Partner.
8. Section 6.4 of the Agreement shall be amended by inserting the words
"and the General Partner's Capital Contributions under Section 3.4" after the
word "Proceeds" at the end of the parenthetical phrase in the second line of
such section.
9. Section 7.2(c) of the Agreement shall be amended by deleting "1600"
in the second line thereof and inserting "1400" in replacement therefor.
10. Section 7.4 of the Agreement shall be deleted in its entirety.
11. The proviso in the first sentence of Section 7.10 of the Agreement
shall be restated in its entirety as follows:
; provided, that each Partner shall conduct its business in a
manner so that the Limited Partner may avoid Public Utility
Status as described in subsection 10.5 hereof.
12. The first sentence of Section 10.1(a) of the Agreement shall be
amended to delete clause (i) in its entirety, to delete sub-clause (x) of clause
(ii) and to delete the word "thereafter" at the end thereof.
-5-
<PAGE> 6
13. Section 12.2 of the Agreement shall be amended (a) to change the
street address of General Electric Capital Corporation - TIFC from "1600 Summer
Street" to "120 Long Ridge Road," and (b) to restate the address of Cogen Linden
or the Partnership as follows:
1400 Smith Street, EB 2407
Houston, Texas 77002
Attention: Donna Lowry, Compliance Department
Telecopy: (713) 646-4039
14. Section 14.1(t) of the Agreement shall be amended to insert the
words "or its successors or assigns" after the word "Exxon" and before the word
"shall" on the first line of Section 14.1(t).
15. Section 14.1(i) of the Agreement shall be restated in its entirety
as follows:
(i) An entity with a net worth of at least
$100,000,000 shall fail to own and control, directly
or indirectly, a beneficial interest of at least 8.2%
in the General Partner; or
16. Section 14.1 of the Agreement shall be amended to add the following
new Section 14.1(w):
(w)(1) Linden GP LLC shall fail to perform or observe
Section 1.04, 2.01, 2.06, 4.01, 5.03 or 5.04 of its limited
liability company agreement; (2) Linden GP Inc. shall fail to
perform or observe Article III, IX.2, IX.3 or XII.1 of its
Certificate of Incorporation; or (3)(A) Linden GP LLC shall
fail to perform or observe any provisions of its limited
liability company agreement (other than provisions enumerated
in clause (1) above of this paragraph (w)), or (B) Linden GP,
Inc. shall fail to perform or observe any provision of its
Certificate of Incorporation (other than provisions enumerated
in clause (2) above of this paragraph (w)), and in each case
in this clause (3) such failure shall continue unremedied for
a period of 30 days after written notice thereof by any
Limited Partner to Linden GP LLC (in the case of clause (A)
above) or Linden GP, Inc. (in the case of clause (B) above)
and the General Partner; provided, however, that such 30 day
period shall be extended for such period of time (not to
exceed 60 days) during which Linden GP LLC or Linden GP, Inc.
or the General Partner on behalf of Linden GP LLC or Linden
GP, Inc. shall be diligently using its best efforts to cure
such default.
17. The General Partner is hereby authorized to execute and deliver the
Buy-Out Agreements on behalf of the Partnership and to make all payments
contemplated thereunder in accordance with the terms thereof. The Owner Trustee
hereby consents under Section 7.3(a) of the
-6-
<PAGE> 7
Agreement to the management fee termination and the fuel fee termination
pursuant to the Buy-Out Agreements.
18. This Amendment Agreement shall be binding upon, and shall enure to
the benefit of, the parties hereto and their respective successors and assigns.
19. This Amendment 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.
20. Except as hereby amended, the Agreement shall remain in full force
and effect.
21. This Amendment Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of Delaware, without regard to principles
of conflict of laws.
-7-
<PAGE> 8
IN WITNESS WHEREOF, this Amendment Agreement has been executed as of
the date and year first above written.
COGEN TECHNOLOGIES LINDEN, LTD.
By: RCM Holdings, Inc.
(formerly Cogen Technologies, Inc.),
a Texas corporation
Its: General Partner
By: /s/ RICHARD A. LYDECKER, JR.
-------------------------------------
Name: Richard A. Lydecker, Jr.
Title: Senior Vice President
and Chief Financial Officer
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, not in its
individual capacity but as Owner Trustee
By: /s/ GERALD R. WHEELER
-------------------------------------
Name: Gerald R. Wheeler
-------------------------------------
Title: Vice President
-------------------------------------
-8-
<PAGE> 1
EXHIBIT 10.26
EXHIBIT A
to
ATTACHMENT 1
THIRD AMENDMENT OF THE
AGREEMENT OF LIMITED PARTNERSHIP
OF
COGEN TECHNOLOGIES LINDEN, LTD.
THIS THIRD AMENDMENT OF THE AGREEMENT OF LIMITED PARTNERSHIP OF COGEN
TECHNOLOGIES LINDEN, LTD. (this "Amendment Agreement") is made as of the _______
day of February, 1999, by and between RCM Holdings, Inc. (formerly Cogen
Technologies, Inc.), a Texas corporation ("General Partner") and Cogen
Technologies Limited Partners Joint Venture, a Texas general partnership
("Limited Partner"). Unless otherwise noted, all defined terms used herein shall
have the same meaning given such terms in the Agreement of Limited Partnership
of Cogen Technologies Linden, Ltd. dated as of June 30, 1989 (as heretofore
amended, the "Agreement").
WHEREAS, the parties hereto are parties to the Agreement;
WHEREAS, pursuant to the Agreement, the limited partnership known as
Cogen Technologies Linden, Ltd. (the "Partnership") was formed pursuant to the
Partnership Act; and
WHEREAS, the parties hereto desire to amend the Agreement to reflect
the termination of the Management Agreement dated as of July 7, 1989 by and
between the Partnership and Cogen Technologies Management Company (predecessor
to RCM Management Services, L.P.) and to reflect certain other agreements
between and among the Partners.
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings contained herein, the parties hereto hereby agree as follows:
1. The DEFINITIONS of the Agreement shall be amended as follows:
(a) The definition of "Management Agreement" shall be deleted.
(b) The definition of "Partnership Manager" shall be revised
to read as follows:
"Partnership Manager" means the General Partner.
(c) The following new defined terms shall be added:
<PAGE> 2
"Third Amendment" shall mean the Third Amendment of
the Agreement of Limited Partnership of Cogen
Technologies Linden, Ltd. dated as of February__,
1999.
"Buy-Out Agreement" shall mean the Termination
Agreement dated as of the date of the Third Amendment
by and between the Partnership and RCM Management
Services, L.P., a copy of which is attached to the
Third Amendment as Exhibit A.
2. The existing text of Section 8.2 of the Agreement shall become
subparagraph (a) of Section 8.2 and the following provision shall be added as
subparagraph (b) of Section 8.2:
(b) The Partners shall make Capital Contributions,
pro rata in their respective Sharing Ratios, equal to all
funds required to be paid by the Partnership pursuant to the
Buy-Out Agreement and to be paid by Cogen Technologies Linden
Venture, L.P. pursuant to the Termination Agreement dated as
of October 25, 1998 by and between Cogen Technologies Capital
Company L.P. and H. Fred Levine, a copy of which is attached
to the Third Amendment as Exhibit B.
3. Section 15.1 of the Agreement shall be amended in its entirety to
read as follows:
Section 15.1. The overall management and control of
the business and affairs of the Partnership shall be vested in
the General Partner, except that the authority to determine
the following matters may not be carried out by the General
Partner without the concurrence of the Limited Partner:
(a) alteration of the purpose of the
Partnership set forth in Article III hereof; and
(b) any sale, assignment, license or
transfer, of all or substantially all of the assets
of the Partnership.
4. Section 15.2 of the Agreement shall be amended by deleting "Except
for the fees payable to the Partnership Manager pursuant to the Management
Agreement as the same may be amended from time to time" from the first sentence
of Section 15.2.
5. Section 15.4 of the Agreement shall be deleted in its entirety.
6. All references to the Partnership Manager in Sections 15.5 and 15.6
of the Agreement shall be deleted.
-2-
<PAGE> 3
7. The General Partner is hereby authorized to execute and deliver the
Buy-Out Agreement on behalf of the Partnership, to make a capital contribution
to Cogen Technologies Linden Venture L.P. on behalf of the Partnership in an
amount equal to the Capital Contributions made pursuant to Section 8.2(b) of the
Agreement, and to make all payments contemplated under the Buy-Out Agreement in
accordance with the terms thereof.
8. This Amendment Agreement shall be binding upon, and shall enure to
the benefit of, the parties hereto and their respective successors and assigns.
9. This Amendment 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.
10. Except as hereby amended, the Agreement shall remain in full force
and effect.
11. This Amendment Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of Texas, without regard to principles of
conflict of laws.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Agreement as of the day and in the year first above written.
RCM HOLDINGS, INC.
(formerly Cogen Technologies, Inc.), a Texas
corporation
By: /s/ RICHARD A. LYDECKER, JR.
---------------------------------------
Name: Richard A. Lydecker, Jr.
Title: Senior Vice President
and Chief Financial Officer
COGEN TECHNOLOGIES LIMITED
PARTNERS JOINT VENTURE
By: /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
By: /s/ ROBERT A. HANSEN
---------------------------------------
Robert A. Hansen
-4-
<PAGE> 5
By: Evergreen Partnership Energy, Ltd.
By: /s/ H. FRED LEVINE
----------------------------------------
Name: H. Fred Levine
----------------------------------------
Title: General Partner
----------------------------------------
By: The 1989 Energy Trust
By: /s/ ROBERT CARY MCNAIR, JR.
------------------------------------
Robert Cary McNair, Jr., Co-trustee
(and not in his individual capacity)
By: /s/ DAVID C. HOLLAND
------------------------------------
David C. Holland, Co-trustee (and
not in his individual capacity)
By: /s/ C. DONALD VAN WART
----------------------------------------
C. Donald Van Wart
By: Hansfam Three, a Trust
By: /s/ JOHN P. HANSEN
------------------------------------
John P. Hansen, Co-trustee (and not
in his individual capacity)
By: /s/ C. DONALD VAN WART
------------------------------------
C. Donald Van Wart, Co-trustee (and
not in his individual capacity)
-5-
<PAGE> 1
EXHIBIT 10.27
REDEMPTION AND CONVERSION OF PARTNERSHIP INTERESTS
AND FOURTH AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
COGEN TECHNOLOGIES LINDEN, LTD.
This 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 (this "Redemption and Amendment Agreement"),
is entered into by and among JEDI Linden GP, L.L.C., a Delaware limited
liability company ("Linden GP"), JEDI Linden LP, L.L.C., a Delaware limited
liability company ("Linden LP"), RCM Holdings, Inc. (formerly Cogen
Technologies, Inc.), a Texas corporation ("CTI"), Cogen Technologies Limited
Partners Joint Venture, a Texas general partnership ("CTLPJV"), and Cogen
Technologies Linden, Ltd., a Texas limited partnership (the "Partnership").
WITNESSETH:
WHEREAS, the Partnership was formed as a limited partnership under the
Texas Revised Limited Partnership Act (the "Act") upon the filing of a
Certificate of Limited Partnership in the office of the Secretary of State of
the State of Texas on July 7, 1989, and is governed by an Agreement of Limited
Partnership dated as of June 28, 1989, as amended as of the 14th day of
February, 1990, the 31st day of July, 1990 and the 4th day of February, 1999
(the "Partnership Agreement");
WHEREAS, CTI and CTLPJV desire to withdraw as partners of the
Partnership and relinquish any and all remaining rights that they hold in and to
the Partnership, its properties and revenues (collectively, the "Retained
Interests") in exchange for the distribution to CTI and CTLPJV by the
Partnership of their respective share of the cash and other assets described on
Exhibit A hereto (the "Redemption Consideration"); and
WHEREAS, Linden GP and Linden LP desire to (i) consent to the
Partnership's redemption of the Retained Interests of CTI and CTLPJV in the
Partnership, (ii) convert the general partner interest held by Linden LP into a
limited partner interest, and (iii) to continue the business of the Partnership
pursuant to the Partnership Agreement as amended hereby.
NOW, THEREFORE, the undersigned, in consideration of the premises,
covenants and agreements contained herein, do hereby agree as follows:
1. Redemption. In consideration for the distribution by the Partnership
of its respective share of the Redemption Consideration and the covenants and
agreements herein contained, each of CTI and CTLPJV does hereby relinquish and
assign, transfer and convey to the Partnership all of its right, title and
interest in and to its Retained Interest in the Partnership and all rights and
obligations it may have as a Partner under the Partnership Agreement.
<PAGE> 2
2. Conversion of Interest. The Partnership Interest of Linden LP as a
general partner is hereby converted to a Partnership Interest as a limited
partner, and Linden LP shall no longer be a general partner of the Partnership.
3. Revaluation of Capital Accounts. The Capital Accounts of the
Partners shall be revalued pursuant to Section 8.4 of the Partnership Agreement
immediately prior to the distribution of the Redemption Consideration to CTI and
CTLPJV to cause (i) the Capital Accounts of CTI and CTLPJV (as adjusted to
reflect all other allocations and distributions prior to such effective date) to
reflect a credit balance equal to the amount of their respective shares of the
Redemption Consideration, (ii) the Capital Account of Linden GP to reflect a
credit balance equal to 1.1% (.58 / 52.5) of the credit balance in the Capital
Account of CTI and (iii) the Capital Account of Linden LP to reflect a credit
balance equal to 90.5% of the credit balance in the Capital Account of CTLPJV
and a credit balance equal to 80.4% (46.92/52.5) of the credit balance in the
Capital Account of CTI.
4. Withdrawal. Immediately following the admission of Linden GP and
Linden LP as partners of the Partnership and the distribution of the Redemption
Consideration to CTI and CTLPJV, each of CTI and CTLPJV (i) shall and does
hereby withdraw as a Partner of the Partnership and (ii) shall thereupon cease
to be a Partner of the Partnership.
5. Continuation of the Partnership. The parties hereto agree that
notwithstanding any provision of the Partnership Agreement to the contrary, the
withdrawal of CTI and CTLPJV as partners of the Partnership shall not dissolve
the Partnership, and the business of the Partnership shall be continued by
Linden GP and Linden LP.
6. Amendments. The Partnership Agreement is amended as follows:
(a) The definition of "General Partner" shall be revised to read as
follows:
"General Partner" means JEDI Linden GP, L.L.C., a Delaware
corporation, or its successor or assign.
(b) The definition of "Limited Partner" shall be revised to read as
follows:
"Limited Partner" means JEDI Linden LP, L.L.C., a Delaware
corporation, or its successor or assign.
(c) The second sentence of Article IV is deleted in its entirety and
replaced with the following:
The location of the principal office of the Partnership
where the books and records of the Partnership shall be kept
shall be 1400 Smith Street, Houston, Texas 77002.
-2-
<PAGE> 3
(d) The first sentence of Article V is deleted in its entirety and
replaced with the following:
The General Partner shall serve as the Registered Agent of
the Partnership as required under the Partnership Act, and
the location of the Registered Office of the Partnership
shall be 1400 Smith Street, Houston, Texas 77002.
(e) Section 8.1 shall be revised to reflect a Sharing Ratio for the
General Partner equal to 1% and a Sharing Ratio for the Limited
Partner equal to 99%.
7. Pledge. Linden GP, in its capacity as General Partner consents
hereby to the pledge by the Limited Partner of its interest in the Partnership
in favor of NationsBank, N.A., as Agent for the Lenders, in connection with the
acquisition bridge and term financing and in favor of a trustee in connection
with any capital markets take-out of the acquisition bridge or term financing
and confirms, acknowledges and agrees that such acquisition bridge financing, is
in connection with a bona fide financing under Section 16.5 of the Partnership
Agreement.
8. Books and Records. The General Partner shall take all actions
necessary under the Act and the Partnership Agreement as the General Partner
shall deem necessary or desirable, to evidence the withdrawal of CTI and CTLPJV
from the Partnership and the admission of Linden GP and Linden LP to the
Partnership as the General Partner and Limited Partner, respectively.
9. Future Cooperation. Each of the parties hereto agrees to cooperate
at all times from and after the date hereof with respect to all of the matters
described herein, and to execute such further assignments, assumptions,
amendments of the Partnership Agreement, notifications and other documents as
may be reasonably requested for the purpose of giving effect to, or evidencing
or giving notice of, the transactions contemplated by this Redemption and
Amendment Agreement.
10. Binding Effect. This Redemption and Amendment Agreement shall be
binding upon, and shall enure to the benefit of, the parties hereto and their
respective successors and assigns.
11. Execution in Counterparts. This Redemption and Amendment Agreement
may be 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.
12. Agreement in Effect. Except as hereby amended, the Agreement shall
remain in full force and effect.
13. Governing Law. This Redemption and Amendment Agreement shall be
governed by, and interpreted in accordance with, the laws of the State of Texas,
without regard to principles of conflict of laws.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Redemption and
Amendment Agreement to be duly executed and delivered as of the day and year
first above written.
JEDI LINDEN GP L.L.C.
By: /s/ JEREMY BLACHMAN
----------------------------------------
Name: Jeremy Blachman
--------------------------------------
Title: Attorney in Fact
-------------------------------------
JEDI LINDEN LP, L.L.C.
By: /s/ JEREMY BLACHMAN
----------------------------------------
Name: Jeremy Blachman
--------------------------------------
Title: Attorney in Fact
-------------------------------------
RCM HOLDINGS, INC.,
a Texas corporation
By: /s/ RICHARD A. LYDECKER, JR.
----------------------------------------
Name: Richard A. Lydecker, Jr.
Title: Senior Vice President
and Chief Financial Officer
COGEN TECHNOLOGIES LIMITED
PARTNERS JOINT VENTURE
By: /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
By: /s/ ROBERT A. HANSEN
------------------------------------
Robert A. Hansen
-4-
<PAGE> 5
By: Evergreen Partnership Energy, Ltd.
By: /s/ H. FRED LEVINE
----------------------------------------
Its: G.P.
---------------------------------------
By: The 1989 Energy Trust
By: /s/ ROBERT CARY MCNAIR, JR.
------------------------------------
Robert Cary McNair, Jr., Co-trustee
(and not in his individual capacity)
By: /s/ DAVID C. HOLLAND
------------------------------------
David C. Holland, Co-trustee
(and not in his individual capacity)
By: /s/ C. DONALD VAN WART
------------------------------------
C. Donald Van Wart
By: Hansfam Three, a Trust
By: /s/ JOHN P. HANSEN
------------------------------------
John P. Hansen, Co-trustee
(and not in his individual capacity)
By: /s/ C. DONALD VAN WART
------------------------------------
C. Donald Van Wart, Co-trustee
(and not in his individual capacity)
-5-
<PAGE> 6
COGEN TECHNOLOGIES LINDEN, LTD.
By: JEDI Linden GP, L.L.C.
Its: General Partner
By: /s/ JEREMY BLACHMAN
----------------------------------------
Name: Jeremy Blachman
--------------------------------------
Title: Attorney in Fact
-------------------------------------
By: JEDI Linden LP, L.L.C.
Its: General Partner
By: /s/ JEREMY BLACHMAN
----------------------------------------
Name: Jeremy Blachman
--------------------------------------
Title: Attorney in Fact
-------------------------------------
By: RCM Holdings, Inc.,
a Texas corporation
Its: General Partner
By: /s/ RICHARD A. LYDECKER, JR.
----------------------------------------
Name: Richard A. Lydecker, Jr.
Title: Senior Vice President
and Chief Financial Officer
By: Cogen Technologies Limited Partners
Joint Venture
Its: Limited Partner
By: /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
-6-
<PAGE> 7
By: /s/ ROBERT A. HANSEN
------------------------------------
Robert A. Hansen
By: Evergreen Partnership Energy, Ltd.
By: /s/ H. FRED LEVINE
----------------------------------------
Its: G.P.
---------------------------------------
By: The 1989 Energy Trust
By: /s/ ROBERT CARY MCNAIR, JR.
------------------------------------
Robert Cary McNair, Jr., Co-trustee
(and not in his individual capacity)
By: /s/ DAVID C. HOLLAND
------------------------------------
David C. Holland, Co-trustee
(and not in his individual capacity)
By: /s/ C. DONALD VAN WART
------------------------------------
C. Donald Van Wart
By: Hansfam Three, a Trust
By: /s/ JOHN P. HANSEN
------------------------------------
John P. Hansen, Co-trustee
(and not in his individual capacity)
By: /s/ C. DONALD VAN WART
------------------------------------
C. Donald Van Wart, Co-trustee
(and not in his individual capacity)
-7-
<PAGE> 1
EXHIBIT 10.29
CONFIDENTIAL
EASEMENT CROSSING AGREEMENT
This Agreement entered into this 17 day of December, 1990, by and
between Coastal Pipeline Company ("Coastal"), a Delaware corporation and
Cogen Technologies Linden Venture L.P. ("Cogen") a Delaware limited
partnership.
WHEREAS, Coastal possesses an easement from the State of New York for
its 12" Harbor Pipeline which passes under the Arthur Kill between Linden,
New Jersey and Staten Island, New York (hereinafter referred to as
"Easement"), a copy of the instrument creating the Easement is attached
hereto as Exhibit "A"; and
WHEREAS, Cogen is desirous of crossing the Easement with underground
electrical transmission lines and related facilities from its Linden, New
Jersey cogeneration facility to an electric utility substation on Staten
Island, New York (hereinafter referred to as the "Project"); and
WHEREAS, Coastal has filed a remonstrance to the application of Cogen
for a license from the State of New York Office of General Services,
Bureau of Land Management to cross said Easement, expressing safety,
environmental and other concerns held by Coastal;
WHEREAS, the parties desire to address their mutual and individual
concerns by express provisions detailed in this written agreement;
NOW THEREFORE, the parties do hereby agree as follows:
1. Conditioned upon and in consideration of the full and faithful
performance by Cogen of the agreements set forth herein, Coastal agrees to
withdraw its remonstrance and file its written
<PAGE> 2
CONFIDENTIAL
consent to the Project with the Bureau of Land Management, New York State Office
of General Services.
2. Cogen acknowledges that it has been advised that Coastal has future
plans to relocate its pipeline within the Easement to a depth of approximately
sixty five feet (65') below M.S.L. Therefore, Cogen agrees that its Project
shall cross the Easement at a depth of no less than seventy five feet (75')
below M.S.L. so as to avoid interference with Coastal's future plans. Cogen
further agrees that it has no objection to and will fully cooperate with Coastal
in its future efforts for relocation of its pipeline within the Easement.
3. Cogen agrees to notify Coastal's representative when the project
drilling begins, to keep said representative apprised of the progress of the
drilling and to allow said representative to be in attendance at the drill site.
Cogen shall specially notify the Coastal representative of the period of time
during which the drilling is expected to be within one hundred (100) feet from
the pipeline route. Cogen also agrees to notify said representative as its best
estimate of when the drilling will be taking place directly beneath Coastal's
pipeline.
Cogen agrees to reimburse Coastal for all reasonable costs incurred by
Coastal in retaining a qualified representative to serve the function described
in the preceding paragraph.
4. Cogen assumes full and complete responsibility for any and all damages
caused to Coastal by the drilling and other activities associated with the
construction of its Project. Cogen further agrees to indemnify and hold
Coastal, its agents and
-2-
<PAGE> 3
CONFIDENTIAL
employees harmless for any and all demands, claims, costs, penalties, fines,
liabilities and expenses (including but not limited to attorneys' fees) for
personal injuries, deaths, property damage or otherwise which may arise or occur
during or as a result of the drilling and/or construction of the Project,
including those claims alleged to arise or occur from the joint or concurrent
negligence of the parties hereto.
5. At such time as Coastal proceeds with the repair, replacement or
maintenance of its pipeline within the Easement, Cogen shall, upon ninety (90)
days advance notice of such operation by Coastal, cooperate with Coastal so that
any work performed by or on behalf of Coastal, within one hundred feet (100') of
either side of Cogen's transmission lines may be safely performed. Cogen agrees
that, upon the written findings of two mutually acceptable independent
recognized experts, one in power transmission and one in horizontal drilling,
that drilling within an area identified in the written findings may be unsafe,
Cogen will cease transmitting electricity through the cables when the drilling
or other work associated with the Coastal pipeline is within said area. Coastal
agrees that it will make all reasonable efforts to minimize Cogen's downtime, if
any. All cost and expenses incurred in securing the services of the two experts
shall be shared equally by Coastal and Cogen.
6. Coastal shall be responsible for any and all direct damages to Cogen
caused by Coastal's negligence in its repair, replacement or maintenance of its
pipeline. Provided, however, that Coastal shall not be liable for any indirect,
consequential or
-3-
<PAGE> 4
special damages which may be incurred by Cogen, and Cogen hereby waives and
releases Coastal from any such damages.
7. This Agreement may be assigned by either party provided written
notice of such assignment is provided to the other party no later than ten (10)
days prior to the effective date of such assignment. Assignment shall not
release either party from responsibility for the obligations provided for
herein.
8. This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas, regardless of conflict of laws provisions.
Jurisdiction and venue shall be proper, and the parties hereby agree and submit
to same, in the appropriate Courts of Harris County, Texas.
This Agreement shall be effective upon the full and complete execution of
duplicate originals hereof.
COASTAL PIPELINE COMPANY
BY: /s/ HUGH C. WILLIAMS
----------------------------------------
NAME: Hugh C. Williams
--------------------------------------
TITLE: Senior Vice President
-------------------------------------
DATE: December 14, 1990
--------------------------------------
[SEAL]
-4-
COGEN
CONFIDENTIAL
<PAGE> 5
CONFIDENTIAL
COGEN TECHNOLOGIES LINDEN VENTURE, L.P.
BY ITS GENERAL PARTNER,
COGEN TECHNOLOGIES LINDEN, LTD.
BY ITS GENERAL PARTNER
COGEN TECHNOLOGIES, INC.
BY: /s/ JOSEPH M. BOLLINGER
------------------------------------
NAME: JOSEPH M. BOLLINGER
----------------------------------
TITLE: VICE PRESIDENT/GENERAL MANAGER
---------------------------------
DATE: DECEMBER 14, 1990
----------------------------------
-5-
<PAGE> 1
CONFIDENTIAL
EXHIBIT 10.30
[COLONIAL PIPELINE COMPANY LETTERHEAD]
Woodbury Area Office
P.O. Box 727
Woodbury, NJ 08096
June 12, 1991
Cogen Technologies Linden Venture L.P.
1600 Smith Street
Suite 5000
Houston, Texas 77002
RE: Rights-Of-Way Crossing
Linden Cogen 345KV Pipe Cable
Richmond County, New York
Tax Block 1835 Lot 50
CPC Locations Nos. 1460-1:2, 1460-2:2 & 1460-5:2
In connection with the planned installation by Cogen Technologies Linden
Venture L.P. ("Cogen") of electric transmission cables and related facilities
(Cogen's facilities), whereby Cogen's facilities will cross a Colonial Pipeline
Company ("Colonial") right-of-way for (3) petroleum products pipelines on Tax
Block 1835 Lot 50, as shown on the Keller & Kirkpatrick Drawing dated April 15,
1991, revision 4, Project 890803, page 97, titled "Map of Proposed Easements",
Cogen and Colonial hereby agree as follows:
1. Cogen agrees to notify Colonial's Operating Supervisor (phone
908/636-3324), at least two working days prior to initial construction and
subsequent maintenance or repair in the immediate vicinity of the crossing of
the rights-of-way so that Colonial may provide a representative at the site. If
he cannot be reached, Cogen will notify Colonial's Area Manager (phone:
609/845-8745).
Colonial agrees to notify Cogen's Manager of Compliance and Permitting,
(phone: 908/474-0800) as in the paragraph above when it plans to repair or
otherwise work on its pipeline in the vicinity of the crossing of the
rights-of-way.
2. Cogen and Colonial agree that no excavation or construction will take
place within five (5) feet of either side of the extremity of each other's
facilities without prior notification, and that no mechanized ditching or
excavation shall take place in this area. Both parties agree to completely
-1-
<PAGE> 2
CONFIDENTIAL
COLONIAL PIPELINE COMPANY
expose each other's facilities prior to undertaking any construction, repair or
maintenance work within this area. Each party will allow the other party's
representative to be present during construction, maintenance, repair or other
work. Sub-grading, grading and placement of fill over the pipelines will
require the approval of the other party's field representative as to the method
and extent. Stockpiling of spoilage or top soil over the pipelines will not take
place unless approved by the other party.
3. Both rights-of-way will stay clear of vehicles and material at all
times.
4. Permanent structures will not be built on either right-of-way in the
immediate vicinity of the crossing of the two rights-of-way. Manholes, junction
boxes, valve boxes, fire hydrants, service meters, storm drain inlets, and
utility poles are considered permanent structures. The impoundment of water
over the pipelines will not take place.
Neither party shall construct fences or temporary structures in either
right-of-way in the immediate vicinity of the crossing of the two
rights-of-way without the express approval of the other party. Temporary
structures include such items as signs, trailers and temporary power poles.
5. Upon completion of the installation of facilities, Cogen will forward
as-built drawings to Colonial.
Upon request by one party or its agents, the other party will determine
the approximate location of its pipeline and right-of-way limits and will
furnish such information as requested, but will make no warranty as to the
accuracy of the locations and measurements it will provide. Neither party can
provide assurance that its permanent line markers are positioned directly over
its pipeline.
6. Pipeline markers damaged or made unusable shall be repaired or replaced
at the responsible party's expense. In addition, no pipeline markers shall be
obscured from public view.
7. Both parties agree that no blasting shall be undertaken within the
vicinity of the crossing.
8. Each party agrees that all work on its own and the other party's
right-of-way shall be performed in a workmanlike manner and in compliance with
applicable government and industry standards and codes.
-2-
<PAGE> 3
CONFIDENTIAL
COLONIAL PIPELINE COMPANY
9. In addition to the above mentioned restrictions, all of the following
conditions shall apply:
A. Parallel occupancy by foreign utilities shall not be permitted
longitudinally within either party's right-of-way in the
immediate vicinity of the crossing.
B. Each party agrees that installation of its facilities shall be a
minimum of two feet and no inches above or below each other's
pipeline, and that this elevation must be maintained for the
entire width of the right-of-way. The angle of crossing shall be
as near a 90 degree angle as possible.
C. Each party acknowledges that the other party's pipelines have an
impressed electrical current system for the protection of steel
casing. Any loss of this protection will be corrected by
personnel of the party which owns the damaged pipeline. Repair
costs shall be borne by the party causing the damage.
D. If the approximate location of either party's pipeline is
required, steel prod bars, shovels and electrical sensing devices
may be used by either party's field personnel. Both parties note
that these methods are only approximate and can be misleading,
and that the exact location of pipelines can best be determined
through test pitting.
E. If a party requires test pitting to determine the exact location
of the other party's pipeline at the time of construction,
maintenance, repair or other work, it will notify the other party
per Paragraph 1. No test pitting shall take place unless
representatives of both parties are present. All costs for this
test pitting will be borne by the party which requests it. Any
engineering stemming from the amount or location of the test pit
data will be the responsibility of the requesting party.
F. Neither party shall operate heavy equipment over each other's
right-of-way unless earth padding has been provided to protect
the pipeline from vibrating, overloading or physical damage.
Neither party shall locate temporary equipment crossings over
each other's right-of-way except at selected locations approved
by the other party's field representative. Light to medium weight
equipment will require five (5) vertical feet of cover over the
pipeline, and heavy equipment will require six (6) vertical feet
of cover. Colored
-3-
<PAGE> 4
CONFIDENTIAL
COLONIAL PIPELINE COMPANY
strips of plastic shall be placed at original grade under the temporary
fill so that original grade will not be disturbed when the temporary
fill is removed. No equipment or vehicles shall be parked over the
pipelines.
Upon the failure of one party or its representative to comply with any
of the terms of this Agreement, the other party reserves the right to revoke
this agreement in its entirety and, in the event that the noncomplying party
has caused damage, to make any necessary repairs or adjustments to its pipeline
or right-of-way with its own forces at the expense of the noncomplying party.
<TABLE>
<S> <C>
(Signed) /s/ J. M. BOLLINGER 6-24-91 /s/ J. D. CROWELL 6-12-91
------------------------------- -------------------------------
(Name) J. M. Bollinger J. D. Crowell
-------------------------------
(Title) V. P./General Manager Woodbury Area Engineer
------------------------------- Colonial Pipeline Company
Cogen Technologies Linden
Venture, L.P.
</TABLE>
-4-
<PAGE> 1
EXHIBIT 10.31
CONFIDENTIAL
THIS INDENTURE made this 9th day of May, 1991, between THE PEOPLE OF THE
STATE OF NEW YORK acting by John F. Hudace, their Commissioner of the Office of
General Services in the Executive Department, by Robert B. Adams, First Deputy
Commissioner, Corning Tower, Empire State Plaza, Albany, NY, hereinafter
referred to as the "Grantor", and COGEN TECHNOLOGIES LINDEN VENTURE, L.P., a
Delaware limited partnership, having its principal office and place of business
at 1600 Smith Street, Suite 500, Houston, Texas 77002, hereinafter referred to
as the "Grantee";
WITNESSETH, that the Grantor, pursuant to Section 3, subdivision 2 of the
Public Lands Law and Findings of the First Deputy Commissioner dated May 9, 1991
and in consideration of the sum of Thirty Five Thousand Two Hundred Fifty
Dollars ($35,250.00), lawful money of the United States of America, paid by the
Grantee and upon the terms and conditions hereinafter expressed, does hereby
give and grant unto the Grantee and the successors and assigns of the Grantee,
the right, privilege and easement for the construction, reconstruction,
replacement, maintenance, repair, alteration and operation of high voltage
electric transmission cables and related facilities hereinafter referred to as
the "structures and/or improvements", in bedrock under the parcels of land
underwater hereinafter described:
PARCEL I (A TEMPORARY EASEMENT)
Being a 200'-wide strip of land, located under the waters of the Arthur
Kill in the County of Richmond, Borough of Staten Island, State of New York,
more particularly described as follows:
Beginning at an angle point in the boundary line between the States of New
Jersey and New York being described as "Point 0" of said boundary line as
defined and agreed by the Joint Commission on December 23, 1889, having New
York (Long Island) coordinates of North 145,338.79 and East 1,943,275.69, and
running; thence 1) Along said State line North fifteen degrees, fifty-nine
minutes, twenty-five seconds East (N 15 degrees 59' 25" E), forty and
ninety-two hundredths (40.92') feet to a point in same; thence 2) By a new
line through the Arthur Kill, lands of the State of New York, South forty-eight
degrees, nine minutes, seven seconds East (S 48 degrees 09' 07" E), one
thousand one hundred forty (1,140' +/-) feet, more or less, to a point in the
mean high water line of the said Arthur Kill on Staten Island; thence 3) Along
said mean high water line, along lands of Houston Center Corporation, successor
in interest to H.C.C. Dev., Inc. known as Tax Lot 300, Block 1835, southerly
two hundred twenty (220' +/-) feet, more or less, to a point in same; thence 4)
By another new line through the Arthur Kill, parallel and 200' southerly
measured at right angles to the second course herein described, North
forty-eight degrees, nine minutes, seven seconds West (N 48 degrees 09' 07" W),
nine hundred eighty-five (985' +/-) feet, more or less, to a point in the
aforementioned boundary line between the States of New Jersey and New York;
thence 5) Along said State line, North eight degrees, twenty-five minutes,
twelve seconds West (N 08 degrees 25' 12" W), two hundred fifty-five and
twenty-nine hundredths (225.29') feet to an angle point in same and the Place
of Beginning. Containing 215,156 +/- square feet or 4.939 +/- acres.
REEL 2991 PAGE 0291
<PAGE> 2
CONFIDENTIAL
PARCEL II (A TWENTY-FIVE (25) YEAR EASEMENT)
Being a 50'-wide strip of land, under the waters of the Arthur Kill in the
County of Richmond, Borough of Staten Island, State of New York, more
particularly described as follows:
Beginning at a point in the boundary line between the States of New Jersey
and New York, said point being South eight degrees, twenty-five minutes, twelve
seconds East (S 08 degrees 25' 12" E), fifty-nine and seventy-two hundredths
(59.72') feet along said boundary line from "Point O" of said boundary line as
defined and agreed by the Joint Commission on December 23, 1889, having New York
(Long Island) coordinates of North 145,338.79 and East 1,943,275.69, and
running; thence 1) By a new line through the Arthur Kill, lands of the State of
New York, South forty-eight degrees, nine minutes, seven seconds East (S 48
degrees 09' 07" E), one thousand seventy-five (1,075'+/-) feet, more or less, to
a point in the mean high water line of the said Arthur Kill on Staten Island;
thence 2) Along said mean high water line along lands of Houston Center
Corporation, successor in interest to H.C.C. Dev., Inc. known as Tax Lot 300,
Block 1835, southerly seventy-five (75'+/-) feet, more or less, to a point in
same; thence 3) By another new line through the Arthur Kill, parallel and 50'
southerly measured at right angles to the second course herein described, North
forty-eight degrees, nine minutes, seven seconds West (N 48 degrees 09' 07" W),
one thousand forty-five (1,045'+/-) feet, more or less, to a point in the
aforementioned boundary line between the States of New Jersey and New York;
thence 4) Along said State line, North eight degrees, twenty-five minutes,
twelve seconds West (N 08 degrees 25' 12" W), seventy-eight and twenty-two
hundredths (78.22') feet to a point in same and the Place of Beginning.
Containing 54,276+/- square feet or 1.246+/- acres.
All as shown on a map entitled "Map of Proposed Riparian Grant, Arthur
Kill, Borough and County of Richmond, New York" prepared by Keller &
Kirkpatrick, dated June 7, 1990, revised to January 16, 1991, a copy of which
is attached hereto and made a part hereof.
The easements herein granted are subject to the terms and conditions of the
"Easement Crossing Agreement" between Coastal Pipeline Company and the Grantee
herein dated December 17, 1990.
The temporary easement first described above is for the term of
construction only, of for two (2) years, whichever is shorter. The grant of the
50 foot easement is for a term of twenty-five (25) years from the date hereof
and made and accepted subject to the following terms and conditions:
1. At the termination of the easement hereby granted, the Grantee agrees
at the expense of the Grantee and at no expense to the Grantor to
remove or close, sever, or otherwise make safe, the said structures
and/or improvements and to leave the land of the Grantor in as nearly
the same condition as possible as it was prior to the construction
hereby authorized.
2. The easement hereby granted is granted only with respect to the
structures and/or improvements described in the application and shown
on the map or plan which accompanies the application. If the proposed
structures and/or improvements shall not have been maintained and used
for a period of two years, the easement shall cease and determine
without action to such effect being taken by the Grantor and all the
rights of the Grantee shall then terminate and, furthermore, in such
event, the provisions for removal of said structures and/or
improvements above set forth shall apply in the same manner and to the
same effect as so set forth.
REEL 2991 PAGE 0292
<PAGE> 3
CONFIDENTIAL
3. The Grantee shall be liable for and shall pay all damages that may arise or
occur to the Grantor and shall save the Grantor harmless from all claims
for damages in consequence of the construction, reconstruction,
replacement, maintenance, repair, alteration and operation of the said
structures and/or improvements or by reason of any work done or authorized
by or under this grant of easement and, at the expense of the Grantee, will
defend all suits brought on account thereof.
4. The easement hereby granted shall not be assigned or transferred without
the written consent of the Commissioner of General Services, but such
consent shall not be unreasonably withheld, delayed or conditioned.
5. The easement hereby granted is intended to affect only the right, title and
interest of the Grantor in the aforedescribed parcel of land.
6. Upon the expiration of the term of the 50 foot easement, the Grantee or its
successors and assigns shall have the right to reapply for the renewal or
extension of the easement term.
The word "Grantee" shall be construed as if read "Grantees" whenever the
sense of this Indenture so requires. The word "successors" shall be construed as
if read "heirs" whenever the sense of this Indenture so requires.
All the covenants, terms and conditions of this Indenture shall inure to
the benefit of and be binding upon the successors and assigns of the respective
parties hereto, the same as if they were in every case named and expressed.
IN WITNESS WHEREOF, the Grantor has caused this instrument to be signed by
its duly authorized representative on the day and year first above written.
THE PEOPLE OF THE STATE OF NEW YORK
acting by John F. Hudace
Commissioner of General Services
By /s/ ROBERT B. ADAMS
------------------------
Robert B. Adams
First Deputy Commissioner
REEL 2991 PAGE 0293
<PAGE> 4
CONFIDENTIAL
STATE OF NEW YORK )
: ss.:
COUNTY OF ALBANY )
On this 9th day of May, 1991, before me the subscriber personally came
Robert B. Adams acting for John F. Hudace, Commissioner of the Office of General
Services of the State of New York in the Executive Department of the State of
New York, to me known and known to me to be the First Deputy Commissioner of the
Office of General Services described in and who executed the foregoing
instrument and he acknowledged to me that he executed the same as such First
Deputy Commissioner pursuant to a designation filed with the Secretary of State
on July 24, 1989, for and on behalf of The People of the State of New York.
/s/ [ILLEGIBLE]
--------------------------------
Notary Public
[SEAL]
Approved this 13th day Approved as to form this
of May, 1991 10th day of May, 1991
EDWARD V. REGAN ROBERT ABRAMS
State Comptroller Attorney General
By /s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
--------------------- --------------------------
TR Assistant Attorney General
[Illegible]
REEL 2991 Page 0294
<PAGE> 1
EXHIBIT 10.45
AMENDMENT NO. 3
AMENDMENT NO. 3, dated as of February 4, 1999 (the "Amendment"), to the
Amendment and Restatement, dated as of April 1, 1993, of the Construction and
Term Loan Agreement, dated as of February 4, 1992, as amended by Amendment No.
1, dated as of December 22, 1993, and Amendment No. 2, dated as of July 31, 1998
(as may be further amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among (i) Camden Cogen L.P., a Delaware limited
partnership (the "Borrower"), of which Cogen Technologies Camden GP Limited
Partnership, a Delaware limited partnership, is the sole general partner, (ii)
the Tranche A Lenders and Tranche B Lenders from time to time parties thereto
(collectively, the "Lenders"), (iii) The Bank of Tokyo-Mitsubishi Trust Company
(formerly known as The Bank of Tokyo Trust Company), a banking corporation
organized and existing under the laws of the State of New York, as Senior
Tranche Agent, (iv) Commerzbank AG, New York Branch, a New York State licensed
branch of a bank organized under the laws of Germany, as Agent and (v) General
Electric Capital Corporation, a New York corporation ("GE Capital"), as Junior
Trance Agent and as issuer of the Letters of Credit.
WITNESSETH:
WHEREAS, the parties hereto desire to amend certain provisions of the
Credit Agreement as provided herein;
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
Credit Agreement shall have such defined meanings when used herein.
2. Amendments to the Credit Agreement
(i) Section 9(k) of the Credit Agreement is hereby restated in its
entirety to read as follows:
"(k) An entity with a net worth of at least $100,000,000 shall
fail to own and control, directly or indirectly, a beneficial
interest of at least 8.2% in the Borrower."
(ii) Section 11.2 of the Credit Agreement shall be amended
to restate the address of the Borrower as follows:
<PAGE> 2
"Camden Cogen L.P.
1400 Smith Street, EB 2407
Houston, Texas 77002
Attention: Donna Lowry, Compliance Department
Telecopy: (713) 646-4039"
3. Limited Effect. Except as expressly amended hereby, all of the
provisions of the Credit Agreement shall continue to be, and shall remain, in
full force and effect in accordance with their terms.
4. Counterparts. This Amendment may be executed in any number of
counterparts, all of which shall constitute one and the same instrument.
5. Governing Law. This Amendment shall be governed by, and be construed
and interpreted in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed and delivered by their proper and duly authorized officers as of the
date first above written.
CAMDEN COGEN, L.P.
By: Cogen Technologies Camden GP Limited
Partnership, a Delaware Limited
Partnership, its General Partner
By: Jedi Camden GP, L.L.C., a Delaware
Limited Liability Company, its
General Partner
By: /s/ JEREMY BLACHMAN
---------------------------------
Name: Jeremy Blachman
-------------------------------
Title: Attorney-In-Fact
------------------------------
-2-
<PAGE> 3
COMMERZBANK AG, NEW YORK BRANCH,
as Agent
By: /s/ DEMPSEY L. GABLE
--------------------------------------
Name: Dempsey L. Gable
------------------------------------
Title: Senior Vice President
-----------------------------------
By: /s/ TIMOTHY CHIN
--------------------------------------
Name: Timothy Chin
------------------------------------
Title: Assistant Vice President
-----------------------------------
COMMERZBANK AG, ATLANTA AGENCY,
as a Tranche A Lender
By: /s/ DEMPSEY L. GABLE
--------------------------------------
Name: Dempsey L. Gable
------------------------------------
Title: Senior Vice President
-----------------------------------
By: /s/ TIMOTHY CHIN
--------------------------------------
Name: Timothy Chin
------------------------------------
Title: Assistant Vice President
-----------------------------------
THE BANK OF TOKYO-MITSUBISHI
TRUST COMPANY, as Senior Tranche Agent
and a Tranche A Lender
By: /s/ SHINICHI HONGRO
--------------------------------------
Name: Shinichi Hongro
------------------------------------
Title: Sup & Manager
-----------------------------------
THE FUJI BANK LIMITED, as a
Tranche A Lender
By: /s/ THOMAS W. BOYLAN
--------------------------------------
Name: Thomas W. Boylan
------------------------------------
Title: VP & Team Leader
-----------------------------------
-3-
<PAGE> 4
CREDIT LYONNAIS,
NEW YORK BRANCH,
as a Tranche A Lender
By: /s/ ROBERT G. COLVIN
--------------------------------------
Name: Robert G. Colvin
------------------------------------
Title: Vice President
-----------------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION, as Junior Tranche Agent,
Tranche B Lender and issuer of the
Letters of Credit
By: /s/ MICHAEL J. TZOUGRAKIS
--------------------------------------
Name: Michael J. Tzougrakis
------------------------------------
Title: Manager of Operations
-----------------------------------
-4-
<PAGE> 1
EXHIBIT 10.48
AMENDMENT OF THE
AGREEMENT OF LIMITED PARTNERSHIP
OF
COGEN TECHNOLOGIES CAMDEN GP LIMITED PARTNERSHIP
THIS AMENDMENT OF THE AGREEMENT OF LIMITED PARTNERSHIP OF COGEN
TECHNOLOGIES CAMDEN GP LIMITED PARTNERSHIP (this "Amendment Agreement") is made
as of the 4th day of February, 1999, by and between Cogen Technologies Camden,
Inc., a Texas corporation ("General Partner") and Cogen Technologies Limited
Partners Joint Venture, a Texas general partnership ("Limited Partner"). Unless
otherwise noted, all defined terms used herein shall have the same meaning given
such terms in the Agreement of Limited Partnership of Cogen Technologies Camden
GP Limited Partnership dated as of July 26, 1991 (as heretofore amended, the
"Agreement").
WHEREAS, the parties hereto are parties to the Agreement;
WHEREAS, pursuant to the Agreement, the limited partnership known as Cogen
Technologies Camden GP Limited Partnership (the "Partnership") was formed
pursuant to the Partnership Act; and
WHEREAS, the parties hereto desire to amend the Agreement to reflect
certain agreements between the Partners.
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings contained herein, the parties hereto hereby agree as follows:
1. The DEFINITIONS of the Agreement shall be amended as follows:
(c) The following new defined terms shall be added:
"Amendment" shall mean the Amendment of the Agreement of Limited
Partnership of Cogen Technologies Camden GP Limited Partnership dated
as of February 4, 1999.
"Buy-Out Agreement" shall mean the Termination Agreement dated as of
the date of the Amendment, by and between the Partnership and RCM
Management Services, L.P., a copy of which is attached to the
Amendment as Exhibit A.
<PAGE> 2
2. The existing text of Section 8.2 of the Agreement shall become
subparagraph (a) of Section 8.2 and the following provision shall be added as
subparagraph (b) of Section 8.2:
(b) The Partners shall make Capital Contributions, pro rata in
their respective Sharing Ratios, equal to all funds (i) required to be
paid by the Partnership pursuant to the Buy-Out Agreement, (ii)
necessary for the Partnership to be able to prepay all amounts
outstanding under the Term Loan Agreement dated as of February 4, 1992
between the Partnership and General Electric Capital Corporation, as
amended, and (iii) required to be paid by Camden Cogen L.P. pursuant
to the Termination Agreement dated as of the date of the Amendment by
and between Cogen Technologies Capital Company L.P. and H. Fred
Levine, a copy of which is attached to the Amendment as Exhibit B.
3. The address of the General Partner shall be restated as follows:
1400 Smith Street
Houston, TX 77002
4. The General Partner is hereby authorized to execute and deliver the
Buy-Out Agreement on behalf of the Partnership, to make a capital contribution
to Camden Cogen L.P. on behalf of the Partnership in an amount equal to the
Capital Contributions made pursuant to Section 8.2(b) of the Agreement, and to
make all payments contemplated under the Buy-Out Agreement in accordance with
the terms thereof.
5. This Amendment Agreement shall be binding upon, and shall enure to the
benefit of, the parties hereto and their respective successors and assigns.
6. This Amendment Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as of the signatures
were upon the same instrument.
7. Except as hereby amended, the Agreement shall remain in full force and
effect.
8. This Amendment Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of Delaware, without regard to principles
of conflict of laws.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Agreement as of the day and in the year first above written.
COGEN TECHNOLOGIES CAMDEN, INC.,
a Texas corporation
By: /s/ R. A. LYDECKER
------------------------------------
Name: Richard A. Lydecker, Jr.
Title: Senior Vice President
and Chief Financial Officer
COGEN TECHNOLOGIES LIMITED
PARTNERS JOINT VENTURE
By: /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
By: /s/ ROBERT A. HANSEN
------------------------------------
Robert A. Hansen
By: Evergreen Partnership Energy, Ltd.
By: /s/ H. FRED LEVINE
------------------------------------
Name: H. Fred Levine
----------------------------------
Title: General Partner
---------------------------------
By: The 1989 Energy Trust
By: /s/ ROBERT CARY MCNAIR, JR.
------------------------------------
Robert Cary McNair, Jr., Co-trustee
(and not in his individual capacity)
By: /s/ DAVID C. HOLLAND
------------------------------------
David C. Holland, Co-trustee (and
not in his individual capacity)
-3-
<PAGE> 4
By: /s/ C. DONALD VAN WART
------------------------------------
C. Donald Van Wart
By: Hansfam Three, a Trust
By: /s/ JOHN P. HANSEN
-------------------------------
John P. Hansen, Co-trustee (and
not in his individual capacity)
By: /s/ C. DONALD VAN WART
-------------------------------
C. Donald Van Wart, Co-trustee
(and not in his individual
capacity)
-4-
<PAGE> 1
EXHIBIT 10.57
SECOND SUCCESSOR SECURITY DEPOSIT AGENT AGREEMENT
This AGREEMENT (the "Agreement"), dated as of July 31, 1998,
among (a) Camden Cogen L.P., a Delaware limited partnership (the "Partnership"
or the "Borrower") of which Cogen Technologies Camden GP Limited Partnership, a
Delaware limited partnership, is the general partner (the "General Partner"),
(b) Commerzbank AG, New York Branch, a New York State licensed branch of a bank
organized under the laws of Germany ("Commerzbank"), as agent, collateral agent
and Tranche A co-agent (in such capacity, the "Agent") under the Amendment and
Restatement, dated as of April 1, 1993, of the Construction and Term Loan
Agreement, dated as of February 4, 1992, as amended by Amendment No. 1, dated
as of December 22, 1993 (as may be further amended, supplemented or otherwise
modified from time to time, hereinafter referred to as the "Credit Agreement"),
among (i) the Partnership, (ii) the Agent, (iii) The Bank of Tokyo-Mitsubishi
Trust Company (formerly known as The Bank of Tokyo Trust Company), a banking
corporation organized and existing under the laws of the State of New York
("BOTM"), as Senior Tranche Agent for the Tranche A Lenders (in such capacity,
the "Senior Tranche Agent"), (iv) General Electric Capital Corporation, a New
York corporation ("GE Capital"), as Junior Tranche Agent for the Tranche B
Lenders (in such capacity, the "Junior Tranche Agent"), (v) the lenders from
time to time parties thereto (the "Lenders"), (vi) GE Capital, as issuer of the
Letters of Credit (the "Letter of Credit Issuer"), (c) Toronto Dominion
(Texas), Inc. (formerly known as The Toronto-Dominion Bank Trust Company), a
Delaware corporation ("TD Texas"), as prior security agent for GE Capital in
its prior capacity as Counterparty, Junior Tranche Agent and as Letter of
Credit Issuer, BOTM, and the Lenders under the Security Deposit Agreement (in
such capacity, the "Prior Security Agent"), which are parties to the Second
Amended and Restated Security Deposit Agreement, dated as of December 22, 1993
(the "Security Deposit Agreement"), (d) Commerzbank, as successor to the Prior
Security Agent (in such capacity, the "Security Agent"), (e) the General
Partner, (f) GE Capital as the limited partner of the partnership (the "Limited
Partner"), (g) GE Capital as General Partner Term Lender, (h) BOTM, as Senior
Tranche Agent and (i) the Lenders.
<PAGE> 2
W I T N E S S E T H :
WHEREAS, pursuant to Section 6.02 of the Security Deposit
Agreement, the Prior Security Agent is hereby resigning and concurrently
herewith being replaced by the Security Agent;
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms
defined in the Security Deposit Agreement shall have such defined meanings when
used herein.
2. Assignment and Transfer. (a) The Prior Security Agent
hereby assigns, transfers, grants and conveys to the Security Agent, for the
benefit of the Lenders and all other relevant entities, without recourse,
representation or warranty, and the Security Agent, for the benefit of the
Lenders and all other relevant entities, hereby takes and accepts, all of the
Prior Security Agent's right, title and interest in and to any and all of the
Accounts, all cash, cash equivalents, instruments and other securities on
deposit in such Accounts, chattel paper, documents, general intangibles,
instruments and all of the Prior Security Agent's other rights, interests,
benefits and obligations under the Security Deposit Agreement as of the date of
this Agreement.
(b) The Prior Security Agent shall, concurrently with the
execution of this Agreement, deliver to the Security Agent all Accounts held by
the Prior Security Agent and all proceeds thereof held by the Prior Security
Agent and arrange for the transfer of all such funds into the appropriate
respective Accounts established at the Security Agent. Notwithstanding anything
implied to the contrary in this Agreement, the Security Agent shall not succeed
to nor shall the Prior Security Agent be released from any liabilities arising
as a result of facts existing or acts or omissions by the Prior Security Agent
occurring prior to the effectiveness of this Agreement. Any funds described in
the previous sentence received by the Prior Security Agent after the date
hereof shall be promptly transferred to the Security Agent.
2
<PAGE> 3
(c) The Prior Security Agent represents, warrants and
covenants that it has transferred and delivered, or, concurrently with the
execution of this Agreement, will transfer and deliver, to the Security Agent
all property and originals of all books, records and documents in its
possession relating to the Security Deposit Agreement.
3. Resignation and Appointment. Pursuant to subsection 6.02
of the Security Deposit Agreement, TD Texas hereby resigns as Prior Security
Agent and Commerzbank is hereby appointed Security Agent by the parties hereto
and Commerzbank hereby accepts such appointment. The Security Agent hereby
succeeds to and becomes vested with all the rights, powers, privileges and
duties of the Prior Security Agent, and, except for the matters provided for in
the last two sentences of Sections 2(b) and 4 hereof, the Prior Security Agent
is hereby discharged and released from its duties and obligations under the
Security Deposit Agreement as of the date of this Agreement. The provisions of
Section 6 and Section 9.02 of the Security Deposit Agreement shall continue in
effect for the benefit of TD Texas in respect of any actions taken or omitted
to be taken by it while it was acting as Prior Security Agent.
4. Further Assurances.
(a) The Prior Security Agent shall, promptly upon the
request of the Security Agent, execute, or cause to be executed, and deliver,
or cause to be delivered, or if Borrower fails to pay the same, at the cost of
the Lenders on a pro rata basis, such other and further instruments of
assignment and/or transfer, and any other instruments or documents, and take
any other actions, as may be reasonably necessary and are consistent with the
Prior Security Agent's duties and obligations as the former agent to transfer
to and properly vest in the Security Agent, for the benefit of the Lenders, and
to perfect all liens, security interests, pledges, assignments and other
hypothecations, and all rights of a secured party, under the Accounts, and to
otherwise effectuate the purposes of this Agreement.
(b) The Prior Security Agent hereby agrees to promptly turn
over all funds, notices, communications and other property or documents
received by it in such capacity after the date hereof to the Security Agent.
(c) Each of the parties to this Agreement agrees that at any
time and from time to time upon the written
3
<PAGE> 4
request of any other party it will execute and deliver such further documents
and do such further acts and things as such other party may reasonably request
in order to effect the purposes of this Agreement.
(d) Each of the Prior Security Agent and the Security Agent
agree to make all appropriate adjustments regarding the payment of "Security
Agency Fees" as defined in, and made pursuant to, that certain Letter
Agreement, dated as of February 4, 1992, as amended as of April 1, 1993, and as
further amended as of December 22, 1993, among The Toronto-Dominion Bank Trust
Company, as Agent and Security Agent, the Toronto-Dominion Bank, as Tranche A
Lender, The Bank of Tokyo-Mitsubishi Trust Company (formerly known as The Bank
of Tokyo Trust Company), as Senior Tranche Agent and Tranche A Lender, and
General Electric Capital Corporation, as Letter of Credit Issuer and Tranche B
Lender such that all Security Agency Fees accrued prior to the date hereof
shall be allocated for the account of and be paid to. the Prior Security Agent,
and all Security Agency Fees that shall accrue on and after the date hereof
shall be allocated for and be paid to the account of the Security Agent.
5. Miscellaneous.
(a) All notices and other communications provided for herein
shall be delivered in the manner set forth in Section 11.2 of the Credit
Agreement and to the addresses of the parties hereto set forth on the signature
pages hereto (until notice of a change thereof is delivered as provided in
Section 11.2 of the Credit Agreement).
(b) This Agreement may be modified or waived only by an
instrument or instruments in writing signed by each party hereto.
(c) This Agreement shall be binding upon and inure to the
benefit of each of the parties hereto and their respective successors and
assigns.
(d) This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
4
<PAGE> 5
(e) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN AND
INTERPRETED IN ACCORDANCE WITH, LAWS OF THE STATE OF NEW YORK.
(f) The Borrower hereby consents to the foregoing terms and
conditions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
COMMERZBANK AG, NEW YORK
BRANCH, as Agent and as Security Agent
By: /s/ ANDREW JACOBYANSKY
-----------------------------------------
Name: Andrew Jacobyansky
Title: Vice President
By: /s/ ANDREW KJOLLER
-----------------------------------------
Name: Andrew Kjoller
Title: Assistant Treasurer
COMMERZBANK AG, ATLANTA
AGENCY, as a Tranche A
Lender
By: /s/ ANDREW JACOBYANSKY
-----------------------------------------
Name: Andrew Jacobyansky
Title: Vice President
By: /s/ ANDREW KJOLLER
-----------------------------------------
Name: Andrew Kjoller
Title: Assistant Treasurer
THE BANK OF TOKYO-MITSUBISHI
TRUST COMPANY, as Senior
Tranche Agent and a
Tranche A Lender
By: /s/ ROBERT F. MOYLE
-----------------------------------------
Name: Robert F. Moyle
Title: Vice President
5
<PAGE> 6
CAMDEN COGEN, L.P.
By: Cogen Technologies Camden
GP Limited Partnership,
a Delaware limited
partnership, its
general partner
By: Cogen Technologies
Camden, Inc., a Texas
corporation, its
general partner
By: /s/ RICHARD A. LYDECKER, JR.
------------------------------
Name: Richard A. Lydecker, Jr.
Title: Senior Vice President &
Chief Financial Officer
COGEN TECHNOLOGIES CAMDEN GP
LIMITED PARTNERSHIP, as
General Partner
By: Cogen Technologies
Camden, Inc., a Texas
corporation, its
general partner
By: /s/ RICHARD A. LYDECKER, JR.
------------------------------
Name: Richard A. Lydecker, Jr.
Title: Senior Vice President &
Chief Financial Officer
THE FUJI BANK LIMITED, as a
Tranche A Lender
By: /s/ THOMAS W. BOYLAN
------------------------------------
Name: Thomas W. Boylan
Title: Vice President
CREDIT LYONNAIS,
NEW YORK BRANCH,
as a Tranche A Lender
By: /s/ JAMES F. GUIDEN
------------------------------------
Name: James F. Guiden
Title: Vice President
<PAGE> 7
TORONTO DOMINION (TEXAS),
INC., as Prior Security
Agent
By: /s/ JANO MOTT
------------------------------------
Name: Jano Mott
Title: Vice President
THE TORONTO-DOMINION BANK,
as a prior Tranche A
Lender
By: /s/ JANO MOTT
------------------------------------
Name: Jano Mott
Title: Mgr. Syndications & Credit
Admin.
GENERAL ELECTRIC CAPITAL
CORPORATION, as Junior
Tranche Agent, General
Partner Term Lender, Letter
of Credit Issuer and Limited
Partner
By: /s/ MICHAEL J. TZOUGRAKIS
------------------------------------
Name: Michael J. Tzougrakis
Title: Manager of Operations
6
<PAGE> 1
EXHIBIT 10.58
SECOND SUCCESSOR AGENCY AGREEMENT
This AGREEMENT (the "Agreement"), dated as of July 31, 1998, among
COMMERZBANK AG, NEW YORK BRANCH, a New York State licensed branch of a bank
organized under the laws of Germany ("Commerzbank"), as the Agent, Collateral
Agent and Tranche A Co-Agent (as each such term is defined below), TORONTO
DOMINION (TEXAS), INC. (formerly known as The Toronto-Dominion Bank Trust
Company), a Delaware corporation ("TD Texas"), as Prior Agent, Prior Collateral
Agent and Prior Tranche A Co-Agent (as each such term is defined below), THE
BANK OF TOKYO-MITSUBISHI TRUST COMPANY (formerly known as The Bank of Tokyo
Trust Company), a banking corporation organized and existing under the laws of
the State of New York ("BOTM"), as Senior Tranche Agent (as such term is defined
below) and GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation ("GE
CAPITAL"), as Tranche B Lender (as defined in the Credit Agreement referred to
below) and as GP Term Lender (as defined in the Credit Agreement referred to
below), CAMDEN COGEN L.P., a Delaware limited partnership (the "Borrower") of
which Cogen Technologies Camden GP Limited Partnership, a Delaware limited
partnership, is the sole general partner, and the Lenders (as defined below).
W I T N E S S E T H:
WHEREAS, the Borrower is a party to the Amendment and Restatement,
dated as of April 1, 1993, of the Construction and Term Loan Agreement, dated as
of February 4, 1992, as amended by Amendment No. 1, dated as of December 22,
1993 (as may be further amended, modified and otherwise supplemented, the
"Credit Agreement") (unless otherwise defined herein, terms defined in the
Credit Agreement shall have such defined meanings when used herein), with the
lenders from time to time parties thereto (the "Lenders"), TD Texas, as agent
for the Lenders (in such capacity, the "Prior Agent"), BOTM, as senior tranche
agent (in such capacity, "Senior Tranche Agent") for the Tranche A Lenders
thereunder, and GE Capital, as junior tranche agent for the Tranche B Lenders
thereunder and as issuer of the Letters of Credit referred to therein;
<PAGE> 2
WHEREAS, pursuant to Section 10.7 of the Credit Agreement, the Prior
Agent is hereby resigning and concurrently herewith being replaced by
Commerzbank, as agent (in such capacity, the "Agent") for the Lenders under the
Credit Agreement;
WHEREAS, TD TEXAS, as Prior Collateral Agent (as herein defined) is
hereby transferring to Collateral Agent (as herein defined) all of its right,
title and interest in and to any and all Collateral, and all of the Prior
Collateral Agent's interests, rights, benefits and obligations under the
Collateral Security Documents;
WHEREAS, pursuant to Section 10.7 of the Credit Agreement, TD Texas, as
tranche a co-agent ("Prior Tranche A Co-Agent") is hereby resigning and
concurrently herewith being replaced by Commerzbank, as tranche a co-agent (in
such capacity, the "Tranche A Co-Agent"); and
WHEREAS, pursuant to the terms hereof, (i) the Agent shall succeed to
and become vested with all of the rights, powers, privileges and duties of the
Prior Agent, (ii) the Collateral Agent shall succeed to and become vested with
all the rights, powers, privileges and duties of the Prior Collateral Agent, and
(iii) the Tranche A Co-Agent shall succeed to and become vested with all the
rights, powers, privileges and duties of the Prior Tranche A Co-Agent;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Assignment and Transfer. (a) As of the date of this Agreement, the
Prior Agent hereby assigns, transfers, grants and conveys to the Agent, for the
benefit of the Lenders, without recourse, representation or warranty, and the
Agent, for the benefit of the Lenders, hereby takes and accepts, all of the
Prior Agent's right, title and interest in and to any and all of the Collateral,
and all of the Prior Agent's rights, benefits and obligations under the Credit
Agreement and the Collateral Security Documents as of the date of this
Agreement.
(b) The Prior Agent shall, concurrently with the execution of this
Agreement, deliver to the Agent all Collateral held by Prior Agent and all
proceeds thereof held
2
<PAGE> 3
by Prior Agent. Notwithstanding anything implied to the contrary in this
Agreement, the Agent shall not succeed to, nor shall the Prior Agent be released
from, any liabilities arising as a result of facts existing or acts or omissions
of the Prior Agent occurring prior to the effectiveness of this Agreement.
(c) The Prior Agent represents, warrants and covenants that it has
transferred and delivered, or, concurrently with the execution of this
Agreement, will transfer and deliver, to the Agent all relevant property and
originals of all relevant books, records and documents relating to the Credit
Agreement and all Collateral Security Documents.
(d) The Prior Tranche A Co-Agent hereby assigns, transfers, grants and
conveys to the Tranche A Co-Agent, for the benefit of the Lenders, without
recourse, representation or warranty, and the Tranche A Co-Agent, for the
benefit of the Lenders, hereby takes and accepts, all of the Prior Tranche A
Co-Agent's right, title and interest in and to any and all of the Collateral,
and all of the Prior Tranche A Co-Agent's rights, benefits and obligations under
the Credit Agreement and the Collateral Security Documents as of the date of
this Agreement.
(e) The Prior Tranche A Co-Agent shall, concurrently with the execution
of this Agreement, deliver to the Tranche A Co-Agent all Collateral held by the
Prior Tranche A Co-Agent and all proceeds thereof held by the Prior Tranche A
Co-Agent. Notwithstanding anything implied to the contrary in this Agreement,
the Tranche A Co-Agent shall not succeed to, nor shall the Prior Tranche A
Co-Agent be released from, any liabilities arising as a result of facts existing
or acts or omissions of the Prior Tranche A Co-Agent occurring prior to the
effectiveness of this Agreement.
(f) The Prior Tranche A Co-Agent represents, warrants and covenants
that it has transferred and delivered, or, concurrently with the execution of
this Agreement, will transfer and deliver, to the Tranche A Co-Agent all
relevant property and originals of all relevant books, records and documents
relating to the Credit Agreement and all Collateral Security Documents.
2. Assignment of Collateral Agency under Security Documents. (a) TD
Texas, as Collateral Agent (as defined
3
<PAGE> 4
in each of the Assignment and Security Agreement and Cogen Pledge Agreements)
and, as Agent (as defined in the Security Agreement) (in such capacity, the
"Prior Collateral Agent") hereby assigns, transfers, grants and conveys to
Commerzbank (the "Collateral Agent"), for the benefit of the Secured Parties (as
defined in each of the Assignment and Security Agreement and the Cogen Pledge
Agreement), and, with respect to the Security Agreement, the parties in favor of
which such assignments are made, (the Assignment and Security Agreement, the
Cogen Pledge Agreement and the Security Agreement are collectively, referred to
herein as the "Security Documents"), without recourse, representation or
warranty, and the Collateral Agent, for the benefit of the Secured Parties, and,
with respect to the Security Agreement, the parties in favor of which such
assignments are made, hereby takes and accepts, all of the Prior Collateral
Agent's right, title and interest in and to any and all Collateral, and all of
the Prior Collateral Agent's interests, rights, benefits and obligations under
the Security Documents as of the date of this Agreement. The Collateral Agent
hereby succeeds to and becomes vested with all the rights, powers, privileges
and duties of the Prior Collateral Agent, and except as provided in Section 2(b)
hereof, the Prior Collateral Agent is hereby discharged and released from its
duties and obligations under the Security Documents as of the date of this
Agreement.
(b) The Prior Collateral Agent shall, concurrently with the execution
of this Agreement, deliver to the Collateral Agent all Collateral held by the
Prior Collateral Agent and all proceeds thereof held by the Prior Collateral
Agent. Notwithstanding anything implied to the contrary in this Agreement, the
Collateral Agent shall not succeed to, nor shall the Prior Collateral Agent be
released from, any liabilities arising as a result of facts existing or acts or
omissions of the Prior Collateral Agent occurring prior to the effectiveness of
this Agreement.
(c) The Prior Collateral Agent represents, warrants and covenants that
it has transferred and delivered, or, concurrently with the execution of this
Agreement, will transfer and deliver, to the Collateral Agent all property and
originals of all books, records and documents relating to the Security
Documents.
3. Resignation and Appointment. (a) Pursuant to subsection 10.7 of the
Credit Agreement, TD Texas hereby resigns as Prior Agent and Commerzbank is
hereby appointed
4
<PAGE> 5
Agent by the Required Lenders and Commerzbank hereby accepts such appointment.
The Agent hereby succeeds to and becomes vested with all the rights, powers,
privileges and duties of the Prior Agent (including, without limitation, in the
Prior Agent's capacity as Mortgagee, as defined in the Mortgage), and, except
for the matters provided for in the last sentence of subsections 1(b) and
Section 4 hereof, the Prior Agent is hereby discharged and released from its
duties and obligations under the Credit Agreement and the Collateral Security
Documents as of the date of this Agreement. The provisions of Section 10 of the
Credit Agreement shall continue in effect for the benefit of TD Texas in respect
of any actions taken or omitted to be taken by it while it was acting as Agent.
(b) Pursuant to subsection 10.7 of the Credit Agreement, TD Texas
hereby resigns as Prior Tranche A Co-Agent and Commerzbank is hereby appointed
Tranche A Co-Agent by the Required Lenders and Commerzbank hereby accepts such
appointment. The Tranche A Co-Agent hereby succeeds to and becomes vested with
all the rights, powers, privileges and duties of the Prior Tranche A Co-Agent,
and, except for the matters provided for in the last sentence of subsection 1(e)
and Section 4 hereof, the Prior Tranche A Co-Agent is hereby discharged and
released from its duties and obligations under the Credit Agreement and the
Collateral Security Documents as of the date of this Agreement. The provisions
of Section 10 of the Credit Agreement shall continue in effect for the benefit
of TD Texas in respect of any actions taken or omitted to be taken by it while
it was acting as Tranche A Co-Agent.
4. Further Assurances. (a) The Prior Agent, Prior Collateral Agent and
Prior Tranche A Co-Agent shall, promptly upon the request of the Agent,
Collateral Agent and Tranche A Co-Agent, as the case may be, execute, or cause
to be executed, and deliver, or cause to be delivered, at the cost of the
Lenders on a pro rata basis, such other and further instruments of assignment
and/or transfer, financing statements and amendments or assignments of financing
statements, and any other instruments or documents, and take any other actions,
as may be reasonably necessary, and are consistent with the Prior Agent's, Prior
Collateral Agent's and Prior Tranche A Co-Agent's duties and obligations as the
Prior Agent, Prior Collateral Agent or Prior Tranche A Co-Agent, as the case may
be, to transfer to, and properly vest in the Agent, the Collateral Agent or the
Tranche A Co-Agent, as the case may be, for the benefit of the Lenders,
5
<PAGE> 6
and to perfect all liens, security interests, pledges, assignments and other
hypothecations, and all rights of any mortgagee or secured party, under the
Collateral Security Documents, and to otherwise effectuate the purposes of this
Agreement.
(b) The Prior Agent, Prior Collateral Agent and Prior Tranche A
Co-Agent hereby agree to promptly turn over all funds, notices, communications
and other documents received in such capacities after the date hereof to the
Agent, Collateral Agent and Prior Tranche A Co-Agent, as the case may be.
(c) Each of the parties to this Agreement agrees that at any time and
from time to time upon the written request of any other party it will execute
and deliver such further documents and do such further acts and things as such
other party may reasonably request in order to effect the purposes of this
Agreement.
5. Miscellaneous. (a) All notices and other communications provided for
herein shall be delivered in the manner set forth in Section 11.2 of the Credit
Agreement and to the addresses of the parties hereto set forth on the signature
pages hereto (until notice of a change thereof is delivered as provided in
Section 11.2 of the Credit Agreement).
(b) This Agreement may be modified or waived only by an instrument or
instruments in writing signed by each party hereto.
(c) This Agreement shall be binding upon and inure to the benefit of
each of the parties hereto and their respective successors and assigns.
(d) This Agreement may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument, and any of
the parties hereto may execute this Agreement by signing any such counterpart.
(e) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN AND
INTERPRETED IN ACCORDANCE WITH, LAWS OF THE STATE OF NEW YORK.
(f) The Borrower hereby consents to the foregoing terms and conditions
of this Agreement and authorizes the
6
<PAGE> 7
Agent, the Collateral Agent and the Tranche A Co-Agent to notify the parties to
the Project Contracts of the replacement of the Prior Agent, Prior Collateral
Agent and Prior Tranche A Co-Agent with the Agent, Collateral Agent and Tranche
A Co-Agent and to direct the parties to the Project Contracts to make all
payments to the Security Agent under the Security Deposit Agreement and give all
notices to the Collateral Agent.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
COMMERZBANK AG, NEW YORK
BRANCH, as Agent,
Collateral Agent and
Tranche A Co-Agent
By: /s/ ANDREW JACOBYANSKY /s/ ANDREW KJOLLER
----------------------------------------------
Name: Andrew Jacobyansky Andrew Kjoller
Title: Vice President Assistant Treasurer
COMMERZBANK AG, ATLANTA
AGENCY, as a Tranche A
Lender
By: /s/ ANDREW JACOBYANSKY /s/ ANDREW KJOLLER
----------------------------------------------
Name: Andrew Jacobyansky Andrew Kjoller
Title: Vice President Assistant Treasurer
THE BANK OF TOKYO-MITSUBISHI
TRUST COMPANY, as Senior
Tranche Agent and as a
Tranche A Lender
By: /s/ ROBERT F. MOYLE
----------------------------------------------
Name: Robert F. Moyle
Title: Vice President
<PAGE> 8
GENERAL ELECTRIC CAPITAL
CORPORATION, as Tranche B
Lender and GP Term Lender
By: /s/ MICHAEL J. TZOUGRAKIS
------------------------------
Name: Michael J. Tzougrakis
Title: Manager of Operations
TORONTO DOMINION (TEXAS),
INC., as Prior Agent,
Prior Collateral Agent and
Prior Tranche A Co-Agent
By: /s/ JANO MOTT
------------------------------
Name: Jano Mott
Title: Vice President
THE FUJI BANK LIMITED, as a
Tranche A Lender
By: /s/ THOMAS W. BOYLAN
------------------------------------
Name: Thomas W. Boylan
Title: Vice President
CREDIT LYONNAIS,
NEW YORK BRANCH,
as a Tranche A Lender
By: /s/ JAMES F. GUIDEN
------------------------------------
Name: James F. Guiden
Title: Vice President
THE TORONTO-DOMINION BANK, as
a prior Tranche A Lender
By: /s/ JANO MOTT
------------------------------------
Name: Jano Mott
Title: Vice President
8
<PAGE> 9
CONSENTED TO:
CAMDEN COGEN L.P.,
as Borrower
By: Cogen Technologies Camden
GP Limited Partnership, a
Delaware limited
partnership, its general
partner
By: Cogen Technologies
Camden, Inc., a Texas
corporation, its
general partner
By: /s/ RICHARD A. LYDECKER, JR.
----------------------------
Name: Richard A. Lydecker, Jr.
Title: Senior Vice President & Chief
Financial Officer
<PAGE> 1
EXHIBIT 10.65
EASEMENT AGREEMENT
THIS EASEMENT AGREEMENT (this "Agreement") is made and entered into as of
the 1st day of April, 1993 (the "Effective Date"), by and between CAMDEN COGEN
L.P. (D/B/A Camden Cogen Limited Partnership), a Delaware limited partnership,
whose address is 1600 Smith Street, Suite 5000, Houston, Texas 77002
("Grantor"), and PUBLIC SERVICE ELECTRIC AND GAS COMPANY, a New Jersey
corporation, whose address is 80 Park Plaza, Newark, New Jersey 07101
("Grantee").
W I T N E S S E T H:
WHEREAS, Grantor is the fee owner of that certain tract or parcel of land
situated in Camden, Camden County, New Jersey, more fully described on Exhibit
A attached hereto (the "Property"); and
WHEREAS, Grantee desires to obtain and Grantor desires to grant to Grantee
a non-exclusive easement (the "Easement") over, under, upon, through and across
the land (the "Area") which constitutes a portion of the Property and which is
described on Exhibit B attached hereto, for the purposes of installing, laying,
constructing, reconstructing, operating, maintaining, inspecting, repairing,
removing, replacing and relaying within the Area a sixteen inch (16") gas
pipeline, together with all necessary fittings, appurtenances and facilities,
all to enable Grantee to deliver gas to Grantor's cogeneration facility located
on the Property.
NOW THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties intend to be legally
bound by this Agreement and agree as follows:
1. Definitions. The following terms used in this Agreement shall have the
following meanings:
A. "Easement Rights" means the rights described as follows:
(1) the right to install, lay, construct, reconstruct, operate,
maintain, inspect, repair, remove, replace, and relay the Improvements
(hereinafter defined) within the Area; and
(2) the right of ingress and egress for pedestrian, vehicular and
other traffic over those portions of the Property as Grantee may
reasonably require to install, lay, construct, reconstruct, operate,
maintain, inspect, repair, remove, replace, and relay the Improvements.
PREPARED BY:
/s/ TERRY L. RADNEY
-------------------
TERRY L. RADNEY
<PAGE> 2
B. "Improvements" means a sixteen inch (16") gas pipeline,
together with all necessary fittings, appurtenances and facilities
required in the operation of such gas pipeline, constructed or placed
on the Area by Grantee or its agents and/or contractors.
2. Grant of Easement. Grantor hereby grants, warrants, bargains,
sells and conveys unto Grantee, its successors and assigns, the Easement
over, under, upon, through and across the Area and otherwise grants,
warrants, bargains, sells and conveys unto Grantee, its successors and
assigns, the Easement Rights covering the Property, subject only to the
liens, easements and other encumbrances listed on Exhibit C attached
hereto.
3. Term. Grantee's right to use the Easement shall automatically
terminate when the Easement is no longer used for the purposes
contemplated herein, and, if requested by Grantor, Grantee shall execute a
release of the Easement in recordable form. Grantee may, in its sole
discretion, abandon all or a portion of the Improvements in place.
4. Improvements. The Improvements are and shall remain the property
of Grantee, which shall be responsible for and shall pay all taxes,
applicable assessments and other governmental charges resulting from
ownership or use of the Improvements.
5. Indemnification. (i) Grantee shall defend, indemnify and hold
Grantor and its employees, contractors and agents harmless from and against
all claims, actions, liabilities, losses, damages and expenses (including
reasonable attorney's fees) whether for injury to person or damage to
property incurred by or asserted against Grantor or its employees,
contractors or agents which are either (a) caused by the activities of
Grantee or its employees, contractors or agents upon the Property or (b)
due to the placement by Grantee of any Improvements or other materials upon
the Property. Notwithstanding the foregoing, Grantee shall not be liable to
Grantor or its employees, contractors or agents for any environmental loss,
damage, cost or expense which results from the condition of the Property
existing prior to the Effective Date or from activities of Grantor or its
employees, contractors or agents on or with respect to the Property. (ii)
Grantor shall defend, indemnify and hold Grantee and its employees,
contractors and agents harmless from and against all claims, actions,
liabilities, losses, damages and expenses (including reasonable attorneys'
fees) whether for injury to person or damage to property incurred by or
asserted against Grantee or its employees, contractors or agents which are
(a) caused by the activities of Grantor or its employees, contractors or
agents upon the Property, (b) due to the placement by Grantor of any
materials upon the Property, or (c) due to an environmental condition
existing on the Property prior to the Effective Date, whether known or
unknown on the Effective Date. Nothing contained herein shall be deemed to
indemnify any party hereto against its own gross negligence or willful
misconduct. Grantee agrees to look solely to the interest of Grantor and
its successors and assigns in and to the Property (or the proceeds of the
sale or disposition thereof) for the collection of any judgment obtained
by Grantee under this Paragraph 5, and no other assets of Grantor or its
successors or assigns
-2-
<PAGE> 3
shall be subject to levy, execution, or other enforcement procedure for the
satisfaction of such judgment.
6. Use of Easement. Grantee shall schedule construction and installation
of all Improvements and shall construct and install the Improvements so as not
to interfere with the operations of Grantor or the rights of any party having an
interest superior to the interests created hereunder in favor of Grantee.
Further, Grantor fully reserves and Grantee is hereby granted all rights
reasonably necessary to allow it to cross the Area with both personnel and
machinery as may be reasonably necessary for their respective routine operations
on the Property; provided, however, that Grantor and Grantee agree to exercise
their respective rights hereunder in such a manner as to cause minimal
inconvenience to the other party.
7. Burial of Pipes. The Improvements installed under this Agreement
shall be buried and maintained by Grantee and its successors and assigns at a
depth of at least three feet below the surface of the Area or at any greater
depth which may be required by applicable governmental statutes or regulations
or standard industrial practice.
8. Recording. This Agreement will be recorded in the appropriate
property records of Camden County, New Jersey.
9. Assignments. This Agreement may not be assigned by Grantee without
the prior written consent of Grantor, said consent not to be unreasonably
withheld. Any assignee of this Agreement shall take such assignment subject to
all the terms and conditions set forth herein. The Easement and the Easement
Rights created herein shall run with the land and shall bind all permitted
subsequent purchasers, transferees, successors and assignees of the parties
hereto.
10. Notices. All notices, requests, consents, demands and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be given to each applicable party hereto at its address or
facsimile number set forth in this paragraph or at such other address or
facsimile number as such party may hereafter specify for such purpose by notice
to the other parties, and shall be either delivered personally or sent by
facsimile or mail, postage prepaid, and shall be deemed to have been made or
given (a) if given by facsimile, when sent and the appropriate confirmation is
received, and (b) if given by any other means, when delivered.
-3-
<PAGE> 4
Unless changed in accordance with this paragraph, the addresses for
all such communications shall be as follows:
If to Grantor:
Camden Cogen L.P.
1600 Smith Street, Suite 5000
Houston, Texas 77002
Facsimile No.: (713) 951-7745
Attention: R. Cary McNair, Jr.
If to Grantee:
Public Service Electric and Gas Company
80 Park Plaza - T24B
Newark, New Jersey 07101
Facsimile No.: (201) 621-7484
Attention: General Manager of Corporate Properties
11. Modifications. Any modifications of this Agreement must be made
in writing and executed by the parties hereto.
12. Exhibits. All Exhibits attached to and referenced in this
Agreement are incorporated herein and made a part hereof for all purposes.
13. Paragraph Headings. Paragraph headings contained in this
Agreement are for convenience only and shall not be considered in interpreting
or construing this Agreement.
14. Choice of Law. This Agreement shall be interpreted, construed and
enforced in accordance with the internal laws of the State of New Jersey,
without regard to conflicts of law rules.
15. Severability. If any provision of this Agreement is determined by
a court of competent jurisdiction to be invalid or unenforceable, the remainder
of this Agreement shall nonetheless remain in full force and effect.
-4-
<PAGE> 5
EXECUTED on the dates of the acknowledgments set forth below, to be
effective for all purposes as of the Effective Date.
CAMDEN COGEN L.P., d/b/a Camden Cogen
Limited Partnership, a Delaware limited
partnership
By: COGEN TECHNOLOGIES CAMDEN GP
LIMITED PARTNERSHIP,
Its general partner
ATTEST: By: COGEN TECHNOLOGIES CAMDEN, INC.,
Its general partner
/s/ MARYANN MCLENDON By: /s/ R. CARY MCNAIR, JR.
- ----------------------- --------------------------------
Assistant Secretary Name: R. Cary McNair, Jr.
------------------------------
Title: Vice President
-----------------------------
[SEAL]
ATTEST: PUBLIC SERVICE ELECTRIC AND GAS COMPANY,
a New Jersey corporation
/s/ [ILLEGIBLE] By: /s/ DONALD A. ANDERSON
- ----------------------- -------------------------------------
Assistant Secretary Name: Donald A. Anderson
-----------------------------------
Title: Vice President
----------------------------------
[SEAL]
-5-
<PAGE> 6
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
BE IT REMEMBERED, that on this 1st day of April, 1993, before me, the
subscriber, a notary public, personally appeared R. Cary McNair, Jr., who is
the Vice President of COGEN TECHNOLOGIES CAMDEN, INC., General Partner of COGEN
TECHNOLOGIES CAMDEN GP LIMITED PARTNERSHIP, which is the General Partner of
CAMDEN COGEN L.P., d/b/a CAMDEN COGEN LIMITED PARTNERSHIP, a Delaware limited
partnership, who I am satisfied is the person who signed this instrument, and
he acknowledged that he signed, sealed with the corporate seal, and delivered
the same as such officer aforesaid, and that this instrument is the voluntary
act and deed of such corporation, on behalf of CAMDEN COGEN, L.P. The full and
actual consideration paid or to be paid for the transfer of title to realty
evidenced by the within indenture, as such consideration is defined in N.J. Rev.
Stat. Section 46:15-5 is $10.00.
Given under my hand and seal of office this 1st day of April, 1993.
/s/ ESTALEETA WATSON
-------------------------------
[NOTARY SEAL] Notary Public in and for
Harris County, Texas
My Commission Expires: July 30, 1996
-6-
<PAGE> 7
THE STATE OF NEW JERSEY )
)
THE COUNTY OF ESSEX )
BE IT REMEMBERED, that on this 2nd day of April, 1993, before me, the
subscriber, a notary public, personally appeared D. A. Anderson, who is the
Vice President of PUBLIC SERVICE ELECTRIC AND GAS COMPANY, a New Jersey
corporation, who I am satisfied is the person who signed this instrument, and
he acknowledged that he signed, sealed with the corporate seal, and delivered
the same as such officer aforesaid, and that this instrument is the voluntary
act and deed of such corporation, on behalf of PUBLIC SERVICE ELECTRIC AND GAS
COMPANY.
Given under my hand and seal of office this 2nd day of April, 1993.
/s/ NICOLAS AROCHA
--------------------------------------
Notary Public in and for
County
----------------------- -------
[Nicolas Arocha]
[NOTARY PUBLIC OF NEW JERSEY]
[My Commission Expires Sept. 19, 1996.]
My Commission Expires:
----------------
WHEN RECORDED, RETURN TO:
TERRY L. RADNEY
FULBRIGHT & JAWORSKI
1301 MCKINNEY, SUITE 5100
HOUSTON, TEXAS 77010-3095
-7-
<PAGE> 1
EXHIBIT 10.66
AMENDMENT TO EASEMENT AGREEMENT
THIS AMENDMENT TO EASEMENT AGREEMENT (the "Amendment") is made and entered
into as of the 22nd day of March, 1993 (the "Effective Date"), by and between
MAFCO WORLDWIDE CORPORATION, a Delaware corporation (formerly known as
MacAndrews & Forbes Company) ("Grantor"), whose address is Third Street and
Jefferson Avenue, Camden, New Jersey 08104 and CAMDEN COGEN L.P. (D/B/A Camden
Cogen Limited Partnership), a Delaware limited partnership ("Grantee"), whose
address is 1600 Smith Street, Suite 5000, Houston, Texas 77002.
W I T N E S S E T H:
WHEREAS, Grantor is the fee owner of those certain tracts or parcels of
land situated in Camden, Camden County, New Jersey, more fully described on
Exhibit A attached hereto (the "Property"); and
WHEREAS, under the terms of that certain Easement Agreement dated December
18, 1992 (the "Original Easement Agreement"), by and between MacAndrews & Forbes
Company and Grantee and recorded on January 14, 1993, in the Office of the
Register of Deeds of Camden County, New Jersey at Deed Book 4600, Page 768,
MacAndrews & Forbes Company conveyed to Grantee a non-exclusive easement under,
through and across a portion of the Property which is described on Exhibit B to
the Original Easement Agreement (the "Area"); and
WHEREAS, MacAndrews & Forbes Company changed its corporate name to "Mafco
Worldwide Corporation"; and
WHEREAS, the legal description of the Area contained on Exhibit B to the
Original Easement Agreement is incorrect and Grantor and Grantee have agreed to
amend the Original Easement Agreement to correct the legal description of the
Area contained on Exhibit B to the Original Easement Agreement;
NOW THEREFORE, for and in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and confessed, Grantor and Grantee agree that Exhibit B to the
Original Easement Agreement is hereby deleted and replaced by the Exhibit B
attached to this Amendment, and Grantee hereby releases and quitclaims to
Grantor all of Grantee's right, title and interest in the lands described in
Exhibit B to the Original Easement Agreement, except to the extent such lands
fall within the lands described in Exhibit B attached hereto.
Except as specifically herein amended, the Original Easement Agreement
remains in full force and effect and the same is hereby ratified and confirmed.
Prepared By: /s/ TERRY L. RADNEY
-----------------------
Terry L. Radney
<PAGE> 2
EXECUTED on the dates of the acknowledgments set forth below, to be
effective for all purposes as of the Effective Date.
ATTEST: MAFCO WORLDWIDE CORPORATION,
a Delaware corporation
/s/ [ILLEGIBLE] By /s/ GLENN P. DICKES
- ----------------------------- ------------------------------------
Assistant Secretary Name: Glenn P. Dickes
-----------------------------
(SEAL) Title: Vice President
-----------------------------
CAMDEN COGEN L.P., d/b/a Camden Cogen
Limited Partnership, a Delaware limited
partnership
By: COGEN TECHNOLOGIES CAMDEN GP
LIMITED PARTNERSHIP, its general
partner
ATTEST: By: COGEN TECHNOLOGIES CAMDEN, INC.,
its general partner
/s/ [ILLEGIBLE] By /s/ R. CARY MCNAIR, JR.
- --------------------------- ------------------------------
Secretary Name: R. Cary McNair, Jr.
--------------------------
(SEAL) Title: Vice President
--------------------------
-2-
<PAGE> 3
THE STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BE IT REMEMBERED, that on this ___ day of _____________, 1993, before me,
the subscriber, a notary public, personally appeared ______________, who is the
_____________ of MAFCO WORLDWIDE CORPORATION, a Delaware corporation, who I am
satisfied is the person who signed this instrument, and he acknowledged that
he signed, sealed with the corporate seal, and delivered the same as such
officer aforesaid, and that this instrument is the voluntary act and deed of
such corporation, on behalf of MAFCO WORLDWIDE CORPORATION.
Given under my hand and seal of office this ______ day of _______, 1993.
/s/ JORAM C. SALIG
---------------------------------
Notary Public in and for
___________ County, _____________
My Commission Expires:
-----------
JORAM C. SALIG
Notary Public, State of New York
No. 4976737
Qualified in New York County
Commission Expires Dec. 17, 1994
-3-
<PAGE> 4
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
BE IT REMEMBERED, that on this 23rd day of March, 1993, before me, the
subscriber, a notary public, personally appeared R. Cary McNair, Jr. who is the
Vice President of COGEN TECHNOLOGIES CAMDEN, INC., General Partner of COGEN
TECHNOLOGIES CAMDEN GP LIMITED PARTNERSHIP, which is the General Partner of
CAMDEN COGEN L.P., D/B/A CAMDEN COGEN LIMITED PARTNERSHIP, a Delaware limited
partnership, who I am satisfied is the person who signed this instrument, and
he acknowledged that he signed, sealed with the corporate seal, and delivered
the same as such officer aforesaid, and that this instrument is the voluntary
act and deed of such corporation, on behalf of CAMDEN COGEN L.P.
Given under my hand and seal of office this 23rd day of March, 1993.
[SEAL] /s/ ESTALEETA WATSON
-----------------------------
Notary Public in and for
Harris County, Texas
My Commission Expires: July 30, 1996
-----------------
WHEN RECORDED, RETURN TO:
TERRY L. RADNEY
FULBRIGHT & JAWORSKI
1301 MCKINNEY, SUITE 5100
HOUSTON, TEXAS 77010-3095
-4-
<PAGE> 1
EXHIBIT 10.67
EASEMENT AGREEMENT
THIS EASEMENT AGREEMENT (this "Agreement") is made and entered into as
of the 22nd day of February, 1993 (the "Effective Date"), by and between CAMDEN
PAPERBOARD CORPORATION, a New Jersey corporation ("Grantor") and CAMDEN COGEN
L.P. (D/B/A Camden Cogen Limited Partnership), a Delaware limited partnership
("Grantee").
W I T N E S S E T H:
WHEREAS, Grantor is the fee owner of those certain tracts or parcels of
land situated in Camden, Camden County, New Jersey, more fully described on
Exhibit A attached hereto (the "Property"); and
WHEREAS, Grantee desires to obtain and Grantor desires to grant to
Grantee an easement (the "Easement") over, under, upon, through and across the
land (the "Area") which constitutes a portion of the Property and which is
described on Exhibit B attached hereto, for the purposes of constructing,
installing, operating, maintaining, inspecting, altering, repairing, replacing,
relocating and removing within the Area certain underground pipes and other
appurtenant facilities, all to enable the conveyance of steam from and return of
condensate to a certain facility located in Camden, Camden County, New Jersey
owned by Grantee and more fully described on Exhibit C attached hereto (the
"Facility").
NOW THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties intend to be legally
bound by this Agreement and agree as follows:
1. Definitions. The following terms used in this Agreement shall have
the following meanings:
A. "Easement Rights" means the rights described as follows:
(1) the right to construct, install, operate,
maintain, inspect, alter, repair, replace, relocate and remove
the Improvements (hereinafter defined) within the Area; and
(2) the right of ingress and egress for pedestrian,
vehicular and other traffic over those portions of the
Property as Grantee may reasonably require to construct,
install, operate, maintain, inspect, alter, repair, replace,
relocate and remove the Improvements; and
Prepared by: /s/ TERRY L. RADNEY
--------------------------
Terry L. Radney
<PAGE> 2
(3) the right to convey steam to or through or
receive condensate from or through the Area; and
(4) the right to trim and cut vegetation growing on,
within or over the Area and to remove fences, pavement, and
other obstructions thereon, subject to Paragraph 7 herein, as
is reasonable in the exercise of the Easement Rights without
unreasonably impeding Grantor's use of the Property.
B. "Improvements" means the permanent structures, pipes,
conduits, manholes and other appurtenant facilities and improvements
constructed or placed on the Area by Grantee or its agents in
connection with Grantee's provision of thermal energy to Grantor in
accordance with the terms of that certain Energy Purchase Agreement
dated December 18, 1989 (the "Steam Purchase Contract"), by and between
Grantor and Grantee.
2. Grant of Easement. Grantor hereby grants, warrants, bargains, sells
and conveys unto Grantee, its successors and assigns, the Easement over, under,
upon, through and across and otherwise grants, warrants, bargains, sells and
conveys unto Grantee, its successors and assigns, the Easement Rights covering
the Property, free and clear of all liens, easements and other encumbrances;
subject, however, to the other matters set forth herein.
3. Term. Grantee shall have the right to use the Easement until the
termination of the Steam Purchase Contract, subject to modifications by the
written agreement of Grantee and Grantor. Grantor shall notify Grantee's lender
(the "Lender") in writing at least thirty (30) days prior to the expiration of
this Agreement due to the termination of the Steam Purchase Contract, and allow
Lender the opportunity to cure any default of Grantee hereunder or under the
Steam Purchase Contract.
4. Improvements. The Improvements are and shall remain the property
of Grantee, which shall be responsible for and shall pay all taxes, applicable
assessments and other governmental charges resulting from ownership or use of
the Improvements. All cable, pipe and wire installations in the Area shall be
underground, except where the same surface to interconnect with Grantor's boiler
room. Any damage to permitted improvements within the Area as a result of
installation, or maintenance of, cable, pipes or wires installed by the Grantee
in exercising its rights hereunder shall be repaired or replaced at the expense
of the Grantee.
5. Indemnification. A. Grantee shall defend, indemnify and hold Grantor
and its employees and agents harmless from and against all claims, actions,
liabilities, losses, damages and expenses (including reasonable attorneys' fees)
whether for injury to person or damage to property incurred by or asserted
against Grantor or its
-2-
<PAGE> 3
employees or agents which is either (a) caused by the activities of Grantee or
its employees or agents upon the Property; (b) due to the placement by Grantee
of any Improvements or other materials upon the Property or (c) otherwise
arising out of Grantee's use, occupancy or operation of the Area or Improvements
or the exercise of Grantee's rights hereunder. Notwithstanding the foregoing,
Grantee shall not be liable to Grantor or its employees or agents for any
environmental loss, damage, cost or expense which results from the condition of
the Property existing prior to the Effective Date or from the activities of
Grantor or its employees or agents on or with respect to the Property. Nothing
contained herein shall be deemed to indemnify any party hereto against its own
gross negligence or willful misconduct. In the event the Easement and the
Easement Rights granted hereunder are owned by any party pursuant to foreclosure
proceedings or deed in lieu of foreclosure, Grantor agrees to look solely to the
interest of such party and its successors in and to the Facility (or the
proceeds of the sale or disposition thereof) for the collection of any judgment
obtained by Grantor under this Paragraph 5A, and no other assets of such party
or its successors shall be subject to levy, execution, or other enforcement
procedure for the satisfaction of such judgment.
B. Grantor shall defend, indemnify and hold Grantee and its employees
and agents harmless from and against all claims, actions, liabilities, losses,
damages and expenses (including reasonable attorneys' fees) whether for injury
to person or damage to property incurred by or asserted against Grantee or its
employees or agents which is, and to the extent, either (a) caused by the gross
negligence or willful misconduct of Grantor or its employees or agents upon the
Area or (b) due to the gross negligence or willful misconduct in the placement
by Grantor of any materials upon the Area.
6. Representations. Grantor hereby represents that it is the fee owner
of the Property, and that, except for the matters set forth herein, the Area is
free and clear of all liens, easements and other encumbrances.
7. Use of Easement. All Improvements shall be installed so as not to
interfere with the operations of Grantor or the rights of any party having an
interest superior to the interests created hereunder in favor of Grantee.
Further, Grantor fully reserves the right to (i) maintain, repair and replace
any structures that exist on the surface of the Easement as of the date of this
Agreement and to use the same for any purposes which will not interfere with
Grantee's use and enjoyment of the Easement Rights hereby granted, (ii) pave and
landscape the surface of the Easement and to use same for the parking of motor
vehicles, and for driveways, roadways and sidewalks, and for other purposes
which will not interfere with the Grantee's use and enjoyment of the Easement
Rights hereby granted, (iii) grant additional easements across the surface of
the Area so long as the use of such easements does not interfere with the
Easement herein granted and such other easements through the Area that Grantee
consents to in writing, such consent not to be unreasonably withheld, and (iv)
relocate the Easement if required for future construction or other purpose,
provided that (a) Grantor pays the cost and expense for such relocation, (b)
Grantor gives Grantee at
-3-
<PAGE> 4
least thirty (30) days advance written notice of its desire to relocate the
Easement, (c) at least thirty (30) days before construction is to begin on the
relocation, Grantor submits the plans for such relocation to Grantee for
Grantee's review and comment, and (d) any such relocation is performed in such a
manner as to cause minimal interference with Grantee's use and enjoyment of the
Easement Rights hereby granted.
8. Burial of Pipes. The underground pipes, conduits and other
facilities installed under this Agreement shall be buried and maintained by
Grantee or its successors, assigns or agents at a depth of at least three feet
below the surface of the Area or at any greater depth which may be required by
applicable governmental statutes or regulations or standard industrial practice,
except where such pipes, conduits and other facilities surface to interconnect
with Grantor's boiler room.
9. Recording. This Agreement will be recorded in the appropriate real
property records of Camden County, New Jersey.
10. Assignments. This Agreement shall be freely assignable by Grantee.
Any assignee of this Agreement shall take such assignment subject to all the
terms and conditions set forth herein. The Easement and the Easement Rights
created herein shall be irrevocable and shall run with the land for so long as
Grantee, its successors and assigns are obligated to furnish thermal energy to
Grantor pursuant to the Steam Purchase Contract, and shall bind all permitted
subsequent purchasers, transferees, successors and assignees of the parties
hereto.
11. Notices. All notices, requests, consents, demands and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be given to each applicable party hereto at its address or
facsimile number set forth in this paragraph or at such other address or
facsimile number as such party may hereafter specify for such purpose by notice
to the other parties, and shall be either delivered personally or sent by
facsimile or mail postage prepaid, and shall be deemed to have been made or
given (a) if given by facsimile, when sent and the appropriate confirmation is
received, and (b) if given by any other means, when delivered.
Unless changed in accordance with this paragraph, the addresses for all
such communications shall be as follows:
If to Grantor:
Camden Paperboard Corporation
267 Jefferson Avenue
Camden, New Jersey
Facsimile No.: (609) 963-0891
Attention: Mr. James B. Whitten
-4-
<PAGE> 5
If to Grantee:
Camden Cogen L.P.
1600 Smith Street, Suite 5000
Houston, Texas 77002
Facsimile No.: (713) 951-7747
Attention: R. Cary McNair, Jr.
If to Lender:
General Electric Capital Corporation
1600 Summer Street
Stamford, Connecticut 06927
Facsimile No.: (203) 357-6366
Attention: Project Financing Investments--
Transportation and Industrial
Financing Division
12. Modifications. Any modifications of this Agreement must be made in
writing and executed by the parties hereto.
13. Exhibits. All Exhibits attached to and referenced in this Agreement
are incorporated herein and made a part hereof for all purposes.
14. Paragraph Headings. Paragraph headings contained in this Agreement
are for convenience only and shall not be considered in interpreting or
construing this Agreement.
15. Consent to Jurisdiction. Grantor and Grantee hereby irrevocably
submit to the jurisdiction of any state or federal court sitting in Camden
County, New Jersey, in any action or proceeding arising out of or related to
this Agreement, and agree that no such party shall bring any such action or
proceeding in any other court, or seek to remove such action or proceeding to
any other court; provided, however, notwithstanding any other provision of this
Agreement to the contrary, this Paragraph 15 will not be binding on any
transferee, successor or assignee of Grantee or of the general partner of
Grantee pursuant to foreclosure or a conveyance in lieu of foreclosure or
incident to the exercise of any remedy under the security documentation executed
by Grantee or the general partner of Grantee.
16. Choice of Law. This Agreement shall be interpreted, construed and
enforced in accordance with the internal laws of the State of New Jersey,
without regard to conflicts of law rules.
-5-
<PAGE> 6
17. Severability. If any provision of this Agreement is determined by a
court of competent jurisdiction to be invalid or unenforceable, the remainder
of this Agreement shall nonetheless remain in full force and effect.
EXECUTED on the dates of the acknowledgements set forth below, to be
effective for all purposes as of the Effective Date.
ATTEST: CAMDEN PAPERBOARD CORPORATION,
a New Jersey corporation
/s/ [ILLEGIBLE] By /s/ JAMES WHITTEN
- ----------------------------- ---------------------------
Secretary Name: James Whitten
------------------------
Title: Vice President
General Manager
-----------------------
(SEAL)
CAMDEN COGEN L.P., d/b/a Camden Cogen
Limited Partnership, a Delaware limited
partnership
By: COGEN TECHNOLOGIES CAMDEN GP
LIMITED PARTNERSHIP, its general
partner
ATTEST: By: COGEN TECHNOLOGIES CAMDEN INC., its
general partner
/s/ MARYANN MCLENDON By /s/ R. CARY MCNAIR, JR.
- --------------------------- -------------------------------
Asst. Secretary Name: R. Cary McNair, Jr.
----------------------------
Title: Vice President
---------------------------
(SEAL)
-6-
<PAGE> 7
THE STATE OF NEW JERSEY )
)
COUNTY OF CAMDEN )
BE IT REMEMBERED, that on this 3rd day of March, 1993, before me, the
subscriber, a notary public, personally appeared John Dekzek, who is the
Secretary of CAMDEN PAPERBOARD CORPORATION, a New Jersey corporation, who I am
satisfied is the person who signed this instrument, and he acknowledged that he
signed, sealed with the corporate seal, and delivered the same as such officer
aforesaid, and that this instrument is the voluntary act and deed of such
corporation, on behalf of CAMDEN PAPERBOARD CORPORATION.
Given under my hand and seal of office this 3rd day of March, 1993.
/s/ MARGARET M. HOFFMAN
---------------------------------------
Notary Public in and for Gloucester
County, N.J.
My Commission Expires: Nov 4, 1994
-7-
<PAGE> 8
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
BE IT REMEMBERED, that on this 22nd day of February, 1993, before me, the
subscriber, a notary public, personally appeared R. Cary McNair, Jr., who is the
Vice President of COGEN TECHNOLOGIES CAMDEN, INC., General Partner of COGEN
TECHNOLOGIES CAMDEN GP LIMITED PARTNERSHIP, which is the General Partner of
CAMDEN COGEN L.P., D/B/A CAMDEN COGEN LIMITED PARTNERSHIP, a Delaware limited
partnership, who I am satisfied is the person who signed this instrument, and he
acknowledged that he signed, sealed with the corporate seal, and delivered the
same as such officer aforesaid, and that this instrument is the voluntary act
and deed of such corporation, on behalf of CAMDEN COGEN L.P.
Given under my hand and seal of office this 22nd day of February, 1993.
=============================== /s/ ESTALEETA WATSON
ESTALEETA WATSON ---------------------------------------------
[SEAL] NOTARY PUBLIC, STATE OF Notary Public in and for Harris County, Texas
TEXAS MY COMMISSION
EXPIRES JULY 30, 1996
=============================== My Commission Expires: July 30, 1996
----------------------
WHEN RECORDED, RETURN TO:
Terry L. Radney
Fulbright & Jaworski
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
-8-
<PAGE> 1
EXHIBIT 10.97
- --------------------------------------------------------------------------------
PURCHASE AGREEMENT
between
EAST COAST POWER HOLDING COMPANY L.L.C.,
and
MESQUITE INVESTORS, L.L.C.
AUGUST 2, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1
DEFINITIONS
SECTION 1.01 Definitions.....................................................1
ARTICLE 2
TRANSACTIONS AND CLOSING
SECTION 2.01 Acquisition of Interests........................................5
SECTION 2.02 Closing.........................................................6
SECTION 2.03 Certain Post-Closing Payments...................................7
SECTION 2.04 Amended Credit Support Agreement................................7
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 3.01 Capacity; Organization, Etc.....................................8
SECTION 3.02 Title to Membership Interests; Capitalization...................9
SECTION 3.03 No Violation...................................................10
SECTION 3.04 Approvals......................................................10
SECTION 3.05 Financial Statements; Absence of Certain Changes...............11
SECTION 3.06 Cogen Transaction Agreement....................................13
SECTION 3.07 Certain Actions and Agreements.................................13
SECTION 3.08 Employees; Employee Benefits...................................13
SECTION 3.09 Litigation.....................................................14
SECTION 3.10 Compliance with Law; Environmental Matters.....................14
SECTION 3.11 Regulatory Matters.............................................14
SECTION 3.12 Taxes..........................................................16
SECTION 3.13 Insurance......................................................16
SECTION 3.14 Brokers........................................................16
SECTION 3.15 Year 2000......................................................16
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 4.01 Organization, Etc..............................................17
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 4.02 No Violation...................................................17
SECTION 4.03 Approvals......................................................17
SECTION 4.04 Investment Intent, Investigation...............................18
SECTION 4.05 Financing......................................................18
SECTION 4.06 Regulatory Matters.............................................18
SECTION 4.07 Brokers. ......................................................19
ARTICLE 5
COVENANTS
SECTION 5.01 Conduct of Business............................................19
SECTION 5.02 Access to Information; Confidentiality.........................19
SECTION 5.03 Public Announcements...........................................20
SECTION 5.04 Best Efforts...................................................20
SECTION 5.05 Exclusivity. .................................................20
SECTION 5.06 Option Agreement. .............................................20
ARTICLE 6
CONDITIONS TO CLOSING
SECTION 6.01 Conditions to the Obligations of Each Party....................21
SECTION 6.02 Conditions to Obligations of the Buyer.........................21
SECTION 6.03 Conditions to Obligations of Seller............................22
ARTICLE 7
TERMINATION
SECTION 7.01 Grounds for Termination........................................22
SECTION 7.02 Effect of Termination..........................................23
ARTICLE 8
SURVIVAL; INDEMNIFICATION
SECTION 8.01 Survival.......................................................24
SECTION 8.02 Indemnification................................................24
SECTION 8.03 Procedures for Third Party Claims..............................25
SECTION 8.04 Exclusive Remedy...............................................25
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE 9
MISCELLANEOUS
SECTION 9.01 Notices.......................................................26
SECTION 9.02 Amendments; No Waivers........................................27
SECTION 9.03 Parties in Interest...........................................27
SECTION 9.04 Expenses......................................................27
SECTION 9.05 Successors and Assigns........................................27
SECTION 9.06 Governing Law.................................................27
SECTION 9.07 Counterparts; Effectiveness...................................29
SECTION 9.08 Entire Agreement..............................................29
SECTION 9.09 Captions......................................................29
SECTION 9.10 Further Assurances............................................29
Annex 1.01(a) Class B Contribution Agreement
Annex 2.01-A Amended LLC Agreement
Annex 2.01-B Buyer Security Agreement
Annex 2.04 Amended Credit Support Agreement
Annex 6.02 Opinion of Counsel to Seller
Annex 6.03 Opinion of Counsel to Buyer
</TABLE>
iii
<PAGE> 5
PURCHASE AGREEMENT
This Purchase Agreement ("AGREEMENT") is made this 2nd day of August
1999 between East Coast Power Holding Company L.L.C., a Delaware limited
liability company ("SELLER"), and Mesquite Investors, L.L.C., a Delaware limited
liability company ("BUYER").
A. Seller owns all of the outstanding Class A Membership Interests in
East Coast Power, L.L.C., a Delaware limited liability company (the "COMPANY").
B. Immediately prior to the Closing contemplated by this Agreement, it
is contemplated that 50% of the outstanding Class B Membership Interests in the
Company will be contributed to Seller (the "CLASS B CONTRIBUTION") as set forth
in the Class B Contribution Agreement (as defined herein).
C. Buyer wishes to acquire from Seller 49% of its Class A Membership
Interest in the Company and 98% of the Class B Membership Interest contributed
to it pursuant to the Class B Contribution Agreement (which will represent 49%
of the outstanding Class B Membership Interest), and Seller desires to sell such
Membership Interests to the Buyer, 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.
(a) The following capitalized terms used in this Agreement shall have
the meanings set forth below:
"ACQUISITION CLOSING" means the closing of the transactions
contemplated by the Cogen Transaction Agreement, which occurred on February 4,
1999.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such other Person.
"AMENDED CREDIT SUPPORT AGREEMENT" has the meaning set forth in Section
2.04.
"AMENDED LLC AGREEMENT" has the meaning set forth in Section 2.01(b).
"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 applicable to such Person or
any of its Affiliates or any of their respective properties or assets.
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"AUDITED FINANCIAL STATEMENTS" has the meaning set forth in Section
3.05.
"BAYONNE PLANT" means the 176 megawatt gas-fired, combined cycle
cogeneration facility owned by NJ Venture and located in Bayonne, New Jersey on
the site of the IMTT Facility.
"BENEFIT PLANS" shall mean employee pension benefit plans (whether or
not insured) as defined in Section 3(2) of ERISA and employee welfare benefit
plans (whether or not insured) as defined in Section 3(1) of ERISA.
"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 SECURITY AGREEMENT" has the meaning set forth in Section
2.01(b).
"CALPERS" means the California Public Employees' Retirement System, a
unit of the State and Consumer Service Agency of the State of California.
"CAMDEN COGEN" means Camden Cogen LP, a Delaware limited partnership.
"CAMDEN PLANT" means the 146 megawatt gas-fired, combined cycle
cogeneration facility owned by Camden Cogen and located in Camden, New Jersey.
"CLASS B CONTRIBUTION" has the meaning set forth in the recitals.
"CLASS B CONTRIBUTION AGREEMENT" means the Contribution Agreement
relating to the Class B Contribution dated the date hereof, a copy of which is
attached hereto as Annex 1.01(a).
"CLOSING" has the meaning set forth in Section 2.02.
"CLOSING DATE" means the date of the Closing.
"COGEN GROUP" has the meaning set forth in Section 3.05.
"COGEN TRANSACTION AGREEMENT" means the Transaction Agreement dated
October 25, 1998, as amended by Amendment No. 1 to Transaction Agreement
effective as of November 6, 1998, Amendment No. 2 to Transaction Agreement
effective as of November 13, 1998, and Amendment No. 3 to Transaction Agreement
effective as of February 1, 1999, between Enron, Enron Capital & Trade Resources
Corp., RCM Holdings, Inc., (formerly Cogen Technologies, Inc.), Cogen
Technologies Camden, Inc.,Cogen Technologies Capital Company, L.P., the McNair
Group Sellers and Minority Group Sellers listed on the signature page thereto,
the Company, JEDI Linden GP LLC, JEDI Linden LP LLC, JEDI Camden GP LLC, JEDI
Camden LP LLC and JEDI Bayonne GP LLC.
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"COMPANY" has the meaning set forth in the recitals to this Agreement.
"COMPANY EMPLOYEES" shall mean all individuals who are employed by the
Company or who are employed by an Affiliate of Enron other than the Company and
who perform services in connection with the business operations of the Company.
"CONFIDENTIALITY AGREEMENT" has the meaning set forth in Section 5.02.
"CREDIT SUPPORT AGREEMENT" has the meaning set forth in Section 2.04.
"DAMAGES" has the meaning set forth in Section 8.02(a).
"DISCLOSURE SCHEDULE" means the Disclosure Schedule delivered by Seller
to Buyer relating to this Agreement, which contains the disclosures required to
be made under the various terms and provisions of this Agreement.
"DISPUTED CLAIMS" has the meaning set forth in Section 9.06.
"ECT MERCHANT" means ECT Merchant Investments Corp., a Delaware
corporation.
"ENRON" means Enron Corp., an Oregon corporation.
"EL PASO ENERGY" means El Paso Energy Corporation, a Delaware
corporation.
"EL PASO HOLDING" means El Paso Power Holding Company, a Delaware
corporation, which is a party to this Agreement for the purposes set forth on
the signature page hereto.
"ENVIRONMENTAL LAW" 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, removal,
remediation, manufacture, release, use, treatment, processing, transportation,
storage or handling of pollutants, contaminants, wastes or any toxic,
radioactive, ignitable, corrosive, reactive or otherwise hazardous substances.
Examples of Environmental Laws include, but are not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
the Resource Conservation and Recovery Act ("RCRA"), the Toxic Substances
Control Act ("TSCA"), the Clean Air Act, the Clean Water Act, the Superfund
Amendments and Reauthorization Act of 1986, the Occupational Safety and Health
Act of 1970, the Hazardous Materials Transportation Act, each as amended from
time to time and all comparable state and local laws.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"FERC" means the United States Federal Energy Regulatory Commission, or
any successor or replacement agency thereto.
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"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.
"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.
"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 VENTURE" means Cogen Technologies Linden Venture, L.P., a
Delaware limited partnership.
"LLC AGREEMENT" means the Amended and Restated Limited Liability
Company Agreement of the Company, dated as of February 4, 1999.
"MATERIAL ADVERSE EFFECT" means any event, condition, effect or change
that is or would be materially adverse to the business, results of operations,
prospects, condition (financial or otherwise), assets or liabilities of the
Company and its Subsidiaries, when taken as a whole.
"MEMBERSHIP INTEREST" has the meaning given to such term in the LLC
Agreement.
"NJ VENTURE" Cogen Technologies NJ Venture, a New Jersey general
partnership.
"OPERATING FACILITIES" means the Linden Plant, the Bayonne Plant and
the Camden Plant.
"PERSON" means an individual, corporation, partnership, joint venture,
limited liability company, association, trust, estate or other entity or
organization, including a Governmental Authority.
"PUHCA" means the Public Utility Holding Company Act of 1935, as
amended.
"PURCHASED INTERESTS" means the Class A Membership Interest and Class B
Membership Interests in the Company to be purchased by Buyer from Seller under
this Agreement at the Closing.
"PURPA" means the Public Utility Regulatory Policies Act of 1978, as
amended.
"PURPA REQUIREMENTS" has the meaning set forth in Section 3.12.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER" has the meaning set forth in the introductory paragraph to
this Agreement.
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"SENIOR NOTE SECURITY INTERESTS" means the security interests granted
by Seller, ECT Merchant and CalPERS in their Membership Interests pursuant to
various security agreements dated as of April 20, 1999 between each such entity
and the Trustee, in each case securing the obligations of the Company under the
Senior Secured Notes issued under the Indenture dated as of April 20, 1999
between the Company and the Trustee.
"SUBSIDIARY" has the meaning set forth in Section 3.02.
"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 Company and its Subsidiaries, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom or import 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 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.
"TRUSTEE" means The Bank of New York, as Trustee under the Indenture
dated as of April 20, 1999 between The Bank of New York, Trustee and the
Company.
"UNAUDITED FINANCIAL STATEMENTS" has the meaning set forth in Section
3.05.
(b) 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 in the United States as of the date hereof applied on a
consistent basis, (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 and (i)
the terms "Article" or "Section" shall refer to the specified Article or Section
of this Agreement.
ARTICLE 2
TRANSACTIONS AND CLOSING
SECTION 2.01. Acquisition of Interests. Upon the terms and subject to
the conditions set forth herein, including the consummation of the Class B
Contribution, the parties agree that on the Closing Date:
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<PAGE> 10
(a) El Paso Holding will cause Buyer to buy, and Seller will
sell, assign, transfer and convey to Buyer, a 49% Class A Membership
Interest (as defined in the LLC Agreement) in the Company and a 49%
Class B Membership Interest in the Company (as defined in the LLC
Agreement), in each case subject to the Senior Note Security Interests
but free and clear of all other Liens (other than as set forth in the
Amended LLC Agreement described below), in exchange for a cash payment
of $128,000,000 by Buyer to Seller (which is $133,000,000 less the
$5,000,000 deposit (the "Deposit") paid to Seller prior to the date
hereof).
(b) To evidence the foregoing assignments and admit Buyer as a
Class A and Class B member of the Company:
(i) Seller, Buyer and CalPERS will enter into the
Second Amended and Restated Limited Liability Company
Agreement (the "AMENDED LLC AGREEMENT") of the Company in
substantially the form attached hereto as ANNEX 2.01-A;
(ii) Buyer will enter into a Security Agreement with
the Trustee relating to the Purchased Interests in
substantially the form attached hereto as ANNEX 2.01-B (the
"BUYER SECURITY AGREEMENT"); and
(iii) The Company will cause to be issued in the name
of each party a new certificate evidencing the Membership
Interest of such party as contemplated by the terms of the
Amended LLC Agreement, and the parties shall cause such
certificates to be delivered to the Trustee together with duly
executed transfer powers or assignments satisfactory to the
Trustee, against surrender by the Trustee to the Company of
the old certificates representing such Membership Interests.
SECTION 2.02. Closing.
(a) Subject to the satisfaction of the conditions set forth in
Article 6, the closing (the "CLOSING") of the transactions contemplated
by this Agreement shall take place at the offices of Vinson & Elkins
L.L.P., 1001 Fannin, Houston, Texas 77002, on August 13, 1999 or at
such other time or place as the Buyer and Seller may agree; provided,
that Buyer at its option may delay the Closing as long as (i) the
Closing shall be on a Business Day no later than September 15, 1999,
(ii) if the Buyer delays Closing past August 13, 1999, then Buyer shall
give at least 3 Business Days notice to Seller of the new Closing Date,
and (iii), if the Closing is after August 13, 1999, at the Closing, El
Paso Holding will cause Buyer to pay to Seller in addition to the
$128,000,000 specified in Section 2.01(a), interest on such amount at
the rate of 12% per annum from August 14, 1999 through the Closing and,
if the Closing has not occurred by August 31, 1999, such interest rate
shall increase to 15% for the period from September 1, 1999 through
Closing, in each case except to the extent the delay in Closing is
caused by Seller.
(b) The parties agree that at the Closing, El Paso Holding
will cause Buyer to pay to Seller the applicable cash consideration (as
set forth in Section 2.01 and 2.02(a)) in immediately available funds
by wire transfer to an account designated by Seller in writing prior to
the Closing.
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SECTION 2.03. Certain Post-Closing Payments.
(a) In the event that any of the distributions to Seller
contemplated by Section 5.01(d)(i) of the Amended LLC Agreement are not
made for any reason within 90 days of the event specified in clauses
(A)-(G) of such Section 5.01(d)(i) that triggers the obligation to pay
such distribution (each, a "PAYMENT EVENT"), then Buyer agrees to pay
to Seller an amount equal to 49% of the difference between (a) the
distribution specified in such Section 5.01(d)(i) with respect to such
Payment Event and (b) any distribution actually made by the Company to
Seller pursuant to such Section 5.01(d)(i) in respect of such Payment
Event. In no event shall the sum of (a) 49% of the distributions made
by the Company to Seller pursuant to Section 5.01(d)(i) of the Amended
LLC Agreement and (b) the payments made by Buyer to Seller pursuant to
this Section 2.03(a) exceed $17,000,000, excluding any interest paid or
owed pursuant to Section 2.03(b).
(b) Any such payment shall be paid within three Business Days
of the end of the 90 day period referred to in the first sentence of
Section 2.03(a), by wire transfer in immediately available funds to an
account designated by Seller. If any such payment is not made timely in
accordance with the foregoing, then the amount of any such payment
shall accrue simple interest at the rate of 12% per annum from the due
date until paid. The obligation to pay interest hereunder may be
satisfied by (i) Buyer paying such amount to Seller or (ii) the Company
making a distribution pursuant to Section 5.01(d)(iv) of the Amended
LLC Agreement in an amount equal to the amount of such interest payment
divided by 0.49.
SECTION 2.04 Amended Credit Support Agreement. Enron is party to a
Credit Support Agreement effective April 20, 1999 (the "CREDIT SUPPORT
AGREEMENT"). At or prior to Closing, Buyer agrees to use its best efforts to
cause El Paso Energy to enter into an Amended and Restated Credit Support
Agreement with Enron and the Company in substantially the form attached hereto
as ANNEX 2.04 (the "AMENDED CREDIT SUPPORT AGREEMENT") pursuant to which El Paso
Energy will agree to bear responsibility for 49% of Enron's obligations under
the Credit Support Agreement and the Company will agree to pay to El Paso
Energy, from and after the Closing, 49% of the compensation or other payments
that are payable by the Company under the Credit Support Agreement. At or prior
to Closing, Seller agrees to use its best efforts to cause Enron to enter into a
security agreement in the form of the pledge of the note under the Amended
Credit Support Agreement to the extent the granting of such security interest is
possible. If the granting of such security interest is not possible, then Buyer
and Seller shall cooperate to amend the form of Amended Credit Support Agreement
to provide to provide that any advances to the Company under the Amended Credit
Support Agreement shall be made directly by Enron and El Paso to the Company
based on their respective Participation Percentages (as defined in the Amended
Credit Support Agreement), with the Company providing a note to repay such
advances to each of El Paso and Enron.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
SECTION 3.01 Capacity; Organization, Etc.
(a) Seller has been duly organized and is validly existing as
a limited liability company under the laws of the State of Delaware,
and has full right, power and authority to enter into and perform its
obligations under this Agreement and the Amended LLC Agreement and to
consummate the transactions contemplated hereby, and has obtained all
requisite corporate or similar authorizations, consents or approvals
applicable to such Seller to do so. This Agreement has been, and the
Amended LLC Agreement, when executed at the Closing, will be, duly
executed and delivered by Seller and constitute the valid and binding
obligations of Seller, enforceable against Seller in accordance with
its terms.
(b) The Company is a limited liability company duly organized,
validly existing and in good standing under the laws of the state of
Delaware and has full limited liability company power and authority to
conduct its business as it is now being conducted and to own, operate
or lease the properties and assets it currently owns, operates or holds
under lease. The Company is duly qualified or licensed to do business
and is in good standing in each jurisdiction where the character of its
business or the nature of its properties makes such qualification or
licensing necessary.
(c) SECTION 3.01(c) OF THE DISCLOSURE SCHEDULE sets forth a
list of each subsidiary of the Company (the "SUBSIDIARIES") and, with
respect only to the Subsidiaries of the Company other than the Acquired
Entities as defined in the Cogen Transaction Agreement that are less
than wholly-owned by the Company and its Subsidiaries, a description of
the ownership interest of the Company in such Subsidiary. Each
Subsidiary is a partnership or limited liability company duly
organized, validly existing and (other than with respect to
partnerships) in good standing under the laws of its jurisdiction of
organization and has full partnership or limited liability company
power and authority to conduct its business as it is now being
conducted and to own, operate or lease the properties and assets it
currently owns, operates or holds under lease. Each Subsidiary is duly
qualified or licensed to do business and, if applicable, is in good
standing in each jurisdiction where the character of its business or
the nature of its properties makes such qualification or licensing
necessary. Except as set forth in SECTION 3.01(c) OF THE DISCLOSURE
SCHEDULE, all issued and outstanding interests of equity capital of
each of the Subsidiaries are owned, directly or indirectly, by the
Company. Except as set forth in SECTION 3.01(c) OF THE DISCLOSURE
SCHEDULE, none of the equity interests in the Subsidiaries have become
subject to any Liens since the Acquisition Closing. Since the
Acquisition Closing, the Company and its Subsidiaries have not issued
or entered into any (i) securities convertible into or exchangeable for
any interests of the equity capital of any of the Subsidiaries, (ii)
options, warrants or other rights to purchase or subscribe for equity
capital of any of the Subsidiaries or (iii) contracts, commitments,
agreements, understandings or arrangements of any kind relating to the
issuance of any equity capital of
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<PAGE> 13
any of the Subsidiaries, any such convertible or exchangeable
securities or any such options, warrants or rights, pursuant to which,
in any of the foregoing cases, any of the Subsidiaries is subject or
bound. Since the Acquisition Closing, except for the agreements listed
in SECTION 3.01(c) OF THE DISCLOSURE SCHEDULE, none of the Subsidiaries
has become party to any voting trusts, member agreements or other
similar instruments restricting or relating to the rights of the
holders of equity interests in such Subsidiary. Except for the
Subsidiaries, the Company does not own, directly or indirectly, any
interest or investment in any corporation, association, joint venture,
partnership or other business organization, firm or enterprise of any
character whatsoever.
SECTION 3.02 Title to Membership Interests; Capitalization.
(a) Seller is, and at the Closing will be, the record and
beneficial owner of 100% of the outstanding Class A Membership Interest
in the Company, which represents a 90% Sharing Ratio (as defined in the
LLC Agreement), and such Membership Interest is owned by such Seller
free and clear of all Liens, except for the Senior Note Security
Interests and except as set forth in the LLC Agreement. Upon
consummation of the Class B Contribution, Seller will be the record and
beneficial owner of 50% of the outstanding Class B Membership Interest
in the Company, which will represent a 5.0% Sharing Ratio, and such
Membership Interest will be owned by Seller free and clear of all
Liens, except for the Senior Note Security Interests and except as set
forth in the LLC Agreement. Seller has full authority to transfer the
portion of its Class A Membership Interest to be transferred pursuant
to this Agreement, and, upon consummation of the Class B Contribution,
Seller will have full authority to transfer the Class B Membership
Interest to be transferred pursuant to this Agreement, in each case
free and clear of all Liens, except for the Senior Note Security
Interests and except as set forth in the Amended LLC Agreement. Except
as contemplated by the Amended LLC Agreement and the Senior Note
Security Interests, there are no outstanding options, warrants,
convertible securities, calls, rights, commitments, preemptive rights
or agreements or instruments or understandings of any character, to
which Seller is a party or by which Seller is bound, obligating Seller
to sell or otherwise transfer any of its Membership Interests. Except
for the agreements listed in SECTION 3.02(a) OF THE DISCLOSURE SCHEDULE
and the Amended LLC Agreement, since the Acquisition Closing, the
Company has not entered into any voting trusts, member agreements or
other similar instruments restricting or relating to the rights of the
holders of equity interests in the Company.
(b) The Membership Interests of CalPERS, ECT Merchant and
Seller set forth on SECTION 3.02(b) OF THE DISCLOSURE SCHEDULE
constitute all of the outstanding equity interests in the Company as of
the date hereof. There are no outstanding options, warrants,
convertible securities, calls, rights, commitments, preemptive rights
or agreements or instruments or understandings of any character, except
as contemplated herein, to which the Company is a party or by which the
Company is bound, obligating the Company to issue, deliver or sell, or
cause to be issued, delivered or sold, equity interests in the Company
or any securities or obligations convertible into or exchangeable for
such equity interests or to grant, extend or enter into any such
option, warrant, convertible security, call, right, commitment,
preemptive right or agreement.
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(c) Upon payment of the consideration specified in Section
2.01, title to the Purchased Interests will pass to Buyer, free and
clear of all Liens except as contemplated by the Amended LLC Agreement
and except for the Senior Note Security Interests.
SECTION 3.03 No Violation.
(a) The execution and delivery of this Agreement by Seller
does not, and the consummation by Seller of the transactions
contemplated by this Agreement and the Amended LLC Agreement will not
(a) violate any permit, concession, grant, franchise, law, rule or
regulation, or any judgment, decree or order of any Governmental
Authority to which Seller is a party or to which Seller or any of its
respective property is subject; or (b) assuming execution and delivery
by all parties of the Amended LLC Agreement, conflict with, or result
in a breach or violation of, or accelerate the performance required by,
the terms of any agreement, contract, indenture or other instrument to
which Seller is a party or to which any of its property is subject,
except in each case such as would not materially impair the ability of
Seller to consummate the transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by Seller
does not, and the consummation by Seller of the transactions
contemplated by this Agreement and the execution and delivery of the
Amended LLC Agreement by Seller and the consummation of the transaction
contemplated therein will not (a) violate any permit, concession,
grant, franchise, law, rule or regulation, or any judgment, decree or
order of any Governmental Authority to which the Company or any of its
Subsidiaries is a party or to which the Company or any of its
Subsidiaries or any of their respective properties is subject; or (b)
assuming execution and delivery by all parties of the Amended LLC
Agreement, conflict with, or result in a breach or violation of, or
accelerate the performance required by, the terms of any agreement,
contract, indenture or other instrument to which the Company or any of
its Subsidiaries is a party or to which any of their respective
properties is subject, except in each case such as would not have a
Material Adverse Effect.
SECTION 3.04 Approvals.
(a) The execution and delivery of this Agreement by Seller and
the consummation of the transactions contemplated by this Agreement and
the execution and delivery of the Amended LLC Agreement by Seller and
the consummation of the transactions contemplated therein will not,
require the consent, approval, order or authorization of any
Governmental Authority or regulatory authority or, assuming execution
and delivery by all parties of the Amended LLC Agreement, any other
person under any permit, license, agreement, indenture or other
instrument to which Seller is a party or to which any of its respective
properties are subject, and no declaration, filing or registration with
any Governmental Authority or regulatory authority is required by
Seller in connection with the execution and delivery of this Agreement
and the consummation of such transactions other than notice filings to
be made after the Closing, in each case except such as would not
materially impair the ability of Seller to consummate the transactions
contemplated by this Agreement or for such consents and approvals as
have been received.
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(b) The execution and delivery of this Agreement by Seller and
the consummation of the transactions contemplated by this Agreement and
the execution and delivery of the Amended LLC Agreement by Seller and
the consummation of the transaction contemplated therein will not,
require the consent, approval, order or authorization of any
Governmental Authority or regulatory authority or, assuming execution
and delivery by all parties of the Amended LLC Agreement, any other
person under any permit, license, agreement, indenture or other
instrument to which the Company or any of its Subsidiaries is a party
or to which any of their respective properties is subject, and no
declaration, filing or registration with any Governmental Authority or
regulatory authority is required by the Company or any of its
Subsidiaries in connection with the execution and delivery of this
Agreement and the consummation of such transactions other than notice
filings to be made after the Closing, in each case except such as would
not have a Material Adverse Effect.
SECTION 3.05 Financial Statements; Absence of Certain Changes.
(a) Seller has delivered to Buyer true and complete copies of
the combined financial statements, including an income statement, a
balance sheet and a statement of cash flows, of (i) Cogen Technologies
Linden Ltd., Cogen Technologies Camden GP Limited Partnership and
McNair Energy Services Corporation and its wholly owned subsidiary
Cogen Technologies NJ, Inc. (collectively, the "COGEN GROUP") as of and
for the year ended December 31, 1998 and (ii) Cogen Technologies NJ
Venture, Camden Cogen L.P. and Cogen Technologies Linden Venture, L.P.
(collectively, the "COGEN TECHNOLOGIES OPERATING PARTNERSHIPS") as of
and for the year ended December 31, 1998 (collectively, the "AUDITED
FINANCIAL STATEMENTS"). The Audited Financial Statements have been
audited by Arthur Andersen LLP, have been prepared from the books and
records of the Cogen Group and Cogen Technologies Operating
Partnerships, as the case may be, using generally accepted accounting
principles except as set forth in the footnotes thereto, and fairly
present in all material respects the financial position of the Cogen
Group or Cogen Technologies Operating Partnerships, as the case may be,
as of the date thereof and the results of operations and cash flows for
the periods set forth therein.
(b) Seller has delivered to Buyer true and complete copies of
the consolidated financial statements, including an income statement, a
balance sheet and a statement of cash flows, of the Company and its
Subsidiaries for as of and for the six month period ended June 30, 1999
(the "UNAUDITED FINANCIAL STATEMENTS"). The Unaudited Financial
Statements have been prepared using generally accepted accounting
principles from the books and records of the Company and its
Subsidiaries, except that the Unaudited Financial Statements omit
footnote information. The Financial Statements fairly present in all
material respects the financial position of the Company and its
Subsidiaries as at the dates thereof and the results of operations and
cash flows for the periods set forth therein.
(c) Except as set forth in SECTION 3.05 OF THE DISCLOSURE
SCHEDULE, since the Acquisition Closing, there has not occurred:
(i) any material adverse change or, to the knowledge of
Seller, any threatened material adverse change, in the
condition (financial or otherwise) or in the
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properties, assets or liabilities or business or prospects of
the Company and its Subsidiaries;
(ii) any material change in the accounting methods or
practices followed by the Company and its Subsidiaries or
change in the depreciation or amortization policies or rates
of the Company and its Subsidiaries theretofore adopted;
(iii) any incurrence of any debts, obligations or
liabilities, absolute, accrued, contingent or otherwise,
whether due or to become due by the Company or any Subsidiary,
which exceed, in the aggregate, $1,000,000, other than in the
ordinary course of business;
(iv) any discharge or satisfaction of any Liens or
payment of any obligation or liability of the Company or any
Subsidiary, other than in the usual and ordinary course of
business consistent with past practice;
(v) the creation of any Lien on any of the assets,
tangible or intangible, of the Company or any Subsidiary,
other than in the usual and ordinary course of business
consistent with past practice;
(vi) any sale, transfer or lease as lessor or
sublessor of any assets of the Company or any Subsidiary,
other than in the usual and ordinary course of business
consistent with past practice in an aggregate amount not in
excess of $1,000,000;
(vii) any physical damage, restriction or loss
incurred by the Company or any of its Subsidiaries not covered
by insurance (or that is covered by self-insurance) that
individually or in the aggregate would have a Material Adverse
Effect;
(viii) (A) any default by the Company or any of its
Subsidiaries, or, to the knowledge of Seller, any other party,
to any contract to which the Company or any of its
Subsidiaries is a party, or any event which, with the lapse of
time or the giving of notice, or both, would cause the Company
or any of its Subsidiaries, or, to the knowledge of Seller,
any other party, to be in default of such contracts or give
any other party to such contracts the right to terminate such
contracts, or (B) the provision of notice of any material
default under any such contracts, except in each of the above
cases as would not in the aggregate have a Material Adverse
Effect and except that none of the foregoing shall apply to
any default or breach (or condition that with the giving of
notice or lapse of time or both, would constitute a default or
breach) in existence at or prior to the Acquisition Closing;
or
(ix) any distribution by the Company to its Members
(except as contemplated by Section 5.01(a) of the Amended LLC
Agreement).
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SECTION 3.06 Cogen Transaction Agreement.
(a) Seller has delivered to or made available to Buyer a true
and complete copy of the Cogen Transaction Agreement, including the
Disclosure Schedules delivered by the Sellers thereunder, together with
a copy of all documents delivered at the Acquisition Closing. The
Company is one of the "Buyer Entities" under, and as that term is
defined in, the Cogen Transaction Agreement and is entitled to the
benefit of the representations, warranties and indemnities set forth
therein, subject to the terms and conditions thereof.
(b) Since the Acquisition Closing, Seller has not become aware
of any of the representations and warranties made by the Sellers (as
that term is defined in the Cogen Transaction Agreement) in the Cogen
Transaction Agreement being untrue in any material respect.
(c) Seller has delivered to Buyer a true and complete copy of
the Offering Memorandum dated April 14, 1999 with respect to the
issuance and sale by the Company of its 6.737% Senior Secured Notes due
2008, its 7.066% Senior Secured Notes due 2012 and its 7.536% Senior
Secured Notes due 2017 and the prospectus included in the S-4
Registration Statement with respect to the exchange offer relating to
such Senior Notes filed by the Company with the Securities Exchange
Commission on June 25, 1999. Buyer acknowledges that such Offering
Memorandum and prospectus were prepared solely for the purpose of the
offering of the Senior Notes referenced therein and not for the use of
the Buyer in connection with the transactions contemplated hereby.
Neither the Offering Memorandum nor the prospectus, as of the
respective dates thereof, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of
the circumstances in which they were made.
SECTION 3.07 Certain Actions and Agreements.
(a) Except as disclosed on SECTION 3.07 OF THE DISCLOSURE
SCHEDULE, since the Acquisition Closing, neither the Company nor any of
its Subsidiaries has taken any action or entered into, amended or
waived any rights under any agreement that would have required the
unanimous consent of the Class A Members under the Amended LLC
Agreement if the Amended LLC Agreement had been in effect at the time
of such action.
(b) SECTION 3.07 OF THE DISCLOSURE SCHEDULE sets forth a list
of each contract or agreement currently in effect between the Company
or any of its Subsidiaries, on one hand, and Seller or any Affiliate
thereof, on the other hand (other than the Company or any other
Subsidiary of the Company).
SECTION 3.08 Employees; Employee Benefits. Subject to SECTION 5.01 OF
THE DISCLOSURE SCHEDULE, all Company Employees are covered by the Benefit Plans
sponsored and maintained by Enron for its and certain of its Affiliates'
employees on the same basis as similarly situated employees of Enron except that
the Company Employees have temporary coverage under a special severance benefit
plan. Seller has delivered to Buyer a true and complete copy of the agreement
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between Enron and the Company with respect to the coverage of Company Employees
under Enron's benefit plans. To the knowledge of Seller after due inquiry, the
Benefit Plans covering the Company Employees have been maintained and
administered in accordance with their terms and provisions and substantially in
compliance with the requirements of all applicable laws including, but not
limited to, ERISA and the Code, except as in the aggregate would not have a
Material Adverse Effect.
SECTION 3.09 Litigation. Except as set forth on SECTION 3.09 OF THE
DISCLOSURE SCHEDULE, since the Acquisition Closing, no action, suit, or
proceeding has been commenced, or, to the knowledge of Seller, threatened,
against the Company, any of its Subsidiaries or their respective officers,
directors, employees or assets before any Governmental Authority or pursuant to
any agreement to arbitrate, including any action, suit, claim, investigation or
proceeding arising out of or relating to any Environmental Laws, except for any
such matters that, if adversely determined, would not in the aggregate have a
Material Adverse Effect.
SECTION 3.10 Compliance with Law; Environmental Matters. Since the
Acquisition Closing:
(a) None of the Company or its Subsidiaries has violated, or,
to the knowledge of Seller, 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, except as would not have a Material
Adverse Effect;
(b) Neither the Company nor any of its Subsidiaries has
received any notice, notification, demand, request for information,
citation, summons or order, and no complaint has been filed, and no
penalty has been assessed 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; and
(c) The Company and its Subsidiaries have complied in all
material respects with all Environmental Laws.
SECTION 3.11 Regulatory Matters.
(a) Assuming that, from the commencement of power generation
at each Operating Facility through the Acquisition Closing, each
Operating Facility had continuously been a "qualifying cogeneration
facility" within the meaning of Section 3(18)(B) of the Federal Power
Act, as amended, and the regulations of the FERC thereunder, at 18
C.F.R. Part 292, interpretations thereof by the FERC and courts of
competent jurisdiction of the PURPA and such regulations (collectively,
PURPA, the regulations and all such interpretations, the "PURPA
REQUIREMENTS"), each Operating Facility is, and since the Acquisition
Closing has been, a "qualifying cogeneration facility" within the
meaning of such requirements. Seller is not aware of any event or
circumstances that would result in a loss by any of the Operating
Facilities of such status. The consummation of the transactions
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contemplated by the Cogen Transaction Agreement and the Class B
Contribution did not result in the loss of such status for such
Operating Facility.
(b) Each of Linden Venture, Camden Cogen and NJ Venture is an
"exempt wholesale generator" as defined in Section 32 of PUHCA.
(c) Since the Acquisition Closing, each of Linden Venture,
Camden Cogen and NJ Venture has been in compliance with the Federal
Power Act, as amended, and the FERC's regulations thereunder.
(d) Except as set forth in SECTION 3.11 OF THE DISCLOSURE
SCHEDULE, each of the Operating Facilities has in effect a contract
with an entity under which such entity has agreed to purchase steam
from such Operating Facility during the term of such contract and use
such steam during such term for an industrial or commercial process or
for heating or cooling, or has agreed to obtain cooling for 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.
(e) None of the Company, Linden Venture, Camden Cogen or NJ
Venture, or any "affiliate" thereof, as defined in section 2(a)(11)(B)
of PUHCA, is subject to regulation as a "public utility" under the
Federal Power Act, other than as contemplated by 18 C.F.R. Section
292.601(c), or under any state law or regulation with respect to the
rates or the financial or organizational regulation of electric
utilities, other than as contemplated by 18 C.F.R. Section
292.602(c)(2). None of the Company or its Subsidiaries, including
Linden Venture, Camden Cogen or NJ Venture, or any "affiliate" thereof,
as defined in section 2(a)(11) of PUHCA, is subject to regulation as a
"public-utility company," a "holding company," a "subsidiary company,"
an "associate company," or an "affiliate" of any of a "public-utility
company," a "holding company" or a "subsidiary company" of a "holding
company," as each such term is defined in PUHCA. Assuming the accuracy
of the representation in Section 4.06(a), none of Seller or the
Company, the Subsidiaries or any "affiliate" thereof, as defined in
section 2(a)(11) of PUHCA, requires any approvals under the Federal
Power Act or PUHCA for the execution, delivery, or performance of the
transactions contemplated by this Agreement.
(f) Assuming the accuracy of the representation set forth in
Section 4.06(c) and assuming that, from the commencement of power
generation at each Operating Facility through the Acquisition Closing,
each Operating Facility had continuously been a "qualifying
cogeneration facility" within the meaning of the PURPA Requirements,
consummation of the transactions contemplated by the Purchase Agreement
and the Amended LLC Agreement by Seller will not result in any of the
Operating Facilities losing its status as a "qualifying cogeneration
facility" within the meaning of the PURPA Requirements.
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SECTION 3.12 Taxes.
(a) (i) All Tax Returns of or with respect to any Tax which is
required to be filed by or with respect to the Company or any
Subsidiary since the Acquisition Closing and on or before the Closing
Date 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 the Company
or its Subsidiaries since the Acquisition Closing have been or will be
satisfied in full in all material respects.
(b) Since the Acquisition Closing, each of the Company and its
Subsidiaries has properly been classified as a partnership or
disregarded entity for federal income tax purposes.
(c) The consummation of any transactions subsequent to the
Acquisition Closing have not caused a termination of the Company
pursuant to Section 708(b) of the Code. The consummation of the
transactions contemplated by this Agreement and the Amended LLC
Agreement will not cause a termination of the Company pursuant to
Section 708(b) of the Code.
(d) Valid elections made pursuant to Section 754 of the Code
are in effect (or will be in effect with respect to the Company's
taxable year that includes the Closing upon the filing of the
applicable tax returns) for each of Company and its Subsidiaries
(except if such Subsidiary is a disregarded entity for federal income
tax purposes).
SECTION 3.13 Insurance. Seller has furnished to Buyer a list of all
insurance policies and fidelity bonds relating to the Company and its
Subsidiaries and their respective businesses and operations and officers and
employees. Except as set forth on SECTION 3.13 OF THE DISCLOSURE SCHEDULE, since
the Acquisition Closing, there has been no claim by the Company or any of its
Subsidiaries 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. Since
the Acquisition Closing, all premiums payable under all such policies and bonds
have been timely paid and such policies have been in full force and effect. To
the knowledge of Seller, all such policies satisfy the requirements of and have
been endorsed in accordance with the terms and conditions of all applicable
contracts and/or agreements.
SECTION 3.14 Brokers. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Seller or the Company or its Subsidiaries who might be entitled to any fee or
commission from Buyer or the Company or any of its Subsidiaries in connection
with the transactions contemplated by this Agreement.
SECTION 3.15 Year 2000. SECTION 3.15 OF THE DISCLOSURE SCHEDULE sets
forth Seller's representations as to the Company's Year 2000 compliance plan.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
SECTION 4.01 Organization, Etc. Buyer is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full limited liability power and authority to enter
into and perform its obligations under this Agreement, and has obtained all
requisite corporate or similar authorizations, consents or approvals applicable
to it to do so. El Paso Holding is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
full corporate power and authority to enter into and perform its obligations
under this Agreement, and has obtained all requisite corporate authorizations,
consents or approvals applicable to it to do so. This Agreement constitutes, and
the Amended LLC Agreement, the Buyer Security Agreement and the Amended Credit
Support Agreement, when executed at Closing, will constitute, valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. This Agreement constitutes a valid and binding obligation of
El Paso Holding, enforceable against El Paso Holding in accordance with its
respective terms.
SECTION 4.02 No Violation. The execution and delivery of this
Agreement, the Amended LLC Agreement, the Buyer Security Agreement and the
Amended Credit Support Agreement by Buyer does not, and the consummation by
Buyer of the transactions contemplated hereby and thereby will not, and the
execution and delivery of this Agreement by El Paso Holding does not, and the
consummation by El Paso Holding of the transactions contemplated hereby and
thereby will not (a) violate the organizational documents of Buyer or El Paso
Holding, as applicable, (b) violate any permit, concession, grant, franchise,
law, rule or regulation, or any judgment, decree or order of any Governmental
Authority to which Buyer or El Paso Holding, as applicable, is a party or to
which Buyer or El Paso Holding, as applicable, or any of their property is
subject; or (c) conflict with, or result in a breach or violation of, or
accelerate the performance required by, the terms of any agreement, contract,
indenture or other instrument to which Buyer is a party or to which any of its
property is subject, except in each case such as would not materially impair the
ability of Buyer and El Paso Holding to consummate the transactions contemplated
by this Agreement.
SECTION 4.03 Approvals. The execution and delivery of this Agreement,
the Amended LLC Agreement, the Buyer Security Agreement and the Amended Credit
Support Agreement and the consummation of the transactions contemplated hereby
and thereby by Buyer, and the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and thereby by El Paso
Holding, will not require the consent, approval, order or authorization of any
Governmental Authority or regulatory authority or any other person under any
permit, license, agreement, indenture or other instrument to which Buyer or El
Paso Holding is a party or to which any of its properties are subject, and no
declaration, filing or registration with any Governmental Authority or
regulatory authority is required by Buyer or El Paso Holding in connection with
the execution and delivery of this Agreement and the consummation of such
transactions, except such as would not materially impair the ability of Buyer
and El Paso Holding to consummate the transactions contemplated by this
Agreement.
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SECTION 4.04 Investment Intent, Investigation.
(a) Buyer is capable of evaluating the merits and risks of its
investment in the Purchased Interests. Buyer is taking such Purchased
Interests for its own account and not with a view to or for sale in
connection with any distribution of such securities as such terms are
defined under Securities Act. The Buyer has had an opportunity to
discuss the Company's and its Subsidiaries' business and financial
condition, properties, operations and prospects with the Company's and
its Subsidiaries' management and to ask questions of officers of the
Company and its Subsidiaries, and all requests for information in such
connection have been answered to their satisfaction; provided that
Seller agrees that the foregoing representation shall in no way limit
Buyer's ability to rely on the representations made by Seller herein.
(b) Buyer understand that (i) the Purchased Interests 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 a holder may dispose of the Purchased Interests 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 that, accordingly, Buyer may be required to
bear the economic risk of the investment in the Purchased Interests for
a substantial period of time, and (iii) the certificates representing
the Purchased Interests may bear a legend to the foregoing effect.
SECTION 4.05 Financing. El Paso Holding or Buyer has, and will have at
Closing, sufficient cash funds available to pay the consideration to be paid to
Seller at Closing.
SECTION 4.06 Regulatory Matters.
(a) None of the Buyer or any "affiliate" thereof, as defined
in section 2(a)(11)(B) of PUHCA, is subject to regulation as a "public
utility" under the Federal Power Act, other than as contemplated by 18
C.F.R. section 292.601(c), or under any state law or regulation with
respect to the rates or the financial or organizational regulation of
electric utilities, other than as contemplated by 18 C.F. R. section
292.602(c)(2). None of the Buyer or any "affiliate" thereof, as defined
in section 2(a)(11) of PUHCA, is subject to regulation as a
"public-utility company," a "holding company," a "subsidiary company,"
an "associate company," or an "affiliate" of any of a "public-utility
company," a "holding company," or a "subsidiary company" of a "holding
company," as each such term is defined in PUHCA. The Buyer is not
subject to regulation as (i) a "public utility" under the Federal Power
Act; (ii) 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. Assuming the accuracy of the representation in
Section 3.11(e), none of the Buyer or any "affiliate" thereof, as
defined in section 2(a)(11) of PUHCA, requires any approvals under the
Federal Power Act or PUHCA for the execution, delivery, or performance
of the transactions contemplated by this Agreement.
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(b) Buyer is not "a person primarily engaged in the generation
or sale of electric power (other than electric power solely from
cogeneration facilities or small power production facilities"), an
"electric utility", an "electric utility holding company", or "a wholly
or partially owned subsidiary of an electric utility or electric
utility holding company", within the meaning of 18 C.F.R. section
292.206.
(c) Assuming the accuracy of the representation set forth in
Section 3.11(f) and assuming 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 transactions contemplated by this Agreement and the Amended LLC
Agreement by Buyer will not result in the loss of such status for such
Operating Facility.
SECTION 4.07 Brokers. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Buyer or its Affiliates who might be entitled to any fee or commission from
Seller or the Company or any of its Subsidiaries in connection with the
transactions contemplated by this Agreement.
ARTICLE 5
COVENANTS
SECTION 5.01 Conduct of Business. Except as contemplated by this
Agreement, from the date of this Agreement until the Closing, Seller will cause
the Company and its Subsidiaries to conduct their respective businesses in the
ordinary course consistent with past practices and use their reasonable efforts
to preserve intact, in all material respects, their respective business
organizations and relationships with third parties. Without limiting the
generality of the foregoing, except as contemplated by this Agreement or as set
forth on SECTION 5.01 OF THE DISCLOSURE SCHEDULE, from the date of this
Agreement until the Closing Date, without the prior written consent of Buyer,
Seller will not and will cause the Company and its Subsidiaries not to take any
action that would require the unanimous consent of the Class A Members pursuant
to the Amended LLC Agreement, if such Amended LLC Agreement were in effect. From
the date of this Agreement until Closing, Seller will cause the Company not to
make any distributions to its members in respect of their Membership Interests,
except for the distribution referred to in Section 5.01(a) of the Amended LLC
Agreement.
SECTION 5.02 Access to Information; Confidentiality.
(a) From the date of this Agreement until the Closing, Seller
will cause the Company and its Subsidiaries to (i) give the Buyer and
its representatives access to their respective properties, books,
records and employees, each during normal business hours and upon
reasonable prior notice; provided that any such access by Buyer or its
representatives shall not unreasonably interfere with the conduct of
business by the Company or any Subsidiary, (ii) furnish to the Buyer
and its representatives such financial and operating data and other
information regarding the Company and its Subsidiaries as Buyer may
reasonably request and (iii) instruct their respective employees to
cooperate with the Buyer in connection with such activities.
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(b) Any information obtained by Buyer and its representatives
pursuant to this Section 5.02 shall be subject to the provisions of the
Confidentiality Agreement dated April 29, 1999 between Buyer and Enron
Capital & Trade Resources Corp. (the "CONFIDENTIALITY AGREEMENT").
SECTION 5.03 Public Announcements. Subject to applicable securities
laws or stock exchange requirements, neither Buyer nor Seller shall, without the
prior approval of the other party, 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 5.04 Best Efforts. Prior to the Closing, subject to the terms
and conditions of this Agreement, each of the parties agrees that it shall use
its commercially reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including, but not limited to,
(i) obtaining all consents from governmental authorities and other third parties
required for the consummation of the transactions contemplated hereby and (ii)
having vacated, dismissed or withdrawn any order, stay, decree, judgment or
injunction of any governmental authority which temporarily, preliminarily or
permanently prohibits or prevents the transactions contemplated by this
Agreement. Upon the terms and subject to the conditions hereof, each of the
parties agrees to use its commercially reasonable best efforts to take, or cause
to be taken, all actions to do, or cause to be done, all things necessary to
satisfy the conditions to Closing set forth herein.
SECTION 5.05 Exclusivity. Prior to the earlier of Closing or
termination of this Agreement, Seller will not, and Seller will cause the
Company and its Subsidiaries not to, solicit, initiate or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any Membership Interest or all or substantially all of the ownership
interests or assets of any of the Subsidiaries (including any acquisition
structured as a merger, consolidation or share exchange).
SECTION 5.06 Option Agreement. Buyer and Seller agree to negotiate in
good faith to reach an agreement acceptable to both parties providing for the
purchase by Buyer from Seller for fair value of an additional 1% of the
outstanding Class A and Class B Membership interests in the Company when and to
the extent that can be done without adversely affecting the Company and its
Subsidiaries.
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ARTICLE 6
CONDITIONS TO CLOSING
SECTION 6.01. Conditions to the Obligations of Each Party. The
obligations of the parties to consummate the transactions contemplated by this
Agreement are subject to the satisfaction of the following conditions:
(a) As of the Closing, no temporary restraining order,
preliminary or permanent injunction or other order or restraint issued
by any court of competent jurisdiction, no order, decree, restraint or
pronouncement by any Governmental Authority, and no other legal
restraint or prohibition that would prevent or have the effect of
preventing the consummation of the transactions described in this
Agreement shall be in effect;
(b) As of the Closing, the permits, approvals, filings and
consents required to be obtained from or made with any Governmental
Authorities, and all waiting periods required or contemplated to expire
prior to the consummation of transactions described in this Agreement
under any Applicable Law shall have been obtained, made or expired, as
the case may be, and all such regulatory approvals shall be in full
force and effect; and
(c) CalPERS shall have entered into the Amended LLC Agreement.
SECTION 6.02. Conditions to Obligations of the Buyer. The obligations
of the Buyer to consummate the transactions contemplated by this Agreement are
subject to the satisfaction of the following further conditions:
(a) 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;
(b) The representations and warranties of Seller contained in
this Agreement and in any certificate or other writing delivered by
Seller 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, except that representations and warranties made as of a specific
date need be true only as of that date;
(c) The Buyer shall have received certificates signed by an
authorized representative of Seller to the foregoing effect;
(d) The Buyer shall have received an opinion of Vinson &
Elkins L.L.P. or other counsel to Seller in substantially the form set
forth on ANNEX 6.02 hereto;
(e) Seller shall have entered into the Amended LLC Agreement;
(f) The Class B Contribution shall have been consummated;
(g) Enron and the Company shall have entered into the Amended
Credit Support Agreement and either (i) the security agreement
contemplated by Section 2.04 or (ii) the amendments to the form of
Amended Credit Support Agreement as contemplated by Section 2.04 to the
extent the security agreement cannot be entered into; and
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(h) Seller shall have delivered to Buyer certification of
non-foreign status (as described in Treas. Reg. section 1.1445-2(b))
for purposes of Section 1445 of the Code.
SECTION 6.03. Conditions to Obligations of Seller. The obligation of
Seller to consummate the transactions contemplated by this Agreement is subject
to the satisfaction of the following further conditions:
(a) The Buyer shall have performed in all material respects
all of their obligations under this Agreement required to be performed
by it on or prior to the Closing Date, including entering into the
Buyer Security Agreement;
(b) The representations and warranties of the Buyer contained
in this Agreement and in any certificate or other writing delivered by
the Buyer 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;
(c) Seller shall have received a certificate signed by an
executive officer of Buyer to the foregoing effect;
(d) Seller shall have received the opinion of counsel to Buyer
in substantially the form set forth on ANNEX 6.03 hereto;
(e) El Paso Energy shall have entered into the Amended Credit
Support Agreement and either (i) the security agreement contemplated by
Section 2.04 or (ii) the amendments to the form of Amended Credit
Support Agreement as contemplated by Section 2.04 to the extent the
security agreement cannot be entered into; and
(f) Buyer shall have entered into the Amended LLC Agreement.
ARTICLE 7
TERMINATION
SECTION 7.01. Grounds for Termination. This Agreement may be terminated
at any time prior to the Closing:
(a) by mutual written agreement of Buyer and Seller;
(b) by either Buyer or Seller if the Closing shall not have
been consummated by August 13, 1999 or such later Closing Date as
elected by Buyer pursuant to Section 2.02(a) (the later of such dates
being the "END DATE"); provided, however, that Seller may not terminate
this Agreement pursuant to this Section 7.01(b) if the Closing shall
not have been consummated by the End Date by reason of 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 7.01(b)
if the
22
<PAGE> 27
Closing shall not have been consummated by the End Date by reason of
Buyer'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 Seller set forth in this Agreement
shall have occurred which would cause the condition set forth in
Section 6.02 (a) or (b) 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 Seller of
notice of such breach from Buyer (or, if earlier, by the End Date);
(d) by Seller, if a breach of any representation, warranty,
covenant or agreement on the part of the Buyer set forth in this
Agreement (including, without limitation, the breach of Buyer's
obligations pursuant to Section 2.02(a) to consummate the Closing on or
before the End Date) shall have occurred which would cause the
condition set forth in Section 6.03 (a) or (b) 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 Seller (or, if earlier, by the End
Date); or
(e) by either Buyer or Seller 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.
SECTION 7.02. Effect of Termination.
(a) If this Agreement is terminated as permitted by Section
7.01, such termination shall be without liability of any 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.
(b) In the event this Agreement is terminated for any reason,
other than pursuant to Section 7.01(d), Seller shall immediately refund
following such termination, by wire transfer in immediately available
funds to an account designated in writing by Buyer, the Deposit.
23
<PAGE> 28
ARTICLE 8
SURVIVAL; INDEMNIFICATION
SECTION 8.01. Survival. The representations and warranties of the
parties contained in this Agreement or in any certificate or other writing
delivered pursuant to this Agreement shall terminate at and not survive the
Closing; provided that (i) the representations and warranties of Seller
contained in Sections 3.07(a) and 3.07(b) shall each survive the Closing for a
period of one year, (ii) the representations and warranties of Seller contained
in clauses (ii)-(ix) of Section 3.05(c) and Sections 3.08, 3.09, 3.10(a) and
(b), 3.11(a),(b),(c),(e) and (f), each only with respect to actions or events
occurring during the time since the Acquisition Closing through June 30, 1999,
shall each survive the Closing for a period of one year, (iii) the
representations and warranties of Seller contained in Sections 3.01(a), 3.03(a)
and 3.04(a) and the representations and warranties of the Buyer contained in
Article 4 (other than those with respect to El Paso Holdings) shall each survive
the Closing for a period of two years, (iv) the representations and warranties
of Seller contained in Section 3.12 shall each survive the Closing until six
months after the closing of the applicable statute of limitations, and (v) the
representations and warranties of Seller contained in Section 3.02 shall survive
the Closing indefinitely (the representations and warranties of Seller listed in
this proviso being referred to herein as the "SURVIVING SELLER
REPRESENTATIONS"). 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 8) contained in this Agreement shall survive
the Closing.
SECTION 8.02. Indemnification.
(a) Seller hereby agrees to defend, indemnify and hold
harmless Buyer 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 it arising out of any misrepresentation or breach of any of the
Surviving Seller Representations or any covenant or agreement made or
to be performed by Seller under this Agreement. Notwithstanding the
foregoing, the total amount of Damages for which Seller may be liable
for breach of any Surviving Seller Representations (other than Section
3.02(c)) shall not in the aggregate exceed $50,000,000 and no claim for
breach of any Surviving Seller Representations referred to in clause
(ii) of the proviso in the first sentence of Section 8.01 may be made
until the aggregate amount of all such claims for breaches of all such
Surviving Seller Representations exceeds $1,000,000, and then only to
the extent of the excess over such $1,000,000 amount. Subject to
Sections 8.01 and 8.04, no claim for indemnification for a breach of a
Surviving Seller Representation may be made after the applicable
survival period set forth in Section 8.01.
24
<PAGE> 29
(b) Buyer hereby agrees to defend, indemnify and hold harmless
Seller against any and all Damages incurred or suffered by them arising
out of any misrepresentation or breach of a representation or warranty
in Article 4 or any covenant or agreement made or to be performed by
the Buyer pursuant to this Agreement. Subject to Sections 8.01 and
8.04, no claim for indemnification for a breach of a representation or
warranty in Article 4 may be made after the applicable survival period
set forth in Section 8.01.
(c) For all Tax purposes, the parties shall treat any
indemnification payment made pursuant to this Section 8.02 as an
adjustment to the purchase price paid by Buyer pursuant to Section
2.01(a).
SECTION 8.03. Procedures for Third Party Claims.
(a) The parties seeking indemnification under Section 8.02
(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
8.02 (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 8.03, except to the extent such failure shall actually
prejudice an Indemnifying Party.
(b) Upon receipt of notice from the Indemnified Parties
pursuant to Section 8.03(a), the Indemnifying Parties will 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. 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.
SECTION 8.04. Exclusive Remedy. Each party hereto acknowledges and
agrees that the provisions of this Article 8 shall be the exclusive remedy of
such party with respect to any matter arising under this Agreement or in
connection with the transactions contemplated hereby; provided however that none
of the provisions set forth in this Agreement 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
25
<PAGE> 30
any other party's fraudulent acts or omissions, nor shall any such provisions
limit, or be deemed to limit, the time period during which a claim for fraud may
be brought.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. 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 Seller:
c/o Enron Capital & Trade Resources Corp.
1400 Smith Street
Houston, Texas 77002-7361
Attention: W. David Duran and Travis McCullough
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
if to Buyer:
Mesquite Investors, L.L.C.
1001 Louisiana Street
Houston, Texas 77002
Attention: Robert W. Baker, Esq. and Vicki Sidhu
Fax No. (713) 420-2813
with a copy to:
Roger B. Wagner, Esq.
Coudert Brothers
Army Navy Club Building
1627 I Street, N.W.
Suite 1200
Washington, D.C. 20006-4007
Fax No.: (202) 775-1168
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
26
<PAGE> 31
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 9.02. Amendments; No Waivers.
(a) 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.
SECTION 9.03. Parties in Interest. Nothing in this Agreement is
intended to confer any rights or remedies under or by reason of this Agreement
on any persons other than the Buyer or Seller and their respective successors
and permitted assigns.
SECTION 9.04. Expenses. Except as otherwise provided in this Agreement,
all costs and expenses incurred in connection with the transactions contemplated
by this Agreement shall be paid by the party incurring such cost or expense.
SECTION 9.05. 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
except to a permitted successor and assign under the Amended LLC Agreement,
without the consent of each other party.
SECTION 9.06. Governing Law; Arbitration.
(a) This Agreement (including, but not limited to, the
validity and enforceability hereof) 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) 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 in the manner set forth herein.
(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
27
<PAGE> 32
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); provided, however, that IT IS
EXPRESSLY AGREED THAT NOTWITHSTANDING ANY OTHER PROVISION IN THIS
AGREEMENT TO THE CONTRARY, THE ARBITRATORS SHALL HAVE ABSOLUTELY NO
AUTHORITY TO AWARD CONSEQUENTIAL DAMAGES (SUCH AS LOSS OF PROFIT),
TREBLE, EXEMPLARY OR PUNITIVE DAMAGES OF ANY TYPE UNDER ANY
CIRCUMSTANCES REGARDLESS OF WHETHER SUCH DAMAGES MAY BE AVAILABLE UNDER
TEXAS LAW, THE LAW OF ANY OTHER STATE, OR FEDERAL LAW, OR UNDER THE
UNITED STATES ARBITRATION ACT, OR UNDER ANY OTHER RULES OF ARBITRATION.
The arbitrators shall have the authority to assess the costs and
expenses of the arbitration proceeding (including the arbitrators' fees
and expenses) against either or both parties. However, each party shall
bear its own attorneys fees and the arbitrators shall have no authority
to award attorneys fees.
(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, 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.
28
<PAGE> 33
SECTION 9.07. 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.
SECTION 9.08. Entire Agreement. This Agreement and the agreements
specifically contemplated hereby 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 9.09. 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 9.10. Further Assurances. Following the Closing, each of the
parties will cooperate and use its reasonable efforts to take or cause to be
taken all actions, to cooperate with the other parties hereto with respect to
all actions, and to do or cause to be done all things necessary or advisable to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, making the notice filings contemplated by Section
3.04.
29
<PAGE> 34
The parties have caused this Agreement to be duly executed individually
or by their authorized representatives on the day and year first above written.
EAST COAST POWER
HOLDING COMPANY L.L.C.
By: Joint Energy Development Investments II
Limited Partnership, its Managing Member
By: Enron Capital Management II Limited
Partnership, its General Partner
By: Enron Capital II Corp., its General Partner
By: /s/ WILLIAM W. BROWN
---------------------------------------------
Name: William W. Brown
Title: Vice President
<PAGE> 35
MESQUITE INVESTORS, L.L.C.
By: Chaparral Investors, L.L.C., its sole Member
By: El Paso Chaparral Investor, L.L.C., its sole
Member
By: El Paso Chaparral Holding Company, its sole
Member
By: /s/ LARRY M. KELLERMAN
------------------------------------------------
Name: Larry M. Kellerman
Title: President
The undersigned joins this Agreement for the purposes of its agreements
in Sections 2.01 and 2.02, and further joins in the representations applicable
to it in Sections 4.01, 4.02, 4.03 and 4.05.
EL PASO POWER HOLDING COMPANY
By: /s/ LARRY M. KELLERMAN
------------------------------------------------
Name: Larry M. Kellerman
Title: President
<PAGE> 1
EXHIBIT 10.98
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "Agreement") is dated as of the 2nd
day of August, 1999, is among ECT Merchant Investments Corp., a Delaware
corporation ("ECT Merchant"), Enron Capital Management II Limited Partnership,
a Delaware limited partnership ("ECM II"), Enron Capital Management III Limited
Partnership, a Delaware limited partnership ("ECM III"), Joint Energy
Development Investments II Limited Partnership, a Delaware limited partnership
("JEDI II"), East Coast Power Holding Company L.L.C., a Delaware limited
liability company ("ECP Holding"), the California Public Employees' Retirement
System, a unit of the State and Consumer Services Agency of the State of
California ("CalPERS"), and Mesquite Investors, L.L.C., a Delaware limited
liability company ("Mesquite"). ECT Merchant, ECM II, ECM III, JEDI II, ECP
Holding, CalPERS and Mesquite are collectively referred to herein as the
"parties."
WHEREAS, ECT Merchant and CalPERS each owns 50% of the Class B
Membership Interests in East Coast Power L.L.C. ("East Coast Power") (such
parties' Class B Membership Interests being referred to herein as the "ECT
Merchant Interest" and the "CalPERS Interest", respectively); and
WHEREAS, pursuant to a Purchase Agreement dated the date hereof (the
"Purchase Agreement") by and between ECP Holding, El Paso Holding Company and
Mesquite, Mesquite has agreed to purchase 49% of the Class A Membership
Interests and 49% of the Class B Membership Interests in East Coast Power; and
WHEREAS, ECM II, EMC III and CalPERS are the partners of JEDI II
pursuant to the Partnership Agreement of Joint Energy Development Investments
II Limited Partnership, dated as of December 30, 1997 (the "JEDI II
Agreement");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties agree as follows:
1. ECT Merchant Contribution to ECM III. Effective immediately prior
to the closing of the transactions contemplated by the Purchase Agreement, ECT
Merchant agrees that it will contribute its entire ECT Merchant Interest, free
and clear of all liens and encumbrances (other than the Senior Note Security
Interests (as defined in the Purchase Agreement)), to ECM III.
2. ECM III Contribution to JEDI II. ECM III hereby agrees, upon
receipt of the ECT Merchant Interest, to contribute the ECT Merchant Interest,
free and clear of all liens and encumbrances (other than the Senior Note
Security Interests), to JEDI II, effective immediately prior to the closing of
the transactions contemplated by the Purchase Agreement.
3. JEDI II Contribution to ECP Holding. JEDI II hereby agrees, upon
receipt of the ECT Merchant Interest, to contribute the ECT Merchant Interest,
free and clear of all liens and encumbrances (other than the Senior Note
Security Interests), to ECP Holding effective immediately prior to the closing
of the transactions contemplated by the Purchase Agreement.
<PAGE> 2
4. Execution of Amended Limited Liability Company Agreement. CalPERS
hereby agrees, at or prior to the closing of the transactions contemplated by
the Purchase Agreement, to execute the Second Amended and Restated Limited
Liability Company Agreement of East Coast Power, in the form attached hereto as
Exhibit A (the "Amended LLC Agreement").
5. Contribution of CalPERS Membership Interest. CalPERS hereby agrees
to contribute the CalPERS Interest, free and clear of all liens and
encumbrances (other than the Senior Note Security Interests), to JEDI II on the
day after the first anniversary of the closing of the transactions contemplated
by the Purchase Agreement (such date of contribution being the "CalPERS
Contribution Date"). Such contribution shall be subject to CalPERS' receipt of
evidence, in form and substance satisfactory to it, that upon such contribution
it shall have no further obligations pursuant to the Security Agreement
creating the Senior Note Security Interests with respect to the CalPERS
Interest. Such contribution shall also be subject to receipt of the tax opinion
contemplated by Section 3.03(c)(i)(D) of the Amended LLC Agreement; provided,
that if CalPERS cannot make such contribution on the CalPERS Contribution Date
due to the failure of such condition, CalPERS shall make such contribution as
soon thereafter as such condition is satisfied or waived. ECT Merchant,
Mesquite and CalPERS agree that, if such tax opinion cannot be delivered on the
CalPERS Contribution Date, that they will cooperate to agree upon a mutually
satisfactory arrangement that will provide the parties the same economic
benefits as would have been enjoyed if the contribution had occurred.
6. Restriction on Transfer of CalPERS Interest. CalPERS agrees that it
will not sell, convey, transfer, dispose of the CalPERS Interest other than as
contemplated by paragraph 5, without the prior written consent of each of ECP
Holding and Mesquite.
7. Agreement to Share CalPERS Interest Proceeds. On the CalPERS
Contribution Date, CalPERS shall remit to ECT Merchant fifty percent (50%) of
any dividends, distributions, or other amounts received by CalPERS in respect
of the CalPERS Interest from and after the date hereof through the CalPERS
Contribution Date.
8. Agreement Regarding JEDI II Agreement. As among ECM II, ECM III and
CalPERS, such parties agree as follows:
(a) The contributions by ECM III and CalPERS to JEDI II pursuant to
paragraphs 2 and 5 hereof (i) shall not reduce the Commitment (as defined in
the JEDI II Agreement); (ii) shall not, in the case of ECM III, constitute a
Capital Contribution (as defined in the JEDI II Agreement) in cash for purposes
of Section 4.02(b)(i)(B) of the JEDI II Agreement; (iii) shall be deemed
approved for purposes of Section 4.02(b) of the JEDI II Agreement; and (iv)
shall each have the same net agreed value, which ECM II, ECM III and CalPERS
shall specify on or prior to the closing of the transactions contemplated by
the Purchase Agreement; and
(b) each of ECM II, ECM III and CalPERS waives any provision of the
JEDI II Agreement that might require consent to, or might otherwise restrict or
prohibit, the consummation of the transactions contemplated by this
Contribution Agreement.
2
<PAGE> 3
9. Termination. This Contribution Agreement shall immediately
terminate and be of no further force or effect in the event that the Purchase
Agreement terminates in accordance with the provisions thereof.
10. Remedies. The parties agree that recovery of monetary damages for
a breach by any of the parties of their obligations under this Agreement may
not provide adequate compensation for the damages caused by such breach, and
accordingly, that any of the parties hereto shall be entitled to seek
injunctive or other equitable relief from any court of competent jurisdiction
to specifically enforce the provisions hereof.
11. Amendment. This Agreement may be amended with the prior written
consent of ECT Merchant, Mesquite and CalPERS.
12. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors.
13. Invalidity. In the event that any one or more of the provisions
contained in this Agreement shall, for any reason, be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of such Agreement.
14. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
15. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the state of Delaware.
3
<PAGE> 4
IN WITNESS WHEREOF, the Parties have executed this Contribution
Agreement as of the date first above written.
ECT MERCHANT INVESTMENT CORP.
By:/s/ J. CLIFFORD BAXTER
--------------------------------
Name: J. Clifford Baxter
Title: Chairman and Chief Executive Officer
ENRON CAPITAL MANAGEMENT II LIMITED PARTNERSHIP
By: Enron Capital II Corp., General Partner
By:/s/ WILLIAM W. BROWN
----------------------------
Name: William W. Brown
Title: Vice President
ENRON CAPITAL MANAGEMENT III LIMITED
PARTNERSHIP
By: Enron Capital IV Corp., General Partner
By:/s/ J. CLIFFORD BAXTER
----------------------------
Name: J. Clifford Baxter
Title: Chairman and Chief Executive Officer
4
<PAGE> 5
JOINT ENERGY DEVELOPMENT INVESTMENTS II
LIMITED PARTNERSHIP
By: Enron Capital Management II Limited
Partnership, General Partner
By: Enron Capital II Corp., General Partner
By:
---------------------------------
Name:
Title:
EAST COAST POWER HOLDING COMPANY L.L.C.
By:
----------------------------------------
Name:
Title:
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
By: /s/ LEON G. SHAHINIAN
----------------------------------------
Name: Leon G. Shahinian
Title: Investment Officer II
MESQUITE INVESTORS, L.L.C.
By: Chaparral Investors, L.L.C.
its sole member
By: El Paso Chaparral Investors, L.L.C.
its sole Member
By: /s/ LARRY M. KELLERMAN
------------------------------------
Name: Larry M. Kellerman
Title: President
5
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------
COGEN TECH GROUP
PRO FORMA COMPANY --------------------------------------
------------------------- PERIOD FROM
SIX MONTHS YEAR FEBRUARY 4, PERIOD SIX MONTHS
ENDED ENDED 1999 TO ENDED ENDED
JUNE 30, DECEMBER 31, JUNE 30, FEBRUARY 4, JUNE 30,
1999 1998 1999 1999 1998
------------ ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
INCOME FOR FIXED CHARGE COVERAGE
Income (Loss) Before Tax $ (78.0) $ (56.2) $ (0.5) $ (56.0) $ 35.7
--------- ---------- --------- --------- ---------
Income for Fixed Charge Coverage $ (78.0) $ (56.2) $ (0.5) $ (56.0) $ 35.7
========= ========== ========= ========= =========
FIXED CHARGES
Group Interest Expense $ 53.5 $ 101.3 $ 43.3 $ 2.0 $ 9.6
Group Share of Interest Expense of
Affiliates (1)
Bayonne Venture 3.3 7.1 2.6 0.7 3.4
Camden Venture 2.7 5.4 2.1 0.6 2.6
Portion of Rent Expense Representative
of Interest Factor -- 0.1 -- -- --
--------- ---------- --------- --------- ---------
Total Fixed Charges $ 59.5 $ 113.9 $ 48.0 $ 3.3 $ 15.6
========= ========== ========= ========= =========
INCOME FOR FIXED CHARGE COVERAGE PLUS
TOTAL FIXED CHARGES $ (18.5) $ 57.7 $ 47.5 $ (52.7) $ 51.3
========= ========== ========= ========= =========
FIXED CHARGE COVERAGE (Income for Fixed Charge
Coverage Plus Total Fixed Charges divided by
Total Fixed Charges) (0.3) 0.5 1.0 (16.0) 3.3
========= ========== ========= ========= =========
(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 $ 3.6 $ 7.7 $ 2.8 $ 0.8 $ 3.9
% 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 $ 3.3 $ 7.1 $ 2.6 $ 0.7 $ 3.4
Camden Venture Interest Expense $ 3.5 $ 7.4 $ 2.8 $ 0.7 $ 3.7
% of earnings allocated to Group 77.00% 72.80% 75.00% 80.65% 71.40%
Company's / Group's Share of Camden Venture
Interest Expense $ 2.7 $ 5.4 $ 2.1 $ 0.6 $ 2.6
<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 (Loss) Before Tax $ 88.6 $ 78.3 $ 73.1 $ 79.7 $ 55.8
------- ------- ------- ------- -------
Income for Fixed Charge Coverage $ 88.6 $ 78.3 $ 73.1 $ 79.7 $ 55.8
======= ======= ======= ======= =======
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 7.8
Camden Venture 5.4 7.0 7.7 8.2 8.7
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 $ 42.5
======= ======= ======= ======= =======
INCOME FOR FIXED CHARGE COVERAGE PLUS
TOTAL FIXED CHARGES $120.2 $114.2 $111.7 $122.1 $ 98.3
======= ======= ======= ======= =======
FIXED CHARGE COVERAGE (Income for Fixed Charge
Coverage Plus Total Fixed Charges divided by
Total Fixed Charges) 3.8 3.2 2.9 2.9 2.3
======= ======= ======= ======= =======
(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 88.10% 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 72.80% 91.20% 93.80% 97.10% 98.30%
Company's / Group's Share of Camden Venture Interest Expense $ 5.4 $ 7.0 $ 7.7 $ 8.2 $ 8.7
</TABLE>
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of East Coast Power L.L.C.
JEDI Linden NB, L.L.C. (Delaware)
o membership interests owned 100% by the Company
JEDI Linden, Inc. (Delaware)
o owned 100% by JEDI Linden NB, L.L.C.
JEDI Linden GP, L.L.C. (Delaware)
o Class A membership interest with 99% sharing ratio owned by JEDI
Linden NB, L.L.C.
o Class B membership interest with 1% sharing ratio owned by JEDI
Linden, Inc.
JEDI Linden LP, L.L.C. (Delaware)
o membership interests owned 100% by JEDI Linden NB, L.L.C.
Cogen Technologies Linden, Ltd. (Texas)
o general partner interest owned by JEDI Linden GP, L.L.C.
o limited partner interest owned by JEDI Linden LP, L.L.C.
Cogen Technologies Linden Venture, L.P. (Delaware)
o general partnership interest owned by Cogen Technologies Linden,
Ltd.
o limited partnership interest owned by Owner Trust (for the benefit
of General Electric Capital Corporation and Dana Capital
Corporation)
JEDI Camden GP, L.L.C. (Delaware)
o membership interests owned 100% by East Coast Power L.L.C.
JEDI Camden LP, L.L.C. (Delaware)
o membership interests owned 100% by East Coast Power L.L.C.
Cogen Technologies Camden GP Limited Partnership (Delaware)
o general partner interest owned by JEDI Camden GP, L.L.C. o limited
partner interest owned by JEDI Camden LP, L.L.C.
Camden Cogen L.P. (Delaware)
o general partner interest owned by Cogen Technologies Camden GP
Limited Partnership
o limited partner interest owned by General Electric Capital
Corporation
II-1
<PAGE> 2
JEDI Bayonne GP, L.L.C. (Delaware)
o membership interests owned 100% by East Coast Power L.L.C.
Cogen Technologies NJ Venture (New Jersey)
o 91.75% managing general partner interest owned by JEDI Bayonne GP,
L.L.C.
o 7.5% general partner interest owned by an affiliate of Calpine
Corporation
o 0.75% general partner interest owned by an affiliate of American
National Power and Mission Energy
II-2
<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
October 14, 1999
