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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER
EAST COAST POWER L.L.C.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 52-2143667
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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711 LOUISIANA STREET, HOUSTON, TEXAS 77002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 345-9722
SECURITIES REGISTERED PURSUANT TO SECTION 15(d) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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6.737% Series B Senior Secured Notes due 2008 None
7.066% Series B Senior Secured Notes due 2012 None
7.536% Series B Senior Secured Notes due 2017 None
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No [X].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting equity held by non-affiliates of
registrant is not ascertainable, as there is no established public trading
market for the registrant's voting equity.
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TABLE OF CONTENTS
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ITEM PAGE
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 26
Item 3. Legal Proceedings........................................... 27
Item 4. Submission of Matters to a Vote of Security Holders......... 28
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 29
Item 6. Selected Financial Data..................................... 30
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation.................................... 35
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 50
Item 8. Financial Statements and Supplementary Data................. 51
PART III
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 98
Item 10. Directors and Executive Officers of the Registrant.......... 99
Item 11. Executive Compensation...................................... 100
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 101
Item 13. Certain Relationships and Related Transactions.............. 102
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 103
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PART I
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Annual Report on Form 10-K
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 Annual Report and our
assumptions about future events. These forward-looking statements are subject to
various risks and uncertainties that may be outside of our control. We use words
like "anticipate," "estimate," "project," "plan," "expect" and similar
expressions to help identify forward-looking statements in this Annual Report.
For factors that could affect the validity of our forward-looking statements,
you should read Item 1 "Business" and Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations." In light of that
information 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 Annual Report or may not occur.
ITEM 1. BUSINESS
East Coast Power L.L.C. (the "Company") is a Delaware limited liability
company owned by affiliates of Enron Corp., the California Public Employees'
Retirement System, El Paso Energy Corporation and Donaldson, Lufkin & Jenrette
Securities Corporation. In February 1999 the Company acquired indirect equity
interests in three combined-cycle natural gas cogeneration plants located in
Linden, Camden and Bayonne, New Jersey. The following information summarizes
certain important information with respect to our facilities:
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LINDEN VENTURE CAMDEN VENTURE BAYONNE VENTURE
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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
(1999)(1)................ 9,777 Btu/KWh 8,713 Btu/KWh 9,255 Btu/KWh
Historical Average
Availability
(1994-1999).............. 94% 95% 96%
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
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(1) Without credit for steam production.
(2) The fuel supply for the Linden and Camden facilities is provided under
short-term firm gas supply contracts. The contract price is based on spot
gas prices plus a reservation charge.
THE LINDEN FACILITY
Linden Facility Description. The Linden facility is a 715 MW gas-fired,
combined-cycle cogeneration dispatchable facility located in Linden, New Jersey,
on the site of Bayway Refining Company, adjacent to a chemical plant complex and
technology center owned by Infineum USA L.P. The Linden facility began
commercial operations in May 1992.
During the last five full calendar years, the Linden facility had an
average availability factor of 94%. This facility sells its electric capacity
and energy (up to 645 MW) to The Consolidated Edison Company of New York, Inc.
("Con Ed") under a power purchase agreement which expires in 2017. 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 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 cables, 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. Cogen Technologies Linden Venture, L.P.
("Linden Venture"), the owner and operator of the Linden facility, 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.
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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 (3.061c for December 1999). Linden Venture is entitled
to keep 50% of the amount by which actual fuel costs are less than the
annual cap. Actual fuel costs above the annual cap are absorbed 100% by
Linden Venture. In addition, Con Ed is required to pay the full costs
attributable to steam generated by an outside source and delivered to
the Linden facility.
Operating and Maintenance: Con Ed is required to pay an escalating
operations and maintenance ("O&M") rate equal to 0.9c per KWh as of the
inception of the Linden PPA, increasing by a local CPI inflation factor
on a monthly basis (1.277c per KWh for December 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.
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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
approximately 120,000 lbs/hr during the peak period, which it receives at
no cost. During the first five months of 1999 Infineum exceeded the
contractual maximum steam takes. For the remainder of 1999 Infineum took
below the maximum which reflects their actual usage.
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 our 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 1994
through 1999, 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
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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 Public Service Electric & Gas Company of New
Jersey ("PSE&G") and Elizabethtown Gas Company (the "Suppliers"), providing for
transportation and partial supply to be furnished jointly by PSE&G and
Elizabethtown Gas Company. Certain provisions of the Linden GSA are summarized
below.
Term: Base term of 25 years. Sales service terminates after 15 years,
unless extended by the Suppliers at the end of the 13th year, in which case
such sales service continues for an additional 10 years. If no such
election is made, the transportation resale service increases to the
maximum quantity during the final 10 years of the base term to replace the
terminated sales service.
Quantities: The base amount of gas provided pursuant to resale service is
85,000 MMBtu/day. The resale amount may be increased or decreased, subject
to a minimum quantity of gas of 73,000 MMBtu/day and a maximum quantity of
143,500 MMBtu/day, over the life of the Linden GSA. Gas delivered pursuant
to sales service is subject to nomination by Linden Venture and can range
from zero to 58,500 MMBtu/day. Sales service is fully interruptible, but
resale service may be curtailed only to the minimum quantity. Delivery of
butane may be used to satisfy the minimum quantity in periods of reduced
resale service quantity. Butane storage and deliverability are sized to
supply the minimum fuel requirements during gas supply interruption. During
such interruptions, the plant can be operated on butane at an output level
of only 300 MW due to butane deliverability restrictions. After the
fifteenth year, the parties may negotiate to adjust the quantities of gas
and butane to reflect changes in electricity purchases by Con Ed.
Obligations: Resale service under the Linden GSA creates an obligation on
Linden Venture to procure a sufficient supply of natural gas to deliver to
the designated interstate pipeline receipt points. Linden Venture must
contract for a year-round supply of natural gas of 85,000 MMBtu/day plus
line loss and compressor fuel. Such supply must be firm from December
through March and must be contractually committed for by the preceding June
1. The Linden facility must purchase and make available to the Suppliers
certain quantities of butane storage and butane product, which may be
substituted by the 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.
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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 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.
Project Development. On February 14, 2000, the Company entered into an
Energy Services Agreement (the "ESA") with Tosco Refining L.P., a subsidiary of
Tosco Corporation, under which the Company agreed to procure construction of a
172-megawatt cogeneration facility (the "New Facility") to be located on part of
the Linden facility's site. In connection with the ESA, the Company and Bayway
Refining also entered into a ground lease to provide a site for interconnection
of the New Facility and three additional ground leases providing sites for
future capital improvement projects. The ESA also contemplates amending the
steam sale agreement between Bayway, a Tosco subsidiary, and Linden Venture to
increase the minimum amounts of steam that Bayway is required to take under the
agreement.
Upon the receipt of consents from Linden Venture's lenders and partners and
the lenders to Cogen Technologies Linden, Ltd., Linden Venture's general
partner. Upon receipt of such consents, the Company intends to assign the ESA
and the ground leases to Linden Venture. The Company anticipates that the New
Facility, which is expected to be operational during the last quarter of 2001,
will require capital expenditures of approximately $107 million. The Company is
currently evaluating its alternatives for financing the construction of the New
Facility, but such financing may entail a recapitalization of Linden Venture.
Either party may terminate the ESA without cause within 65 days of
execution of the Agreement. In the event that the Company terminates the ESA
after such 65 day period, the Company will be required to pay Tosco Refining a
termination payment of $13,140,000. The ESA also provides for reimbursement of
certain of the Company's expenditures incurred in connection with the ESA over
such 65-day period, provided certain conditions are met.
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THE CAMDEN FACILITY
Camden Facility Description. The Camden facility is a 146 MW gas-fired,
combined-cycle cogeneration facility located in Camden, New Jersey. The Camden
facility began commercial operations in March 1993.
During the last five full calendar years, the Camden facility had an
average availability factor of 95%. This facility sells its electric capacity
and energy to PSE&G under a power purchase agreement which expires in 2013. 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 extraction 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 Cogen L.P. ("Camden Venture"), the
owner and operator of the Camden facility, 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: Approval by the New Jersey Board of Public Utilities
(the "NJBPU") 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 December 31, 1999 was $14.6576/KW/month.
Payments during the summer peak months will not exceed the Camden
Facility's current nominated capacity of 148.5 MW, and payments during
the winter peak months will not exceed the Camden facility's current
nominated capacity of 151.5 MW. Camden Venture has the right to adjust
these seasonal capacity levels every three years, with a cumulative
maximum of 10% of the initial nominated capacity of 135 MW during summer
months and 145 MW during winter months. Adjustments to date have
resulted in the cumulative summer maximum being achieved. In the event
that any capacity in excess of the nominated capacity has been delivered
in
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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 December 1999, the
adjustable component was 1.915c/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 December 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 the capacity and energy rates of the Pennsylvania-New
Jersey-Maryland ("PJM") system. 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 generation emergencies which have occurred every year.
Qualifying Facility Status: If sections 201 and 210 of the Public Utility
Regulatory Policies Act of 1978 ("PURPA") are no longer in effect or the
Camden facility ceases to qualify as a QF for reasons not within its
control, including a reduction or cessation in thermal energy use, the
Camden PPA will nevertheless continue in effect provided the following
conditions are met:
- the NJBPU does not bar PSE&G from passing the rates through to its
customers;
- federal, state or local laws are not violated; and
- Camden Venture or its owners are not subject to unreasonably
burdensome regulation under the Public Utility Holding Company Act of
1935 ("PUHCA").
However, in such circumstances, Camden Venture must file the Camden PPA
with the FERC, and the FERC might impose a lower rate. See
"Regulation -- Federal Energy Regulation." If one of the above events
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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.
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.
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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. The Bayonne facility began commercial operations in October 1988.
During the last five full calendar years, the Bayonne facility had an
average availability factor of 96%. This facility sells approximately 76% of its
electric capacity and energy (up to 125 MW) to Jersey Central Power & Light
Company ("JCP&L") and approximately 24% (up to 40 MW) to PSE&G under separate
power purchase agreements which expire in 2008. 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
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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. Cogen Technologies NJ Venture ("Bayonne
Venture"), the owner and operator of the Bayonne facility, is party to a
transmission service and interconnection agreement with PSE&G pursuant to which
PSE&G agreed to design, construct, own and operate a 138 KV underground
transmission cable circuit and associated terminal facilities to connect the
Bayonne facility with PSE&G's Public Service System at PSE&G's Bayonne Switching
Station. The electric power transmission facilities of PSE&G are interconnected
with those of JCP&L, and both PSE&G and JCP&L are members of the PJM. The
initial term of the agreement expires in 2008. A determination by the FERC that
the Bayonne facility is no longer a qualifying facility is an event of
termination under the transmission and interconnection agreement.
Bayonne Power Purchase Agreements. Bayonne Venture sells 75.8% of the
Bayonne facility's net electrical output (up to an average annual maximum of 125
MW) to JCP&L pursuant to a power purchase agreement (the "JCP&L PPA"). The
remaining 24.2% of electrical output of the Bayonne facility (up to 40 MW) is
sold to PSE&G pursuant to a power purchase agreement (the "PSE&G PPA"). Certain
provisions of the JCP&L PPA and the PSE&G and PPA are summarized below.
JCP&L PPA.
Term: Base term expires in October 2008.
Regulatory Approval: Approval by the 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.
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Gas: The gas component is indexed against changes in JCP&L's weighted
average cost of gas for the prior year. For December 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 December 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 December 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. We do 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.
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 December 31, 1999, the rate was
$14.13/Kw/month. Payments during the summer peak months will not exceed
PSE&G's proportion of the Bayonne facility's nominated capacity of 150
MW (i.e., 36 MW), and payments during the winter peak months will not
exceed PSE&G's proportion of the Bayonne facility's nominated capacity
of 179 MW (i.e., 43 MW). Bayonne Venture has the right to adjust these
seasonal capacity levels every year, within a range of plus or minus 10%
of the initial or renominated values.
Energy Fixed: PSE&G is required to pay a fixed energy component of
2.0c/KWh for power delivered to PSE&G's receipt point. The fixed energy
component remains unchanged 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 December 1999, the fuel energy
component rate was 2.127c/KWh.
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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 December 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 ($4.4 million at December 31, 1999) to
secure its contingent obligation with respect to the security provisions of
the PSE&G PPA. If the tracking account has not been closed by the end of
the 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 report, PSE&G has curtailed the Bayonne facility
only pursuant to the "light load" provisions and minimum generation system
emergency.
Qualifying Facility Status: If sections 201 and 210 of PURPA are no longer
in effect or the Bayonne facility ceases to qualify as a QF for reasons not
within its control, including a reduction or cessation in thermal energy
use, the PSE&G PPA will nevertheless continue in effect, provided the
following conditions are met:
- the NJBPU does not bar PSE&G from passing the rates through to its
customers;
- federal, state or local laws are not violated; and
- Bayonne Venture or its owners are not subject to unreasonably
burdensome regulation under PUHCA.
However, in such circumstances, Bayonne Venture must file the PSE&G PPA
with the FERC, and the FERC might impose a lower rate. See
"Regulation -- Federal Energy Regulation." If one of the above events does
occur, Bayonne Venture and PSE&G must negotiate in good faith for an
arrangement with substantially similar economic benefits to each party as
are provided under the PSE&G PPA. If one of the above PURPA events occurs
and the NJBPU denies rate pass-through of PSE&G's obligations under the
PSE&G PPA, Bayonne Venture and PSE&G must negotiate in good faith to
provide a rate with substantially similar economic benefits to each party,
and which the NJBPU will permit PSE&G to recover from its ratepayers. Any
such agreement would be subject to approval by the FERC. If the parties
cannot reach such an agreement, either party may exercise any other right
afforded it under the PSE&G PPA.
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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.
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
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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 1999 was $3.130 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
Our 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, our revenues are not significantly
impacted by competition from other sources of generation. The power generation
industry is rapidly evolving, however, and regulatory initiatives have been
adopted at the federal level and in both New York and New Jersey aimed at
increasing competition in the power generation business. As a result, it is
likely that when the power purchase agreements expire over the period of
2008-2017, the facilities will be required to compete in a significantly
different market in which operating efficiency and other economic factors will
determine success. We are 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
We have five officers who are responsible for the day-to-day management of
our affairs. Our company has approximately 30 employees in total. Upon the
request of our management, Enron may provide tax, human resource, legal, office
space, cash management, information technology, payroll and employee benefit
related services pursuant to our corporate services agreement with Enron. 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.
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INSURANCE
We have 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.
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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. We believe 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 our
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 us 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.
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
24
<PAGE> 27
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 us.
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. An inspection of the Camden and Linden
facilities was performed during March 2000 by the New Jersey Department of
Environmental Protection. Camden and Linden were found to be in substantial
compliance with the EPA requirements.
25
<PAGE> 28
ITEM 2. PROPERTIES
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. The Linden facility began commercial operations in May 1992.
The Camden facility is a 146 MW gas-fired, combined-cycle cogeneration
facility located in Camden, New Jersey. The Camden facility began commercial
operations in March 1993.
The Bayonne facility is a 176 MW gas-fired, combined-cycle cogeneration
facility located on the site of the IMTT facility in Bayonne, New Jersey. FERC
has certified the Bayonne facility as a QF under PURPA. The Bayonne facility
began commercial operations in October 1988.
See "Item 1 Business."
26
<PAGE> 29
ITEM 3. LEGAL PROCEEDINGS
Our subsidiaries are involved in or threatened with other various legal
proceedings from time to time arising in the ordinary course of business. We do
not believe that any liability arising from any such current proceedings will
have a material adverse effect on our consolidated results of operations or
financial position.
27
<PAGE> 30
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of holders of the Company's Senior
Notes during the quarter ended December 31, 1999. The equity holders of the
Company approved by unanimous written consent the $30 million Senior
Subordinated Credit Agreement with Bank of America, N.A. and an amendment to the
Enron Subordinated loan in connection therewith (see Item 7 -- Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources) and a distribution to ECP Holding
Company during the quarter ended December 31, 1999.
28
<PAGE> 31
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established trading market for our equity securities.
29
<PAGE> 32
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth summary historical financial data for our
company and our 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 December 31, 1999 and the summary historical
income statement data for the period then ended for our company are derived from
financial statements which have been audited by Arthur Andersen LLP and are
included elsewhere in this Form 10-K. The summary historical balance sheet data
as of December 31, 1998 and the summary historical income statement data for
each of the two 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 Form 10-K. The summary
historical balance sheet data as of December 31, 1997, 1996 and 1995 and the
summary historical income statement data for each of the two years in the period
ended December 31, 1996 for the Acquired Group are derived from combined
financial statements which have been audited by Arthur Andersen LLP and are not
included in this Form 10-K.
Also set forth below are summary historical financial and operating data
for each of Linden Venture, the owner and operator of the Linden facility;
Camden Venture, the owner and operator of the Camden facility; and Bayonne
Venture, the owner and operator of the Bayonne facility. The summary historical
balance sheet data and the summary income statement data for each of the five
years in the period ended December 31, 1999 for these entities are derived from
the individual financial statements of Linden Venture, Camden Venture and
Bayonne Venture which have been audited by Arthur Andersen LLP and are not
included in this Form 10-K.
You should read the summary historical financial data in conjunction with
the historical financial statements which are included elsewhere in this Form
10-K. See also "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
As a result of the acquisition, our capital structure and the accounting
basis of our 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.
30
<PAGE> 33
<TABLE>
<CAPTION>
OUR COMPANY ACQUIRED GROUP (PREDECESSOR)
----------- ----------------------------------------------
2/4/99 1/1/99 YEAR ENDED DECEMBER 31,
TO TO ------------------------------------
12/31/99 2/4/99 1998 1997 1996 1995
----------- ------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Equity in earnings (losses) of affiliates
Linden Venture..................................... $ 44.3 $(44.8) $ 73.3 $ 71.8 $ 81.3 $ 61.1
Camden Venture..................................... (0.7) (11.8) 15.0 14.7 14.2 13.9
Bayonne Venture.................................... 16.1 5.2 44.6 17.2 19.3 29.3
-------- ------ ------ ------ ------ ------
59.7 (51.4) 132.9 103.7 114.8 104.3
-------- ------ ------ ------ ------ ------
Costs and expenses:
Operating overhead................................... -- 0.9 21.6 11.6 9.6 8.4
General and administrative........................... 11.2 1.7 20.2 19.9 10.9 10.4
-------- ------ ------ ------ ------ ------
11.2 2.6 41.8 31.5 20.5 18.8
-------- ------ ------ ------ ------ ------
Income (loss) from operations.......................... 48.5 (54.0) 91.1 72.2 94.3 85.5
Other income (expense):
Interest and other income............................ 11.0 0.1 12.6 15.5 16.7 17.8
Interest expense..................................... (88.5) (2.0) (19.3) (21.8) (23.3) (26.5)
Allowance for long-term receivable................... -- -- 10.3 (10.3) 6.5
-------- ------ ------ ------ ------ ------
(77.5) (1.9) (6.7) 4.0 (16.9) (2.2)
Income (loss) before income taxes...................... (29.0) (55.9) 84.4 76.2 77.4 83.3
Income taxes......................................... -- (1.8) (13.3) (4.1) (4.6) (7.9)
-------- ------ ------ ------ ------ ------
Net income (loss)...................................... $ (29.0) $(57.7) $ 71.1 $ 72.1 $ 72.8 $ 75.4
======== ====== ====== ====== ====== ======
BALANCE SHEET DATA AT END OF PERIOD:
Investment in affiliates............................. $1,219.2 $83.6 $ 85.2 $ 79.4 $ 77.4 $ 74.4
Total assets......................................... 1,266.5 261.0 248.8 254.7 256.2 282.7
Long-term debt (including current portion)........... 1,213.1 205.6 218.0 230.9 246.9 262.2
Equity (deficit)..................................... 25.7 43.8 18.8 (6.6) (20.4) (12.8)
OTHER FINANCIAL DATA:
Distributions received from affiliates............... 117.2 $20.3 $128.5 $102.3 $116.7 $106.3
</TABLE>
31
<PAGE> 34
LINDEN VENTURE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Electricity...................................... $266.9 $262.8 $283.5 $290.4 $246.9
Steam............................................ 10.2 11.3 15.5 15.1 8.7
------ ------ ------ ------ ------
277.1 274.1 299.0 305.5 255.6
------ ------ ------ ------ ------
Costs and expenses:
Fuel............................................. 130.4 118.1 138.1 138.6 104.8
Operating and maintenance........................ 18.8 22.0 24.1 20.0 26.0
Depreciation and amortization.................... 15.1 15.4 22.3 22.2 22.3
General and administrative....................... 50.3 10.1 11.4 10.7 9.1
Taxes other than income.......................... 1.6 1.6 0.6 1.7 2.1
------ ------ ------ ------ ------
216.2 167.2 196.5 193.2 164.3
------ ------ ------ ------ ------
Income from operations.............................. 60.9 106.9 102.5 112.3 91.3
Interest and other income........................ 4.4 0.8 1.1 0.6 0.8
Interest expense................................. -- -- -- (0.1) (0.1)
------ ------ ------ ------ ------
Net income(1)(2)................................. $ 65.3 $107.7 $103.6 $112.8 $ 92.0
====== ====== ====== ====== ======
THE ACQUIRED GROUP'S SHARE OF:
Net income(3)(4).................................... $ 39.8 $ 73.3 $ 71.8 $ 81.3 $ 61.1
Cash distributions.................................. 90.6 74.0 75.6 77.7 59.4
BALANCE SHEET DATA AT END OF PERIOD:
Property and equipment, net......................... $398.0 $413.6 $428.2 $450.1 $470.6
Total assets........................................ 464.1 470.6 492.4 514.8 525.8
Long-term debt (including current portion).......... -- -- -- -- --
Partners' capital................................... 433.5 445.2 461.2 485.1 501.6
SELECTED OPERATING INFORMATION:
Megawatt-hours generated (thousands)................ 3,818 3,808 3,891 3,806 3,952
Average heat rate (without steam credit)(6)......... 9,777 9,588 9,852 9,924 9,768
Average heat rate (with steam credit)(6)............ 8,925 8,757 8,664 8,938 8,848
Average equivalent availability..................... 95% 96% 94% 89% 91%
Steam produced (millions of pounds)................. 4,576 4,357 5,073 4,953 4,168
</TABLE>
- ---------------
(1) 1999 includes a one-time payment of $6.0 million in connection with the
termination of a gas management agreement. See Note 3 to the Audited
Financial Statements of Cogen Technologies New Jersey Operating Partnerships
included herein.
(2) 1999 includes a one-time payment of $46.4 million in connection with the
termination of a management services agreement. See Note 3 to the Audited
Financial Statements of Cogen Technologies New Jersey Operating Partnerships
included herein.
(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) Linden Venture's net income allocated to our company is before amortization
of the excess of the purchase price over the fair value of the underlying
net assets of Linden Venture totaling $40.3 million in 1999.
(5) Linden Venture's financial data is shown at historical cost and does not
reflect an allocation of the excess purchase price paid by our company.
(6) Btu/Kilowatt-hour.
32
<PAGE> 35
CAMDEN VENTURE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Electricity....................................... $ 73.4 $ 73.1 $ 80.2 $ 77.2 $ 67.5
Steam............................................. -- -- -- -- --
------ ------ ------ ------ ------
73.4 73.1 80.2 77.2 67.5
------ ------ ------ ------ ------
Costs and expenses:
Fuel.............................................. 34.6 33.3 39.2 38.4 28.9
Operating and maintenance(6)...................... 10.7 6.1 7.5 6.0 6.8
Depreciation and amortization..................... 3.8 3.7 6.9 6.8 6.8
General and administrative........................ 14.0 2.2 2.6 2.6 2.3
Taxes other than income........................... 0.5 0.4 0.6 0.6 0.5
------ ------ ------ ------ ------
63.6 45.7 56.8 54.4 45.3
------ ------ ------ ------ ------
Income from operations.............................. 9.8 27.4 23.4 22.8 22.2
Interest and other income......................... 1.6 0.4 0.4 0.4 0.4
Interest expense.................................. (6.9) (7.4) (7.7) (8.2) (8.4)
------ ------ ------ ------ ------
Net income (loss)(1)(2)........................... $ 4.5 $ 20.4 $ 16.1 $ 15.0 $ 14.2
====== ====== ====== ====== ======
THE ACQUIRED GROUP'S SHARE OF:
Net income (loss)(3)(4)............................. $ (0.7) $ 15.0 $ 14.7 $ 14.2 $ 13.9
Cash distributions.................................. 12.5 15.0 8.6 14.5 15.0
BALANCE SHEET DATA AT END OF PERIOD:
Property and equipment, net......................... $ 99.3 $103.1 $106.3 $108.9 $115.3
Total assets........................................ 119.3 121.4 125.3 128.4 133.5
Long-term debt (including current portion).......... 78.5 84.6 90.2 95.2 99.8
Partners' capital................................... 34.4 31.1 29.0 24.6 27.l
SELECTED OPERATING INFORMATION:
Megawatt-hours generated (thousands)................ 1,120 1,153 1,208 1,190 1,169
Average heat rate (without steam credit)(7)......... 8,735 8,791 8,764 8,740 8,662
Average heat rate (with steam credit)(7)............ 8,551 8,601 8,431 8,422 8,347
Average equivalent availability(6).................. 90% 96% 97% 98% 98%
Steam produced (millions of pounds)................. 284 220 300 301 310
</TABLE>
- ---------------
(1) Includes a one-time payment of $1.6 million in connection with the
termination of a gas management agreement. See Note 3 to the Audited
Financial Statements of Cogen Technologies New Jersey Operating Partnerships
included herein.
(2) Includes a one-time payment of $12.8 million in connection with the
termination of a management services agreement. See Note 3 to the Audited
Financial Statements of Cogen Technologies New Jersey Operating Partnerships
included herein.
(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) Camden Venture's net income allocated to our company is before amortization
of the excess of the purchase price over the fair value of the underlying
net assets of Camden Venture totaling $11.8 million.
(5) Camden Venture's financial data is shown at historical cost and does not
reflect an allocation of the excess purchase price paid by our company.
(6) Reflects the impact of a planned major outage which occurred in April and
May of 1999. This major outage is scheduled to occur every six years and
results in a reduction in the average equivalent availability.
(7) Btu/Kilowatt-hour.
33
<PAGE> 36
BAYONNE VENTURE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Electricity(1)...................................... $104.5 $112.8 $ 92.8 $ 90.4 $ 93.2
Steam(1)............................................ 3.8 3.8 3.7 4.9 3.3
------ ------ ------ ------ ------
108.3 116.6 96.5 95.3 96.5
------ ------ ------ ------ ------
Costs and expenses:
Fuel................................................ 41.6 38.6 43.2 45.2 33.4
Operating and maintenance........................... 10.2 14.4 14.7 8.8 10.2
Depreciation and amortization....................... 2.9 3.0 6.9 6.9 6.9
General and administrative.......................... 1.1 3.1 2.9 2.8 2.6
Taxes other than income............................. 0.5 0.5 0.5 0.5 0.5
------ ------ ------ ------ ------
56.3 59.6 68.2 64.2 53.6
------ ------ ------ ------ ------
Income from operations................................ 52.0 57.0 28.3 31.1 42.9
Interest and other income........................... 0.4 1.2 0.1 0.1 0.1
Interest expense.................................... (7.2) (7.7) (8.1) (8.5) (8.8)
------ ------ ------ ------ ------
Net income(1)....................................... $ 45.2 $ 50.5 $ 20.3 $ 22.7 $ 34.2
====== ====== ====== ====== ======
THE ACQUIRED GROUP'S SHARE OF:
Net income(2)......................................... $ 36.3 $ 44.8 $ 17.5 $ 19.6 $ 29.6
Cash distributions.................................... 29.6 39.5 18.1 24.5 31.9
BALANCE SHEET DATA AT END OF PERIOD:
Property and equipment, net........................... 68.1 $ 70.9 $ 73.8 $ 80.6 $ 87.2
Total assets.......................................... 97.1 97.0 99.0 99.8 107.3
Long-term debt (including current portion)............ 63.5 68.4 71.8 74.9 77.7
Partners' capital..................................... 27.9 20.1 14.4 15.1 20.8
SELECTED OPERATING INFORMATION:
Megawatt-hours generated (thousands).................. 1,431 1,400 1,330 1,351 1,386
Average heat rate (without steam credit)(4)........... 9,255 9,183 9,285 9,215 4,184
Average heat rate (with steam credit)(4).............. 8,787 8,278 8,449 8,370 8,141
Average equivalent availability....................... 96% 95% 94% 97% 98%
Steam produced (millions of pounds)................... 1,031 1,056 927 952 975
</TABLE>
- ---------------
(1) Subsequent to February 4, 1999, electricity and steam revenues have been
reduced by the fee paid to a former affiliate of $1.4 million and $0.1
million, respectively. See Note 3 to the Audited Financial Statements of
Cogen Technologies New Jersey Operating Partnerships included herein.
(2) Bayonne Venture's net income allocated to our company is before amortization
of the excess of the purchase price over the fair value of the underlying
net assets of Bayonne Venture totaling $20.2 million.
(3) Bayonne Venture's financial data is shown at historical cost and does not
reflect an allocation of the excess purchase price paid by our company.
(4) Btu/Kilowatt-hour.
34
<PAGE> 37
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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, our 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, we 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 our 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 our 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. Our limited liability
company agreement 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 Form 10-K
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 $1.277
billion. For the reasons discussed below, our results of operations for the
period from February 4, 1999 through December 31, 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
We expect our 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 results for the period from February 4, 1999 through December 31, 1999 as
described below. We employ approximately 30 persons, compared with approximately
55 employees of the Acquired Group. We also expect to realize significant
savings compared to historical operations in travel and entertainment,
professional fees, management information systems, political and charitable
contributions and insurance.
We 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 and the period prior to the acquisition in
1999, equity in
35
<PAGE> 38
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 and $0.3 million, respectively, for Linden Venture
and $1.3 million and $0.1 million, respectively, for Camden Venture. The results
of operations for the Acquired Group in the year 1998 also includes operating
overhead of $16.3 million for development bonuses earned during the period
(including $14.5 million 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 include general and administrative expense of $6.0 million relating to
the use of a private aircraft that is not available to our 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, the Acquired Group 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 would have increased by $1.5 million and net income would have
increased by $1.0 million.
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
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 Linden Venture's 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
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<PAGE> 39
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)
as a result of the sale of its gas-fired generation assets in late 1999.
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 "Item 1. 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 our company from Linden Venture could be reduced by
approximately $1.3 million per year.
RESULTS OF OPERATIONS
East Coast Power L.L.C. -- Year Ended December 31, 1999
Our results of operations for the year ended December 31, 1999 include the
effect of the results of operations of the Acquired Group for the period
subsequent to the acquisition (February 5 to December 31, 1999). Unless
otherwise indicated, discussions with respect to Linden Venture, Camden Venture
and Bayonne Venture reflect the results of operations for the years ended
December 31, 1999 and 1998.
Our equity in earnings of affiliates for the year ended December 31, 1999
totaled $59.7 million. Our equity in earnings is reflected net of amortization
expense of $72.3 million representing the amortization of the excess of the
purchase price allocated to each Venture and the historical equity in such
Venture. See Notes 2 and 3 to the East Coast Power L.L.C. audited financial
statements included herein. We received $117.2 million in cash distributions
during the period subsequent to the acquisition.
Linden Venture. Revenues increased to $277.1 million for the year
ended December 31, 1999 as compared to revenues of $274.1 million for the
year ended December 31, 1998. Electricity revenues increased by $4.1
million due primarily to a higher fuel component. However, the full impact
of higher fuel cost could not be passed on under our contracts. For
instance, electricity revenues in the year ended December 31, 1999
reflected a $10.9 million limitation in the Linden power purchase agreement
on the pass-through of fuel costs compared with a $7.0 million limitation
in the prior period. Steam revenues declined by $1.1 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. See "-- Linden Steam Agreements." Costs and expenses totaled
$216.2 million in the year ended December 31, 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 to $163.8 million for
the year ended December 31, 1999 from $167.2 million for the year ended
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<PAGE> 40
December 31, 1998, primarily as a result of a $2.8 million decrease in
costs associated with the major planned outage and a $6.2 million decrease
in general and administrative expense as a result of the elimination of the
GP management fee offset by the $3.9 million increase in the pass-through
of fuel costs described above.
Linden Venture had net income of $65.3 million in the year ended
December 31, 1999 after $52.4 million of one-time charges discussed above,
compared to net income of $107.7 million in the year ended December 31,
1998. Linden Venture made cash distributions of $129.4 million in the year
ended December 31, 1999 compared to $123.7 million during the year ended
December 31, 1998. The one-time charges of $52.4 million were allocated
100% to the Acquired Group, resulting in a net income allocation of $39.8
million to the Acquired Group for the year ended December 31, 1999.
Excluding these one-time charges, the Acquired Group was allocated earnings
of $92.2 million in the year ended December 31, 1999 compared to earnings
of $73.3 million in the year ended December 31, 1998. The Acquired Group's
share of Linden Venture cash distributions in the year ended December 31,
1999 was $90.6 million compared to $74.0 million in the prior period. This
increase in cash distributions primarily relates to a high percentage of
earnings being allocated to the Company for the period from October 1998
through September 2001 (see Note 3 to the Company's 1999 financial
statements).
Subsequent to the acquisition, Linden Venture reported earnings of
$107.7 million and made cash distributions of $109.7 million. Our share of
such earnings, $84.6 million, are included in our results of operations for
the period ended December 31, 1999, and our share of such cash
distributions, $77.2 million, are included in cash flows for the year ended
December 31, 1999. Our equity in the earnings of Linden Venture, $43.9
million, is reported net of $40.3 million of amortization of the excess of
our investment in Linden Venture over our share of Linden Venture's equity.
Camden Venture. Revenues remained flat at $73.4 million for the year
ended December 31, 1999 compared to $73.1 million for the year ended
December 31, 1998. Costs and expenses totaled $63.6 million in the year
ended December 31, 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 increased from $45.7 million in the year ended December 31,
1998 to $49.2 million in the year ended December 31, 1999 primarily as a
result of a major planned outage totaling $5.0 million in 1999.
Camden Venture had a net income of $4.5 million in the year ended
December 31, 1999 after $14.4 million of one-time charges discussed above,
compared to a net income of $20.4 million for the year ended December 31,
1998. Camden Venture made cash distributions of $18.9 million for the year
ended December 31, 1999 compared to $18.3 million for the year ended
December 31, 1998. The one-time charges of $14.4 million were allocated
100% to the Acquired Group resulting in a net loss allocation of $0.7
million to the Acquired Group for the year ended December 31, 1999.
Excluding these one-time charges, the Acquired Group was allocated earnings
of $13.7 million in the year ended December 31, 1999 compared to earnings
of $15.0 million in the year ended December 31, 1998. The Acquired Group's
share of Camden Venture cash distributions in the year ended December 31,
1999 was $12.5 million compared to $15.0 million in the year ended December
31, 1998.
Subsequent to the acquisition, Camden Venture reported earnings of
$15.7 million and made cash distributions of $16.5 million ($13.3 million
excluding a $3.3 million special distribution to the limited partner in
connection with the acquisition). Our share of these earnings, $11.1
million, is included in our results of operations for the year ended
December 31, 1999, and our share of these cash distributions, $10.4
million, is included in cash flows for the year ended December 31, 1999.
Our equity in the earnings of Camden Venture, $(0.7) million, is reported
net of $11.8 million of amortization of the excess of our investment in
Camden Venture over our share of Camden Venture's equity.
Bayonne Venture. Revenues decreased from $116.6 million in the year
ended December 31, 1998 to $108.3 million in the year ended December 31,
1999. Electricity revenues for the year ended December 31, 1998 include a
$6.4 million fuel component adjustment related to 1997 and 1996 operations.
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<PAGE> 41
Excluding the adjustment, electricity revenues were $1.9 million lower in
the year ended December 31, 1999. Costs and expenses decreased from $59.6
million in the year ended December 31, 1998 to $56.3 million in the year
ended December 31, 1999, primarily due to a $4.7 million decrease in costs
relating to major overhauls. The other income included in the year ended
December 31, 1998 represents interest related to the previously mentioned
fuel component adjustment.
Bayonne Venture had net income of $45.2 million in the year ended
December 31, 1999, compared to earnings of $50.5 million in the year ended
December 31, 1998, and made cash distributions of $37.4 million in the year
ended December 31, 1999, compared to $44.7 million in the year ended
December 31, 1998. The Acquired Group's share of Bayonne Venture's net
income in the year ended December 31, 1999 was $36.3 million compared to
$44.8 million in the year ended December 31, 1998, and the Acquired Group's
share of Bayonne Venture's cash distributions in the year ended December
31, 1999 was $29.6 million compared to $39.5 million in the year ended
December 31, 1998.
Subsequent to the acquisition, Bayonne Venture reported earnings of
$39.6 million and made cash distributions of $32.3 million. Our share of
these earnings, $36.3 million, is included in our results of operations for
the year ended December 31, 1999, and our share of these cash
distributions, $29.6 million, is included in cash flows for the year ended
December 31, 1999. Our equity in the earnings of Bayonne Venture, $16.1
million, is reported net of $20.2 million of amortization of the excess of
our investment in Bayonne Venture over our share of Bayonne Venture's
equity.
General and administrative costs (including operating overhead) for our
company totaled $11.2 million for the year ended December 31, 1999, compared to
the Acquired Group's costs of $2.6 million in the one-month period in 1999 and
$41.8 million in the year ended December 31, 1998. The reasons for the lower
costs reported by our company are discussed in "--The Acquisition -- Operating,
General and Overhead Expenses."
We recorded interest expense of $88.5 million for the year ended December
31, 1999. This amount includes $82.4 million in interest expense related to the
bridge loan, the senior secured notes, the Enron subordinated note and the
Linden Ltd. term loan, a $6.8 million write-off of deferred costs related to the
bridge loan, the Linden Ltd. term loan and the senior secured notes offset by a
$0.6 million amortization of the Linden Ltd. term loan premium. See "--
Liquidity and Capital Resources -- Acquisition Financing."
Our loan agreements require us to maintain compliance with certain
financial covenants, among other things. We believe that we are in compliance
with the terms and conditions of the loan agreements.
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
$103.7 million in 1997 to $132.9 million in 1998. Cash distributions to the
Acquired Group from its affiliates increased from $102.3 million to $128.5
million over the same period.
Linden Venture. Revenues decreased from $299.0 million in 1997 to
$274.1 million in 1998. Electricity revenues decreased by $20.7 million
from period to period due primarily to a lower fuel component. Electricity
revenues also reflected a $7.0 million limitation in the Linden power
purchase agreement on the pass-through of fuel costs in 1998 compared with
a $4.7 million limitation in 1997. Steam revenues declined by $4.2 million
from period to period due primarily to a lower fuel price component and
lower steam take. The decline in revenues was more than offset by a $29.3
million decrease in operating costs. This decrease in operating 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 $2.1 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
$103.6 million in 1997 to $107.7 million in 1998. The Acquired Group's
share of net income increased from $71.8 million in 1997 to $73.3 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.
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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 $11.1 million
decrease in operating 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 $1.4 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 $16.1 million in 1997 to $20.4 million in 1998. The Acquired Group's
share of net income increased from $14.7 million in 1997 to $15.0 million
in 1998. Income before depreciation increased $1.1 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 remained virtually
flat from 1997 to 1998. 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 $20.3 million in 1997 to $50.5
million in 1998. The Acquired Group's share of net income increased from
$17.5 million in 1997 to $44.8 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.
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 Enron subordinated note with the proceeds of the offering of the outstanding
notes and an equity contribution by JEDI II. The Enron 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, $236.0 million of
7.066% notes due 2012 and $318.0 million of 7.536% notes due 2017. 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 and the December 31, 1999 payment of
$4.0 million reduced the original principal amount of the 2008 notes to $275.9
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
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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 our
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 our company, our pledge of our ownership interests in certain of our
subsidiaries that own indirect interests in the facilities and the pledge of
Linden Ltd.'s $289.6 million intercompany subordinated note payable to us.
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 us to fund a debt service reserve account unless we provide 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 us.
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.
Senior Subordinated Credit Facility
On December 29, 1999, we entered into a $30.0 million senior subordinated
credit facility with Bank of America, N.A. The facility has an initial maturity
date of June 30, 2000 which is automatically extended to December 29, 2000
provided that we satisfy certain terms and conditions. Advances under the
facility bear interest, payable quarterly, at either the base or the eurodollar
rate as elected at the time of borrowing. The base rate is defined as the
greater of the federal funds rate plus 1/2% and the Prime Rate (as defined). A
commitment fee of 1/2% is payable on the unused portion of the facility. At
December 31, 1999 there were base rate advances of $16.0 million outstanding
under the facility. The proceeds from the advances were used to acquire the gas
turbine from Enron in connection with the planned expansion of the Linden
facility. We expect to use the facility to fund our 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 and borrowings under the $30.0
million senior subordinated credit facility.
Linden. During February 2000, we entered into an Energy Services Agreement
(the "ESA") with Tosco Refining L.P., a subsidiary of Tosco Corporation
("Tosco"), under which we will cause to be constructed, own and operate a 172
megawatt cogeneration facility (the "New Facility") to be located on part of the
existing facility's site. In connection with the ESA, we also entered into a
ground lease to provide a site for the interconnection of the new facility and
three additional ground leases with Bayway Refining providing sites for future
development projects. In addition, the ESA contemplates amending the steam sale
agreement between Bayway, a subsidiary of Tosco, and Linden Venture to increase
the minimum amounts of steam Bayway is required to take. The terms of the ESA
provide for a 65 day period following the effective date during which either
party may terminate the ESA without cause. The ESA also provides for
reimbursement of certain expenditures incurred by ECP in connection with the ESA
during the term of the 65 day period
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provided that certain conditions are met. The Linden Venture partnership and
Linden Ltd. loan agreements prohibit, without partner and lender consents,
Linden Venture from entering into the ESA, the amendment to the steam sale
agreement and the ground leases. It is our intent to assign the ESA and the
ground leases to Linden Venture upon receipt of necessary partner and lender
approvals or upon the recapitalization of Linden Venture. The New Facility will
require a total capital expenditure of approximately $107 million and is
expected to be fully operational during the last quarter of 2001.
Camden. Camden Venture has no planned capital expenditures in 2000.
Bayonne. Bayonne Venture has no planned capital expenditures in 2000.
Existing Project and Subsidiary Debt
The following table summarizes the outstanding long-term indebtedness of
our subsidiaries and investees at December 31, 1999:
<TABLE>
<CAPTION>
CURRENT LONG-TERM TOTAL MATURITY
------- --------- ------ --------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Linden Ltd.(1)
Fixed rate............................................ $ 7.5 $ 79.6 $ 87.1 2007
Floating rate......................................... 8.1 86.6 94.7 2007
Working capital....................................... -- 10.0 10.0 2007
----- ------ ------
15.6 176.2 191.8
----- ------ ------
Camden Venture(2)
Term loan -- Tranche A loan........................... 5.6 50.8 56.4 2007
Term loan -- Tranche B loan........................... 1.1 21.0 22.1 2009
----- ------ ------
6.7 71.8 78.5
----- ------ ------
Bayonne Venture(2)
Term loan............................................. 3.3 59.8 63.1 2008
Equipment loan........................................ 0.4 -- 0.4 2000
----- ------ ------
3.7 59.8 63.5
----- ------ ------
Total......................................... 26.0 $307.8 $333.8
===== ====== ======
</TABLE>
- ---------------
(1) Does not include a $3.5 million unamortized premium recorded in connection
with the acquisition.
(2) Camden Venture and Bayonne Venture are unconsolidated investees.
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Linden Structure, Indebtedness and Cash Distributions
Linden Structure. The following chart shows the Linden ownership structure:
[LINDEN OWNERSHIP 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 December 31, 1999, Linden Ltd. had outstanding
indebtedness of $191.7 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
December 31, 1999, $87.1 million was outstanding under the fixed rate portion,
$94.6 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 March 1, 2000 being $1.8 million. The floating
rate portion bears interest at LIBOR plus 1.65% (7.48% at December 31, 1999),
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 March 1, 2000 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.
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The Linden Ltd. Term Loan contains certain restrictions that significantly
limit or prohibit, among other things, the ability of Linden Ltd. to:
- incur indebtedness;
- make payments of certain indebtedness;
- pay distributions to its owners;
- make investments;
- engage in transactions with affiliates;
- create liens;
- sell assets; and
- engage in acquisitions, mergers and consolidations.
Linden Cash Distributions. The cash remaining after payment of taxes,
operating expenses and maintenance of required reserve funds ("Linden Venture
Distributable Cash") is distributed monthly by Linden Venture to Linden Ltd. and
the owner trust, in accordance with the allocations described below. Portions of
distributions of Linden Venture Distributable Cash to Linden Ltd. are deposited
in an escrow account held by Linden Ltd. for the benefit of the owner trust to
pay monthly (a) debt service requirements under the Linden Ltd. Term Loan and
(b) amounts required to maintain ratios (the "Required Payment Ratios"), for
specified periods, based upon (y) total Linden Venture Distributable Cash,
together with the amount of earnings on the working capital fund and interest
paid by Linden Venture on working capital loans from Linden Ltd. for such
period, to (z) Linden Venture Distributable Cash paid to Linden Ltd. under
Linden Tranche 1 (as defined below), together with debt service payments of
Linden Ltd. on the Linden Ltd. Term Loan, for the same period. No Linden Venture
Distributable Cash may be paid to Linden Ltd. if there exists any default under
the Linden Ltd. Term Loan. The Required Payment Ratios are calculated quarterly
and are required to be at least 1.2 to 1.0.
Linden Venture Distributable Cash is paid to the owner trust and Linden
Ltd. monthly based on three tranches of payments under the Linden Venture
partnership agreement. Linden Ltd. receives 1% and the owner trust, as the
limited partner in Linden Venture, receives 99% of Linden Venture Distributable
Cash up to a capped amount equal to approximately $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 the
balance in the Arrears Account equals zero, at which time the normal
distributions of Linden Tranche 2
44
<PAGE> 47
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>
1999 1998 1997
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Linden Venture Distributable Cash
Distributions to owner trust:
Linden Tranche 1.............................. $ 35.9 $ 48.7 $ 51.1
Linden Tranche 2.............................. 0.7 0.7 0.8
Linden Tranche 3.............................. 2.2 0.3 0.1
--------- --------- ---------
38.8 49.7 52.0
--------- --------- ---------
Linden Venture Distributable Cash
Distributions to Linden Ltd.:
Linden Tranche 1.............................. 0.3 0.5 0.5
Linden Tranche 2.............................. 70.5 70.7 74.1
Linden Tranche 3.............................. 19.8 2.8 1.0
--------- --------- ---------
90.6(1) 74.0(1) 75.6(1)
--------- --------- ---------
Total distributions........................... $ 129.4 $ 123.7 $ 127.6
========= ========= =========
</TABLE>
- ---------------
(1) Includes amounts escrowed for payment of the Linden Ltd. Term Loan of $28.6
million, $28.4 million and $28.9 million for 1999, 1998 and 1997,
respectively.
45
<PAGE> 48
Camden Structure, Indebtedness and Cash Distributions
Camden Structure. The following chart sets forth the ownership structure of
Camden Venture:
[CAMDEN OWNERSHIP 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 December 31, 1999, the aggregate outstanding
principal balance of Tranche A, which matures May 1, 2007, was $56.4 million. At
December 31, 1999, the outstanding principal balance of Tranche B, which matures
May 1, 2009, was $22.1 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 February 1, 2000 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 February 1, 2000
being $0.3 million, and the final eight
46
<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.
47
<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>
1999 1998 1997
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Payments to GECC and lenders:
Camden Tranche 1.......................................... $16.3 $16.3 $16.0
Camden Tranche 2.......................................... 0.1 0.1 0.1
----- ----- -----
16.4 16.4 16.1
----- ----- -----
Camden Venture Distributable Cash Distributions to Camden
GP:
Camden Tranche 1.......................................... 0.2 0.1 0.2
Camden Tranche 2.......................................... 12.3 14.9 8.4
----- ----- -----
12.5 15.0 8.6
----- ----- -----
Total Distributions............................... $28.9 $31.4 $24.7
===== ===== =====
</TABLE>
48
<PAGE> 51
Bayonne Structure, Indebtedness and Cash Distributions
Bayonne Structure. The following chart sets forth the ownership structure
of Bayonne Venture:
[BAYONNE OWNERSHIP 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 December 31, 1999, Bayonne Venture had $63.1
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 has not been required to fund the debt
service reserve.
49
<PAGE> 52
Bayonne Venture has entered into a commitment letter with 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. This
credit facility has been approved by the partners of Bayonne Venture.
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>
1999 1998 1997
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Bayonne Venture Distributable Cash Distributions:(1)
JEDI Bayonne GP, LLC/NJ Inc. (former managing general
partner of Bayonne Venture)............................ $29.6 $39.5 $18.1
Minority general partners................................. 7.8 5.2 2.8
----- ----- -----
Total Distributions............................... $37.4 $44.7 $20.9
===== ===== =====
</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 COMPLIANCE
The year 2000 issue is the result of computer systems and other equipment
with embedded chips or processors using two digits instead of four to define a
specific year and potentially being unable to process accurately certain data
before, during or after the year 2000. This could result in system failures or
miscalculations, causing disruptions to various activities and operations.
During 1999, the Company completed its year 2000 readiness plan for its
critical information technology and operating systems. The readiness plan
involved four phases: assessment, remediation, testing and implementation. Since
entering the year 2000, the Company has not experienced any significant year
2000 failures in its own information technology or operating systems or those of
its vendors. The Company will continue to monitor these systems throughout the
year but does not anticipate any material disruptions.
We have expended a total of approximately $200,000 on material and
approximately six man-months of effort preparing for the year-end rollover and
expect to expend an additional one-half man-month of effort to complete our
preparations.
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. Our analysis of the potential impact of this statement has
not been completed.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Our 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 nine months of 1999 would not have a materially
adverse impact on earnings in the last quarter of 1999.
50
<PAGE> 53
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
AUDITED FINANCIAL STATEMENTS OF EAST COAST POWER L.L.C.
Report of Independent Public Accountants.................. 52
Consolidated Statement of Operations of East Coast Power
L.L.C. for the period February 4, 1999 to December 31,
1999................................................... 53
Consolidated Balance Sheet of East Coast Power L.L.C. as
of December 31, 1999................................... 54
Consolidated Statement of Cash Flows of East Coast Power
L.L.C. for the period February 4, 1999 to December 31,
1999................................................... 55
Consolidated Statement of Members' Equity of East Coast
Power L.L.C. for the period February 4, 1999 to
December 31, 1999...................................... 56
Notes to Consolidated Financial Statements of East Coast
Power L.L.C. .......................................... 57
AUDITED FINANCIAL STATEMENTS OF COGEN TECH GROUP
Report of Independent Public Accountants.................. 68
Combined Statements of Income of Cogen Tech Group for the
periods ended February 4, 1999, December 31, 1998 and
1997................................................... 69
Combined Balance Sheets of Cogen Tech Group as of December
31, 1998 and 1997...................................... 70
Combined Statements of Cash Flows of Cogen Tech Group for
the periods ended February 4, 1999, December 31, 1998
and 1997............................................... 71
Combined Statements of Owners' Equity of Cogen Tech Group
for the periods ended February 4, 1999, December 31,
1998 and 1997.......................................... 72
Notes to Combined Financial Statements of Cogen Tech
Group.................................................. 73
AUDITED FINANCIAL STATEMENTS OF COGEN TECHNOLOGIES NEW
JERSEY OPERATING PARTNERSHIPS
Report of Independent Public Accountants.................. 82
Combined Statements of Income of Cogen Technologies New
Jersey Operating Partnerships for the years ended
December 31, 1999, 1998 and 1997....................... 83
Combined Balance Sheets of Cogen Technologies New Jersey
Operating Partnerships as of December 31, 1999 and
1998................................................... 84
Combined Statements of Cash Flows of Cogen Technologies
New Jersey Operating Partnerships for the years ended
December 31, 1999, 1998 and 1997....................... 85
Combined Statements of Partners' Capital of Cogen
Technologies New Jersey Operating Partnerships for the
years ended December 31, 1999, 1998 and 1997........... 86
Notes to Combined Financial Statements of Cogen
Technologies New Jersey Operating Partnerships......... 87
</TABLE>
51
<PAGE> 54
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) and subsidiaries as of
December 31, 1999, and the related consolidated statements of operations,
members' equity and cash flows for the period from February 4, 1999 to December
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 auditing standards generally
accepted in the United States. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of East Coast
Power L.L.C. and subsidiaries as of December 31, 1999, and the results of their
operations and their cash flows for the period from February 4, 1999 to December
31, 1999 in conformity with accounting principles generally accepted in the
United States.
ARTHUR ANDERSEN LLP
Houston, Texas
March 30, 2000
52
<PAGE> 55
EAST COAST POWER L.L.C.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FEBRUARY 4, 1999
TO DECEMBER 31, 1999
--------------------
<S> <C>
Revenues
Equity in earnings of
Cogen Technologies Linden Venture, L.P................. $ 44.3
Camden Cogen L.P....................................... (0.7)
Cogen Technologies NJ Venture.......................... 16.1
------
59.7
Costs and Expenses
General and administrative................................ 11.2
------
Income from Operations...................................... 48.5
Other Income (Expense)
Interest and other income................................. 11.0
Interest expense.......................................... (88.5)
------
Net Loss.................................................... $(29.0)
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
53
<PAGE> 56
EAST COAST POWER L.L.C.
CONSOLIDATED BALANCE SHEET
(IN MILLIONS OF DOLLARS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1999
------------
<S> <C>
Current Assets
Cash and cash equivalents................................. $ 3.2
Restricted cash........................................... 12.7
Other current assets...................................... 0.4
--------
16.3
--------
Investment in Affiliates
Cogen Technologies Linden Venture, L.P.................... 826.7
Camden Cogen L.P.......................................... 188.7
Cogen Technologies NJ Venture............................. 204.2
--------
1,219.6
--------
Other Assets................................................ 30.6
--------
$1,266.5
========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities
Current maturities of long-term debt...................... 28.4
Short-term debt........................................... 16.0
Accounts payable.......................................... $ 0.5
Accounts payable, affiliate............................... 3.2
Interest payable.......................................... 3.4
Accrued liabilities....................................... 4.6
--------
56.1
Long-Term Debt.............................................. 1,184.7
Commitments and Contingencies (Note 7)
Members' Equity............................................. 25.7
--------
$1,266.5
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
54
<PAGE> 57
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
DECEMBER 31,
1999
--------------
<S> <C>
Operating Activities:
Net loss.................................................. $ (29.0)
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity (in earnings) loss of affiliates
Cogen Technologies Linden Venture, L.P............... (44.3)
Camden Cogen L.P..................................... 0.7
Cogen Technologies NJ Venture........................ (16.1)
Distributions received from affiliates
Cogen Technologies Linden Venture, L.P............... 77.2
Camden Cogen L.P..................................... 10.4
Cogen Technologies NJ Venture........................ 29.6
Amortization of deferred financing costs............... 6.6
Amortization of Linden Ltd. term loan premium.......... (0.6)
Changes in other operating assets and liabilities
Decrease in accounts receivable........................ 8.6
Increase in other current assets....................... (0.4)
Decrease in accounts payable........................... (0.5)
Increase in accounts payable, affiliate................ 3.2
Increase in interest payable........................... 0.4
Increase in accrued liabilities........................ 3.1
---------
Net Cash Provided by Operating Activities................... 48.9
---------
Investing Activities:
Acquisition of Acquired Group (net of cash acquired of
$17.7)................................................. (1,070.7)
Purchase of turbine....................................... (16.8)
---------
Net Cash Used in Investing Activities....................... (1,087.5)
---------
Financing Activities:
Short-term borrowings subordinated credit facility........ 16.0
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...................... (927.2)
Debt issuance costs....................................... (20.0)
Contributions received.................................... 105.0
Distributions paid........................................ (50.3)
---------
Net Cash Provided by Financing Activities................... 1,054.5
---------
Increase in Cash and Cash Equivalents....................... 15.9
Cash and Cash Equivalents at Beginning of Period............ --
---------
Cash and Cash Equivalents at End of Period.................. $ 15.9
=========
Cash Paid for Interest...................................... $ 88.9
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
55
<PAGE> 58
EAST COAST POWER L.L.C.
CONSOLIDATED STATEMENT OF MEMBERS' EQUITY
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
CLASS A CLASS B TOTAL
------- ------- ------
<S> <C> <C> <C>
Balance at February 4, 1999................................. $ -- $ -- $ --
Contributions............................................. 80.0 25.0 105.0
Distributions............................................. (25.3) (25.0) (50.3)
Net loss.................................................. (29.0) -- (29.0)
------ ------ ------
Balance at December 31, 1999................................ $ 25.7 $ -- $ 25.7
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
56
<PAGE> 59
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. ("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, and CalPERS as Class B Members. 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.
("Mesquite Investors"), a Delaware limited liability company and an affiliate of
El Paso Energy 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 that ECP Holding Company is
entitled to certain preferential distributions in the event of certain contract
restructuring or capital projects. 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, as
discussed in Note 3.
57
<PAGE> 60
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
December 31, 1999 and the results of their operations, cash flows and changes in
their members' equity for the period from which it commenced operations on
February 4, 1999 to December 31, 1999. All material transactions between the
consolidated entities have been eliminated.
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 December 31, 1999,
$12.7 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. See Note 5.
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 accounting
principles generally accepted in the United States 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
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.
58
<PAGE> 61
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) THE ACQUISITION
On February 4, 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 has been
allocated to the assets and liabilities acquired based on their estimated fair
values.
The purchase price of the Acquired Group totaled $1,277.1 million, as
follows (in millions):
<TABLE>
<S> <C>
Adjusted purchase price paid to former owners............... $1,078.0
Transaction costs paid...................................... 10.4
Linden Ltd. debt assumed.................................... 209.9
Working capital acquired (including cash of $17.7).......... (21.2)
--------
$1,277.1
========
</TABLE>
The purchase price was allocated to the assets purchased and the
liabilities assumed based upon the estimated fair values on the date of
acquisition, as follows (in millions):
<TABLE>
<S> <C>
Value of properties acquired:
Linden Venture............................................ $ 859.6
Camden Venture............................................ 199.8
Bayonne Venture........................................... 217.7
--------
1,277.1
Linden, Ltd. debt assumed................................... (209.9)
Working capital, excluding cash............................. 3.5
--------
Cash paid, net of cash acquired............................. $1,070.7
========
</TABLE>
The Company's primary assets are equity investments in the Linden, Camden
and Bayonne Ventures. The difference between the purchase price allocated to
each Venture and the historical equity in such Venture, totaling $1,197.8
million, is being amortized over the lives of the underlying Venture assets.
Such Venture assets consist primarily of property, plant and equipment
associated with the facilities, with a remaining life of 20 to 24 years, and
power sales contracts with remaining terms ranging from 10 to 18 years.
During the fourth quarter of 1999, the preliminary purchase price
allocation was revised to allocate a substantially all of the purchase price to
the power sales contracts which have a shorter life than the facilities, offset
by fixed fuel purchase contracts, along with certain other revisions. These
revisions resulted in an increase in the amortization of the excess cost over
underlying Venture equity of $23.6 million for the period from February 4, 1999
through December 31, 1999.
The following unaudited pro forma results of operations for the years ended
December 31, 1999 and 1998, have been prepared as if the acquisition had
occurred January 1 of each respective year. The pro forma results include
amortization 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 December
31, 1999. The pro forma results of operations do not purport to be
59
<PAGE> 62
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
indicative of the results that would have occurred had the acquisition occurred
January 1, 1999 or 1998, nor do they purport to be indicative of the results of
future operations.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------ ------------------
THE COMPANY
ACQUIRED GROUP 2/4/99 TO
1/1/99 TO 2/4/99 12/31/99 1999 1998
(UNAUDITED) ---------------- ----------- ------- -------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Revenues........................................ $(51.4)(1) $ 59.7 $ 1.7 $ 71.3
Loss from operations............................ (54.0) 48.5 (12.1) 29.5
Loss before income taxes........................ (55.9) (29.0) (108.7) (71.0)
Net loss ....................................... $(57.7) $(29.0) $(108.7) $ (71.0)
</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) INVESTMENT IN AFFILIATES
The following table reflects the changes in the Company's investments in
affiliates for the period February 4, 1999 to December 31, 1999 (in millions of
dollars):
<TABLE>
<CAPTION>
LINDEN CAMDEN BAYONNE
VENTURE VENTURE VENTURE TOTAL
------- ------- ------- --------
<S> <C> <C> <C> <C>
Acquisition of interests.......................... $859.6 $199.8 $217.7 $1,277.1
Equity in earnings................................ 84.6 11.1 36.3 131.6
Amortization of excess cost....................... (40.3) (11.8) (20.2) (72.3)
Distributions received............................ (77.2) (10.4) (29.6) (117.2)
------ ------ ------ --------
$826.7 $188.7 $204.2 $1,219.2
====== ====== ====== ========
</TABLE>
At December 31, 1999, the unamortized excess cost over the Company's share
of underlying Venture equity totaled $1,125.5 million.
The following table presents summary balance sheet information for the
Company's affiliates at December 31, 1999 (in millions of dollars):
<TABLE>
<CAPTION>
LINDEN CAMDEN BAYONNE
VENTURE VENTURE VENTURE
------- ------- -------
<S> <C> <C> <C>
Assets
Current assets....................................... $ 66.0 $ 20.0 $28.9
Plant and equipment, net............................. 398.0 99.3 68.1
------ ------ -----
$464.0 $119.3 $97.0
====== ====== =====
Liabilities and Partners' Capital
Current liabilities.................................. $ 27.9 $ 13.1 $ 9.3
Long-term debt....................................... -- 71.8 59.8
Other long-term liabilities.......................... 2.6 -- --
Partners' capital.................................... 433.5 34.4 27.9
------ ------ -----
$464.0 $119.3 $97.0
====== ====== =====
</TABLE>
The Venture financial data is shown at historical cost and does not reflect
an allocation of the excess purchase price paid by the Company.
60
<PAGE> 63
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 December 31, 1999 (in millions of dollars):
<TABLE>
<CAPTION>
LINDEN VENTURE CAMDEN VENTURE BAYONNE VENTURE
---------------------------- ---------------------------- ----------------------------
FEBRUARY 5 TO JANUARY 1 TO FEBRUARY 5 TO JANUARY 1 TO FEBRUARY 5 TO JANUARY 1 TO
DECEMBER 31, FEBRUARY 4, DECEMBER 31, FEBRUARY 4, DECEMBER 31, FEBRUARY 4,
1999 1999 1999 1999 1999 1999
------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Electricity.............. $243.0 $ 23.9 $65.2 $ 8.2 $93.4 $11.1
Steam.................... 9.6 0.6 -- -- 3.4 0.4
------ ------ ----- ------ ----- -----
252.6 24.5 65.2 8.2 96.8 11.5
------ ------ ----- ------ ----- -----
Costs and Expenses
Fuel..................... 114.2 16.2 29.8 4.8 38.0 3.6
Operating and
maintenance(1)........ 17.1 1.7 10.2 0.5 9.3 0.9
Depreciation and
amortization.......... 13.7 1.4 3.4 0.4 2.6 0.3
General and
administrative(1)..... 2.8 47.5 1.0 13.0 0.8 0.3
Taxes, other than
income................ 1.4 0.2 0.5 -- 0.5 --
------ ------ ----- ------ ----- -----
149.2 67.0 44.9 18.7 51.2 5.1
------ ------ ----- ------ ----- -----
Income (Loss) from
Operations............... 103.4 (42.5) 20.3 (10.5) 45.6 6.4
Other Income (Expense)
Interest and other
income................ 4.3 0.1 1.6 -- 0.4 --
Interest expense......... -- -- (6.2) (0.7) (6.4) (0.8)
------ ------ ----- ------ ----- -----
Net Income (Loss).......... $107.7 $(42.4) $15.7 $(11.2) $39.6 $ 5.6
====== ====== ===== ====== ===== =====
</TABLE>
- ------
(1) 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.
61
<PAGE> 64
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 December 31, 1999 (in millions of dollars):
<TABLE>
<CAPTION>
LINDEN VENTURE CAMDEN VENTURE BAYONNE VENTURE
---------------------------- ---------------------------- ----------------------------
FEBRUARY 5 TO JANUARY 1 TO FEBRUARY 5 TO JANUARY 1 TO FEBRUARY 5 TO JANUARY 1 TO
DECEMBER 31, FEBRUARY 4, DECEMBER 31, FEBRUARY 4, DECEMBER 31, FEBRUARY 4,
1999 1999 1999 1999 1999 1999
------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Cash provided by (used in)
operating activities..... $ 125.0 $(42.7) $21.5 $(13.1) $43.0 $ 3.1
Cash provided by (used in)
investing activities..... 0.5 -- -- -- (0.1) --
Cash provided by (used in)
financing activities..... (109.8) 32.7 (21.2) 13.9 (39.1) (4.1)
------- ------ ----- ------ ----- -----
Increase (decrease) in cash
and cash equivalents..... $ 15.7 $(10.0) $ 0.3 $ 0.8 $ 3.8 $(1.0)
======= ====== ===== ====== ===== =====
</TABLE>
Under the terms of Linden Venture's partnership agreement, monthly cash
distributions are allocated, 1% to Linden Ltd. and 99% to the limited partner up
to a specified rate of return (approximately $3.0 million per month from October
1998 through September 2001 and between $4.3 million and $4.8 million per month
thereafter) ("Tranche 1"), then 99% to Linden Ltd. and 1% to the limited partner
up to a capped amount, which is twice the amount of Tranche 1, and the remainder
90% to Linden Ltd. and 10% to the limited partner. During the period subsequent
to the acquisition, Linden Ltd. received 70% 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 79% 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 79% 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 73% 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
62
<PAGE> 65
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company is allocated 91.75% of Bayonne Venture's profits and losses and receives
91.75% of all cash distributions.
Prior to February 4, 1999, planning, operational and financial management
was provided to Bayonne Venture by an affiliate. The affiliate was paid a
management fee equal to 1.5% of Bayonne Venture's gross revenues. Subsequent to
February 4, 1999, Bayonne Venture continues to pay the fee to the McNair
affiliate, however, no services are received. For the period from February 4 to
December 31, 1999, the fee was approximately $1.5 million and is shown as a
reduction of Bayonne revenues.
(4) DEBT AND FINANCING TRANSACTIONS
Debt at December 31, 1999 consisted of the following (in millions of
dollars):
<TABLE>
<S> <C>
Long-Term Debt
Senior Secured Notes...................................... $ 830.0
Enron Subordinated Note................................... 187.9
Linden Ltd. Term Loan..................................... 195.2
--------
1,213.1
Less current maturities................................... 28.4
--------
Long-Term Debt............................................ $1,184.7
========
Short-Term Debt
Senior Subordinated Credit Facility....................... $ 16.0
========
</TABLE>
Aggregate maturities of long-term debt for the next five years are as
follows: 2000 -- $28.4 million; 2001 -- $37.7 million; 2002 -- $52.3 million;
2003 -- $53.0 million; 2004 -- $51.3 million.
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 March 31, 2012 with the final payment due June 30, 2017.
Interest on the Notes is payable quarterly beginning June 30, 1999.
63
<PAGE> 66
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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.
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. 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 Senior
Secured Notes. The prepayment reduced the required principal payments on a pro
rata basis. Amounts outstanding under the Enron subordinated note bear interest
at 9% per annum and interest is payable quarterly. The principal amount is
repayable in 32 installments of varying amounts beginning March 31, 2008, with
the final payment due on December 31, 2015. The Enron subordinated note is
subordinated to the bridge loan and the Senior Secured 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.
Linden Ltd.
In September 1992, Linden Ltd. entered into a $250.0 million Amended and
Restated Term Loan Agreement (Linden Ltd. Term Loan) with State Street Bank &
Trust Co. which matures in September 2007. At December 31, 1999, $191.7 million
was outstanding under the terms of the agreement, comprised of a fixed rate
portion ($90.6 million), a floating rate portion ($94.6 million) and a working
capital portion ($10.0 million). Under the terms of the agreement, the fixed
rate portion bears interest at 8.80% (an unamortized premium balance of $3.5
million is being amortized using the interest method, resulting in an effective
interest
64
<PAGE> 67
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
rate of approximately 8.06% 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. The Company believes it is in
compliance with the terms and conditions of this loan agreement.
Senior Subordinated Credit Facility
During December, 1999 the Company entered into a $30.0 million senior
subordinated credit facility with a bank. The facility has an initial maturity
date at June 30, 2000 which is automatically extended to December 29, 2000
provided that the Company satisfies certain terms and conditions. Advances under
the facility bear interest, payable quarterly, at either the base or the
eurodollar rate as elected at the time of borrowing. The base rate is defined as
the greater of the federal funds rate plus 1/2% and the prime rate. A
commitment fee of 1/2% is payable on the unused portion of the facility. At
December 31, 1999 there were base rate advances of $16.0 million outstanding
under the facility.
Capital Transactions
On April 20, 1999, in accordance with the terms of the Company's limited
liability agreement, JEDI II made a $80.0 million capital contribution to the
Company.
(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 December 31, 1999 the Company recorded interest expense of $0.5 million in
connection with the interest rate swap. On April 14, 1999 the agreement with
Enron North America was cancelled and the Company received a payment of $8.9
million in connection with the cancellation, included in Interest and Other
Income in the accompanying Statement of Operations.
(6) 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. Management
believes such charges for services and allocations of expenses represent amounts
equivalent to those that could be obtained in the market. During the period
ended December 31, 1999, the amount charged to the Company with respect to such
costs and services totaled $1.4 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 December 31, 1999 costs with respect to such employee benefit
plans totaled $0.3 million.
Various commercial lenders have issued letters of credit at the request of
Enron on behalf of the Company. At December 31, 1999 there were letters of
credit in the amount of $27.1 million outstanding.
65
<PAGE> 68
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1999 amounts due to Enron Corp. and Enron North America,
which are reflected in the consolidated balance sheet as Accounts payable,
affiliates, totaled $3.2 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 $4.4 million letter of
credit issued to Public Service Electric & Gas Company of New Jersey which
secures certain obligations pursuant to Bayonne Venture's power purchase
agreement.
During December, 1999, in connection with the Linden Venture expansion
project (see Note 7) the Company entered into an Assignment and Assumption
Agreement (the Agreement) with Enron North America. The Agreement assigned Enron
North America's $31.3 million contract to purchase a turbine from General
Electric Company to the Company. Under the terms of the agreement the Company
paid Enron North America $12.6 million representing the progress payments made.
In addition, the Company paid a fee of $3.2 million to Enron North America for
the Agreement. These amounts are included in Other Assets on the balance sheet
at December 31, 1999. Payment under the purchase contract is due monthly with
final payment due in August 2000. The turbine will be transferred to Linden
Venture upon finalization of the Energy Services Agreement as described in Note
7.
(7) COMMITMENTS AND CONTINGENCIES
During February 2000, the Company entered into an Energy Services Agreement
(the ESA) with Tosco Refining, L.P., a subsidiary of Tosco Corporation (Tosco),
under which the Company will cause to be constructed, own and operate a 172
megawatt cogeneration facility (the New Facility) to be located on part of the
existing facility's site. In connection with the ESA, the Company also entered
into a ground lease to provide a site for the interconnection of the New
Facility and three additional ground leases with Bayway Refining providing sites
for future development projects. In addition, the ESA contemplates amending the
steam sale agreement between Bayway, a subsidiary of Tosco, and Linden Venture
to increase the minimum amounts of steam Bayway is required to take. The terms
of the ESA provide for a 65 day period following the effective date during which
either party may terminate the ESA without cause. The ESA also provides for
reimbursement of certain expenditures incurred by the Company in connection with
the ESA during the term of the 65 day period provided that certain conditions
are met. The Linden Venture partnership and Linden Ltd. loan agreements
prohibit, without partner and lender consents, Linden Venture from entering into
the ESA, the amendment to the steam sale agreement and the ground leases. It is
the Company's intent to assign the ESA and the ground leases to Linden Venture
upon receipt of necessary partner and lender approvals or upon the
recapitalization of Linden Venture. The New Facility will require a total
capital expenditure of approximately $107 million and is expected to be fully
operational during the last quarter of 2001.
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.
66
<PAGE> 69
EAST COAST POWER L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(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. The following table reflects the fair value of debt at
December 31, 1999 (in millions of dollars):
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- -----
<S> <C> <C>
East Coast Power
Senior Secured Notes...................................... $829.9 $782.5
Enron Subordinated Note................................... 187.9 187.9
Subordinated Credit Facility.............................. 16.0 16.0
Linden Ltd.................................................. 195.3 194.3
</TABLE>
The fair value of Linden Ltd.'s fixed-rate long-term debt has been
determined based on the differential between the fixed interest rate and
interest rates of long-term treasury securities at the date of the borrowing and
the balance sheet date. The fair value of the Enron subordinated note reflects
certain provisions of the agreement related to the assignment of the note. The
carrying amount of floating rate debt approximates fair value due to the
market-sensitive interest rate on such debt.
The carrying amount of current assets and liabilities are considered to be
reasonable estimates of their fair values due to their short-term nature.
67
<PAGE> 70
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To East Coast Power L.L.C.:
We have audited the accompanying combined balance sheet of Cogen Tech Group
(a group of cogeneration investing entities owned by Robert C. McNair and
affiliates) as of December 31, 1998, and the related combined statements of
income, owners' equity and cash flows for the periods ended February 4, 1999,
December 31, 1998 and 1997. 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 auditing standards generally
accepted in the United States. 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of Cogen Tech Group as
of December 31, 1998 and the results of their operations and their cash flows
for the periods ended February 4, 1999, December 31, 1998 and 1997, in
conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Houston, Texas
December 13, 1999
68
<PAGE> 71
COGEN TECH GROUP
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JANUARY 1, YEAR ENDED
1999 TO DECEMBER 31,
FEBRUARY 4, ---------------
1999 1998 1997
--------------- ------ ------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Revenues
Equity in Earnings of
Cogen Technologies Linden Venture, L.P................. $(44.8) $ 73.3 $ 71.8
Camden Cogen L.P....................................... (11.8) 15.0 14.7
Cogen Technologies NJ Venture.......................... 5.2 44.6 17.2
------ ------ ------
(51.4) 132.9 103.7
------ ------ ------
Costs and Expenses
Operating overhead........................................ 0.9 21.6 11.6
General and administrative................................ 1.7 20.2 19.9
------ ------ ------
2.6 41.8 31.5
------ ------ ------
Income from Operations...................................... (54.0) 91.1 72.2
Other Income (Expense)
Interest and other income................................. 0.1 12.6 15.5
Interest expense.......................................... (2.0) (19.3) (21.8)
Allowance for long-term receivable........................ -- -- 10.3
------ ------ ------
Income Before Income Taxes.................................. (55.9) 84.4 76.2
Income taxes.............................................. (1.8) (13.3) (4.1)
------ ------ ------
Net Income.................................................. $(57.7) $ 71.1 $ 72.1
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
69
<PAGE> 72
COGEN TECH GROUP
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
(IN MILLIONS
OF DOLLARS)
<S> <C>
Current Assets
Cash and cash equivalents................................. $ 12.7
Accounts receivable, affiliate............................ 0.2
------
12.9
------
Investments in Affiliates
Cogen Technologies Linden Venture, L.P.................... 62.6
Camden Cogen L.P.......................................... 13.9
Cogen Technologies NJ Venture............................. 8.7
------
85.2
------
Other Assets
Accounts receivable, affiliate............................ 149.0
Other..................................................... 1.7
------
150.7
------
$248.8
======
LIABILITIES AND OWNERS' EQUITY
Current Liabilities
Current maturities on long-term debt...................... $ 14.5
Income taxes payable...................................... 4.4
Interest payable.......................................... 1.8
------
20.7
Long-Term Debt.............................................. 203.5
Deferred Income Taxes....................................... 5.8
Commitments and Contingencies (Note 7)
Owners' Equity.............................................. 18.8
------
$248.8
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
70
<PAGE> 73
COGEN TECH GROUP
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JANUARY 1, YEAR ENDED
1999 TO DECEMBER 31,
FEBRUARY 4, ---------------
1999 1998 1997
--------------- ------ ------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Operating Activities
Net income................................................ $(57.7) $ 71.1 $ 72.1
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in earnings of affiliates:
Cogen Technologies Linden Venture, L.P............... 44.8 (73.3) (71.8)
Camden Cogen L.P..................................... 11.8 (15.0) (14.7)
Cogen Technologies NJ Venture........................ (5.2) (44.6) (17.2)
Distributions received from affiliates:
Cogen Technologies Linden Venture, L.P............... 13.4 74.0 75.6
Camden Cogen L.P..................................... 2.1 15.0 8.6
Cogen Technologies NJ Venture........................ 4.8 39.5 18.1
Deferred income taxes.................................. 0.7 0.3 1.1
Allowance for long-term receivable..................... -- -- (10.3)
Changes in other operating assets and liabilities
Decrease (increase) in accounts receivable,
affiliate............................................ (8.4) (0.2) 5.2
Decrease (increase) in other current assets............ -- 0.1 0.7
Increase (decrease) in accounts payable, affiliate..... -- (11.7) (1.4)
Increase (decrease) in interest payable................ 1.2 (0.2) 0.3
Increase (decrease) in income taxes payable............ (2.8) 4.3 0.1
Net change in other assets and liabilities............. (0.1) 0.1 0.3
------ ------ ------
Net Cash Provided by Operating Activities................. 4.8 59.4 66.7
------ ------ ------
Investing Activities
Investment in Cogen Technologies Linden Venture, L.P...... (52.4) -- --
Investment in Camden Cogen L.P............................ (17.7) -- --
Investment in Cogen Technologies NJ Venture............... -- (12.5) --
Decreases in long-term receivable, affiliate.............. -- 68.7 70.0
Increases in long-term receivable, affiliate.............. -- (56.9) (62.2)
------ ------ ------
Net Cash Provided by (Used in) Investing Activities......... (70.1) (0.7) 7.8
------ ------ ------
Financing Activities
Principal payments on long-term borrowings................ (12.4) (12.9) (16.0)
Contributions received.................................... 82.7 -- --
Cash distributions........................................ -- (45.7) (58.3)
------ ------ ------
Net Cash Used in Financing Activities....................... 70.3 (58.6) (74.3)
------ ------ ------
Net Increase (Decrease) in Cash and Cash Equivalents........ 5.0 0.1 0.2
Cash and Cash Equivalents at Beginning of Period............ 12.7 12.6 12.4
------ ------ ------
Cash and Cash Equivalents at End of Period.................. $ 17.7 $ 12.7 $ 12.6
====== ====== ======
Cash Payments for
Income taxes.............................................. $ 4.0 $ 7.9 $ 2.6
====== ====== ======
Interest.................................................. $ 0.8 $ 19.5 $ 21.4
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
71
<PAGE> 74
COGEN TECH GROUP
COMBINED STATEMENTS OF OWNERS' EQUITY
(IN MILLIONS OF DOLLARS)
<TABLE>
<S> <C>
Balance at December 31, 1996................................ (20.4)
Net income................................................ 72.1
Distributions............................................. (58.3)
------
Balance at December 31, 1997................................ (6.6)
Net income................................................ 71.1
Distributions............................................. (45.7)
------
Balance at December 31, 1998................................ 18.8
Contributions............................................. 82.7
Net loss.................................................. (57.7)
------
Balance at February 4, 1999................................. $ 43.8
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
72
<PAGE> 75
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 Robert C. McNair, members of his
immediate family and related trusts (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 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, 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.
73
<PAGE> 76
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 accounting
principles generally accepted in the United States 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) THE ACQUISITION
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 L.L.C. ("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
74
<PAGE> 77
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
the proceeds from a $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. In addition, East Coast
Power assumed and subsequently retired the $216.0 million of MESC Notes.
(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 BAYONNE
VENTURE VENTURE VENTURE(1)
------- ------- ----------
<S> <C> <C> <C>
Balance at December 31, 1996............................. 67.1 7.8 (8.0)
Equity in earnings....................................... 71.8 14.7 17.5
Distributions............................................ (75.6) (8.6) (18.1)
Amortization of excess cost.............................. -- -- (0.3)
------ ------ ------
Balance at December 31, 1997............................. 63.3 13.9 (8.9)
Investment............................................... -- -- 12.5
Equity in earnings....................................... 73.3 15.0 44.8
Distributions............................................ (74.0) (15.0) (39.5)
Amortization of excess cost.............................. -- -- (0.2)
------ ------ ------
Balance at December 31, 1998............................. $ 62.6 $ 13.9 $ 8.7
====== ====== ======
</TABLE>
- ---------------
(1) Through December 31, 1997, NJ Inc. received distributions from Bayonne
Venture that were $11.1 million in excess of its proportionate share of
Bayonne Venture's partners' capital before distributions. All partners share
in liquidation rights to the extent of their individual capital accounts;
accordingly, such excess was classified as a long-term liability in the
December 31, 1997 balance sheet.
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.
75
<PAGE> 78
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents summary balance sheet information for the
Acquired Group's affiliates at December 31, 1998 (in millions of dollars):
<TABLE>
<CAPTION>
LINDEN VENTURE CAMDEN VENTURE BAYONNE VENTURE
-------------- -------------- ---------------
<S> <C> <C> <C>
Assets
Current assets.............................. $ 57.0 $ 18.3 $25.9
Property, plant and equipment, net.......... 413.6 103.1 70.9
Other assets................................ -- -- 0.2
------ ------ -----
$470.6 $121.4 $97.0
====== ====== =====
Liabilities and Partners' Capital
Current liabilities......................... $ 23.8 $ 11.8 $12.8
Long-term debt.............................. -- 78.5 64.1
Other long-term liabilities................. 1.5 -- --
Partners' capital........................... 445.3 31.1 20.1
------ ------ -----
$470.6 $121.4 $97.0
====== ====== =====
</TABLE>
The following table presents summary income statement information for the
Acquired Group's affiliates for the years ended 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>
Revenues:
Electricity............................ $262.8 $283.5 $73.1 $80.2 $112.8 $92.8
Steam.................................. 11.3 15.5 -- -- 3.8 3.7
------ ------ ----- ----- ------ -----
274.1 299.0 73.1 80.2 116.6 96.5
------ ------ ----- ----- ------ -----
Costs and Expenses:
Fuel................................... 118.1 138.1 33.3 39.2 38.6 43.2
Operating & maintenance................ 22.0 24.1 6.1 7.5 14.4 14.7
Depreciation & amortization............ 15.4 22.3 3.7 6.9 3.0 6.9
General & administrative............... 10.1 11.4 2.2 2.6 3.1 2.9
Taxes, other than income............... 1.6 0.6 0.4 0.6 0.5 0.5
------ ------ ----- ----- ------ -----
167.2 196.5 45.7 56.8 59.6 68.2
------ ------ ----- ----- ------ -----
Income from Operations................... 106.9 102.5 27.4 23.4 57.0 28.3
Other Income (Expense) Interest and other
income................................. 0.8 1.1 0.4 0.4 1.2 0.1
Interest expense....................... -- -- (7.4) (7.7) (7.7) (8.1)
------ ------ ----- ----- ------ -----
Net Income............................... $107.7 $103.6 $20.4 $16.1 $ 50.5 $20.3
====== ====== ===== ===== ====== =====
</TABLE>
76
<PAGE> 79
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 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>
Cash provided by operating activities.......... $120.4 $134.4 $24.2 $21.7 $51.2 $26.9
Cash used in investing activities.............. (0.8) (0.4) (0.5) (4.4) (0.1) --
Cash used in financing activities.............. (123.7) (127.6) (23.9) (16.7) (47.2) (24.0)
------ ------ ----- ----- ----- -----
Increase (decrease) in cash and cash
equivalents.................................. $ (4.1) $ 6.4 $(0.2) $ 0.6 $ 3.9 $ 2.9
====== ====== ===== ===== ===== =====
</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 68%, 69% and 72%, 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 74%, 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 89.0% of Bayonne Venture's profits and losses and received
88.4% of all cash distributions.
77
<PAGE> 80
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 consisted of the following (in millions
of dollars):
<TABLE>
<CAPTION>
1998
-------------------
CURRENT LONG-TERM
------- ---------
<S> <C> <C>
Linden Ltd.
Fixed rate................................................ $ 6.7 $ 87.0
Floating rate............................................. 7.2 94.7
Working capital........................................... -- 10.0
----- ------
13.9 191.7
----- ------
Camden GP................................................... 0.6 11.8
----- ------
$14.5 $203.5
===== ======
</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 sheet. The receivable bears
interest at 8.8%, and Linden Ltd. has earned net interest of $11.8 million in
1998 and $14.6 million in 1997.
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,
78
<PAGE> 81
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. At December 31,
1998, 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, 1998, $0.2 million was payable by Financial Services to
Camden GP. Advances bear interest at 9.3%, and during 1998 and 1997 Camden GP
recorded interest income totaling $0.2 million and $0.6 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 and 1997 totaled
$1.1 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 and 1997
totaled $4.2 million and $4.6 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 and 1997: (i) Camden GP -- $1.1 million and $1.2 million, respectively; and
(ii) Linden Ltd. -- $4.2 million and $4.6 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 and $1.4 million in 1998 and 1997, 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 and 1997: (i) Linden Ltd. -- $28.3 million and $21.2
million, respectively; (ii) Camden GP -- $5.8 million and $4.3 million,
respectively; and (iii) NJ Inc. -- $7.0 million and $5.2 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 and $2.2 million in
1997 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.
79
<PAGE> 82
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 and 1997 consisted of (in millions of dollars):
<TABLE>
<CAPTION>
1998 1997
----- ----
<S> <C> <C>
Current
Federal................................................... $12.0 $2.6
State..................................................... 1.0 0.4
----- ----
13.0 3.0
----- ----
Deferred
Federal................................................... 0.1 0.3
State..................................................... 0.2 0.8
----- ----
0.3 1.1
----- ----
Total............................................. $13.3 $4.1
===== ====
</TABLE>
Deferred tax liabilities (assets) at December 31, 1998 are composed of the
following differences between financial and tax reporting amounts (in millions
of dollars):
<TABLE>
<CAPTION>
1998
----
<S> <C>
Deferred income tax liabilities
Tax depreciation in excess of book depreciation........... $5.7
State tax depreciation in excess of book depreciation..... 0.1
----
Net deferred income tax liability........................... $5.8
====
</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 and 1997 is presented in the following table (in millions of
dollars):
<TABLE>
<CAPTION>
1998 1997
----- ----
<S> <C> <C>
Federal income taxes at statutory rate...................... $12.5 $3.4
Increase resulting from:
State income taxes, net of federal effect................. 0.8 0.2
Other..................................................... -- 0.5
----- ----
$13.3 $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 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 limited discovery on the merits of the case has incurred in
1999. Discovery in the merits is expected to continue in 2000. On October 1,
1999, a substantially identical suit was filed in state court in Louisiana on
behalf of
80
<PAGE> 83
COGEN TECH GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
320 additional plaintiffs. Defendants have removed the case to federal court,
and the suit is now pending in the United States District Court for the Western
District of Louisiana. Defendants have also asked the court to transfer the suit
to the United States District Court for the Middle District of Louisiana, where
it may be consolidated with the original suit. 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 (in millions of dollars):
<TABLE>
<CAPTION>
1998
-----------------
CARRYING FAIR
AMOUNT VALUE
-------- ------
<S> <C> <C>
Long-Term Debt
Camden GP................................................. $ 12.4 $ 12.4
Linden Ltd................................................ 205.6 229.3
</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 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.
81
<PAGE> 84
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 East Coast Power L.L.C. has an interest) as of December
31, 1999 and 1998, and the related combined statements of income, partners'
capital and cash flows for each of the three years in the period ended December
31, 1999. 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 auditing standards generally
accepted in the United States. 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 combined 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, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
ARTHUR ANDERSEN LLP
Houston, Texas
March 30, 2000
82
<PAGE> 85
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
1999 1998 1997
------ ------ ------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Revenues
Electricity............................................... $444.8 $448.7 $456.5
Steam..................................................... 14.0 15.1 19.2
------ ------ ------
458.8 463.8 475.7
------ ------ ------
Costs and Expenses
Fuel...................................................... 206.6 190.0 220.5
Operating and maintenance................................. 39.7 42.5 46.3
Depreciation and amortization............................. 21.8 22.1 36.1
General and administrative................................ 65.4 15.4 16.9
Taxes, other than income.................................. 2.6 2.5 1.7
------ ------ ------
336.1 272.5 321.5
------ ------ ------
Income from Operations...................................... 122.7 191.3 154.2
Other Income (Expense)
Interest and other income................................. 6.4 2.4 1.6
Interest expense.......................................... (14.1) (15.1) (15.8)
------ ------ ------
Net Income.................................................. $115.0 $178.6 $140.0
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
83
<PAGE> 86
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1999 1998
---------- ----------
(IN MILLIONS OF DOLLARS)
<S> <C> <C>
Current Assets
Cash and cash equivalents................................. $ 48.7 $ 39.1
Accounts receivable (net of allowance for doubtful
accounts of $1.6 million and $0.3 million in 1999 and
1998, respectively).................................... 45.4 42.7
Inventories............................................... 18.5 16.7
Other current assets...................................... 2.3 2.9
------- -------
114.9 101.4
------- -------
Plant and Equipment, at cost................................ 827.2 827.6
Accumulated depreciation.................................. (261.8) (240.0)
------- -------
565.4 587.6
------- -------
$ 680.3 $ 689.0
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Current maturities on long-term debt...................... $ 10.4 $ 10.4
Short-term debt........................................... -- 0.9
Accounts payable.......................................... 21.7 20.4
Accounts payable, affiliate............................... 0.1 0.4
Interest payable.......................................... 1.1 3.1
Other current liabilities................................. 17.0 13.1
------- -------
50.3 48.3
Long-Term Debt.............................................. 131.6 142.6
Other Long-Term Liabilities................................. 2.6 1.6
Commitments and Contingencies (Note 4)
Partners' Capital........................................... 495.8 496.5
------- -------
$ 680.3 $ 689.0
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
84
<PAGE> 87
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1999 1998 1997
------- ------- -------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Operating Activities
Net income................................................ $ 115.0 $ 178.6 $ 140.0
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 21.8 22.1 36.1
Changes in other operating assets and liabilities
Decrease (increase) in accounts receivable............. (2.7) 1.9 8.3
Decrease (increase) in inventories..................... (1.8) 4.5 (3.8)
Decrease (increase) in other current assets............ 0.6 0.2 0.3
Increase (decrease) in accounts payable and other
current liabilities.................................. 4.9 (10.8) 3.8
Increase (decrease) in interest payable................ (2.0) (0.1) (0.3)
Increase (decrease) in other long-term liabilities..... 1.0 (0.6) (1.4)
------- ------- -------
Net Cash Provided by Operating Activities................... 136.8 195.8 183.0
------- ------- -------
Investing Activities
Additions to plant and equipment.......................... (0.9) (1.4) (4.8)
Disposals of property, plant and equipment................ 1.3 -- --
------- ------- -------
Net Cash Provided by (Used in) Investing Activities......... 0.4 (1.4) (4.8)
------- ------- -------
Financing Activities
Principal payments on long-term borrowings................ (11.0) (9.0) (8.1)
Borrowings on short-term debt............................. 5.5 36.6 45.0
Repayments of short-term debt............................. (6.4) (35.7) (45.0)
Cash contributions from partners.......................... 70.1 -- --
Cash distributions to partners............................ (185.8) (186.7) (160.2)
------- ------- -------
Net Cash Used in Financing Activities....................... (127.6) (194.8) (168.3)
------- ------- -------
Net Increase (Decrease) in Cash and Cash Equivalents........ 9.6 (0.4) 9.9
Cash and Cash Equivalents at Beginning of Year.............. 39.1 39.5 29.6
------- ------- -------
Cash and Cash Equivalents at End of Year.................... $ 48.7 $ 39.1 $ 39.5
======= ======= =======
Cash Payments for Interest.................................. $ 16.1 $ 15.3 $ 16.0
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
85
<PAGE> 88
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 January 1, 1997.................................. $ 64.4 $ 460.4 $ 524.8
Net income................................................ 104.0 36.0 140.0
Distributions............................................. (102.3) (57.9) (160.2)
------- ------- -------
Balance at December 31, 1997................................ 66.1 438.5 504.6
Net income................................................ 133.1 45.5 178.6
Purchase (sale)of interests............................... 9.9 (9.9) --
Distributions............................................. (128.5) (58.2) (186.7)
------- ------- -------
Balance at December 31, 1998................................ 80.6 415.9 496.5
Net income................................................ 80.6 34.4 115.0
Contributions............................................. 70.1 -- 70.1
Distributions............................................. (137.5) (48.3) (185.8)
------- ------- -------
Balance at December 31, 1999................................ $ 93.8 $ 402.0 $ 495.8
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
86
<PAGE> 89
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 and under the common control of East Coast Power, L.L.C.
(ECP) at December 31, 1999. ECP is a Delaware limited liability corporation
formed by Joint Energy Development Investments II Limited Partnership (JEDI II),
a Delaware limited partnership in which Enron Corp. (Enron), and the California
Public Employees' Retirement System each own a 50% interest. All material
transactions between the combined entities have been eliminated.
On February 4, 1999, ECP acquired 100% of the general and limited
partnership interests in Cogen Technologies Camden GP Limited Partnership
("Camden GP"), the managing partner of Camden Venture, and Cogen Technologies
Linden Ltd. ("Linden Ltd."), the managing partner of Linden Venture. Also on
February 4, Enron North America, 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. In a series of
transactions occurring on February 4, 1999 and August 13, 1999 ECP admitted
Enron North America Corp, a wholly owned subsidiary of Enron and Mesquite
Investors L.L.C. as members.
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 prior to February 4, 1999 was
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"), was
the managing partner of Bayonne Venture and provided 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 89.0% of Bayonne Venture's
profits and losses and received 88.4% of all cash distributions. On February 4,
1999, NJ Inc. was merged with and into MESC and MESC was designated managing
general partner of Bayonne Venture. Subsequently, ECP acquired all of the
outstanding shares of MESC. MESC subsequently assigned its interest in Bayonne
Venture to JEDI Bayonne GP L.L.C., which is controlled by ECP.
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 prior to February 4, 1999, is the managing partner
of Camden Venture and prior to February 4, 1999 provided planning, operational
and financial management services. On February 4, 1999 Camden Venture terminated
its management services agreement with Camden GP and terminated its gas
management agreement with an affiliate of McNair Interests. To terminate such
agreements Camden GP made a capital contribution to Camden Venture and Camden
Venture paid Camden GP $12.8 million to terminate the management services
agreement and paid
87
<PAGE> 90
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
an affiliate $1.6 million to terminate the gas services agreement. These
one-time payments were allocated 100% to Camden GP's share of Camden Venture's
net income. 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 1999, 1998 and 1997, Camden GP received $12.5 million,
$15.0 million and $8.6 million, respectively, which represented 80%, (excluding
a $3.3 million special distribution to the limited partner related to the East
Coast Power acquisition), 82% and 74%, 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. Excluding the effect of the $14.4 million one-time payments
previously described, which were allocated 100% to Camden GP, during 1999, 1998
and 1997, Camden GP was allocated 72%, 74% and 91%, 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 interest prior to
February 4, 1999 was owned 100% by the McNair Interests, is the managing partner
of Linden Venture and prior to February 4, 1999 provided planning, operational
and financial management services. On February 4, 1999 Linden Venture terminated
its management services agreement with Linden Ltd. and terminated its gas
management agreement with an affiliate of McNair Interests. To terminate such
agreements Linden Ltd. made a capital contribution to Linden Venture and Linden
Venture paid Linden Ltd. $46.4 million to terminate the management services
agreement and paid an affiliate $6.0 million to terminate the gas services
agreement. These one-time payments were allocated 100% to Linden Ltd.'s share of
Linden Venture's net income. Under the terms of Linden Venture's partnership
agreement, cash is distributed monthly, 1% to Linden Ltd. and 99% to the limited
partner up to a specified rate of return (approximately $4.3 million per month
through September 1998, approximately $3.0 million per month from October 1998
through September 2001 and between $4.3 million and $4.8 million per month
thereafter) ("Tranche 1"), then 99% to Linden Ltd. and 1% to the limited partner
up to an amount equal to twice the amount of Tranche 1 and the remainder 90% to
Linden Ltd. and 10% to the limited partner. During 1999, 1998 and 1997, Linden
Ltd. received $90.6 million, $74.0 million and $75.6 million, respectively,
which represented 70%, 60% and 59%, respectively, of Linden Venture's cash
distributions. Linden Venture's income before depreciation is allocated to the
Partners on the basis of cash distributed with any excess primarily allocated
99% to Linden Ltd. Losses are allocated 100% to Linden Ltd. until its capital
account equals zero and then to the limited partner 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 partner.
All remaining depreciation is allocated 99% to Linden Ltd. Excluding the effect
of the $52.4 million one-time payments previously described, which were
allocated 100% to Linden Ltd, during 1999, 1998 and 1997, Linden Ltd. was
allocated 78%, 68% and 69%, 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, 1999 and
1998, $30.7 million and $26.4 million, respectively, of the Operating
Partnerships' cash was held in restricted accounts to comply with the terms and
conditions of certain agreements.
88
<PAGE> 91
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Inventories
Spare parts inventories at December 31, 1999 and 1998 were $11.4 million
and $12.9 million, respectively, and at such dates kerosene and butane
inventories were $7.1 million and $3.8 million, respectively. Inventories are
valued at average cost except for Linden Venture's butane inventory which is
accounted for using the first-in, first-out method.
Plant and Equipment
Plant and equipment is stated at cost. Depreciation is computed using the
straight-line method based on an estimated useful life and a 10% salvage value.
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 estimates resulted in increases in 1998 operating
and net income of $9.2 million and changes to residual value resulted in
increases in 1998 operating and net income of $5.0 million.
Plant and equipment at December 31, 1999 and 1998, consist of the following
(in million of dollars):
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES 1999 1998
-------------------- ------- -------
<S> <C> <C> <C>
Plant and improvements................................ 30 years or $ 820.4 $ 820.8
remaining plant life
Capital spares........................................ Remaining plant life 5.0 5.0
Furniture and equipment............................... 5 years 1.8 1.8
------- -------
827.2 827.6
Accumulated depreciation.............................. (261.8) (240.0)
------- -------
$ 565.4 $ 587.6
======= =======
</TABLE>
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.
Maintenance Costs
Costs associated with planned outages for major plant overhauls, routine
and unplanned maintenance and repairs are expensed as incurred. During 1999 and
1998 the Operating Partnerships incurred parts and labor expenses of $10,767,000
and $13,402,000, respectively, in connection with planned outages for major
plant overhauls. Such costs are included in operating and maintenance expenses
in the accompanying financial statements. Outages for major plant overhauls are
systematic and are scheduled in advance over the remaining estimated life of the
Facility's and vary in complexity and duration. As a result, the expenses
incurred will vary significantly during the periods.
89
<PAGE> 92
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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; 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, 1999 and 1998 such
prepayments totaled $2.6 million and $1.6 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. The tax
returns, the qualification of the Operating Partnerships as partnerships for tax
purposes and other issues relating to the Operating Partnerships are subject to
examinations by federal authorities. Such examinations could result in the
disallowance of positions taken by the Operating Partnerships with respect to
their qualification or other matters, and such examinations could affect the tax
liability of the individual partners.
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.
Reclassifications
Certain reclassifications have been made to prior year amounts to conform
to the current year presentation. All reclassifications have been applied
consistently for the periods presented.
Recent Accounting Pronouncements
The Financial Statement Accounting Standards Board ("FASB") adopted 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 Operating Partnership's analysis of the
potential impact of this statement has not been completed.
90
<PAGE> 93
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(2) FINANCING AND DEBT
Long-term debt at December 31, 1999 and 1998 consisted of the following (in
millions of dollars):
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
CURRENT LONG-TERM CURRENT LONG-TERM
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Bayonne Venture
Term Loan.................................... $ 3.3 $ 59.8 $ 3.9 $ 64.1
Equipment Loan............................... 0.4 -- 0.4 --
----- ------ ----- ------
3.7 59.8 4.3 64.1
----- ------ ----- ------
Camden Venture
Term loan-Tranche A.......................... 5.6 50.8 5.1 56.4
Term loan-Tranche B.......................... 1.1 21.0 1.0 22.1
----- ------ ----- ------
6.7 71.8 6.1 78.5
----- ------ ----- ------
$10.4 $131.6 $10.4 $142.6
===== ====== ===== ======
</TABLE>
Aggregate total maturities during the next five years are as follows:
2000 -- $10.4 million; 2001 -- $12.1 million; 2002 -- $13.3 million;
2003 -- $14.7 million; 2004 -- $16.1 million and thereafter -- $75.4 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 $63.1 million at December 31, 1999. 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, Inc.
Bayonne Venture had an outstanding balance of $0.4 million at December 31, 1999
(including accrued interest of $0.3 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, 1999, 1998 and 1997 was to increase such expense by
$0.3 million, $0.2 million and $0.2 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 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 paid
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. During February 2000 Bayonne
Venture entered into a commitment-letter with the Bank to reinstate the
agreement on terms and conditions substantially equivalent to those previously
provided.
91
<PAGE> 94
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
During 1999 and 1998, GECC provided a standby letter of credit for Linden
Venture in an amount not to exceed $10.0 million to secure various obligations
with Bayway Refining Company. During 1998, GECC also provided a letter of credit
not to exceed $47.2 million to secure obligations with ConEd. As of December 31,
1999 and 1998, letters of credit in the aggregate of $10.0 million were issued
and outstanding; however, no amounts have been drawn. Linden Venture pays GECC a
monthly fee equal to 3/4 percent of outstanding letter-of-credit amounts. Such
fees were approximately $0.1 million, 0.3 million and $0.7 million during 1999,
1998 and 1997 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, 1999 and 1998 letters of credit in the amounts of $4.4 million and $4.6
million, respectively, were outstanding. The letter of credit expires in May
2000.
GECC provides a letter of credit for Camden Venture to secure certain
obligations under the Tranche A loan. As of December 31, 1999 and 1998 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.
(3) RELATED PARTY TRANSACTIONS
Enron North America provides ECP with certain services that are allocated
to the Operating Partnerships. In addition, ECP allocates certain third party
expenses such as legal, consulting and accounting services, insurance, rent and
miscellaneous office services to the Operating Partnerships. Management believes
such charges for services and allocations of expenses represent amounts
equivalent to those that could be obtained in the market. During the year ended
December 31, 1999 the amount charged to the Operating Partnerships with respect
to such costs and services was approximately $3.0 million.
Prior to February 4, 1999, Camden GP provided 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 for the
period from January 1, 1999 through February 4, 1999 and for the years ended
December 31, 1998 and 1997 totaled $0.1 million, $1.1 million and $1.2 million,
respectively. Prior to February 4, 1999 Linden Ltd. provided 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 for the period from January
1, 1999 through February 4, 1999 and for the years ended December 31, 1998 and
1997 totaled $0.4 million, $4.2 million and $4.6 million, respectively. Prior to
February 4, 1999 RCM Management Services, L.P. ("RCM Management"), which is
controlled by the McNair Interests, provided 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 for the period from January 1, 1999 through
February 4, 1999 and for the years ended December 31, 1998 and 1997 totaled $0.2
million, $1.7 million and $1.4 million, respectively. Subsequent to February 4,
1999, Bayonne Venture continues to pay such fees even though no services are
received. Accordingly, the fee of $1.5 million for the period from February 5,
1999 through December 31, 1999 has been presented as a reduction of revenues.
Prior to February 4, 1999 Camden Venture and Linden Venture paid a natural
gas management fee of $0.02 per thousand cubic feet of gas purchased to an
affiliate. For the years ended December 31, 1998 and 1997, Camden Venture was
charged $0.2 million and $0.2 million, respectively, and Linden Venture was
charged $0.7 million and $0.7 million, respectively, for such services.
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
92
<PAGE> 95
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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.
Prior to February 4, 1999, Cogen Technologies Financial Services, L.P.
("Financial Services") periodically advanced funds to the Operating Partnerships
for working capital purposes. At December 31, 1998 such amount totaled $0.4
million.
Bayonne Venture purchases natural gas and standby electricity from PSE&G
(an affiliate of one of Bayonne Venture's limited partners). In 1999, 1998 and
1997 such purchases totaled $41.1 million, $38.2 million and $42.2 million,
respectively. In addition, Bayonne Venture pays wheeling charges to PSE&G, and
in 1999, 1998 and 1997 such charges totaled $1.5 million, $1.5 million and $1.4
million, respectively.
Prior to February 4, 1999, CT Global Insurance, Ltd. ("CT Global"), which
is controlled by the McNair Interests, provided property and general liability
insurance coverage to the Operating Partnerships. During 1998 and 1997, the
Operating Partnerships paid CT Global $0.8 million and $0.7 million,
respectively, for such insurance coverage.
(4) 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 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
93
<PAGE> 96
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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 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 of $16,000 per
month beginning in August 1998 and the payment of bonuses if certain operating
targets are met. During 1999, 1998 and 1997, Bayonne Venture paid $0.1 million,
$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
94
<PAGE> 97
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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 2 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 1999, 1998 and 1997, Camden Venture paid $0.1 million, $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 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 1999, 1998 and 1997, Linden Venture paid $0.3 million, $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 1999, 1998 and
1997 was $0.4 million.
Project Development
During February 2000, ECP entered into an Energy Services Agreement (the
ESA) with Tosco Refining L.P., a subsidiary of Tosco Corporation (Tosco), under
which ECP will cause to be constructed, own and operate a 172 megawatt
cogeneration facility (the New Facility) to be located on part of the existing
facility's site. In connection with the ESA, ECP and Bayway also entered into a
ground lease to provide a site for the interconnection of the New Facility and
three additional ground leases providing sites for future development projects.
In addition, the ESA contemplates amending the steam sale agreement between
Bayway, a subsidiary of Tosco, and Linden Venture to increase the minimum
amounts of steam Bayway is required to take. The terms of the ESA provide for a
65 day period following the effective date during which either party may
terminate the ESA without cause. The ESA also provides for reimbursement of
certain expenditures incurred by ECP in connection with the ESA during the terms
of the 65 day period provided that
95
<PAGE> 98
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
certain conditions are met. The Linden Venture partnership agreement and Linden
Ltd. loan agreements prohibit, without partner and lender consents, Linden
Venture from entering into the ESA, the amendment to the steam sale agreement
and the ground leases. It is ECP's intent to assign the ESA and the ground
leases to Linden Venture upon receipt of necessary partner and lender approvals
or upon the recapitalization of Linden Venture. The New Facility will require a
total capital expenditure of approximately $107 million and is expected to be
fully operational by the last quarter of 2001.
Other
In 1997, Linden Venture initiated an arbitration proceeding against Ebasco
Constructors, Inc. and ENSERCH 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.
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.
(5) 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, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
ConEd....................................................... 58% 57% 60%
PSE&G....................................................... 21% 20% 21%
JCP&L....................................................... 18% 20% 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 Linden Venture's allowance for doubtful accounts of $1.1
million at December 31, 1999 and are net of Bayonne Venture's allowance for
doubtful accounts of $0.5 million and $0.3 million at December 31, 1999 and
1998, respectively. The Operating Partnerships have no other financial
instruments which subject them to credit risk.
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 "Disclosures About Fair Value of Financial Instruments"
requires the disclosure, to the extent practicable, of the fair value of
financial instruments which are recognized or unrecognized in the balance sheet.
The fair value disclosed herein is not representative of the amount that could
be realized or settled, nor does the fair value amount consider tax
consequences, if any, of realization or settlement. The
96
<PAGE> 99
COGEN TECHNOLOGIES NEW JERSEY OPERATING PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
following table reflects the fair value of long-term debt at December 31, 1999
and 1998 (in millions of dollars):
<TABLE>
<CAPTION>
1999 1998
---------------- ----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Long-Term Debt
Camden Venture.................................... $78.5 $78.3 $84.6 $86.0
Bayonne Venture................................... 63.5 74.0 68.4 85.3
Interest rate swap................................ -- 1.9 -- 1.9
</TABLE>
The fair value of fixed-rate long-term debt has been determined based on
the differential between the interest rates of long-term treasury securities of
equivalent maturities and the effective interest rates on the debt at the date
of the borrowing plus the interest rates on similar treasury securities at the
balance sheet date. With respect to floating rate debt, the carrying amount
approximates fair value due to the market-sensitive interest rate on such debt.
The fair value of Camden Venture's interest rate swap is the estimated
amount that GECC would pay to terminate the agreement at December 31, 1999,
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.
97
<PAGE> 100
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
98
<PAGE> 101
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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, we 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 OF THE REGISTRANT
We currently have five 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.
Robert J. Licato, 36, has served as President and Chief Operating Officer
of our company since February 2000. From April 1999 to January 2000, he served
as Vice President -- Operations and Secretary of our company. 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.
Clifford D. Evans, Jr., 43, has served as Vice President -- Projects &
Operations Support of our company since February 2000. From February 1999 to
January 2000 he served as the company's Manager -- Environmental Projects. From
March 1991 to February 1999, he served in various management positions with
companies affiliated with the Acquired Group.
Gary S. Keevill, 42, has served as Vice President -- Marketing &
Development of our company since February 2000. From May 1998 to January 2000,
he served in various management positions of companies affiliated with the
Acquired Group, most recently Director of Development. Prior to May 1998, Mr.
Keevill held positions in operations, marketing, and management with Con Ed.
Christine K. Lee, 37, has served as Vice President -- Finance Secretary and
Chief Accounting Officer of our company since February 2000. From August 1999 to
January 2000 she served as the company's corporate controller. From September
1997 to August, 1999 Ms. Lee held various management positions with Enron. Prior
to September 1997 she was a senior audit manager with Deloitte & Touche L.L.C.
Arthur R. Stappenbeck, 60, has served as Vice President -- Operations of
our company since February 2000. From February 1999 to January 2000, he served
as our company's Director of Operations. Prior to February 1999, he served as
the Director of Operations for companies affiliated with the Acquired Group.
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<PAGE> 102
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual compensation for our company's
executive officers for the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
----------------------
NAME AND POSITION SALARY BONUS
- ----------------- -------- --------
<S> <C> <C>
Ross D. Ain, President - Business Development(2) $200,000 $475,000(3)
Joseph M. Bollinger, President -Generating(4) $200,000 $500,000(5)
Robert J. Licato, Vice President - Operation and Secretary $160,000(6) $100,000(6)
</TABLE>
(1) All annual compensation amounts are for the period from February 4, 1999,
the date we acquired the facilities, to December 31, 1999.
(2) Mr. Ain left the employment of our company in February 2000. All amounts
paid as compensation to Mr. Ain in the fiscal year ended December 31, 1999
were provided pursuant to the terms of an employment agreement that expired
in February 2000.
(3) Includes a signing bonus of $200,000 paid in connection with Mr. Ain's
employment agreement and a bonus paid in February 2000 a portion of which
relates to services rendered in 1999.
(4) Mr. Bollinger left the employment of our company in February 2000. All
amounts paid as compensation to Mr. Bollinger in the fiscal year ended
December 31, 1999 were provided pursuant to the terms of an employment
agreement that expired in February 2000.
(5) Includes a signing bonus of $200,000 paid in connection with Mr. Bollinger's
employment agreement and a bonus paid in February 2000 a portion of which
relates to services rendered in 1999.
(6) Bonus paid in February 2000 a portion of which relates to services rendered
in 1999.
Employment agreements with Mr. Ain and Mr. Bollinger each provided 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.
Pursuant to these agreements, Mr. Ain and Mr. Bollinger each received a
signing bonus of $200,000. During the initial term of their employment
agreements, Mr. Ain and Mr. Bollinger each received a monthly salary of
$16,666.67. They were also entitled to participate, on the same basis generally
as other employees in the same or similar positions, in all general employee
benefit plans and programs that we made available to our employees on or after
the closing of our acquisition of the facilities. The agreements also provided
for a minimum bonus of $275,000 in the case of Mr. Ain and $300,000 in the case
of Mr. Bollinger.
Mr. Ain's and Mr. Bollinger's agreements were not renewed beyond the
initial term. Mr. Ain and Mr. Bollinger received a single lump-sum payment equal
to the sum of twelve times the monthly salary received during the initial term
plus the amount of the signing bonus in accordance with the terms of their
agreements.
We have entered into a consulting services agreement with Mr. Bollinger
pursuant to which Mr. Bollinger has agreed to provide consulting services to our
company for a period of 12 months beginning in February 2000. During the first
six months of the term of this agreement, we have agreed to pay Mr. Bollinger
$20,000 per month plus $120 per hour for the first 520 hours of services
provided and $300 per hour for each hour of services provided in excess of 520
hours. During the final six months of the term of the agreement, we have agreed
to pay Mr. Bollinger $5,000 per month plus $240 per hour for the first 260 hours
of services provided and $350 per hour for each hour of services provided in
excess of 260 hours.
100
<PAGE> 103
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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.
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;
101
<PAGE> 104
- international infrastructure development; and
- energy marketing.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our company and our subsidiaries may from time to time enter into contracts
or other business relationships with one or more of our members or their
affiliates. For example, we expect that our members will assist us in purchasing
natural gas for our power plants and in arranging for gas transportation
service. Our members may provide backup fuel management, power marketing or
other services to us and our subsidiaries. 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.
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. Management
believes such charges for services and allocations of expenses represent amounts
equivalent to those that could be obtained in the market. During the period
ended December 31, 1999, the amount charged to the Company and its subsidiaries
with respect to such costs and services totaled approximately $1.8 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 December 31, 1999 costs with respect to such employee benefit
plans totaled $0.3 million.
Either party may reduce the level of any of the services provided or
terminate the agreement upon 30 days' prior written notice.
In addition, Enron has provided credit support in the form of an
undertaking which eliminates our obligation to fund a debt service reserve
account, and Enron has also provided several letters of credit for our 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. 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 $4.4 million letter of credit issued to
Public Service Electric & Gas Company of New Jersey which secures certain
obligations pursuant to Bayonne Venture's power purchase agreement.
During December, 1999, in connection with the Linden Venture expansion
project (see Item 1) the Company entered into an Assignment and Assumption
Agreement (the Agreement) with Enron North America. The Agreement assigned Enron
North America's $31.3 million contract to purchase a turbine from General
Electric Company to the Company. Under the terms of the agreement the Company
paid Enron North America $12.6 million representing the progress payments made.
In addition, the Company paid a fee of $3.2 million to Enron North America for
the Agreement. Payment under the purchase contract is due monthly with final
payment due in August 2000. The turbine will be transferred to Linden Venture
upon finalization of the Energy Services Agreement as described in Item 1.
The Company believes that all of the foregoing arrangements and
transactions are on terms and conditions that are comparable to those that could
be obtained in transactions with unaffiliated parties.
102
<PAGE> 105
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
See "Item 8. Financial Statements and Supplementary Data" for a list of all
financial statements and financial statement schedules included herein.
103
<PAGE> 106
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. (incorporated by reference
to Exhibit 3.1 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
4.1 -- Indenture between East Coast Power L.L.C. and The Bank of
New York, as trustee, dated as of April 20, 1999
(incorporated by reference to Exhibit 4.1 to Registration
Statement on Form S-4 (Registration No. 333-81601) of
East Coast Power L.L.C., filed on June 25, 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
(incorporated by reference to Exhibit 4.3 to Registration
Statement on Form S-4 (Registration No. 333-81601) of
East Coast Power L.L.C., filed on June 25, 1999).
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
(incorporated by reference to Exhibit 4.4 to Registration
Statement on Form S-4 (Registration No. 333-81601) of
East Coast Power L.L.C., filed on June 25, 1999).
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 (incorporated
by reference to Exhibit 4.5 to Registration Statement on
Form S-4 (Registration No. 333-81601) of East Coast Power
L.L.C., filed on June 25, 1999).
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 (incorporated by reference to Exhibit 4.6 to
Registration Statement on Form S-4 (Registration No.
333-81601) of East Coast Power L.L.C., filed on June 25,
1999).
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 (incorporated by
reference to Exhibit 4.6(b) to Registration Statement on
Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
October 15, 1999).
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
(incorporated by reference to Exhibit 4.7 to Registration
Statement on Form S-4 (Registration No. 333-81601) of
East Coast Power L.L.C., filed on June 25, 1999).
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 (incorporated by reference
to Exhibit 4.8 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
</TABLE>
<PAGE> 107
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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
(incorporated by reference to Exhibit 10.1 to
Registration Statement on Form S-4 (Registration No.
333-81601) of East Coast Power L.L.C., filed on June 25,
1999).
10.2 -- Amendment No. 1 dated as of November 6, 1998, to
Transaction Agreement dated as of October 25, 1998
(incorporated by reference to Exhibit 10.2 to
Registration Statement on Form S-4 (Registration No.
333-81601) of East Coast Power L.L.C., filed on June 25,
1999).
10.3 -- Amendment No. 2 dated as of November 13, 1998, to
Transaction Agreement dated as of October 25, 1998
(incorporated by reference to Exhibit 10.3 to
Registration Statement on Form S-4/A (Registration No.
333-81601) of East Coast Power L.L.C., filed on October
15, 1999).
10.4 -- Amendment No. 3 dated as of February 1, 1999, to
Transaction Agreement dated as of October 25, 1998
(incorporated by reference to Exhibit 10.4 to
Registration Statement on Form S-4/A (Registration No.
333-81601) of East Coast Power L.L.C., filed on October
15, 1999).
10.5 -- Corporate Services Agreement effective as of February 5,
1999, between East Coast Power L.L.C. and Enron Capital &
Trade Resources Corp. (incorporated by reference to
Exhibit 10.5 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on November 19, 1999).
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 (incorporated by reference to
Exhibit 10.6 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
10.7(a) -- Promissory Note, dated as of August 13, 1999, by East
Coast Power L.L.C. in favor of Enron Corp. (incorporated
by reference to Exhibit 10.7(a) to Registration Statement
on Form S-4/A (Registration No. 333-81601) of East Coast
Power L.L.C., filed on October 15, 1999).
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.
(incorporated by reference to Exhibit 10.7(b) to
Registration Statement on Form S-4/A (Registration No.
333-81601) of East Coast Power L.L.C., filed on October
15, 1999).
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 (incorporated by reference to Exhibit 10.8(b) to
Registration Statement on Form S-4/A (Registration No.
333-81601) of East Coast Power L.L.C., filed on October
15, 1999).
</TABLE>
<PAGE> 108
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
(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 (incorporated by reference to Exhibit
10.8(c) to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
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
(incorporated by reference to Exhibit 10.12 to
Registration Statement on Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
October 15, 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 (incorporated by reference
to Exhibit 10.13 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed October 15, 1999).
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 (incorporated by reference to Exhibit
10.15(b) to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
(c) -- Amendment to Ground Lease Agreement dated as of July 31,
1992, by and between Cogen Technologies Linden Venture,
L.P. and Exxon Corporation (incorporated by reference to
Exhibit 10.15(c) to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
</TABLE>
<PAGE> 109
<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) (incorporated by
reference to Exhibit 10.15(d) to Registration Statement
on Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
October 15, 1999).
(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. (incorporated
by reference to Exhibit 10.15(e) to Registration
Statement on Form S-4/A (Registration No. 333-81601) of
East Coast Power L.L.C., filed on October 15, 1999).
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
(incorporated by reference to Exhibit 10.19 to
Registration Statement on Form S-4/A (Registration No.
333-81601) of East Coast Power L.L.C., filed on October
15, 1999).
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 (incorporated by reference to Exhibit
10.22 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
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).
</TABLE>
<PAGE> 110
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.24 -- First Amendment, dated as of February 14, 1990, to the
Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd. (incorporated by reference to Exhibit 10.14
to Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.25 -- Second Amendment, dated as of July 31, 1990, to the
Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd. (incorporated by reference to Exhibit 10.15
to Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.26 -- Third Amendment, dated as of February 4, 1999, to the
Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd. (incorporated by reference to Exhibit 10.26
to Registration Statement on Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
October 15, 1999).
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 (incorporated by reference to Exhibit 10.27 to
Registration Statement on Form S-4/A (Registration No.
333-81601) of East Coast Power L.L.C., filed on October
15, 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. (incorporated by reference to Exhibit
10.29 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
10.30 -- Letter Agreement dated June 12, 1991 between Cogen
Technologies Linden Venture, L.P. and Colonial Pipeline
Company (incorporated by reference to Exhibit 10.30 to
Registration Statement on Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
October 15, 1999).
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. (incorporated by reference to
Exhibit 10.31 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
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).
</TABLE>
<PAGE> 111
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.33 -- Assignment and Security agreement dated February 15, 1990
between Cogen Technologies Linden, Ltd. and General
Electric Power Funding Corporation and Assignment
Agreement, dated as of September 15, 1992, among General
Electric Power Funding Corporation, State Street Bank and
Trust Company or Connecticut, National Association, as
trustee, and Cogen Technologies Linden, Ltd.
(incorporated by reference to Exhibit 10.19 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.34 -- Collateral Agency Agreement dated as of February 15, 1990
between Cogen Technologies Linden, Ltd. and General
Electric Power Funding Corporation and Assignment
Agreement, dated as of September 15, 1992, among General
Electric Power Funding Corporation, State Street Bank and
Trust Company or Connecticut, National Association, as
trustee, and Cogen Technologies Linden, Ltd.
(incorporated by reference to Exhibit 10.20 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.35 -- Letter of Credit and Reimbursement Agreement dated as of
September 17, 1992 between Cogen Technologies Linden
Venture, L.P. and General Electric Capital Corporation
(incorporated by reference to Exhibit 10.27 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.36 -- Power Purchase and Interconnection Agreement, dated April
15, 1988, between Public Service Electric and Gas Company
and Camden Cogen, L.P. (incorporated by reference to
Exhibit 10.30 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
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).
</TABLE>
<PAGE> 112
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
(b) -- First Amendment dated as of March 5, 1992, to Energy
Purchase Agreement dated December 18, 1989 (incorporated
by reference to Exhibit 10.41(b) to Registration
Statement on Form S-4/A (Registration No. 333-81601) of
East Coast Power L.L.C., filed on October 15, 1999).
10.42 -- Amendment and Restatement dated as of April 1, 1993 of
the Construction and Term Loan Agreement dated as of
February 4, 1992 among Camden Cogen, L.P., the lenders
from time to time parties to the Agreement, and General
Electric Capital Corporation (incorporated by reference
to Exhibit 10.36 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.43 -- Amendment No. 1 dated as of December 22, 1993, by and
among Camden Cogen L.P., the lenders from time to time
parties to the Agreement, The Bank of Tokyo Trust
Company, The Toronto-Dominion Bank Trust Company and
General Electric Capital Corporation, to the Amendment
and Restatement dated as of April 1, 1993 of the
Construction and Term Loan Agreement dated as of February
4, 1992 among Camden Cogen L.P. and General Electric
Capital Corporation (incorporated by reference to Exhibit
10.37 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.44 -- Amendment No. 2 dated as of July 31, 1998, by and among
Camden Cogen L.P., The Bank of Tokyo-Mitsubishi Trust
Company (f/k/a The Bank of Tokyo Trust Company),
Commerzbank AG, New York Branch, Commerzbank AG, Atlanta
Agency, The Fuji Bank Limited, Credit Lyonnais, New York
Branch and General Electric Capital Corporation, to the
Amendment and Restatement dated as of April 1, 1993 of
the Construction and Term Loan Agreement dated as of
February 4, 1992 among Camden Cogen L.P. and General
Electric Capital Corporation (incorporated by reference
to Exhibit 10.44 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on November 19, 1999).
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
(incorporated by reference to Exhibit 10.45 to
Registration Statement on Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
October 15, 1999).
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
(incorporated by reference to Exhibit 10.48 to
Registration Statement on Form S-4/A (Registration No.
333-81601) of East Coast Power L.L.C., filed on October
15, 1999).
</TABLE>
<PAGE> 113
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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 (incorporated by reference
to Exhibit 10.52 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on November 19, 1999).
10.53 -- Operation and Maintenance Agreement by and between Camden
Cogen L.P. and General Electric Company dated June 6,
1997 (incorporated by reference to Exhibit 10.45 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.54(a) -- Mortgage dated February 4, 1992 between General Electric
Capital Corporation and Camden Cogen L.P., as amended by
First Amendment to Mortgage dated April 19, 1993 and
Assignment of Mortgage dated December 22, 1993
(incorporated by reference to Exhibit 10.46 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
(b) -- Assignment of Mortgage by Toronto Dominion (Texas), Inc.
to Commerzbank AG, New York Branch, dated as of July 31,
1998 (incorporated by reference to Exhibit 10.54(b) to
Registration Statement on Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
November 19, 1999).
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 (incorporated by reference
to Exhibit 10.56 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on November 19, 1999).
</TABLE>
<PAGE> 114
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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) (incorporated by
reference to Exhibit 10.57 to Registration Statement on
Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
October 15, 1999).
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. (incorporated by reference to Exhibit 10.58 to
Registration Statement on Form S-4/A (Registration No.
333-81601) of East Coast Power L.L.C., filed on October
15, 1999).
10.59 -- Security Agreement dated as of February 4, 1992, between
General Electric Capital Corporation and Camden Cogen
L.P., as amended by Amendment No. 1 dated April 1, 1993
and Amendment No. 2 dated December 22, 1993 (incorporated
by reference to Exhibit 10.48 to Registration Statement
on Form S-1/A (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on August 14, 1998).
10.60 -- Pledge and Security Agreement dated as of February 4,
1992, between General Electric Capital Corporation and
Cogen Technologies Camden Inc., as amended by Amendment
No. 1 dated April 1, 1993 and Amendment No. 2 dated
December 22, 1993 (incorporated by reference to Exhibit
10.49 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.61 -- Mortgage from Camden Cogen L.P., Mortgagor, to General
Electric Power Funding Corporation, Mortgagee, dated as
of February 4, 1992 (incorporated by reference to Exhibit
10.50 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
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).
</TABLE>
<PAGE> 115
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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 (incorporated by reference to Exhibit 10.65
to Registration Statement on Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
October 15, 1999).
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. (incorporated by reference to Exhibit
10.66 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
10.67 -- Easement Agreement dated as of February 22, 1993, by and
between Camden Paperboard Corporation and Camden Cogen
L.P. (incorporated by reference to Exhibit 10.67 to
Registration Statement on Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
October 15, 1999).
10.68 -- Agreement for the Sale of Steam dated as of February 27,
1987 between Cogen Technologies NJ Venture and Exxon
Company U.S.A., as amended by Amendment dated August 21,
1988, assigned to General Electric Power Funding
Corporation pursuant to an Assignment Agreement dated as
of February 27, 1987, by and between Cogen Technologies
NJ Venture and General Electric Power Funding Corporation
(incorporated by reference to Exhibit 10.55 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.69 -- Letter Agreement for Gas Service between Public Service
Electric and Gas Company and Cogen Technologies NJ
Venture dated October 10, 1986 (incorporated by reference
to Exhibit 10.56 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.70 -- Water Supply Agreement between the City of Bayonne and
Cogen Technologies NJ Venture dated June 1, 1988
(incorporated by reference to Exhibit 10.57 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.71 -- Lease Agreement between Bayonne Industries, Inc.,
IMTT-Bayonne and Cogen Technologies NJ Venture dated
October 18, 1986 (incorporated by reference to Exhibit
10.58 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
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).
</TABLE>
<PAGE> 116
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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 (incorporated by reference to
Exhibit 10.76 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on November 19, 1999).
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).
10.81 -- First Amendment dated December 15, 1988 to the Term Loan
Agreement dated as of November 1, 1987 between Cogen
Technologies NJ Venture and The Prudential Insurance
Company of America (incorporated by reference to Exhibit
10.67 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.82 -- Second Amendment dated July 31, 1996 to the Term Loan
Agreement dated as of November 1, 1987 between Cogen
Technologies NJ Venture and The Prudential Insurance
Company of America (incorporated by reference to Exhibit
10.68 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
</TABLE>
<PAGE> 117
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.83 -- Amended and Restated Joint Venture Agreement of Cogen
Technologies NJ Venture dated August 25, 1986, by and
among Cogen Technologies NJ, Inc., Enron Cogeneration
Five Company, CEA Bayonne, Inc. (the name of which was
changed to PSEG Bayonne Inc. and was recently merged into
Cogen Technologies NJ, Inc.), PSVO Bayonne, Inc. and
Transco Cogeneration Company (incorporated by reference
to Exhibit 10.71 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.84 -- Option Agreement between Bayonne Industries, Inc. and
Cogen Technologies NJ, Inc. dated May 22, 1986
(incorporated by reference to Exhibit 10.72 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.85 -- Purchase and Sale Agreement among Bayonne Industries,
Inc., IMTT-Bayonne and Cogen Technologies NJ, Inc. dated
May 22, 1986 (incorporated by reference to Exhibit 10.73
to Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.86 -- Steam Producing Facilities Lease Agreement between Cogen
Technologies NJ, Inc. and IMTT-Bayonne dated May 22, 1986
and Consent to Assignment dated December 15, 1998
(incorporated by reference to Exhibit 10.74 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.87 -- Mortgage and Security Agreement between The Prudential
Insurance Company of America and Cogen Technologies NJ
Venture dated December 15, 1988 (incorporated by
reference to Exhibit 10.75 to Registration Statement on
Form S-1/A (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on August 14, 1998).
10.88 -- Security Agreement and Assignment between The Prudential
Insurance Company of America and Cogen Technologies NJ
Venture dated December 15, 1988, as amended by Amendment
dated April 27, 1995 and Waiver of Consent by The
Prudential Insurance Company of America dated July 28,
1995 (incorporated by reference to Exhibit 10.76 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.89 -- Disbursement and Security Agreement between The
Prudential Insurance Company of America, 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).
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. (incorporated by reference to
Exhibit 10.91 to Registration Statement on Form S-4/A
(Registration
No. 333-81601) of East Coast Power L.L.C., filed on
November 19, 1999).
10.92 -- Lease Agreement dated as of May 22, 1986, by and among
Bayonne Industries, Inc., IMTT-Bayonne and Cogen
Technologies NJ, Inc. (incorporated by reference to
Exhibit 10.92 to Registration Statement on Form S-4/A
(Registration
No. 333-81601) of East Coast Power L.L.C., filed on
November 19, 1999).
</TABLE>
<PAGE> 118
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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.)
(incorporated by reference to Exhibit 10.93 to
Registration Statement on
Form S-4/A (Registration No. 333-81601) of East Coast
Power L.L.C., filed on November 19, 1999).
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 (incorporated by reference to
Exhibit 10.94 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on November 19, 1999).
10.95 -- Security Agreement dated as of May 22, 1986, by and
between Cogen Technologies NJ, Inc. and Bayonne
Industries, Inc. (incorporated by reference to Exhibit
10.95 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on November 19, 1999).
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. (incorporated by reference to Exhibit
10.97 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999)
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. (incorporated by
reference to Exhibit 10.98 to Registration Statement on
Form S-4/A (Registration No. 333-81601) of East Coast
Power L.L.C., filed on October 15, 1999).
*10.99 -- Consulting Services Agreement effective as of February 4,
2000 between East Coast Power L.L.C. and Joseph M.
Bollinger.
*10.100 -- Senior Subordinated Credit Agreement dated as of December
29, 1999 among East Coast Power L.L.C., Bank of America,
N.A., as Initial Lender, and Bank of America, as Agent.
*10.101 -- Energy Services Agreement dated as of February 14, 2000
between East Coast Power L.L.C., as Seller, and Tosco
Refining, as Buyer.
21.1 -- Subsidiaries of the Company (incorporated by reference to
Exhibit 21.1 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
*27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 119
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
EAST COAST POWER L.L.C.
By: /s/ ROBERT J. LICATO
----------------------------------
Name: Robert J. Licato
Title: President and Chief
Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ROBERT J. LICATO President and Chief Operating March 30, 2000
- ----------------------------------------------------- Officer (principal executive
Robert J. Licato officer)
/s/ CHRISTINE K. LEE Vice President -- Finance, March 30, 2000
- ----------------------------------------------------- Secretary and Chief Accounting
Christine K. Lee Officer (principal financial and
accounting officer)
/s/ J. CLIFFORD BAXTER Director of Enron Capital II March 30, 2000
- ----------------------------------------------------- Corp., the indirect general
J. Clifford Baxter partner of the Company's
managing member
/s/ JAMES V. DERRICK, JR. Director of Enron Capital II March 30, 2000
- ----------------------------------------------------- Corp., the indirect general
James V. Derrick, Jr. partner of the Company's
managing member
/s/ MARK E. HAEDICKE Director of Enron Capital II March 30, 2000
- ----------------------------------------------------- Corp., the indirect general
Mark E. Haedicke partner of the Company's
managing member
</TABLE>
<PAGE> 120
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. (incorporated by reference
to Exhibit 3.1 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
4.1 -- Indenture between East Coast Power L.L.C. and The Bank of
New York, as trustee, dated as of April 20, 1999
(incorporated by reference to Exhibit 4.1 to Registration
Statement on Form S-4 (Registration No. 333-81601) of
East Coast Power L.L.C., filed on June 25, 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
(incorporated by reference to Exhibit 4.3 to Registration
Statement on Form S-4 (Registration No. 333-81601) of
East Coast Power L.L.C., filed on June 25, 1999).
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
(incorporated by reference to Exhibit 4.4 to Registration
Statement on Form S-4 (Registration No. 333-81601) of
East Coast Power L.L.C., filed on June 25, 1999).
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 (incorporated
by reference to Exhibit 4.5 to Registration Statement on
Form S-4 (Registration No. 333-81601) of East Coast Power
L.L.C., filed on June 25, 1999).
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 (incorporated by reference to Exhibit 4.6 to
Registration Statement on Form S-4 (Registration No.
333-81601) of East Coast Power L.L.C., filed on June 25,
1999).
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 (incorporated by
reference to Exhibit 4.6(b) to Registration Statement on
Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
October 15, 1999).
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
(incorporated by reference to Exhibit 4.7 to Registration
Statement on Form S-4 (Registration No. 333-81601) of
East Coast Power L.L.C., filed on June 25, 1999).
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 (incorporated by reference
to Exhibit 4.8 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
</TABLE>
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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
(incorporated by reference to Exhibit 10.1 to
Registration Statement on Form S-4 (Registration No.
333-81601) of East Coast Power L.L.C., filed on June 25,
1999).
10.2 -- Amendment No. 1 dated as of November 6, 1998, to
Transaction Agreement dated as of October 25, 1998
(incorporated by reference to Exhibit 10.2 to
Registration Statement on Form S-4 (Registration No.
333-81601) of East Coast Power L.L.C., filed on June 25,
1999).
10.3 -- Amendment No. 2 dated as of November 13, 1998, to
Transaction Agreement dated as of October 25, 1998
(incorporated by reference to Exhibit 10.3 to
Registration Statement on Form S-4/A (Registration No.
333-81601) of East Coast Power L.L.C., filed on October
15, 1999).
10.4 -- Amendment No. 3 dated as of February 1, 1999, to
Transaction Agreement dated as of October 25, 1998
(incorporated by reference to Exhibit 10.4 to
Registration Statement on Form S-4/A (Registration No.
333-81601) of East Coast Power L.L.C., filed on October
15, 1999).
10.5 -- Corporate Services Agreement effective as of February 5,
1999, between East Coast Power L.L.C. and Enron Capital &
Trade Resources Corp. (incorporated by reference to
Exhibit 10.5 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on November 19, 1999).
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 (incorporated by reference to
Exhibit 10.6 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
10.7(a) -- Promissory Note, dated as of August 13, 1999, by East
Coast Power L.L.C. in favor of Enron Corp. (incorporated
by reference to Exhibit 10.7(a) to Registration Statement
on Form S-4/A (Registration No. 333-81601) of East Coast
Power L.L.C., filed on October 15, 1999).
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.
(incorporated by reference to Exhibit 10.7(b) to
Registration Statement on Form S-4/A (Registration No.
333-81601) of East Coast Power L.L.C., filed on October
15, 1999).
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 (incorporated by reference to Exhibit 10.8(b) to
Registration Statement on Form S-4/A (Registration No.
333-81601) of East Coast Power L.L.C., filed on October
15, 1999).
</TABLE>
<PAGE> 122
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
(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 (incorporated by reference to Exhibit
10.8(c) to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
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
(incorporated by reference to Exhibit 10.12 to
Registration Statement on Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
October 15, 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 (incorporated by reference
to Exhibit 10.13 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed October 15, 1999).
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 (incorporated by reference to Exhibit
10.15(b) to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
(c) -- Amendment to Ground Lease Agreement dated as of July 31,
1992, by and between Cogen Technologies Linden Venture,
L.P. and Exxon Corporation (incorporated by reference to
Exhibit 10.15(c) to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
</TABLE>
<PAGE> 123
<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) (incorporated by
reference to Exhibit 10.15(d) to Registration Statement
on Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
October 15, 1999).
(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. (incorporated
by reference to Exhibit 10.15(e) to Registration
Statement on Form S-4/A (Registration No. 333-81601) of
East Coast Power L.L.C., filed on October 15, 1999).
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
(incorporated by reference to Exhibit 10.19 to
Registration Statement on Form S-4/A (Registration No.
333-81601) of East Coast Power L.L.C., filed on October
15, 1999).
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 (incorporated by reference to Exhibit
10.22 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
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).
</TABLE>
<PAGE> 124
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.24 -- First Amendment, dated as of February 14, 1990, to the
Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd. (incorporated by reference to Exhibit 10.14
to Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.25 -- Second Amendment, dated as of July 31, 1990, to the
Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd. (incorporated by reference to Exhibit 10.15
to Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.26 -- Third Amendment, dated as of February 4, 1999, to the
Agreement of Limited Partnership of Cogen Technologies
Linden, Ltd. (incorporated by reference to Exhibit 10.26
to Registration Statement on Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
October 15, 1999).
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 (incorporated by reference to Exhibit 10.27 to
Registration Statement on Form S-4/A (Registration No.
333-81601) of East Coast Power L.L.C., filed on October
15, 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. (incorporated by reference to Exhibit
10.29 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
10.30 -- Letter Agreement dated June 12, 1991 between Cogen
Technologies Linden Venture, L.P. and Colonial Pipeline
Company (incorporated by reference to Exhibit 10.30 to
Registration Statement on Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
October 15, 1999).
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. (incorporated by reference to
Exhibit 10.31 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
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).
</TABLE>
<PAGE> 125
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.33 -- Assignment and Security agreement dated February 15, 1990
between Cogen Technologies Linden, Ltd. and General
Electric Power Funding Corporation and Assignment
Agreement, dated as of September 15, 1992, among General
Electric Power Funding Corporation, State Street Bank and
Trust Company or Connecticut, National Association, as
trustee, and Cogen Technologies Linden, Ltd.
(incorporated by reference to Exhibit 10.19 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.34 -- Collateral Agency Agreement dated as of February 15, 1990
between Cogen Technologies Linden, Ltd. and General
Electric Power Funding Corporation and Assignment
Agreement, dated as of September 15, 1992, among General
Electric Power Funding Corporation, State Street Bank and
Trust Company or Connecticut, National Association, as
trustee, and Cogen Technologies Linden, Ltd.
(incorporated by reference to Exhibit 10.20 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.35 -- Letter of Credit and Reimbursement Agreement dated as of
September 17, 1992 between Cogen Technologies Linden
Venture, L.P. and General Electric Capital Corporation
(incorporated by reference to Exhibit 10.27 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.36 -- Power Purchase and Interconnection Agreement, dated April
15, 1988, between Public Service Electric and Gas Company
and Camden Cogen, L.P. (incorporated by reference to
Exhibit 10.30 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
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).
</TABLE>
<PAGE> 126
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
(b) -- First Amendment dated as of March 5, 1992, to Energy
Purchase Agreement dated December 18, 1989 (incorporated
by reference to Exhibit 10.41(b) to Registration
Statement on Form S-4/A (Registration No. 333-81601) of
East Coast Power L.L.C., filed on October 15, 1999).
10.42 -- Amendment and Restatement dated as of April 1, 1993 of
the Construction and Term Loan Agreement dated as of
February 4, 1992 among Camden Cogen, L.P., the lenders
from time to time parties to the Agreement, and General
Electric Capital Corporation (incorporated by reference
to Exhibit 10.36 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.43 -- Amendment No. 1 dated as of December 22, 1993, by and
among Camden Cogen L.P., the lenders from time to time
parties to the Agreement, The Bank of Tokyo Trust
Company, The Toronto-Dominion Bank Trust Company and
General Electric Capital Corporation, to the Amendment
and Restatement dated as of April 1, 1993 of the
Construction and Term Loan Agreement dated as of February
4, 1992 among Camden Cogen L.P. and General Electric
Capital Corporation (incorporated by reference to Exhibit
10.37 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.44 -- Amendment No. 2 dated as of July 31, 1998, by and among
Camden Cogen L.P., The Bank of Tokyo-Mitsubishi Trust
Company (f/k/a The Bank of Tokyo Trust Company),
Commerzbank AG, New York Branch, Commerzbank AG, Atlanta
Agency, The Fuji Bank Limited, Credit Lyonnais, New York
Branch and General Electric Capital Corporation, to the
Amendment and Restatement dated as of April 1, 1993 of
the Construction and Term Loan Agreement dated as of
February 4, 1992 among Camden Cogen L.P. and General
Electric Capital Corporation (incorporated by reference
to Exhibit 10.44 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on November 19, 1999).
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
(incorporated by reference to Exhibit 10.45 to
Registration Statement on Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
October 15, 1999).
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
(incorporated by reference to Exhibit 10.48 to
Registration Statement on Form S-4/A (Registration No.
333-81601) of East Coast Power L.L.C., filed on October
15, 1999).
</TABLE>
<PAGE> 127
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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 (incorporated by reference
to Exhibit 10.52 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on November 19, 1999).
10.53 -- Operation and Maintenance Agreement by and between Camden
Cogen L.P. and General Electric Company dated June 6,
1997 (incorporated by reference to Exhibit 10.45 to
Registration Statement on Form S-1 (Registration No.
333-53533) of Cogen Technologies, Inc., filed on May 26,
1998).
10.54(a) -- Mortgage dated February 4, 1992 between General Electric
Capital Corporation and Camden Cogen L.P., as amended by
First Amendment to Mortgage dated April 19, 1993 and
Assignment of Mortgage dated December 22, 1993
(incorporated by reference to Exhibit 10.46 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
(b) -- Assignment of Mortgage by Toronto Dominion (Texas), Inc.
to Commerzbank AG, New York Branch, dated as of July 31,
1998 (incorporated by reference to Exhibit 10.54(b) to
Registration Statement on Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
November 19, 1999).
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 (incorporated by reference
to Exhibit 10.56 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on November 19, 1999).
</TABLE>
<PAGE> 128
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
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<C> <S>
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) (incorporated by
reference to Exhibit 10.57 to Registration Statement on
Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
October 15, 1999).
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. (incorporated by reference to Exhibit 10.58 to
Registration Statement on Form S-4/A (Registration No.
333-81601) of East Coast Power L.L.C., filed on October
15, 1999).
10.59 -- Security Agreement dated as of February 4, 1992, between
General Electric Capital Corporation and Camden Cogen
L.P., as amended by Amendment No. 1 dated April 1, 1993
and Amendment No. 2 dated December 22, 1993 (incorporated
by reference to Exhibit 10.48 to Registration Statement
on Form S-1/A (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on August 14, 1998).
10.60 -- Pledge and Security Agreement dated as of February 4,
1992, between General Electric Capital Corporation and
Cogen Technologies Camden Inc., as amended by Amendment
No. 1 dated April 1, 1993 and Amendment No. 2 dated
December 22, 1993 (incorporated by reference to Exhibit
10.49 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.61 -- Mortgage from Camden Cogen L.P., Mortgagor, to General
Electric Power Funding Corporation, Mortgagee, dated as
of February 4, 1992 (incorporated by reference to Exhibit
10.50 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
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).
</TABLE>
<PAGE> 129
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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 (incorporated by reference to Exhibit 10.65
to Registration Statement on Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
October 15, 1999).
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. (incorporated by reference to Exhibit
10.66 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
10.67 -- Easement Agreement dated as of February 22, 1993, by and
between Camden Paperboard Corporation and Camden Cogen
L.P. (incorporated by reference to Exhibit 10.67 to
Registration Statement on Form S-4/A (Registration
No. 333-81601) of East Coast Power L.L.C., filed on
October 15, 1999).
10.68 -- Agreement for the Sale of Steam dated as of February 27,
1987 between Cogen Technologies NJ Venture and Exxon
Company U.S.A., as amended by Amendment dated August 21,
1988, assigned to General Electric Power Funding
Corporation pursuant to an Assignment Agreement dated as
of February 27, 1987, by and between Cogen Technologies
NJ Venture and General Electric Power Funding Corporation
(incorporated by reference to Exhibit 10.55 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.69 -- Letter Agreement for Gas Service between Public Service
Electric and Gas Company and Cogen Technologies NJ
Venture dated October 10, 1986 (incorporated by reference
to Exhibit 10.56 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
10.70 -- Water Supply Agreement between the City of Bayonne and
Cogen Technologies NJ Venture dated June 1, 1988
(incorporated by reference to Exhibit 10.57 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.71 -- Lease Agreement between Bayonne Industries, Inc.,
IMTT-Bayonne and Cogen Technologies NJ Venture dated
October 18, 1986 (incorporated by reference to Exhibit
10.58 to Registration Statement on Form S-1/A
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on August 14, 1998).
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).
</TABLE>
<PAGE> 130
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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 (incorporated by reference to
Exhibit 10.76 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on November 19, 1999).
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).
10.81 -- First Amendment dated December 15, 1988 to the Term Loan
Agreement dated as of November 1, 1987 between Cogen
Technologies NJ Venture and The Prudential Insurance
Company of America (incorporated by reference to Exhibit
10.67 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
10.82 -- Second Amendment dated July 31, 1996 to the Term Loan
Agreement dated as of November 1, 1987 between Cogen
Technologies NJ Venture and The Prudential Insurance
Company of America (incorporated by reference to Exhibit
10.68 to Registration Statement on Form S-1 (Registration
No. 333-53533) of Cogen Technologies, Inc., filed on May
26, 1998).
</TABLE>
<PAGE> 131
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.83 -- Amended and Restated Joint Venture Agreement of Cogen
Technologies NJ Venture dated August 25, 1986, by and
among Cogen Technologies NJ, Inc., Enron Cogeneration
Five Company, CEA Bayonne, Inc. (the name of which was
changed to PSEG Bayonne Inc. and was recently merged into
Cogen Technologies NJ, Inc.), PSVO Bayonne, Inc. and
Transco Cogeneration Company (incorporated by reference
to Exhibit 10.71 to Registration Statement on Form S-1
(Registration No. 333-53533) of Cogen Technologies, Inc.,
filed on May 26, 1998).
10.84 -- Option Agreement between Bayonne Industries, Inc. and
Cogen Technologies NJ, Inc. dated May 22, 1986
(incorporated by reference to Exhibit 10.72 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.85 -- Purchase and Sale Agreement among Bayonne Industries,
Inc., IMTT-Bayonne and Cogen Technologies NJ, Inc. dated
May 22, 1986 (incorporated by reference to Exhibit 10.73
to Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.86 -- Steam Producing Facilities Lease Agreement between Cogen
Technologies NJ, Inc. and IMTT-Bayonne dated May 22, 1986
and Consent to Assignment dated December 15, 1998
(incorporated by reference to Exhibit 10.74 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.87 -- Mortgage and Security Agreement between The Prudential
Insurance Company of America and Cogen Technologies NJ
Venture dated December 15, 1988 (incorporated by
reference to Exhibit 10.75 to Registration Statement on
Form S-1/A (Registration No. 333-53533) of Cogen
Technologies, Inc., filed on August 14, 1998).
10.88 -- Security Agreement and Assignment between The Prudential
Insurance Company of America and Cogen Technologies NJ
Venture dated December 15, 1988, as amended by Amendment
dated April 27, 1995 and Waiver of Consent by The
Prudential Insurance Company of America dated July 28,
1995 (incorporated by reference to Exhibit 10.76 to
Registration Statement on Form S-1/A (Registration No.
333-53533) of Cogen Technologies, Inc., filed on August
14, 1998).
10.89 -- Disbursement and Security Agreement between The
Prudential Insurance Company of America, 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).
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. (incorporated by reference to
Exhibit 10.91 to Registration Statement on Form S-4/A
(Registration
No. 333-81601) of East Coast Power L.L.C., filed on
November 19, 1999).
10.92 -- Lease Agreement dated as of May 22, 1986, by and among
Bayonne Industries, Inc., IMTT-Bayonne and Cogen
Technologies NJ, Inc. (incorporated by reference to
Exhibit 10.92 to Registration Statement on Form S-4/A
(Registration
No. 333-81601) of East Coast Power L.L.C., filed on
November 19, 1999).
</TABLE>
<PAGE> 132
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
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.)
(incorporated by reference to Exhibit 10.93 to
Registration Statement on
Form S-4/A (Registration No. 333-81601) of East Coast
Power L.L.C., filed on November 19, 1999).
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 (incorporated by reference to
Exhibit 10.94 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on November 19, 1999).
10.95 -- Security Agreement dated as of May 22, 1986, by and
between Cogen Technologies NJ, Inc. and Bayonne
Industries, Inc. (incorporated by reference to Exhibit
10.95 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on November 19, 1999).
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. (incorporated by reference to Exhibit
10.97 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999)
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. (incorporated by
reference to Exhibit 10.98 to Registration Statement on
Form S-4/A (Registration No. 333-81601) of East Coast
Power L.L.C., filed on October 15, 1999).
*10.99 -- Consulting Services Agreement effective as of February 4,
2000 between East Coast Power L.L.C. and Joseph M.
Bollinger.
*10.100 -- Senior Subordinated Credit Agreement dated as of December
29, 1999 among East Coast Power L.L.C., Bank of America,
N.A., as Initial Lender, and Bank of America, as Agent.
*10.101 -- Energy Services Agreement dated as of February 14, 2000
between East Coast Power L.L.C., as Seller, and Tosco
Refining, as Buyer.
21.1 -- Subsidiaries of the Company (incorporated by reference to
Exhibit 21.1 to Registration Statement on Form S-4/A
(Registration No. 333-81601) of East Coast Power L.L.C.,
filed on October 15, 1999).
*27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
EXHIBIT 10.99
CONSULTING SERVICES AGREEMENT
This Consulting Services Agreement ("Agreement") is entered into
between EAST COAST POWER, L.L.C., its affiliates, officers, directors,
employees, and representatives, having offices at 711 Louisiana Street, South
Tower Pennzoil Building, 32nd Floor, Houston, Texas 77002 ("Company"), and
JOSEPH M. BOLLINGER, having an office at 44 Bentwater Bay Circle, Montgomery,
Texas 77356 ("Consultant"). The parties agree as follows:
1. Term. The original Term of this Agreement ("Term") shall be a twelve
(12) month period commencing on February 5, 2000. This Agreement may be renewed
or extended by written agreement of the parties.
2. Services.
a. Company engages Consultant to perform Services on matters relating
to the operation and management of Company (the "Services"). During the first
six (6) months of the Term, Consultant shall dedicate all of his available
consulting time to performing the Services. During the second six (6) months of
the Term, Consultant shall dedicate at least 25% of his available consulting
time to performing the Services.
b. Company enters into this Agreement based on Consultant's
demonstrated ability to perform the Services. Consultant shall perform the
Services in a good and workmanlike manner and in accordance with the highest
industry standards. Consequently, Company will not provide Consultant with any
training or instructions with respect to the Services. Similarly, Consultant is
responsible for providing any equipment, materials, or supplies that Consultant
determines is necessary to perform the Services. Consultant has all necessary
licenses, permits, and registrations required to provide the Services.
c. Consultant certifies that it will comply with all applicable laws,
statutes, and regulations relating to providing the Services, including but not
limited to, the Foreign Corrupt Practices Act, environmental laws, employment
laws, safety regulations, securities laws and regulations, antitrust laws,
intellectual property laws, and any other applicable laws, statutes, or
regulations.
3. Payment to Consultant.
a. During the first six months of the Term, Company shall pay
Consultant as follows:
(1) Company shall pay Consultant $20,000.00 per month;
(2) In addition, for the first 520 hours of the initial
six months of the Term, Company shall pay Consultant
$120.00 per hour of Services provided. For each hour
in excess of 520 hours in the initial six months of
the Term, Company shall pay Consultant $300.00 per
hour.
(3) Company shall reimburse Consultant for the cost of his
parking while performing the Services.
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<PAGE> 2
b. During the second six months of the Term, Company shall pay
Consultant as follows:
(1) Company shall pay Consultant $5,000.00 per month;
(2) In addition, for the first 260 hours of the second six
months of the Term, Company shall pay Consultant
$240.00 per hour of Services provided. For each hour
in excess of 260 hours in the second six months of the
Term, Company shall pay Consultant $350.00 per hour.
c. Consultant is responsible for payment of its own office expenses
such as rent, utilities, telephone, office supplies, etc.; provided, however,
that for the initial six months of the Term, Consultant may use office space in
the ECP offices. In addition, Consultant will be provided with support items
such as a personal computer, cellular phone, e-mail, etc. for the initial six
months of the Term. If authorized and approved in advance by an officer of
Company, Company will reimburse Consultant for out-of-pocket expenses actually
incurred by Consultant in performance of the Services. Consultant shall submit
to the Company a monthly statement setting forth the time spent, services
rendered, and related expenses (with records, receipts, or other supporting
evidence as may be requested by Company). Examples of acceptable forms of
monthly statements may be provided at Consultant's request.
4. Confidentiality Of Company's Business. Consultant acknowledges that
the business of Company is highly competitive and that Consultant may have
access to Confidential Information relating to the business of Company.
"Confidential Information" means and includes Company's confidential and/or
proprietary information and/or trade secrets that have been developed or used
and/or will be developed and that cannot be obtained readily by third parties
from outside sources. Confidential Information includes, by way of example and
without limitation, the following: information regarding customers, employees,
contractors, and the industry not generally known to the public; strategies,
methods, books, records, and documents; technical information concerning
products, equipment, services, and processes; procurement procedures and pricing
techniques; the names of and other information concerning customers, investors,
and business affiliates (such as contact name, service provided, pricing for
that customer, type and amount of services used, credit and financial data,
and/or other information relating to Company's relationship with that customer);
pricing strategies and price curves; positions; plans and strategies for
expansion or acquisitions; budgets; customer lists; research; weather data;
financial and sales data; trading methodologies and terms; evaluations,
opinions, and interpretations of information and data; marketing and
merchandising techniques; prospective customers' names and marks; grids and
maps; electronic databases; models; specifications; computer programs; internal
business records; contracts benefiting or obligating Company; bids or proposals
submitted to any third party; technologies and methods; training methods and
training processes; organizational structure; personnel information, including
salaries of personnel; payment amounts or rates paid to consultants or other
service providers; and other such confidential or proprietary information.
Consultant acknowledges that this Confidential Information constitutes a
valuable, special, and unique asset of Company and that protection of such
Confidential Information against unauthorized disclosure and use is of critical
importance to Company in maintaining its competitive position.
Consultant agrees that Consultant will not, at any time during or after the Term
of this Agreement, make any unauthorized disclosure of any Confidential
Information of Company, or make any use thereof, except in the carrying out of
the Services. Consultant also agrees to preserve and protect the
- Page 2 -
<PAGE> 3
confidentiality of third party Confidential Information to the same extent, and
on the same basis, as Company's Confidential Information.
5. Protection of Company's Business Interest. Without prior written
approval of the President of the Company, Consultant agrees that Consultant will
not directly or indirectly, for itself or for others: (a) consult, advise,
counsel, or otherwise assist any competitor, of Company which, in any manner,
would have, or is likely to have, a directly adverse effect upon Company; (b)
consult, advise, counsel, or otherwise assist any Federal or State regulatory
agency on any matter or in a regulatory proceeding which, in any manner, would
have, or is likely to have, an adverse effect upon Company; or (c) for a period
of twelve (12) months following the termination of this Agreement or the
Services provided hereunder, Consultant will not, either directly or indirectly,
call on, solicit, or induce any employee or officer of Company whom Consultant
had contact with, knowledge of, or association with in the course of providing
Services to terminate his or her employment, and will not assist any other
person or entity in such a solicitation.
6. Intellectual Property Rights.
a. All information, data, documents, and materials provided by Company
to Consultant, or acquired or learned by Consultant from Company's files,
documents, employees, or representatives (including Consultants), in connection
with the Services, shall remain the sole and exclusive property of Company.
Consultant shall obtain no rights whatsoever, whether under applicable patent,
copyright, trade secret laws or otherwise, in such information, data, documents,
or materials unless specifically provided in writing by Company.
b. Consultant shall not disclose or provide to Company any
information, ideas, concepts, improvements, discoveries, inventions, or forms of
expression of ideas that Consultant does not own or otherwise have the right to
disclose or provide to Company. Consultant represents and warrants to Company
that all information, ideas, concepts, improvements, discoveries, inventions, or
forms of expression of ideas disclosed or provided to Company shall be free from
third party claims of ownership and from third party intellectual property
rights.
7. INDEMNIFICATION.
a. CONSULTANT SHALL DEFEND, PROTECT, INDEMNIFY, AND SAVE COMPANY
HARMLESS FROM AND AGAINST ALL LIABILITY, CLAIMS, COSTS, EXPENSES, DEMANDS,
SUITS, AND CAUSES OF ACTION OF EVERY KIND AND CHARACTER (THE "CLAIMS") MADE BY
CONSULTANT AND/OR HIS CONTRACTORS OR AGENTS, ON ACCOUNT OF PERSONAL INJURIES OR
DEATH OR DAMAGES TO PROPERTY IN ANYWISE INCIDENT TO OR IN CONNECTION WITH OR
ARISING OUT OF (a) THE SERVICES PERFORMED HEREUNDER; (b) THIS AGREEMENT; (c) THE
PRESENCE OF CONSULTANT ON COMPANY'S PREMISES; OR (d) THE ACT OR OMISSION OF
CONSULTANT.
b. COMPANY AGREES TO INDEMNIFY AND HOLD HARMLESS CONSULTANT FOR ALL
CLAIMS OF ANY KIND FROM THIRD PARTIES, OTHER THAN CLAIMS RESULTING FROM
CONSULTANT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
c. CONSULTANT'S LIABILITY TO COMPANY FOR WARRANTY, BREACH OF CONTRACT
OR ANY OTHER CLAIMS OF COMPANY WILL BE LIMITED TO THE AMOUNT OF ANNUAL
COMPENSATION PAID UNDER THE CONTRACT IN THE YEAR IN WHICH THE CLAIM OCCURS.
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<PAGE> 4
8. Insurance. Consultant shall procure and maintain such insurance
coverage as Company reasonably requires from time to time. The maximum coverage
Company may request is $500,000.00 per occurrence, available at commercially
reasonable rates.
9. Independent Consultant.
a. The Services performed by Consultant shall be as an independent
Consultant and not as an employee. Accordingly, Consultant is not entitled to
the benefits provided by Company to its employees, including, but not limited
to, group insurance and participation in Company's employee benefit and pension
plans.
b. In the event Consultant (and its employees, if any) for any reason
were to become eligible to participate in a Company-sponsored benefit program,
Consultant hereby waives any such right to participate in the program. This
waiver of any right to participate in Company-sponsored employee benefit
programs represents a material component of the terms of payment agreed to by
the parties. Further, Consultant is not an agent, partner, or joint venturer of
Company. Consultant shall not represent self to third persons to be other than
an independent Consultant of Company, nor shall Consultant permit itself to
offer or agree to incur or assume any obligations or commitments in the name of
Company or for Company without the prior written consent and authorization of
the Company.
c. Consultant shall be responsible for payment of all taxes arising
out of the Consultant's activities under this contract, including by way of
illustration but not limitation, federal and state income tax, Social Security
tax, unemployment insurance taxes, and any other taxes or business license fees
as required. Company will neither pay unemployment taxes on, nor withhold
employment taxes from, any compensation it pays Consultant. Rather, Company will
report the amounts it pays Consultant on IRS Form 1099, to the extent required
to do so under applicable Internal Revenue Code provisions.
10. Notices. All notices under this Agreement by the terms shall be
sent by telecopy or Certified Mail to the addresses set forth at the beginning
of this Agreement.
11. Waiver. Failure of Company at any time to require performance by
Consultant of any provision hereof shall in no way affect the right of Company
hereafter to enforce the same. Nor shall any waiver by Company of any breach of
any provision hereof be taken or held to be a waiver of any succeeding breach of
such provision or as a waiver of this provision itself.
12. Applicable Law. This Agreement shall be governed by and be construed
in accordance with the laws of the State of Texas, excluding applicable
conflict-of-law rule(s) or principle(s).
13. Severability. The terms in this Agreement shall be enforceable to the
fullest extent permitted by law. If any such term or covenant or the application
thereof to any person or circumstance shall be construed to be invalid or
unenforceable, then such term shall be construed in a manner as to permit its
enforceability to the fullest extent permitted by law. The remaining provisions
of this Agreement shall remain in full force and effect.
- Page 4 -
<PAGE> 5
14. Successors And Assignment. This Agreement may be assigned by Company.
Other than an assignment to a corporation or other entity through which
Consultant is doing business, this Agreement shall not be subcontracted or
assigned by Consultant without Company's prior written consent.
15. Termination of Consulting Arrangement. This Agreement shall
terminate, and all payments under paragraph (3) shall cease, in the event any of
the following occurs:
a. Consultant has breached the provisions of paragraphs (4) or (5); or
b. Consultant (i) is convicted of a felony; or (ii) willfully refuses
without proper legal cause to perform the Services; or (iii) willfully engages
in conduct that is injurious to the Company. Termination under this subparagraph
shall be effective immediately upon Notice to Consultant.
16. Controlled Substances; Weapons. Consultant agrees to advise its
employees, subcontractors, and agents that it is the policy of Company that: (a)
The use, possession, and/or distribution of illegal or unauthorized drugs, drug
related paraphernalia, or weapons on Company's premises is prohibited, and the
use or possession of alcoholic beverages, except where authorized by Company's
management, also is prohibited; (b) Entry onto or presence on Company's premises
by any person, including Consultant, constitutes consent to Company to conduct
searches, whether announced or unannounced, on Company's premises of the person
and Consultant's personal effects for such prohibited items; (c) Any person who
is found in violation of the policy or who refuses to permit a search may be
removed and barred from Company's premises, at the discretion of Company.
17. Other Agreements/Modifications. This Agreement does not supersede
Consultant's obligations described in Articles 3.1-3.7, 4.1, and 4.4 of the
Employment Agreement between Company and Consultant (signed by Consultant on
February 9, 1999) ("Employment Agreement"). Both parties agree that the
Non-Competition Obligations in Articles 3.1-3.7 of the Employment Agreement
terminate on February 5, 2001. This Agreement supersedes the remaining
provisions of the Employment Agreement. In addition, this Agreement constitutes
the entire agreement of the parties regarding the performance of the Services.
This Agreement may not be amended, modified, superseded, canceled, renewed, or
extended without a written instrument executed by both parties.
18. Advertising and Publicity. Consultant shall not use the name of
Company or any of its employees in any advertising, publicity, or selling
material without prior written approval of Company.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
JOSEPH M. BOLLINGER EAST COAST POWER, L.L.C.
By: /s/ Joseph M. Bollinger By: /s/ Robert J. Licato
---------------------------------- ---------------------------------
This 1st day of February, 2000 Name: Robert J. Licato
----------------------------
Title: President
---------------------------
This 1st day of February, 2000
- Page 5 -
<PAGE> 1
EXHIBIT 10.100
DRAFT
12/22/99
$30,000,000
SENIOR SUBORDINATED CREDIT AGREEMENT
Dated as of December -29, 1999
Among
EAST COAST POWER L.L.C.,
as Borrower,
BANK OF AMERICA, N.A.,
as Initial Lender,
and
BANK OF AMERICA, N.A.,
as Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<S> <C>
1.01. Certain Defined Terms......................................................................................1
1.02. Computation of Time Periods................................................................................1
1.03. Accounting Terms...........................................................................................1
1.04. Best Knowledge.............................................................................................1
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
2.01. The Advances...............................................................................................2
2.02. Making the Advances........................................................................................2
2.03. Repayment of Advances......................................................................................3
2.04. Termination or Reduction of the Commitments................................................................3
2.05. Prepayments, Etc...........................................................................................3
2.06. Interest...................................................................................................4
2.07. Fees.......................................................................................................6
2.08. Conversion of Advances.....................................................................................7
2.09. Increased Costs, Etc.......................................................................................7
2.10. Payments and Computations..................................................................................9
2.11. Taxes.....................................................................................................10
2.12. Sharing of Payments, Etc. ...............................................................................13
2.13. Use of Proceeds...........................................................................................13
2.14. Mandatory Assignment by a Lender; Mitigation..............................................................13
ARTICLE III
CONDITIONS PRECEDENT
3.01. Conditions Precedent to Initial Borrowing.................................................................14
3.02. Conditions Precedent to Each Borrowing....................................................................18
3.03. Conditions Precedent to Extension of Maturity Date........................................................18
3.04. Determinations Under Sections 3.01, 3.02 and 3.03.........................................................20
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties............................................................................20
ARTICLE V
COVENANTS
5.01. Covenants.................................................................................................27
5.02. Additional Covenants if Maturity Date Is Extended.........................................................28
ARTICLE VI
EVENTS OF DEFAULT
6.01. Events of Default.........................................................................................30
ARTICLE VII
THE AGENT
7.01. Authorization and Action..................................................................................34
7.02. Agents' Reliance, Etc.....................................................................................34
7.03. Bank of America and Affiliates............................................................................35
7.04. Lender Credit Decision....................................................................................36
7.05. Indemnification...........................................................................................36
7.06. Successor Agents..........................................................................................37
ARTICLE VIII
SUBORDINATION PROVISIONS
8.01. Subordinated Debt Subordinated to Senior Debt.............................................................37
8.02. Borrower Not to Make Payments with Respect to Subordinated Debt
in Certain Circumstances................................................................................38
8.03. Subordinated Debt Subordinated to Prior Payment of All Senior Debt
on Dissolution, Liquidation or Reorganization for the Benefit of
Creditors of Borrower...................................................................................38
8.04. Lenders to be Subrogated to Rights of Holders of Senior Debt..............................................39
8.05. Subordinated Debt Unconditional...........................................................................40
8.06. Subordination Rights Not Impaired by Acts or Omissions of Borrower or
Holders of Senior Debt..................................................................................40
8.07. Article Not to Prevent Events of Default..................................................................41
8.08. Other Provisions Subject Hereto...........................................................................41
ARTICLE IX
MISCELLANEOUS
9.01. Amendments, Etc...........................................................................................41
9.02. Notices, Etc..............................................................................................42
9.03. No Waiver; Remedies.......................................................................................42
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
9.04. Costs and Expenses........................................................................................42
9.05. Right of Set-off..........................................................................................44
9.06. Binding Effect............................................................................................45
9.07. Assignments and Participations............................................................................45
9.08. Execution in Counterparts.................................................................................48
9.09. Confidentiality...........................................................................................48
9.10. Severability..............................................................................................49
9.11. Governing Law; Entire Agreement...........................................................................49
</TABLE>
Annex A - Definitions
SCHEDULES
Schedule I - Commitments and Applicable Lending Offices
Schedule 4.01(b) - Subsidiaries
Schedule 4.01(x) - Existing Debt
Schedule 4.01(y) - Material Contracts
Schedule 4.01(z) - Investments
<PAGE> 5
iv
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Annual Operating Budget
Exhibit E-1 - Form of Opinion of ENA In-House Counsel
Exhibit E-2 - Form of Opinion of Vinson & Elkins
<PAGE> 6
EXHIBIT 10.100
SENIOR SUBORDINATED CREDIT AGREEMENT
SENIOR SUBORDINATED CREDIT AGREEMENT dated as of December 29,
1999, among (a) EAST COAST POWER L.L.C., a limited liability company organized
under the laws of Delaware (the "Borrower"), (b) BANK OF AMERICA, N.A. ("Bank of
America"), as initial lender (the "Initial Lender"), and (c) BANK OF AMERICA, as
agent (together with any successor appointed pursuant to Article VII, the
"Agent") for the Lenders (as defined in Annex A hereto).
PRELIMINARY STATEMENTS:
The Borrower has requested that the Lenders make a senior
subordinated credit facility available to the Borrower in the amount of
$30,000,000 for the purposes outlined herein, and the Lenders have indicated
their willingness to extend such facility to the Borrower on the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement
(including the schedules and exhibits hereto), unless otherwise defined herein,
the terms used herein have the meanings specified in Annex A hereto.
SECTION 1.02. Computation of Time Periods. In this Agreement
and the Notes in the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(g) ("GAAP").
SECTION 1.04. Best Knowledge. In this Agreement, any reference
to the "best knowledge" of any Person shall mean the complete knowledge of such
Person or of each Responsible Officer of such Person, as the case may be, after
due inquiry, in good faith and with its full abilities and attention.
<PAGE> 7
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. Each Lender severally agrees, on
the terms and conditions hereinafter set forth, to make advances (each, an
"Advance") to the Borrower from time to time on any Business Day during the
period from the date hereof until the Termination Date, in an amount for each
such Advance not to exceed such Lender's Unused Commitment at such time. Each
Borrowing shall be in an aggregate amount of $2,000,000 or an integral multiple
of $1,000,000 in excess thereof and shall consist of Advances made
simultaneously by the Lenders ratably according to their Unused Commitments.
Within the limits of each Lender's Unused Commitment in effect from time to
time, the Borrower may borrow under this Section 2.01. Amounts borrowed under
this Section 2.01 and repaid or prepaid may not be reborrowed.
SECTION 2.02. Making the Advances. (a) Each Borrowing shall be
made on notice, given not later than 11:00 A.M. (Charlotte, North Carolina time)
on the third Business Day prior to the date of such proposed Borrowing in the
case of a Borrowing consisting of Eurodollar Rate Advances, or the first
Business Day prior to the date of such proposed Borrowing in the case of a
Borrowing consisting of Base Rate Advances, by the Borrower to the Agent, which
shall give to each Lender prompt notice thereof by telex or telecopier. Such
notice of a Borrowing (the "Notice of Borrowing") shall be in writing or by
telex or telecopier, in substantially the form of Exhibit B hereto, specifying
therein the requested (i) date of such Borrowing, (ii) aggregate amount of such
Borrowing, (iii) Type of Advances comprising such Borrowing and (iv) in the case
of a Borrowing consisting of Eurodollar Rate Advances, initial Interest Period
for each such Advance. Each Lender shall, before 11:00 A.M. (Charlotte, North
Carolina time) on the date of such Borrowing, make available for the account of
its Applicable Lending Office to the Agent at the Agent's Account, in same day
funds, such Lender's ratable portion of such Borrowing in accordance with the
respective Commitments of such Lender and the other Lenders. After the Agent's
receipt of such funds and upon fulfillment of the applicable conditions set
forth in Article III, the Agent will make such funds available to the Borrower
in the amount set forth in the Notice of Borrowing by transferring such funds as
directed by the Borrower to the Agent in writing.
(b) Each Notice of Borrowing shall be irrevocable and binding
on the Borrower. The Borrower shall indemnify each Lender against any loss, cost
or expense incurred by such Lender as a result of any failure to fulfill on or
before the date specified in any Notice of Borrowing the applicable conditions
set forth in Article III, including, without limitation, any loss (including
loss of anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to fund the Advance to be made by such Lender as part of the related Borrowing
when such Advance, as a result of such failure, is not made on such date.
(c) Unless the Agent shall have received notice from a Lender
prior to the date of any Borrowing that such Lender will not make available to
the Agent such Lender's ratable portion of such Borrowing, the Agent may assume
that such Lender has made such portion available to the Agent on the date of
such Borrowing in accordance with subsection (a) of this Section 2.02
<PAGE> 8
and the Agent may, in reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If and to the extent that such
Lender shall not have so made such ratable portion available to the Agent, such
Lender and the Borrower severally agree to repay or pay to the Agent forthwith
on demand such corresponding amount and to pay interest thereon, for each day
from the date such amount is made available to the Borrower until the date such
amount is repaid or paid to the Agent, at (i) in the case of the Borrower, the
interest rate applicable at such time under Section 2.06 to Advances comprising
such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If
such Lender shall pay to the Agent such corresponding amount, such amount so
paid shall constitute such Lender's Advance as part of such Borrowing for all
purposes.
(d) The failure of any Lender to make the Advance to be made
by it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Advance on the date of such Borrowing,
but no Lender shall be responsible for the failure of any other Lender to make
the Advance to be made by such other Lender on the date of such Borrowing.
SECTION 2.03. Repayment of Advances. (a) On the Maturity Date,
the Borrower shall repay to the Agent for the ratable account of the Lenders the
aggregate principal amount of the Advances outstanding on such date, together
with all accrued and unpaid interest on such principal amount and all fees,
expenses and other amounts owing hereunder and under the Notes.
(b) Subject to the satisfaction of each of the terms and
conditions set forth in Section 3.03, the Maturity Date shall automatically be
extended from the Initial Maturity Date to the Extended Maturity Date. The Agent
shall promptly notify each of the Lenders of such extension of the Maturity
Date.
SECTION 2.04. Termination or Reduction of the Commitments. The
Borrower may, upon at least five Business Days' notice to the Agent, terminate
in whole or reduce in part the Unused Commitments; provided, however, that each
partial reduction of the Unused Commitments (i) shall be in an aggregate amount
of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and (ii)
shall be made ratably among the Lenders in accordance with their Commitments.
SECTION 2.05. Prepayments, Etc. (a) Optional. The Borrower
may, upon at least one Business Day's notice in the case of Base Rate Advances
and three Business Days' notice in the case of Eurodollar Rate Advances stating
the proposed date and aggregate principal amount of the prepayment, and if such
notice is given the Borrower shall, prepay the outstanding aggregate principal
amount of the Advances to it in whole or ratably in part, together with accrued
interest to the date of such prepayment on the principal amount prepaid;
provided, however, that (i) each partial prepayment shall be in an aggregate
principal amount of $2,000,000 or an integral multiple of $1,000,000 in excess
thereof and (ii) if any prepayment of a Eurodollar Rate Advance is made on a
date other than the last day of an Interest Period for such Advance, the
Borrower shall also pay any amounts owing pursuant to Section 9.04(c).
<PAGE> 9
(b) Mandatory. (i) The Borrower shall, on the date of receipt
by it of Net Proceeds from the issuance by the Borrower of the Refinancing
Securities, prepay an aggregate principal amount of the outstanding Advances
equal to the lesser of (A) the aggregate outstanding principal amount of the
Advances (plus all amounts payable pursuant to clause (iii) of this Section
2.05(b) and all fees, expenses, costs, indemnification payments and all other
amounts payable hereunder) and (B) the aggregate amount of such Net Proceeds.
(ii) In the event that the Maturity Date shall be extended
pursuant to Section 3.03, the Borrower shall, on the final Business Day of
September, 2000, prepay an aggregate principal amount of the outstanding
Advances equal to the lesser of (A) the aggregate outstanding principal amount
of the Advances (plus all amounts payable pursuant to clause (iii) of this
Section 2.05(b) and all fees, expenses, costs, indemnification payments and all
other amounts payable hereunder) and (B) the aggregate amount of Available Cash
of the Borrower for the period from the Initial Maturity Date through such final
Business Day of September, 2000.
(iii) All prepayments under this Section 2.05(b) shall be made
together with (A) all accrued interest to the date of such prepayment on the
principal amount prepaid and (B) if any prepayment of a Eurodollar Rate Advance
is made on a date other than the last day of an Interest Period for such
Advance, any amounts owing pursuant to Section 9.04(c).
(iv) All prepayments under this Section 2.05(b) shall be
applied first to pay fees, expenses, costs, indemnification payments and all
other amounts (other than principal and interest) payable hereunder, second to
pay interest and third to prepay the outstanding principal of the Advances.
SECTION 2.06. Interest. (a) Scheduled Interest. The Borrower
shall pay interest on the unpaid principal amount of each Advance owing to each
Lender from the date of such Advance until such principal amount shall be paid
in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is
a Base Rate Advance, a rate per annum equal at all times to the sum of
(A) the Base Rate in effect from time to time plus (B) the Applicable
Margin for such Advance, payable in arrears quarterly on the last
Business Day of each March, June, September and December during such
periods and on the date such Base Rate Advance shall be Converted or
paid in full.
(ii) Eurodollar Rate Advances. During such periods as such
Advance is a Eurodollar Rate Advance, a rate per annum equal at all
times during each Interest Period for such Advance to the sum of (A)
the Eurodollar Rate for such Interest Period for such Advance plus (B)
the Applicable Margin for such Advance, payable in arrears on the last
day of such Interest Period and, if such Interest Period has a duration
of more than three months, on each day that occurs during such Interest
Period every three months from the first day of such Interest Period
and on the date such Eurodollar Rate Advance shall be Converted or paid
in full.
<PAGE> 10
(b) Default Interest. Upon the occurrence and during the
continuance of an Event of Default, the Borrower shall pay interest on (i) the
unpaid principal amount of each Advance owing to each Lender, payable in arrears
on the dates referred to in clause (a)(i) or (a)(ii) above and on demand, at a
rate per annum equal at all times to 2% per annum above the rate per annum
required to be paid on such Advance pursuant to clause (a)(i) or (a)(ii) above
and (ii) to the fullest extent permitted by law, the amount of any interest, fee
or other amount payable hereunder that is not paid when due, from the date such
amount shall be due until such amount shall be paid in full, payable in arrears
on the date such amount shall be paid in full and on demand, at a rate per annum
equal at all times to 2% per annum above the rate per annum required to be paid,
in the case of interest, on the Type of Advance on which such interest has
accrued pursuant to clause (a)(i) or (a)(ii) above, and, in all other cases, on
Base Rate Advances pursuant to clause (a)(i) above.
(c) Information from Reference Banks. (i) Each Reference Bank
shall furnish to the Agent timely information for the purpose of determining
each Eurodollar Rate for which such information is required under clause (c) of
the definition of "Eurodollar Rate". If any one or more of the Reference Banks
shall not furnish such timely information to the Agent for the purpose of
determining any such interest rate, the Agent shall determine such interest rate
on the basis of timely information furnished by the remaining Reference Banks.
(ii) If fewer than two Reference Banks are able to furnish
timely information to the Agent for determining the Eurodollar Rate for any
Eurodollar Rate Advances for which such information is required under clause (c)
of the definition of "Eurodollar Rate",
(A) the Agent shall forthwith notify the Borrower and the
Lenders that the interest rate cannot be determined for such Eurodollar
Rate Advances,
(B) each such Eurodollar Rate Advance will automatically, on
the last day of the then existing Interest Period therefor, convert
into a Base Rate Advance (or, if such Advance is then a Base Rate
Advance, will continue as a Base Rate Advance), and
(C) the obligation of the Lenders to make, or to Convert
Advances into, Eurodollar Rate Advances shall be suspended until the
Agent shall notify the Borrower and the Lenders that the circumstances
causing such suspension no longer exist.
(d) Notice of Interest Period and Interest Rate. Promptly
after receipt of the Notice of Borrowing pursuant to Section 2.02(a), a notice
of Conversion pursuant to Section 2.08 or a notice of selection of an Interest
Period pursuant to the terms of the definition of "Interest Period", the Agent
shall give notice to the Borrower and each Lender of the applicable Interest
Period and the applicable interest rate determined by the Agent for purposes of
clause (a)(i) or (ii) above, as applicable, and, if required under clause (c) of
the definition of "Eurodollar Rate", the applicable rate, if any, furnished by
each Reference Bank for the purpose of determining the applicable interest rate
under clause (a)(ii) above.
<PAGE> 11
(e) Adjustments to Applicable Margins. In the event that the
syndication of the Advances contemplated by Section 5.01(c) cannot be achieved
in a manner satisfactory to the Agent and the Arranger on the terms set forth
herein, the Agent may, in consultation with the Borrower, adjust the Applicable
Margin for any of the Advances and/or the applicable fees described in the Fee
Letter if the Agent and the Arranger determine that such adjustments are
advisable to ensure a successful syndication of the Advances or an optimal
credit structure of the Advances; provided that (i) the aggregate amount of the
Advances shall remain unchanged, (ii) no such adjustments shall cause the
Borrower to be in default under the Indenture and (iii) Section 6.01 and
Article III of this Agreement shall remain unchanged and (iv) such adjustments
may not be made on more than one occasion. If the Agent and the Arranger
determine to make any such change in the Applicable Margin for any Advances
and/or any of the applicable fees described in the Fee Letter, the Agent shall
give notice to the Borrower of the adjusted Applicable Margin for such Advances
and/or of such adjusted fees, and, from and after the date of such notice, (i)
the Applicable Margin for such Advances shall be equal to such adjusted
Applicable Margin and (ii) the applicable fees payable under the Fee Letter
shall be equal to such adjusted fees.
SECTION 2.07. Fees. (a) Commitment Fee. The Borrower shall pay
to the Agent for the account of the Lenders a commitment fee, from the date
hereof in the case of the Initial Lender and from the effective date specified
in the Assignment and Acceptance pursuant to which it became a Lender in the
case of each other Lender until the Termination Date, payable in arrears
quarterly on the last Business Day of March, 2000, and on the Termination Date,
at the rate of 1/2 of 1% per annum on the average daily Unused Commitment of
such Lender.
(b) Other Fees. The Borrower shall pay, or cause to be paid to
the Agent and the Arranger, all of the nonrefundable fees set forth in the Fee
Letter in accordance with the terms thereof and shall observe and perform all of
the other terms and conditions thereof. The Obligation of the Borrower to pay
the fees set forth in the Fee Letter shall not be subject to counterclaim or
setoff for, or be otherwise affected by, any claim or dispute that the Borrower
may have with any Lender, the Agent or the Arranger. Neither the Borrower nor
the Agent shall disclose the matters contained in the Fee Letter to any Person
other than their respective accountants, attorneys and other advisors, and then
only in connection with the transactions contemplated herein and on a
confidential basis, except for such disclosure of the aggregate amount of fees
payable pursuant thereto as the Borrower or the Agent is required by applicable
law, in the reasonable opinion of its counsel, to make.
SECTION 2.08. Conversion of Advances. (a) Optional. The
Borrower may on any Business Day, upon notice given to the Agent not later than
11:00 A.M. (Charlotte, North Carolina time) on the third Business Day prior to
the date of the proposed Conversion and subject to the provisions of Sections
2.06 and 2.09, Convert all or any portion of the Advances of one Type into
Advances of the other Type; provided, however, that (i) any Conversion of
Eurodollar Rate Advances into Base Rate Advances shall be made only on the last
day of an Interest Period for such Eurodollar Rate Advances, (ii) any Conversion
of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not
less than $5,000,000 and (iii) each Conversion of Advances
<PAGE> 12
shall be made ratably among the Lenders in accordance with their Commitments.
Each such notice of Conversion shall, within the restrictions specified above,
specify (A) the date of such Conversion and (B) the Advances to be Converted.
Each notice of Conversion shall be irrevocable and binding on the Borrower.
(b) Mandatory. (i) On the date on which the aggregate unpaid
principal amount of Eurodollar Rate Advances comprising any Borrowing shall be
reduced, by payment or prepayment or otherwise, to an amount that, when divided
by the number of Lenders on such date, is less than $1,000,000, such Advances
shall automatically Convert into Base Rate Advances.
(ii) Upon the occurrence and during the continuance of any
Default, (A) each Eurodollar Rate Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into a Base Rate Advance and
(B) the obligation of the Lenders to Convert Advances into Eurodollar Rate
Advances shall be suspended.
SECTION 2.09. Increased Costs, Etc. (a) If, due to either (i)
the introduction of or any change (other than any change by way of imposition or
increase of reserve requirements included in the Eurodollar Rate Reserve
Percentage) in or in the interpretation of any law or regulation by any
Governmental Authority, central bank or comparable entity or (ii) the compliance
with any guideline or request from any central bank or other Governmental
Authority that becomes effective or is made after the date of this Agreement
(whether or not having the force of law), there shall be any increase in the
cost to any Lender of agreeing to make or of making, funding or maintaining
Eurodollar Rate Advances (excluding for purposes of this Section 2.09 any such
increased costs resulting from (A) Taxes or Other Taxes (as to which Section
2.11 shall govern) and (B) changes in the basis of taxation of overall net
income or overall gross income by the United States or by the foreign
jurisdiction or state under the laws of which such Lender is organized or has
either of its Applicable Lending Offices or any political subdivision thereof),
then the Borrower shall from time to time, upon demand by such Lender (with a
copy of such demand to the Agent), pay to the Agent for the account of such
Lender additional amounts sufficient to compensate such Lender for such
increased cost. A certificate in reasonable detail as to the basis for and the
amount of such increased cost, submitted to the Borrower by such Lender, shall
be conclusive and binding for all purposes, absent manifest error. No Lender
shall be permitted to recover any such costs to the extent such costs were
incurred or accrued more than 60 days after such Lender first obtains knowledge
of the incurrence or accrual of such costs.
(b) If any Lender determines that compliance with any law or
regulation or any guideline, directive or request from any central bank or other
Governmental Authority, or any change therein or in the implementation,
administration or enforcement thereof (whether or not having the force of law)
affects or would affect the amount of capital required or expected to be
maintained by such Lender (or either of the Applicable Lending Offices of such
Lender) or any Person controlling such Lender and that the amount of such
capital is increased by or based upon the existence of such Lender's commitment
to lend hereunder and other commitments of such type (taking into account such
Lender's or such Person's policies with respect to capital adequacy), then,
<PAGE> 13
upon demand by such Lender (with a copy of such demand to the Agent), the
Borrower shall pay to the Agent for the account of such Lender, from time to
time as specified by such Lender, additional amounts sufficient to compensate
such Lender in the light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existence
of such Lender's commitment to lend hereunder. A certificate in reasonable
detail as to such amounts and the basis therefor submitted to the Borrower by
such Lender shall be conclusive and binding for all purposes, absent manifest
error. No Lender shall be permitted to recover any such amount to the extent
such amount was incurred or accrued more than 60 days after such Lender first
obtains knowledge of the incurrence or accrual of such costs.
(c) If, with respect to any Eurodollar Rate Advances, the
Required Lenders notify the Agent that the Eurodollar Rate for any Interest
Period for such Advances will not adequately reflect the cost to such Lenders of
making, funding or maintaining their Eurodollar Rate Advances for such Interest
Period, the Agent shall forthwith so notify the Borrower and the Lenders,
whereupon (i) each such Eurodollar Rate Advance will automatically, on the last
day of the then existing Interest Period therefor, Convert into a Base Rate
Advance and (ii) the obligation of the Lenders to Convert Advances into
Eurodollar Rate Advances shall be suspended until the Agent shall notify the
Borrower that such Lenders have determined that the circumstances causing such
suspension no longer exist.
(d) Notwithstanding any other provision of this Agreement, if
the introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful, or any central bank or other Governmental
Authority shall assert that it is unlawful, for any Lender or its Eurodollar
Lending Office to perform its obligations hereunder to make Eurodollar Rate
Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder,
then, on notice thereof and demand therefor by such Lender to the Borrower
through the Agent, (i) each Eurodollar Rate Advance will automatically, upon
such demand, Convert into a Base Rate Advance and (ii) the obligation of the
Lenders to Convert Advances into Eurodollar Rate Advances shall be suspended
until the Agent shall notify the Borrower that such Lender has determined that
the circumstances causing such suspension no longer exist.
SECTION 2.10. Payments and Computations. (a) The Borrower
shall make each payment hereunder and under the Notes, irrespective of any right
of counterclaim or set-off, not later than 11:00 A.M. (Charlotte, North Carolina
time) on the day when due in U.S. dollars to the Agent at the Agent's Account in
same day funds. The Agent will promptly thereafter cause like funds to be
distributed (i) if such payment by the Borrower is in respect of principal,
interest, commitment fees or any other Obligation then payable hereunder and
under the Notes to more than one Lender, to such Lenders for the account of
their respective Applicable Lending Offices ratably in accordance with the
amounts of such respective Obligations then payable to such Lenders and (ii) if
such payment by the Borrower is in respect of any Obligation then payable
hereunder to one Lender, to such Lender for the account of its Applicable
Lending Office, in each case to be applied in accordance with the terms of this
Agreement. Upon its acceptance of an Assignment and Acceptance and recording of
the information contained therein in the Register pursuant to
<PAGE> 14
Section 9.07(d), from and after the effective date of such Assignment and
Acceptance, the Agent shall make all payments hereunder and under the Notes in
respect of the interest assigned thereby to the Lender assignee thereunder, and
the parties to such Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such effective date directly
between themselves.
(b) The Borrower hereby authorizes each Lender, if and to the
extent payment owed to such Lender is not made when due hereunder or under the
Note held by such Lender, to charge from time to time against any or all of the
Borrower's accounts with such Lender any amount so due.
(c) All computations of interest based on the Eurodollar Rate
and of all fees shall be made by the Agent on the basis of a year of 360 days
(and, with respect to interest based on the Base Rate, a year of 365 or 366
days, as the case may be), in each case for the actual number of days (including
the first day but excluding the last day) occurring in the period for which such
interest, fees or commissions are payable. Each determination by the Agent of an
interest rate, fee or commission hereunder shall be conclusive and binding for
all purposes, absent manifest error.
(d) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or commitment fee, as
the case may be; provided, however, that, if such extension would cause payment
of interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(e) Unless the Agent shall have received notice from the
Borrower prior to the date on which any payment is due to any Lender hereunder
or under the Notes that the Borrower will not make such payment in full, the
Agent may assume that the Borrower has made such payment in full to the Agent on
such date and the Agent may, in reliance upon such assumption, cause to be
distributed to each such Lender on such due date an amount equal to the amount
then due such Lender. If and to the extent the Borrower shall not have so made
such payment in full to the Agent, each such Lender shall repay to the Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Agent, at the
Federal Funds Rate.
SECTION 2.11. Taxes. (a) Any and all payments by the Borrower
hereunder or under the Notes shall be made, in accordance with Section 2.10,
free and clear of and without deduction for any and all present or future taxes,
duties, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender and the
Agent, taxes that are imposed on its overall net income by the United States and
taxes that are imposed on its overall net income (and franchise taxes imposed in
lieu thereof) by the state or foreign jurisdiction under the laws of which such
Lender (or its Applicable Lending Office) or the Agent, as the case may be, is
organized or any political subdivision thereof and, in the case of each Lender,
taxes that are imposed on its overall net income (and franchise taxes imposed in
lieu thereof) by the state or foreign
<PAGE> 15
jurisdiction of such Lender's Applicable Lending Office or any political
subdivision thereof (all such non-excluded taxes, duties, levies, imposts,
deductions, charges, withholdings and liabilities in respect of payments
hereunder or under the Notes being hereinafter referred to as "Taxes"). If the
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder or under any Note to any Lender or the Agent, (i) the sum
payable by the Borrower shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.11) such Lender or the Agent, as the case may
be, receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any and all present or
future stamp, documentary taxes, excise taxes and any other property or similar
taxes or charges or similar levies that arise from any payment made hereunder or
under the Notes or from the execution, delivery or registration of, performance
under, or otherwise with respect to, this Agreement or any Note (hereinafter
referred to as "Other Taxes").
(c) The Borrower shall indemnify each Lender and the Agent for
and hold it harmless against the full amount of Taxes and Other Taxes
(including, without limitation, any Taxes or Other Taxes of any kind imposed or
asserted by any jurisdiction on amounts payable under this Section 2.11) imposed
on or paid by such Lender or the Agent (as the case may be) and any liability
(including penalties, additions to tax, interest and expenses) arising therefrom
or with respect thereto. This indemnification shall be made within 30 days from
the date such Lender or the Agent (as the case may be) makes written demand
therefor.
(d) Each Lender organized under the laws of a jurisdiction
outside the United States shall, on or prior to the date of its execution and
delivery of this Agreement in the case of the Initial Lender and on or prior to
the date of the Assignment and Acceptance pursuant to which it becomes a Lender
in the case of each other Lender, and from time to time thereafter as requested
in writing by the Borrower or Agent (but only so long thereafter as such Lender
remains lawfully able to do so), shall provide each of the Agent and the
Borrower with two original Internal Revenue Service forms 1001 or 4224 or (in
the case of a Lender that has certified in writing to the Agent that it is not a
"bank" as defined in Section 881(c)(3)(A) of the Internal Revenue Code) form W-8
(and, if such Lender delivers a form W-8, a certificate representing that such
Lender is not a "bank" for purposes of Section 881(c) of the Internal Revenue
Code, is not a 10-percent shareholder (within the meaning of Section
871(h)(3)(B) of the Internal Revenue Code) of the Borrower and is not a
controlled foreign corporation related to the Borrower (within the meaning of
Section 864(d)(4) of the Internal Revenue Code)), as appropriate, or any
successor or other form prescribed by the Internal Revenue Service, certifying
that such Lender is exempt from or entitled to a reduced rate
<PAGE> 16
of United States withholding tax on payments pursuant to this Agreement or the
Notes or, in the case of a Lender providing a form W-8, certifying that such
Lender is a foreign corporation, partnership, estate or trust. If the form
provided by a Lender at the time such Lender first becomes a party to this
Agreement indicates a United States interest withholding tax rate in excess of
zero, withholding tax at such rate shall be considered excluded from Taxes
unless and until such Lender provides the appropriate form certifying that a
lesser rate applies, whereupon withholding tax at such lesser rate only shall be
considered excluded from Taxes for periods governed by such form; provided,
however, that, if at the date of the Assignment and Acceptance pursuant to which
a Lender becomes a party to this Agreement, the Lender assignor was entitled to
payments under subsection (a) of this Section 2.11 in respect of United States
withholding tax with respect to interest paid at such date, then, to such
extent, the term Taxes shall include (in addition to withholding taxes that may
be imposed in the future or other amounts otherwise includable in Taxes) United
States withholding tax, if any, applicable with respect to the Lender assignee
on such date. If any form or document referred to in this subsection (e)
requires the disclosure of information, other than information necessary to
compute the tax payable and information required on the date hereof by Internal
Revenue Service form 1001, 4224 or W-8 (or the related certificate described
above), that the Lender reasonably considers to be confidential, the Lender
shall give notice thereof to the Borrower and shall not be obligated to include
in such form or document such confidential information.
(e) For any period with respect to which a Lender has failed
to provide the Borrower with the appropriate form described in subsection (d)
above (unless such failure is due to a change in treaty, law or regulation
occurring subsequent to the date on which a form originally was required to be
provided or if such form otherwise is not required under subsection (d) above),
such Lender shall not be entitled to indemnification under subsection (a) or (c)
of this Section 2.11 with respect to Taxes imposed by the United States by
reason of such failure; provided, however, that should a Lender, which is
otherwise exempt from or subject to a reduced rate of withholding tax, become
subject to Taxes because of its failure to deliver a form required hereunder,
the Borrower shall take such steps as such Lender shall reasonably request to
assist such Lender to recover such Taxes.
(f) Within 30 days after the date of any payment of Taxes, the
Borrower shall furnish to the Agent, at its address referred to in Section 9.02,
the original or a certified copy of a receipt evidencing such payment.
(g) If any Lender determines, in its sole discretion, that it
has finally and irrevocably realized, by reason of a refund of any Taxes that
have been paid or reimbursed by the Borrower pursuant to Section 2.11(a) or
2.11(c) in respect of payments under this Agreement or any Note or credit in
respect of such Taxes against any tax payable by it, a current monetary benefit
that it would otherwise not have obtained and that would result in the total
payments made under this Section 2.11 exceeding that amount needed to make such
Lender whole, such Lender shall, to the extent that it determines in its sole
discretion that it can do so without prejudice to the retention of the amount of
such refund or credit, pay to the Borrower following actual realization of such
benefit and without any interest thereon, an amount equal to the lesser of (i)
the amount of such benefit and
<PAGE> 17
(ii) the amount of such excess, in each case after deducting therefrom all
out-of-pocket expenses incurred by or on behalf of such Lender in securing such
refund or credit; provided that the Borrower agrees, upon the request of such
Lender, to return the amount of such refund or credit to such Lender, together
with the amount of all additional out-of-pocket expenses, penalties, interest or
other charges in respect thereof, if such Lender is required to repay or
otherwise loses the benefit of such refund or credit. Nothing in this Section
2.11(g) shall be construed to interfere with the right of a Lender to arrange
its tax affairs in whatever manner it thinks fit or require any Lender to claim
any refund or credit, or to require any Lender to make available to the Borrower
any of its tax returns or any other information relating to its Taxes that it
deems to be confidential.
(h) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 2.11 shall survive the payment in full of the Notes
and all other Obligations of the Borrower hereunder.
SECTION 2.12. Sharing of Payments, Etc. If any Lender shall
obtain at any time any payment (whether voluntary, involuntary, through the
exercise of any right of set-off, or otherwise) (a) on account of Obligations
due and payable to such Lender hereunder and under the Notes at such time in
excess of its ratable share (according to the proportion of (i) the amount of
such Obligations due and payable to such Lender at such time to (ii) the
aggregate amount of the Obligations due and payable to all Lenders hereunder and
under the Notes at such time) of payments on account of the Obligations due and
payable to all Lenders hereunder and under the Notes at such time obtained by
all the Lenders at such time or (b) on account of Obligations owing (but not due
and payable) to such Lender hereunder and under the Notes at such time in excess
of its ratable share (according to the proportion of (i) the amount of such
Obligations owing to such Lender at such time to (ii) the aggregate amount of
the Obligations owing (but not due and payable) to all Lenders hereunder and
under the Notes at such time) of payments on account of the Obligations owing
(but not due and payable) to all Lenders hereunder and under the Notes at such
time obtained by all of the Lenders at such time, such Lender shall forthwith
purchase from the other Lenders such participations in the Obligations due and
payable or owing to them, as the case may be, as shall be necessary to cause
such purchasing Lender to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each other
Lender shall be rescinded and such other Lender shall repay to the purchasing
Lender the purchase price to the extent of such Lender's ratable share
(according to the proportion of (i) the purchase price paid to such Lender to
(ii) the aggregate purchase price paid to all Lenders) of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such other Lender's required repayment to (ii) the total
amount so recovered from the purchasing Lender) of any interest or other amount
paid or payable by the purchasing Lender in respect of the total amount so
recovered. The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 2.12 may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off) with respect to such participation as fully as if such Lender were the
direct creditor of the Borrower in the amount of such participation.
<PAGE> 18
SECTION 2.13. Use of Proceeds. The proceeds of the Advances
shall be used (and the Borrower agrees that it shall use such proceeds) solely
for general corporate purposes of the Borrower and its Subsidiaries and to pay
fees and expenses payable by the Borrower under this Agreement.
SECTION 2.14. Mandatory Assignment by a Lender; Mitigation. If
any Lender requests from the Borrower either reimbursement for increased costs
pursuant to Section 2.09 or payment of or reimbursement for Taxes pursuant to
Section 2.11, or if any Lender notifies the Agent that it is unlawful for such
Lender or its Eurodollar Lending Office to perform its obligations hereunder
pursuant to Section 2.09(d), (a) such Lender will, upon three Business Days'
notice by the Borrower to such Lender and the Agent, to the extent not
inconsistent with such Lender's internal policies and applicable legal and
regulatory restrictions, use reasonable efforts to make, fund or maintain its
Eurodollar Rate Advances through another Eurodollar Lending Office of such
Lender if (i) as a result thereof the additional amounts required to be paid
pursuant to Section 2.09 or 2.11, as applicable, in respect of such Eurodollar
Rate Advances would be eliminated or reduced or the provisions of Section
2.09(d) would not apply to such Lender, as applicable, and (ii) as determined by
such Lender in good faith but in its sole discretion, the making or maintaining
of such Eurodollar Rate Advances through such other Eurodollar Lending Office
would not be otherwise disadvantageous to such Lender, and (b) unless such
Lender has theretofore taken steps to remove or cure, and has removed or cured,
the conditions creating such obligation to pay such additional amounts or the
circumstances described in Section 2.09(d), the Borrower may designate an
Eligible Assignee to purchase for cash (pursuant to an Assignment and
Acceptance) all, but not less than all, of the Advances then owing to such
Lender and all, but not less than all, of such Lender's rights and obligations
hereunder, without recourse to or warranty by, or expense to, such Lender, for a
purchase price equal to the outstanding principal amount of each such Advance
then owing to such Lender plus any accrued but unpaid interest thereon and any
accrued but unpaid fees owing thereto and, in addition, (A) all additional costs
reimbursements, expense reimbursements and indemnities, if any, owing in respect
of the Advances owed to such Lender hereunder, and all other accrued and unpaid
amounts owing to such Lender hereunder, at such time shall be paid to such
Lender and (B) the applicable processing and recordation fee under Section
9.07(a) for such assignment shall have been paid.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01. Conditions Precedent to Initial Borrowing. The
obligation of each Lender to make an Advance on the occasion of the initial
Borrowing hereunder is subject to the satisfaction of the following conditions
precedent concurrently with such Borrowing and on or prior to December 31, 1999:
<PAGE> 19
(a) The Lenders shall be satisfied with the legal structure
and capitalization of the Borrower, including the terms and conditions
of the charter and bylaws (or equivalent constitutive or governing
documents) of, and each class of Equity Interest in, the Borrower and
of each agreement or instrument relating to such structure or
capitalization.
(b) There shall have occurred (i) no Material Adverse Change
nor (ii) any other event that would reasonably be expected to have a
Material Adverse Effect, in each case since September 30, 1999.
(c) Since December 7, 1999 there shall have occurred no
material adverse change in the market for syndicated bank credit
facilities or a material disruption of, or a material adverse change
in, financial, banking or capital market conditions, in each case as
determined by the Agent and the Arranger in their sole discretion.
(d) Since December 7, 1999, there shall have occurred no
change in any Requirement of Law or in the administration or
interpretation thereof by any Governmental Authority charged with the
administration or interpretation thereof which would reasonably be
expected to subject the Borrower or any of its Subsidiaries to any
governmental regulation that would reasonably be expected to have a
Material Adverse Effect.
(e) There shall exist no action, suit, investigation,
litigation or proceeding of any kind pending or threatened before any
court, Governmental Authority or arbitrator (including, without
limitation, any Environmental Action) affecting the Borrower or any of
its Subsidiaries or any of the Facilities that (i) would reasonably be
expected to have a Material Adverse Effect or (ii) purports to affect
the legality, validity or enforceability of this Agreement or any Note.
(f) The Borrower shall have paid (or shall pay
contemporaneously with such Borrowing) all accrued fees and expenses of
the Agent, the Arranger and the Lenders (including the accrued fees and
expenses of counsel to the Agent and the Arranger).
(g) The Agent shall have received on or before the day of the
initial Borrowing the following, each dated such day (unless otherwise
specified), in form and substance satisfactory to the Agent (unless
otherwise specified) and (except for the Notes) in sufficient copies
for each Lender:
(i) The Notes payable to the order of the Lenders.
(ii) Certified copies of the consents of the Class A
Members of the Borrower approving or delegating authority to
approve the First Amendment, this Agreement and the Notes, and
of all documents evidencing other necessary action and
governmental and other third party approvals and consents, if
any, with respect to this Agreement and the Notes.
<PAGE> 20
(iii) A copy of a certificate of the Secretary of
State of the jurisdiction of organization of the Borrower,
dated reasonably near the date of such Borrowing, certifying
(A) as to a true and correct copy of the charter (or the
equivalent constitutive or governing documents) of the
Borrower and each amendment thereto on file in such
Secretary's office and (B) that (x) such amendments are the
only amendments to the Borrower's charter (or such equivalent
documents) on file in such Secretary's office, (y) the
Borrower has paid all franchise taxes to the date of such
certificate and (z) the Borrower is duly organized and in good
standing or presently subsisting under the laws of the State
of the jurisdiction of its organization.
(iv) A copy of a certificate in respect of the
Borrower and each of its Subsidiaries (except Empire Energy
Supply L.L.C.), from the office of the Secretary of State of
the State of New Jersey, dated reasonably near the date of the
Borrowing, certifying that each such Person is duly qualified
and in good standing as a foreign corporation or other entity
in such State and has filed all annual reports required to be
filed to the date of such certificate.
(v) A certificate of the Borrower, signed on behalf
of the Borrower by a Responsible Officer thereof, dated the
date of such Borrowing (the statements made in which
certificate shall be true on and as of the date of such
Borrowing), certifying as to (A) the absence of any amendments
to the charter (or the equivalent organizational or
constitutive documents) of the Borrower since the date of the
certification referred to in Section 3.01(g)(iii), a copy of
which shall be attached to such certificate, (B) a true and
correct copy of the bylaws (or the equivalent organizational
documents) of the Borrower as in effect on the date of such
Borrowing, a copy of which shall be attached to such
certificate, (C) the due organization and good standing of the
Borrower and the absence of any proceeding for the
dissolution, winding-up or liquidation (or any equivalent
thereof) of the Borrower or any of its Subsidiaries and (D)
the names and true signatures of the officers or
representatives of the Borrower authorized to sign this
Agreement and the Notes and the other certificates and
documents to be delivered hereunder and thereunder.
(vi) A certificate of the Borrower, signed on behalf
of the Borrower by a Responsible Officer thereof, dated the
date of such Borrowing (the statements made in which
certificate shall be true on and as of the date of the
Borrowing), certifying that:
(A) all of the representations and
warranties of the Borrower contained in this
Agreement or which are contained in any certificate,
document or financial or other statement furnished
hereunder or in connection herewith, shall be true
and correct in all material respects on and as of the
date of the initial Borrowing, before and after
giving effect to such
<PAGE> 21
Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date
(other than any such representations or warranties
that, by their terms, refer to a specific date other
than the date of such Borrowing, in which case as of
such specific date), and
(B) no event has occurred and is continuing,
or would result from the initial Borrowing or from
the application of the proceeds therefrom, that
constitutes a Default.
(vii) (A) Certified copies of the most recently
completed audited financial statements of the Borrower prior
to the date of the initial Borrowing, together with the
opinion of the Borrower's certified public accountants of
recognized standing delivered in connection with such
financial statements (which opinion shall include any
qualifications to such financial statements issued by such
accountants), and the most recently completed interim
financial statements of the Borrower, and (B) such other
financial, business and other information regarding the
Borrower, each Subsidiary of the Borrower and each of the
Facilities as the Lenders shall have requested, including,
without limitation, information as to possible contingent
liabilities, tax matters, environmental matters, obligations
under Plans, Multiemployer Plans and Welfare Plans, collective
bargaining agreements and other arrangements with employees,
audited annual financial statements dated December 31, 1998,
interim financial statements dated the end of the most recent
fiscal quarter for which financial statements are available
(or, in the event the Lenders' due diligence review reveals
material changes since such financial statements, as of a
later date within 45 days of the day of the initial
Borrowing), and forecasts prepared by management of the
Borrower, in form and substance satisfactory to the Lenders,
of balance sheets, income statements and cash flow statements
on a monthly basis for the first year following the day of the
initial Borrowing.
(viii) A certified copy of the Annual Operating
Budget of the Borrower and its Subsidiaries for fiscal year
2000.
(ix) A copy of the Fee Letter, duly executed by each
of the parties thereto.
(x) A favorable opinion of counsel to ENA in
substantially the form of Exhibit E-1 hereto and as to such
other matters as any Lender through the Agent may reasonably
request.
(xi) A favorable opinion of Vinson & Elkins L.L.P.,
counsel to the Borrower, in substantially the form of Exhibit
E-2 hereto and as to such other matters as any Lender through
the Agent may reasonably request.
<PAGE> 22
(xii) A favorable opinion of Shearman & Sterling,
counsel for the Agent, in form and substance satisfactory to
the Agent.
(xiii) Such other approvals, opinions or documents as
any Lender through the Agent may reasonably request.
SECTION 3.02. Conditions Precedent to Each Borrowing. The
obligation of each Lender to make an Advance on the occasion of each Borrowing
(including the initial Borrowing) shall be subject to the further conditions
precedent that on the date of such Borrowing (a) the following statements shall
be true (and each of the giving of the applicable Notice of Borrowing and the
acceptance by the Borrower of the proceeds of such Borrowing shall constitute a
representation and warranty by the Borrower that both on the date of such notice
and on the date of such Borrowing such statements are true):
(i) the representations and warranties contained in this
Agreement are true and correct in all material respects on and as of
such date, before and after giving effect to such Borrowing and to the
application of the proceeds therefrom, as though made on and as of such
date (other than any such representations or warranties that, by their
terms, refer to a specific date other than the date of such Borrowing,
in which case as of such specific date); and
(ii) no event has occurred and is continuing, or would result
from such Borrowing or from the application of the proceeds therefrom,
that constitutes a Default
and (b) the Administrative Agent shall have received such other approvals,
opinions or documents as any Lender through the Administrative Agent may
reasonably request.
SECTION 3.03. Conditions Precedent to Extension of Maturity
Date. The extension of the Maturity Date from the Initial Maturity Date to the
Extended Maturity Date pursuant to Section 2.03(b) shall be subject to the
satisfaction of the following conditions precedent concurrently with such
extension of the Maturity Date:
(a) The Borrower shall have paid all accrued fees and expenses
of the Agent, the Arranger and the Lenders (including fees and expenses
of counsel for the Agent and the Arranger) payable under or in
connection with the Fee Letter or this Agreement.
(b) Since the date of the initial Borrowing, there shall have
occurred no change in any Requirement of Law or in the administration
or interpretation thereof by any Governmental Authority charged with
the administration or interpretation thereof which would reasonably be
expected (i) to render such extension of the Maturity Date illegal or
(ii) to subject the Borrower, any Subsidiary of the Borrower or any of
the Facilities to any governmental regulation in connection therewith
that would reasonably be expected to have a Material Adverse Effect.
<PAGE> 23
(c) All Governmental Authorizations and third party consents
and approvals necessary in connection with the extension of the
Maturity Date shall have been obtained (without the imposition of any
conditions that are not acceptable to the Lenders) and shall remain in
effect, and no law or regulation shall be applicable in the judgment of
the Lenders, in each case that restrains, prevents or imposes
materially adverse conditions upon the extension of the Maturity Date
or the rights of the Borrower or any of its Subsidiaries freely to
transfer or otherwise dispose of any properties now owned or hereafter
acquired by any of them.
(d) There shall exist no action, suit, investigation,
litigation or proceeding of any kind pending or threatened before any
court, Governmental Authority or arbitrator (including, without
limitation, any Environmental Action) affecting the Borrower, any
Subsidiary of the Borrower or any of the Facilities that (i) would
reasonably be expected to have a Material Adverse Effect or (ii)
purports to affect the legality, validity or enforceability of this
Agreement or the Notes or such extension of the Maturity Date.
(e) Each of the following statements shall be true and the
Agent shall have received on or before the date of the extension of the
Maturity Date, a certificate of the Borrower, signed on behalf of the
Borrower by a Responsible Officer thereof, dated the Initial Maturity
Date (the statements made in which certificate shall be true on and as
of such date) certifying that (and the giving of such certificate shall
constitute a representation and warranty by the Borrower that both on
and as of the date of the extension of the Maturity Date) the following
statements are true:
(i) all of the representations and warranties of the
Borrower contained in this Agreement (other than those
contained in the final sentence of Section 4.01(g) hereof, the
first sentence of Section 4.01(h) hereof and in Section
4.01(cc) hereof), or which are contained in any certificate,
document or financial or other statement furnished hereunder
or in connection herewith, shall be true and correct in all
material respects on and as of the date of the extension of
the Maturity Date, before and after giving effect to such
extension, as though made on and as of such date (other than
any such representations or warranties that, by their terms,
refer to a specific date other than the date of the extension
of the Maturity Date, in which case as of such specific date);
(ii) since September 30, 1999 there has been no
Material Adverse Change;
(iii) neither any information memorandum prepared
after the date of the initial Borrowing in connection with the
syndication of the Advances, nor any representation, warranty
or other statement made after the date of the initial
Borrowing by the Borrower or any Subsidiary of the Borrower in
this Agreement, or
<PAGE> 24
in any certificate, statement, exhibit or report furnished
after the date of the initial Borrowing to the Agent, the
Arranger or any Lender by or on behalf of such Person pursuant
to the terms of or in connection with the negotiation of this
Agreement or in connection with the syndication of the
Advances, contains or contained any untrue statement of a
material fact or omits or omitted to state a material fact
necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were
made, not misleading; and
(iv) no event has occurred and is continuing, or
would result from the extension of the Maturity Date, that
constitutes a Default.
SECTION 3.04. Determinations Under Sections 3.01, 3.02 and
3.03. For purposes of determining compliance with the conditions specified in
Sections 3.01, 3.02 and 3.03, each Lender shall be deemed to have consented to,
approved or accepted or to be satisfied with each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to the Lenders unless an officer of the Agent responsible for the
transactions contemplated by this Agreement shall have received notice from such
Lender prior to such Borrowing or the extension of the Maturity Date, as the
case may be, specifying its objection thereto, and, in the case of any
Borrowing, such Lender shall not have made available to the Agent such Lender's
ratable portion of such Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties. The Borrower
represents and warrants as follows:
(a) The Borrower and each of its Subsidiaries (i) is a Person
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, (ii) is duly authorized or
licensed (A) in each jurisdiction in which it owns or leases property
or in which the conduct of its business requires it to so qualify or be
licensed except where the failure to so qualify or be licensed would
not reasonably be expected to have a Material Adverse Effect and (B) in
the State of New Jersey, and (iii) has all requisite power (corporate,
partnership or otherwise) and authority (including, without limitation,
all material Governmental Authorizations, licenses, permits and other
approvals) (A) to own or hold under lease and to operate all of its
property and assets, (B) to carry on its business as now conducted and
as proposed to be conducted and (C) in the case of the Borrower, to
execute, deliver and perform all of its Obligations under this
Agreement and the Notes. All of the outstanding Equity Interests in the
Borrower has been validly issued, is fully paid and non-assessable and
is owned by East Coast Power Holding Company, LLC, JEDI II, CalPERS and
Mesquite Investors L.L.C.
<PAGE> 25
(b) Set forth on Schedule 4.01(b) hereto is a complete and
accurate list of all Subsidiaries of the Borrower, showing as of the
date hereof (as to each such Subsidiary) the jurisdiction of its
organization, the number of shares or units of each class of its Equity
Interests authorized and the number outstanding (if applicable) on the
date hereof, the percentage of each such class of its Equity Interests
owned (directly or indirectly) by such Subsidiary, and the number of
shares or units covered by all outstanding options, warrants, rights of
conversion or purchase and similar rights at the date hereof. All of
the outstanding Equity Interests in the Borrower's Subsidiaries has
been validly issued, are fully paid and non-assessable and are owned by
the Borrower or one or more of its Subsidiaries.
(c) The execution, delivery and performance by the Borrower of
this Agreement and the Notes are within the Borrower's powers
(corporate or otherwise), have been duly authorized by all necessary
action (corporate or otherwise), and do not or will not:
(i) contravene the Borrower's charter or bylaws (or
similar constitutive or governing documents),
(ii) violate any Requirement of Law binding on or
applicable to the Borrower or any of its Subsidiaries or any
of their respective properties or assets or any of the
Facilities (including, without limitation, the Securities
Exchange Act of 1934, the Racketeer Influenced and Corrupt
Organizations Chapter of the Organized Crime Control Act of
1970, Regulation X of the Board of Governors of the Federal
Reserve System, the Investment Company Act of 1940, as
amended, PUHCA, PURPA, and the rules and regulations
promulgated by FERC and each applicable state regulatory
authority),
(iii) conflict with or result in the breach of, or
constitute a default under any contract, loan agreement,
indenture, mortgage, deed of trust, lease or other instrument
binding on or affecting the Borrower, any of its Subsidiaries
or any of their respective properties or assets or any of the
Facilities, or
(iv) result in or require the creation or imposition
of any Lien upon or with respect to any of the assets or
properties of the Borrower, any of its Subsidiaries or any of
the Facilities.
Neither the Borrower nor any of its Subsidiaries is in violation of any
such Requirement of Law or in breach of any such contract, loan
agreement, indenture, mortgage, deed of trust, lease or other
instrument, the violation or breach of which would reasonably be
expected to have a Material Adverse Effect.
(d) No authorization, approval, consent or other action by,
and no notice to or registration, recording or filing with, any
Governmental Authority or any other Person is
<PAGE> 26
required for the due execution, delivery or performance by the Borrower
of this Agreement or the Notes, except for the consents of the
Borrower's Class A Members, which have been duly obtained, taken, given
or made and are in full force and effect.
(e) This Agreement has been, and each of the Notes when
delivered hereunder will have been, duly executed and delivered by the
Borrower. This Agreement is, and each of the Notes when delivered
hereunder will be, the legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its
terms.
(f) There is no action, suit, investigation, litigation or
proceeding of any kind pending or threatened before any court,
Governmental Authority or arbitrator (including, without limitation,
any Environmental Action) affecting the Borrower, any of its
Subsidiaries or any of the Facilities that (i) would reasonably be
expected to have a Material Adverse Effect (other than the Disclosed
Litigation) or (ii) purports to affect the legality, validity or
enforceability of this Agreement or any Note, and there has been no
material adverse change in the status, or financial effect on the
Borrower, any of its Subsidiaries or any of the Facilities of the
Disclosed Litigation since December 15, 1999.
(g) The financial statements delivered to the Lenders pursuant
to Section 3.01(g)(vii), together in each case with the related
certified public accountants audit opinions, true and complete copies
of which have been furnished to each Lender, represent in each case the
most recently completed audited annual and unaudited interim financial
statements of the Borrower and each of its Subsidiaries and fairly
present, subject, in the case of such interim financial statements, to
normal year-end adjustments, the financial condition and results of
operations and changes in financial position of the Borrower and each
such Subsidiary as at the dates and for the periods indicated therein,
all in accordance with GAAP applied on a consistent basis. Since
September 30, 1999, there has been no Material Adverse Change.
(h) No representation, warranty or other statement made by the
Borrower in this Agreement, or in any certificate, statement, exhibit
or report furnished to the Agent, the Arranger or any Lender by or on
behalf of the Borrower pursuant to the terms of or in connection with
the negotiation of this Agreement contains or contained any untrue
statement of a material fact or omits or omitted to state a material
fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading. There are no facts or circumstances known to the Borrower
or any of its Subsidiaries which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect and
which have not been disclosed to the Arranger, the Agent and the
Lenders.
(i) The Borrower and each of its Subsidiaries is the legal and
beneficial owner of, and has good and marketable title to (subject to
the restrictions on transfer of ownership set forth in the Related
Documents), or a valid and enforceable leasehold interests in or
<PAGE> 27
easement on, all of its property and assets comprising part of any of
the Facilities (including, without limitation, works in progress at the
location of any of the Facilities) and all of their other material
property and assets, free and clear of all Liens, except for Liens that
are permitted to be incurred or to exist under Section 5.01(a).
(j) Neither the Borrower nor any of its Subsidiaries has
conducted any business or engaged in any activities other than (i) the
business of, and activities related to, the development, construction,
operation and maintenance of the Facilities or (ii) businesses and
activities otherwise permitted hereunder.
(k) The Borrower, each of its Subsidiaries and each of the
Facilities is in compliance with all applicable Requirements of Law,
except to the extent the failure to comply therewith would not be
reasonably expected to have a Material Adverse Effect.
(l) The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying Margin Stock, and no
proceeds of any Advance will be used to purchase or carry any Margin
Stock or to extend credit to others for the purpose of purchasing or
carrying any Margin Stock.
(m) Neither the Borrower, any of its Subsidiaries nor any of
their respective ERISA Affiliates has any Plans, Multiemployer Plans or
Welfare Plans.
(n) Neither the business nor the properties of the Borrower,
any of its Subsidiaries or any of the Facilities are affected by any
fire, explosion, accident, strike, lockout or other labor dispute,
drought, storm, hail, earthquake, embargo, act of God or of the public
enemy or other casualty (whether or not covered by insurance) that
would reasonably be expected to have a Material Adverse Effect.
(o) The operations and properties of the Borrower, each of its
Subsidiaries and each of the Facilities comply in all material respects
with all applicable Environmental Laws and Environmental Permits, all
past non-compliance with such Environmental Laws and Environmental
Permits has been resolved without ongoing material obligations or
costs, and no circumstances exist that would reasonably be expected to
(i) form the basis of an Environmental Action against the Borrower, any
of its Subsidiaries, any of their properties or any of the Facilities
that would reasonably be expected to have a Material Adverse Effect or
(ii) other than generally applicable provisions of ISRA, cause any such
property or Facility to be subject to any restrictions on ownership,
occupancy, use or transferability under any Environmental Law.
(p) None of the properties currently or formerly owned or
operated by the Borrower or any of its Subsidiaries (including, without
limitation, the Facilities) is listed or proposed for listing on the
NPL or on the CERCLIS or any analogous foreign, state or local list
(including, without limitation, the New Jersey Compensation and Control
Act, N.J. Stat.
<PAGE> 28
Ann. 58: 10-23.11 et seq.); there are no underground or aboveground
storage tanks or any surface impoundments, septic tanks, pits, sumps or
lagoons in which Hazardous Materials are being or have been treated,
stored or disposed on any property currently owned or operated by the
Borrower or any of its Subsidiaries (including, without limitation, the
Facilities) or, to the best of its knowledge, on any property formerly
owned or operated by any Subsidiary of the Borrower (including, without
limitation, the Facilities) in any manner that could reasonably be
expected to have a Material Adverse Effect; there is no asbestos or
asbestos-containing material on any property currently owned or
operated by the Borrower or any of its Subsidiaries (including, without
limitation, the Facilities) that in its present condition requires
removal or other remedial action under applicable Environmental Laws;
and Hazardous Materials have not been released, discharged or disposed
of on any property currently owned or operated by the Borrower or any
of its Subsidiaries (including, without limitation, the Facilities).
(q) Neither the Borrower nor any of its Subsidiaries is
undertaking, and has not completed, either individually or together
with other potentially responsible parties, any investigation or
assessment or remedial or response action relating to any actual or
threatened release, discharge or disposal of Hazardous Materials at any
site, location or operation (including, without limitation, the
Facilities), either voluntarily or pursuant to the order of any
Governmental Authority or the requirements of any Environmental Law,
except for such investigations, assessments or remedial or response
actions the existence of which would not reasonably be expected to have
a Material Adverse Effect; and all Hazardous Materials generated, used,
treated, handled or stored at, or transported to or from, any property
currently owned or operated by the Borrower, any of its Subsidiaries or
any of the Facilities have been disposed of in a manner not reasonably
expected to result in material liability to the Borrower, any of its
Subsidiaries or any of the Facilities.
(r) Neither the Borrower nor any of its Subsidiaries is a
party to any indenture, loan or credit agreement or any lease or other
agreement or instrument or subject to any charter or corporate
restriction that would be reasonably be expected to have a Material
Adverse Effect.
(s) The Borrower and each of its Subsidiaries and Affiliates
has filed, has caused to be filed or has been included in all tax
returns (federal, state, local and foreign) required to be filed and
has paid all taxes shown thereon to be due, together with applicable
interest and penalties.
(t) Neither the Borrower nor any of its Subsidiaries is an
"investment company", or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended. Neither the
making of any Advances, nor the application of the proceeds or
repayment thereof by the Borrower, will violate any provision of such
Act or any rule, regulation or order of the Securities and Exchange
Commission thereunder.
<PAGE> 29
(u) Other than NJ Venture, Linden Venture and Camden Cogen,
each of which is regulated under the Federal Power Act to the extent
provided in 18 C.F.R. ' 292.601(c), neither the Borrower nor any of its
Subsidiaries is, by reason of its ownership of any of the Facilities or
the operation thereof by it or any such Subsidiary, (i) subject to
regulation as a "public utility" under the Federal Power Act, an
"electric corporation" under New York law, or a "public utility" under
New Jersey law, or (ii) subject to regulation by the Securities and
Exchange Commission as a "holding company" or a "subsidiary company" of
a "holding company" under PUHCA; each of NJ Venture, Linden Venture and
Camden Cogen is exempt from all applicable state law or regulation
respecting the rates of "electric utilities" and the financial and
organizational regulation of "electric utilities," as such term is used
in 18 C.F.R. ' 292.602(c).
(v) Neither the Agent, the Arranger nor any Lender will,
solely by reason of (i) the ownership and operation of the Facilities
by the owners thereof or (ii) the making of the Advances hereunder, (A)
be subject to regulation as a "public utility" under the Federal Power
Act, an "electric corporation" under New York law, or a "public
utility" under New Jersey law, or (B) be subject to regulation by the
Securities and Exchange Commission as a "holding company" or a
"subsidiary company" of a "holding company" under PUHCA.
(w) Each Facility (i) is a Qualifying Facility, (ii) is
eligible for the benefit of the exemptions provided by 18 C.F.R. "
292.601 and 292.602 and (iii) is exempt from all regulation under PUHCA
(other than those regulations applicable to Qualifying Facilities) and
the New Jersey Department of Public Utilities Act of 1948, as amended;
and JEDI II and each of its Subsidiaries satisfy the ownership criteria
for a cogeneration facility set forth in 18 C.F.R ' 292.203(b).
(x) Set forth on Schedule 4.01(x) hereto is a complete and
accurate list of all Debt of the Borrower and its Subsidiaries (the
"Existing Debt"), showing as of the date hereof the principal amount
outstanding thereunder.
(y) Set forth on Schedule 4.01(y) hereto is a complete and
accurate list of all Material Contracts of the Borrower and its
Subsidiaries, showing as of the date hereof the parties, subject matter
and term thereof. Each such Material Contract has been duly authorized,
executed and delivered by all parties thereto, has not been amended or
otherwise modified, is in full force and effect and is binding upon and
enforceable against all parties thereto in accordance with its terms,
and there exists no default under any Material Contract by any party
thereto.
(z) Set forth on Schedule 4.01(z) hereto is a complete and
accurate list of all Investments of the Borrower and its Subsidiaries
(other than Investments by the Borrower or any of its Subsidiaries in
any of their respective Subsidiaries), showing as of the date hereof,
the amount, obligor or issuer and maturity, if any, thereof.
<PAGE> 30
(aa) Neither the Borrower nor any of its Subsidiaries is in
default under or with respect to any Related Document to which it is a
party in any respect which could reasonably be expected to (i) have a
Material Adverse Effect or (ii) materially adversely affect the ability
of the Borrower or any of its Subsidiaries to perform its obligations
under this Agreement, any Note or any Related Document to which it is a
party. No notice of default has been given to the Borrower or any of
its Subsidiaries under any of the Related Documents to which it is a
party. To the best knowledge of the Borrower, no default or incipient
default exists under any of the Related Documents that would reasonably
be expected to have a Material Adverse Effect. Each Power Purchase
Agreement is in full force and effect and no default or incipient
default has occurred thereunder. No Event of Loss has occurred.
(bb) The Borrower has (i) as of the date hereof, initiated a
review and assessment of all material areas within its and each of its
Subsidiaries' business and operations (including those affected by
major suppliers, vendors and customers) that could be adversely
affected by the risk that computer applications used by the Borrower or
any of its Subsidiaries (or any of their respective major suppliers,
vendors and customers) may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date
after December 31, 1999 (the "Year 2000 Problem"), (ii) as of the date
hereof, developed a plan and timeline for addressing the Year 2000
Problem on a timely basis and (iii) to date, implemented that plan in
accordance with that timetable. All computer applications (including,
to the Borrower's best knowledge based on such review and assessment to
date, those of major domestic suppliers, vendors and customers) that
are material to any of the business and operations of the Borrower or
any of its Subsidiaries are, as of the date hereof, reasonably expected
on a timely basis to be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000 ("Year 2000
Compliant"), except to the extent that a failure to do so could not
reasonably be expected to have a Material Adverse Effect.
ARTICLE V
COVENANTS
SECTION 5.01. Covenants. So long as any Lender shall have any
Commitment or any Advance shall remain unpaid:
(a) The Borrower will comply, and cause each of its
Subsidiaries to comply, (i) with each covenant set forth in Sections
801, 1004, 1005, 1006, 1007, 1008, 1009, 1013, 1014, 1016, 1018, 1019,
1020 and 1021 of the Indenture and (ii) through the Initial Maturity
Date, with the covenant set forth in Section 1012 of the Indenture, in
each case as the Indenture is in effect on the date hereof, without
giving effect to any amendment, termination or waiver thereof, unless
the Lenders shall otherwise consent in writing. Each such covenant and
the terms defined in the Indenture and used in such covenants are
incorporated by reference in this Agreement as fully as if set forth in
full herein; provided,
<PAGE> 31
however, that each of the terms "Default", "Event of Default",
"Material Adverse Effect", "Notes" and "Responsible Officer", as used
in such covenants, shall have the meaning set forth in this Credit
Agreement rather than the meaning set forth in the Indenture for
purposes of such covenants as incorporated herein; and provided,
further, that each of the terms "Company", "Indenture" and "Trustee",
as used in such covenants, shall mean "Borrower", "Credit Agreement"
and "Agent", respectively, for purposes of such covenants as
incorporated herein.
(b) Debt. The Borrower will not create, incur, assume or
suffer to exist, or permit any of its Subsidiaries to create, incur,
assume or suffer to exist, any Debt other than:
(i) Debt under this Agreement and the Notes;
(ii) the Existing Debt;
(iii) Debt in respect of hedging transactions to the
extent permitted under the Indenture; and
(iv) Debt incurred by NJ Venture from time to time
under a revolving credit facility with Southwest Bank of Texas
so long as the aggregate principal amount of such Debt
outstanding at any time does not exceed $5,000,000.
(c) Syndication. (i) The Borrower will actively assist, and
cause each of its Subsidiaries to actively assist, the Agent and the
Arranger in syndicating the Advances to one or more Eligible Assignees,
such assistance to include, without limitation: (A) providing, and
causing each of its Subsidiaries and their respective advisors to
provide, the Agent, the Arranger and the Lenders upon request with all
information reasonably deemed necessary by the Agent or the Arranger to
complete the syndication of the Advances, (B) assisting the Agent and
the Arranger, upon their reasonable request, in the preparation of an
Information Memorandum to be used in connection with the syndication of
the Advances and (C) otherwise assisting the Agent and the Arranger in
their syndication efforts, including by making available officers and
advisors of the Borrower and its Subsidiaries from time to time to
attend and make presentations regarding the business and prospects of
the Borrower, its Subsidiaries and the Facilities, as appropriate, at a
meeting or meetings of prospective Lenders; and (ii) until the
termination of the general syndication of the Advances (as determined
by the Arranger in its sole discretion), (x) subject to the provisions
of clause (y) below, the Borrower will work, and cause each of its
Subsidiaries to work, with the Agent and the Arranger in coordinating
the syndication (including the timing of such syndication) of the
Advances with similar syndications and issuances (or proposed
syndications or issuances) by any Subsidiaries of the Borrower
(including any renewals thereof) in the domestic capital or banking
markets in an attempt to mitigate any actual or potential material
market disruption affecting the syndication of the Advances (including
the timing of such syndications) and (y) not permit any Subsidiaries of
the Borrower to syndicate or issue, or
<PAGE> 32
attempt to syndicate or issue, any debt or equity facility (including,
without limitation, the Subordinated Loan Agreement) or security
(including any renewals thereof) in respect of any of the transactions
contemplated herein in the domestic or international capital or banking
markets.
(d) Use of Proceeds. The Borrower will use, and cause each of
its Subsidiaries to use, the proceeds of the Advances solely as
provided in Section 2.13.
SECTION 5.02. Additional Covenants if Maturity Date Is
Extended. In the event that the Maturity Date is extended pursuant to Section
3.03 and so long thereafter as any Advance shall remain unpaid:
(a) Prepayments, Etc., of Debt. The Borrower will not prepay,
redeem, purchase, defease or otherwise satisfy prior to the scheduled
maturity thereof in any manner, or make any payment in respect of, any
Debt, other than (i) the prepayment of the Advances and the payment of
interest and other amounts payable hereunder in accordance with the
terms of this Agreement, (ii) regularly scheduled or required
repayments or redemptions of Existing Debt, (iii) regularly scheduled
payments of interest on Existing Debt and (iv) required funding of
reserve accounts relating to Existing Debt; or amend, modify or change
in any manner any term or condition of any Existing Debt; or permit any
of its Subsidiaries to do any of the foregoing, other than to prepay
any Debt payable to the Borrower.
(b) Administrative Expenses. The Borrower will not, and will
not permit any of its Subsidiaries to, pay Administrative Expenses to
the extent not required to permit the Facility or Facilities owned
directly or indirectly by the Borrower or such Subsidiary and the
business and activities carried on in connection therewith to be
conducted at all times in accordance with prudent operating practices
in the electrical power production industry.
(c) Capital Expenditures. The Borrower will not, and will not
permit any of its Subsidiaries to, make any Capital Expenditures except
to the extent required to make (i) repairs, additions, replacements or
improvements to its properties and assets used in the conduct of its
business to the extent necessary to permit the Facility or Facilities
owned directly or indirectly by the Borrower or such Subsidiary and the
business and activities carried on in connection therewith to be
conducted at all times in accordance with prudent operating practices
in the electrical power production industry and (ii) regularly
scheduled payments required under that certain Agreement by and between
the Borrower, as addignee of ENA, and General Electric Company dated as
of February 4, 1999, as in effect on the date hereof.
(d) Distributions. To the extent not prohibited by the
documents governing the Existing Debt or by the Partnership Agreements,
the Borrower will cause each of its Subsidiaries to declare and pay
cash dividends or other cash distributions in respect of its Equity
Interests or repay or prepay in cash any Debt owed to, make loans or
advances in cash
<PAGE> 33
to, or otherwise transfer cash or make a cash investment in, the
Borrower or any other Subsidiary of the Borrower, in each case on or
prior to the final Business Day of September, 2000, and on or prior to
the Final Maturity Date, in an aggregate amount equal to the Available
Cash of such Subsidiary for the period from the Initial Maturity Date
through such final Business Day and for the period from such final
Business Day through the Final Maturity Date, respectively.
(e) Restricted Payments. The Borrower will not declare or pay
any dividends, purchase, redeem, retire, defease or otherwise acquire
for any of its Equity Interests now or hereafter outstanding, return
any capital to its stockholders, partners or members (or the equivalent
Persons thereof) as such, make any distribution of assets, Equity
Interests, obligations or securities to its stockholders, partners or
members (or the equivalent Persons thereof) as such or, except to the
extent required under Section 5.02(d) and except to the extent required
by the Partnership Agreements, permit any of its Subsidiaries to do any
of the foregoing, or permit any of its Subsidiaries to purchase,
redeem, retire, defease or otherwise acquire for value any Equity
Interests in the Borrower or to issue or sell any Equity Interests
therein.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following
events ("Events of Default") shall occur and be continuing:
(a) (i) the Borrower shall fail to pay any principal of any
Advance when the same shall become due and payable or (ii) the Borrower
shall fail to pay any interest on any Advance, or the Borrower shall
fail to make any other payment under this Agreement, in each case under
this clause (ii) within three Business Days after the same becomes due
and payable; or
(b) any representation or warranty made by the Borrower (or
any of its officers or representatives) under or in connection with
this Agreement (or contained in any certificate, document, financial or
other statement furnished hereunder or in connection herewith) shall
prove to have been incorrect in any material respect when made; or
(c) the Borrower shall fail to perform or observe any term,
covenant or agreement contained in Section 2.13, 5.01 or 5.02; or
(d) the Borrower or any of its Subsidiaries shall fail to
perform any other term, covenant or agreement contained in any Loan
Document on its part to be performed or observed if such failure shall
remain unremedied for 15 Business Days after the earlier of the
<PAGE> 34
date on which (i) a Responsible Officer of the Borrower becomes aware
of such failure or (ii) written notice thereof shall have been given to
the Borrower by the Agent or any Lender; or
(e) the Borrower or any of its Subsidiaries shall fail to pay
any principal of, premium or interest on or any other amount payable in
respect of any Debt that is outstanding in a principal amount (or, in
the case of any Hedge Agreement, an Agreement Value) of at least
$10,000,000 either individually or in the aggregate (but excluding Debt
outstanding hereunder) of such Person, when the same becomes due and
payable (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 Debt; or any other event shall occur or
condition shall exist under any agreement or instrument relating to any
such Debt and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event
or condition is to accelerate the maturity of such Debt or otherwise to
cause such Debt to mature; or any such Debt shall be declared to be due
and payable or required to be prepaid or redeemed (other than by a
regularly scheduled required prepayment or redemption), purchased or
defeased, or an offer to prepay, redeem, purchase or defease such Debt
shall be required to be made, in each case prior to the stated maturity
thereof; or
(f) the Borrower 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 any proceeding shall be
instituted by or against the Borrower or any of its Subsidiaries
seeking to adjudicate it a bankrupt or insolvent, or 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 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 that is (i) instituted against it (but not instituted by it)
and (ii) being diligently contested by it in good faith, either (A)
such proceeding shall remain undismissed or unstayed for a period of 30
days or (B) any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official
for, it or any substantial part of its property) shall occur; or the
Borrower or any of its Subsidiaries shall take any corporate,
partnership or equivalent action to authorize any of the actions set
forth above in this subsection (f); or
(g) any judgment or order for the payment of money in excess
of $5,000,000 shall be rendered against the Borrower or any of its
Subsidiaries and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there
shall be any period of 10 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
<PAGE> 35
(h) any non-monetary judgment or order shall be rendered
against the Borrower or any of its Subsidiaries that would reasonably
be expected to have a Material Adverse Effect and there shall be any
period of 30 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; or
(i) a default under any Related Document on the part of the
Borrower or any Subsidiary of the Borrower shall have occurred and any
applicable grace period provided therein shall have expired; or a
default under any Related Document on the part of any other Person
shall have occurred, any applicable grace period provided therein shall
have expired and such default could reasonably be expected to have a
Material Adverse Effect; or, except in accordance with its terms and to
the extent no Material Adverse Effect would be reasonably expected to
result therefrom, any of the Related Documents shall have been revoked
or terminated, or for any reason shall cease to be in full force and
effect; or
(j) (i) any Governmental Authority shall take any action (A)
to displace the management or owners of the Borrower, any Subsidiary of
the Borrower or any Facility from carrying on any substantial part of
its business or operations or (B) to impair the Borrower or any
Subsidiary of the Borrower from performing any of its respective
Obligations under this Agreement or any Related Document to which it is
a party or (ii) any material Governmental Authorization or Third Party
Consent shall have been effectively revoked, rescinded, withdrawn or
terminated or otherwise shall cease to be in full force and effect; or
(k) any ERISA Event shall have occurred with respect to a Plan
of the Borrower, any of its Subsidiaries or any of their respective
ERISA Affiliates and the sum (determined as of the date of occurrence
of such ERISA Event) of the Insufficiency of such Plan and the
Insufficiency of any and all other such Plans with respect to which an
ERISA Event shall have occurred and then exist (or the liability of
such Person and its ERISA Affiliates related to such ERISA Event)
exceeds $5,000,000; or
(l) the Borrower, any of its Subsidiaries or any of their
respective ERISA Affiliates shall have been notified by the sponsor of
a Multiemployer Plan of such Person or any of its ERISA Affiliates that
it has incurred Withdrawal Liability to such Multiemployer Plan in an
amount that, when aggregated with all other amounts required to be paid
to Multiemployer Plans by such Person and its ERISA Affiliates as
Withdrawal Liability (determined as of the date of such notification),
exceeds $5,000,000 or requires payments exceeding $1,000,000 per annum;
or
(m) the Borrower, any of its Subsidiaries or any of their
respective ERISA Affiliates shall have been notified by the sponsor of
a Multiemployer Plan of such Person or any of its ERISA Affiliates that
such Multiemployer Plan is in reorganization or is being terminated,
within the meaning of Title IV of ERISA, and as a result of such
reorganization or termination the aggregate annual contributions of
such Person and its ERISA Affiliates to all Multiemployer Plans of such
Person and its ERISA Affiliates that are then in
<PAGE> 36
reorganization or being terminated have been or will be increased over
the amounts contributed to such Multiemployer Plans for the plan years
of such Multiemployer Plans immediately preceding the plan year in
which such reorganization or termination occurs by an amount exceeding
$1,000,000; or
(n) (i) any Termination Event set forth in clause (ii), (iv)
or (v) of the definition thereof with respect to a Plan of ENA or any
of its ERISA Affiliates shall have occurred and, 30 days after notice
thereof shall have been given to ENA by the Agent, (A) such Termination
Event shall still exist and (B) the sum (determined as of the date of
occurrence of such Termination Event) of the liabilities to the PBGC
resulting from all such Termination Events is equal to or greater than
$50,000,000; or
(ii) ENA or any of its ERISA Affiliates shall have been
notified by the sponsor of a Multiemployer Plan of such Person that it
has incurred Withdrawal Liability to such Multiemployer Plan in an
amount which, when aggregated with all other amounts required to be
paid to Multiemployer Plans of such Person in connection with
Withdrawal Liabilities (determined as of the date of such
notification), exceeds $50,000,000; or
(iii) ENA or any of its ERISA Affiliates shall have been
notified by the sponsor of a Multiemployer Plan of such Person that
such Multiemployer Plan is in reorganization or is being terminated,
within the meaning of Title IV of ERISA, if as a result of such
reorganization or termination the aggregate annual contributions of ENA
and its ERISA Affiliates to all Multiemployer Plans of such Persons
which are then in reorganization or being terminated have been or will
be increased over the amounts contributed to such Multiemployer Plans
for the respective plan years which include December 31, 1997 by an
amount exceeding $50,000,000 in the aggregate; or
(o) a Change of Control shall have occurred; or
(p) an Event of Loss shall have occurred; or
(q) a "Special Event" (as defined in any of the Partnership
Agreements) shall have occurred; or
(r) any of the Facilities shall (i) cease to be a Qualifying
Facility, (ii) cease to be eligible for the benefit of the exemptions
provided by 18 C.F.R. 292.601 or (iii) cease to be exempt from all
regulation under PUHCA and the New Jersey Department of Public
Utilities Act of 1948, as amended, unless, in the opinion of the
Supermajority Lenders, such occurrence would not reasonably be expected
to have a Material Adverse Effect; or
(s) the immediate owner of the Borrower, the Borrower or any
of the Borrower's Subsidiaries shall fail to satisfy the ownership
criteria for a cogeneration facility set forth in
<PAGE> 37
18 C.F.R ' 292.203(b), unless, in the opinion of the Supermajority
Lenders, such failure would not reasonably be expected to have a
Material Adverse Effect; or
(t) the Borrower or any of the Borrower's Subsidiaries shall
abandon any of the Facilities;
then, and in any such event, the Agent shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the Notes,
all interest thereon and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Notes, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower; provided, however, that in the event of an actual or
deemed entry of an order for relief with respect to the Borrower under the
Federal Bankruptcy Code, the Notes, all such interest and all such amounts shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower; and provided, further, however, that unless and until the Senior
Debt has been paid in full or the principal of the Senior Secured Notes has been
accelerated pursuant to Section 5.02 of the Indenture, the Required Lenders
shall not take any action to accelerate the maturity of the Subordinated Debt
pursuant to this Section 6.01 or the Notes.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action. Each Lender hereby
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under this Agreement and the Notes as are
delegated to the Agent by the terms hereof and thereof, together with such
powers and discretion as are reasonably incidental thereto. As to any matters
not expressly provided for by this Agreement (including, without limitation,
enforcement or collection of the Notes), the Agent shall not be required to
exercise any discretion or take any action, but the Agent shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding upon all Lenders and all holders of Notes;
provided, however, that the Agent shall not be required to take any action that
exposes the Agent to personal liability or that is contrary to this Agreement or
applicable law or unless it shall first be indemnified to its satisfaction by
the Lenders against any and all liability and expense which may be incurred by
it by reason of taking such action. The Agent agrees to give to each Lender
prompt notice of each notice given to it by the Borrower pursuant to the terms
of this Agreement.
SECTION 7.02. Agents' Reliance, Etc. Neither the Agent nor any
of its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement or the Notes, except for its or their own gross negligence
<PAGE> 38
or willful misconduct. Without limitation of the generality of the foregoing,
the Agent: (a) may treat the payee of any Note as the holder thereof until the
Agent receives and accepts an Assignment and Acceptance entered into by the
Lender that is the payee of such Note, as assignor, and an Eligible Assignee, as
assignee, as provided in Section 8.07; (b) may consult with legal counsel
(including counsel for the Borrower), independent public accountants and other
experts selected by it, shall not be liable for any action taken or omitted to
be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts, and shall not be responsible for the negligence or
misconduct of any counsel, accountants and other experts selected by it without
gross negligence or wilful misconduct; (c) makes no warranty or representation
to any Lender and shall not be responsible to any Lender for any recitals,
statements, warranties or representations (whether written or oral) made in or
in connection with this Agreement or any certificate or any other document
referred to or provided for in, or received under, this Agreement, or for the
value, validity, effectiveness, genuineness, enforceability, or sufficiency of
this Agreement, or any other document referred to or provided for herein or for
any failure by the Borrower to perform any of its obligations hereunder; (d)
shall not be responsible for or have any duty to ascertain, inquire into or
verify the performance or observance of any of the terms, covenants or
conditions of this Agreement or the Notes on the part of the Borrower or to
inspect the property (including the books and records) of the Borrower or any of
its Subsidiaries or Affiliates; (e) shall not be responsible to any Lender for
the due execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement or the Notes or any other instrument or document
furnished pursuant hereto; (f) shall incur no liability under or in respect of
this Agreement or the Notes by acting or refraining from acting upon any notice,
consent, certificate, resolution, statement, request, order, approval, opinion
or other instrument or writing (which may be by telegram, telecopy or telex)
believed by it to be genuine and signed or sent by the proper party or parties;
(g) shall not be required to initiate or conduct any litigation or collection
proceedings under this Agreement or the Notes; and (h) shall not be under any
obligation to undertake or omit to be undertaken any action or duty in
connection with this Agreement or the Notes if it does not reasonably believe it
has been first provided with an indemnity from parties satisfactory to it (and
in addition to any indemnity provided for herein). The Agent shall not be liable
for any error of judgment or for any act done or omitted to be done by it in
good faith or for any mistake of fact or law, or for anything which it may do or
refrain from doing, except for its own gross negligence or willful misconduct.
SECTION 7.03. Bank of America and Affiliates. With respect to
its Commitment, the Advances made by it and the Notes issued to it, Bank of
America (and any successor acting as Agent) shall have the same rights and
powers under this Agreement and the Notes as any other Lender and may exercise
the same as though it were not an Agent; and the terms "Lender" and "Lenders"
shall, unless otherwise expressly indicated, include Bank of America (or such
successor) in its individual capacity. Bank of America (and any successor acting
as Agent) and its Affiliates may (without having to account therefor to any
Lender) accept deposits from, lend money to, make investments in, provide
services to, act as trustee under indentures of, accept investment banking
engagements from and generally engage in any kind of business with, the Borrower
or any of its Subsidiaries or Affiliates and any Person who may do business with
or own securities of the Borrower or any such Subsidiary or Affiliate, all as if
it were not an Agent, and Bank of America (and any
<PAGE> 39
successor acting as Agent) and its Affiliates may accept fees and other
consideration from the Borrower or any of its Subsidiaries or Affiliates for
services in connection with this Agreement or otherwise without any duty to
account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges
that it has, independently and without reliance upon any Agent or any other
Lender and based on the financial statements referred to in Section 4.01 and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon any Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement. The Agent shall not be required to keep
itself informed as to the performance or observance by the Borrower of this
Agreement or any other document referred to or provided for herein or to inspect
the properties or books of the Borrower or any of its Affiliates. Except for
notices, reports and other documents and information expressly required to be
furnished to the Lenders by the Agent hereunder (as to which such Agent only
shall have the duty to forward what it has received), the Agent shall have no
duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition or business of the
Borrower or any of its Affiliates that may come into its possession or that of
any of its Affiliates.
SECTION 7.05. Indemnification. (a) Each Lender severally
agrees to indemnify the Agent and its officers, directors, agents and employees
(to the extent not promptly reimbursed by the Borrower, but without limiting the
obligations of the Borrower hereunder) from and against such Lender's ratable
share (determined as provided below) of any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including attorneys' fees and expenses) or disbursements of any kind or nature
whatsoever that may be imposed on, incurred by, or asserted against the Agent
(including by any Lender) in any way relating to or arising out of this
Agreement or the Notes, out of any document or transaction contemplated
hereunder or hereby or any action taken or omitted by such Agent under this
Agreement or the Notes, in each case whether or not such liability, obligation,
loss, damage, penalty, action, judgment, suit, cost, expense or disbursement is
imposed on, incurred by or asserted against the Agent by the Borrower, its
directors, shareholders or creditors or any Lender, or any Lender is a party
thereto, and whether or not any Borrowing occurs; provided, however, that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from such Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender agrees to reimburse the Agent promptly
upon demand for its ratable share of any costs and expenses (including, without
limitation, fees and expenses of counsel) payable by the Borrower under Section
9.04, to the extent that such Agent is not promptly reimbursed for such costs
and expenses by the Borrower. The agreements contained in this Section 7.05
shall survive payment in full of the Advances and all other amounts payable
under this Agreement and the Notes and the termination of this Agreement.
<PAGE> 40
(b) For purposes of this Section 7.05, the Lenders' respective
ratable shares of any amount shall be determined, at any time, according to the
sum of the aggregate principal amount of the Advances outstanding at such time
and owing to the respective Lenders or, if no Advances are at the time
outstanding, according to the aggregate Commitments at such time of the
respective Lenders. The failure of any Lender to reimburse any Agent promptly
upon demand for its ratable share of any amount required to be paid by such
Lender to the Agent as provided herein shall not relieve any other Lender of its
obligation hereunder to reimburse the Agent for its ratable share of such
amount, but no Lender shall be responsible for the failure of any other Lender
to reimburse the Agent for such other Lender's ratable share of such amount.
Without prejudice to the survival of any other agreement of any Lender
hereunder, the agreement and obligations of each Lender contained in this
Section 7.05 shall survive the payment in full of principal, interest and all
other amounts payable hereunder and under the Notes.
SECTION 7.06. Successor Agents. The Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrower and may be
removed at any time with or without cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days after
the retiring Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders appoint, or petition any court of competent jurisdiction to appoint, a
successor Agent, which shall be a commercial bank organized under the laws of
the United States or of any State thereof and having a combined capital and
surplus of at least $250,000,000. Upon the acceptance of any appointment as an
Agent hereunder by a successor Agent, such successor Agent shall succeed to and
become vested with all the rights, powers, discretion, privileges and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations under this Agreement and the Notes. After the retiring Agent's
resignation or removal hereunder as an Agent, the provisions of this Article VII
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Agent under this Agreement.
ARTICLE VIII
SUBORDINATION PROVISIONS
SECTION 8.01. Subordinated Debt Subordinated to Senior Debt.
The Borrower and the Lenders agree that the payment of the Subordinated Debt 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 Senior Debt. 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
Debt, and each such Person shall be entitled to enforce such provisions.
<PAGE> 41
SECTION 8.02. Borrower Not to Make Payments with Respect to
Subordinated Debt in Certain Circumstances. (a) Upon the maturity of all of the
principal of the Senior Debt by lapse of time, acceleration (unless rescinded or
annulled) or otherwise, all Senior Debt 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 Debt in cash in a manner satisfactory to all of the
holders of such Senior Debt, 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 the Borrower on account of the Subordinated
Debt and before the Borrower is entitled to acquire, directly or indirectly, any
portion of Subordinated Debt.
(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 the Borrower on account of
the Subordinated Debt and (ii) the Borrower shall not acquire, directly or
indirectly, any of the Subordinated Debt. If, during the occurrence and
continuance of an Event of Default hereunder due to an Insolvency Event with
respect to the Borrower, the holders of the Senior Debt have been prohibited
from accelerating the Senior Debt, then such prohibition shall be deemed to
constitute an Indenture Default under this Section 8.02(b).
(c) In the event that notwithstanding the provisions of this
Section 8.02, the Borrower shall make any payment to any of the Lenders on
account of the Subordinated Debt or acquire any of the Subordinated Debt or any
of the Lenders shall receive or retain any such payment at any time when such
acquisition or payment is prohibited pursuant to clauses (a) and (b) of this
Section 8.02, then, such payment shall be held by such Lender in trust for the
benefit of, and shall be paid forthwith over and delivered to, the holders of
Senior Debt (pro rata as to each of such holders on the basis of the respective
amounts of Senior Debt held by them) or their representative under the
Indenture, as their respective interests may appear, for application to the
payment of all Senior Debt remaining unpaid to the extent necessary to pay in
full all Senior Debt in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Debt.
SECTION 8.03. Subordinated Debt Subordinated to Prior Payment
of All Senior Debt on Dissolution, Liquidation or Reorganization for the Benefit
of Creditors of Borrower. Upon any distribution of assets of the Borrower in any
dissolution, winding up, liquidation or reorganization for the benefit of
creditors of the Borrower (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors or otherwise):
(a) the holders of all Senior Debt shall first be entitled to
receive payments in full of all amounts in respect of Senior Debt (including
without limitation interest accruing after the commencement of any such
proceeding at the rate specified in the documentation governing the terms of the
Senior Debt) in cash or cash equivalents or in a manner satisfactory to all of
its holders
<PAGE> 42
before (i) any Lender is 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 the Borrower on account of the
Subordinated Debt and (ii) the Borrower is entitled to acquire, directly or
indirectly, any of the Subordinated Debt;
(b) any payment or distribution of assets of the Borrower of
any kind or character, (whether in cash, property or securities or by set-off or
otherwise (other than Replacement Subordinated Securities)), to which any Lender
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 to the holders of the Senior Debt or their representative
under the Indenture (pro rata as to each such holder, on the basis of the
respective amounts of unpaid Senior Debt held by each), to the extent necessary
to make payment in full of all amounts in respect of the Senior Debt remaining
unpaid, after giving effect to any concurrent payment or distribution to or for
the benefit of the holders of such Senior Debt, except that the Lenders shall be
entitled to receive Replacement Subordinated Securities;
(c) in the event that, notwithstanding the foregoing
provisions of this Section 8.03, any direct or indirect payment or distribution
of assets of the Borrower 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 Debt
or in connection with the acquisition of any Note by the Borrower before all
Senior Debt 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 Debt 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 Debt,
after giving effect to any concurrent payment or distribution to or for the
benefit of the holders of such Senior Debt, except that the Lenders shall be
entitled to receive Replacement Subordinated Securities; and
(d) the Borrower shall give prompt written notice to the Agent
and the Lenders of any dissolution, winding up, liquidation or reorganization of
Borrower.
SECTION 8.04. Lenders to be Subrogated to Rights of Holders of
Senior Debt. Subject to the payment in full, in cash or cash equivalents, of all
Senior Debt, the Lenders shall be subrogated equally and ratably to the rights
of the holders of the Senior Debt to receive payments or distributions of assets
of the Borrower (whether in cash, property or securities or by set-off or
otherwise), applicable to the Senior Debt until all amounts owing on the Senior
Debt shall be paid in full, and for the purpose of such subrogation no payments
or distributions to the holders of the Senior Debt by or on behalf of the
Borrower or by or on behalf of the Lenders by virtue of this Article which
otherwise would have been made to any Lender shall, as between the Borrower, its
creditors other than holders of the Senior Debt, and the Lenders be deemed to be
payment by the Borrower to or on account of the Subordinated Debt.
<PAGE> 43
SECTION 8.05. Subordinated Debt Unconditional. (a) The
provisions of this Article are intended solely for the purpose of defining the
relative rights of the Lenders, on the one hand, and the holders of the Senior
Debt, on the other hand, and nothing contained in this Article or elsewhere in
this Agreement is intended to or shall impair as between the Borrower, its
creditors other than holders of Senior Debt, and the Lenders, the obligation of
the Borrower, which is absolute and unconditional, to pay to the Lenders the
principal of interest on the Advances 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 the Lenders and creditors of the Borrower other than the
holders of the Senior Debt, nor shall anything herein or therein prevent any
Lender from exercising all remedies otherwise permitted by applicable law upon
default under this Agreement, subject to the rights, if any, under this Article
VIII, of the holders of Senior Debt in respect of cash, property, or securities
of the Borrower received upon the exercise of such remedy. Upon any distribution
of assets of the Borrower referred to in this Article VIII, the 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 such distribution for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of the Senior Debt and other Debt of the Borrower, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon, and all
other facts pertinent thereto or to this Article VIII.
(b) Nothing contained in this Article VIII or elsewhere in
this Agreement or in the Notes is intended to or shall affect the obligation of
the Borrower to make, or prevent the Borrower from making, at any time except
during the pendency of any liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of the Borrower or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, and except during the continuance of any Indenture Default specified in
Section 8.02 (not cured or waived), payments at any time of the principal of or
interest on the Notes.
SECTION 8.06. Subordination Rights Not Impaired by Acts or
Omissions of Borrower or Holders of Senior Debt. The right or interest of any
present or future holders of any Senior Debt, and all agreements and obligations
of the 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 Debt, 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 Debt; (c)
any other circumstance which might otherwise constitute a defense available to
or discharge of any Lender in respect of the provisions of this Article VIII; or
(d) any act or failure to act on the part of the Borrower or by any act or
failure to act by any holder of the Senior Debt, or by any noncompliance by the
Borrower with the terms of this Agreement, regardless of any knowledge thereof
which any holder of Senior Debt may have or be otherwise charged with.
<PAGE> 44
SECTION 8.07. Article Not to Prevent Events of Default. The
failure to make a payment on account of principal of or interest on any
Subordinated Debt 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 8.08. Other Provisions Subject Hereto. Except as
expressly stated in this Article VIII, notwithstanding anything contained in
this Agreement to the contrary, all provisions of this Agreement are subject to
the provisions of this Article VIII. The provisions of this Article VIII shall
continue to be effective or shall be reinstated, as the case may be, if at any
time any payment in respect of Senior Debt is rescinded or must otherwise be
returned on the insolvency, bankruptcy or reorganization of the Borrower or
otherwise, all as though such payment had not been made.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Notes, nor consent to any departure by the
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Required Lenders, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that no amendment, waiver or consent shall,
unless in writing and signed by all of the Lenders, do any of the following at
any time: (i) amend or waive any of the conditions specified in Article III;
(ii) change the number of Lenders or the percentage of (A) the Commitments or
(B) the aggregate unpaid principal amount of the Advances that, in each case,
shall be required for the Lenders or any of them to take any action hereunder;
(iii) reduce or limit the obligations of the Borrower under this Agreement or
the Notes; (iv) amend this Section 9.01; (v) increase the Commitments of the
Lenders or subject the Lenders to any additional obligations; (vi) reduce the
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder; (vii) postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder or amend
Section 2.06; (viii) amend, waive or otherwise modify the provisions of Section
5.01 or 5.02 or of Article III; or (ix) amend, waive or otherwise modify any of
the terms of subordination contained in, or any term relating to the date on
which any payment may be made under, the Subordinated Loan Agreement or any
definitions relating thereto; and provided further that no amendment, waiver or
consent shall, unless in writing and signed by the appropriate Agent in addition
to the Lenders required above to take such action, affect the rights, immunities
or duties of such Agent under this Agreement.
SECTION 9.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including
telegraphic, telecopy or telex communication) and mailed, telegraphed,
telecopied, telexed or delivered:
<PAGE> 45
(a) if to the Borrower, at its address at 711 Louisiana
Street, Suite 3200, Houston, Texas 77002, Telecopier No.:
(713)345-9702, Telephone No.: (713)345-9709, Attention: Christine Lee;
(b) if to any Initial Lender or at its Domestic Lending Office
specified opposite its name on Schedule I hereto;
(c) if to any other Lender, at its Domestic Lending Office
specified in the Assignment and Acceptance pursuant to which it became
a Lender; and
(d) if to the Agent, at its address at Bank of America
Corporate Center, 100 North Tryon Street, NC1-007-10-07, Charlotte,
North Carolina 28255, Telecopier No.: (704) 386-3324, Telephone No.:
(704) 388-6833, Attention: Laura Ryan;
or, as to the Borrower and each of the Agents, at such other address as shall be
designated by such party in a written notice to the other parties and, as to
each other party, at such other address as shall be designated by such party in
a written notice to the Borrower and each of the Agents. All such notices and
communications shall, when mailed, telegraphed, telecopied or telexed, be
effective when deposited in the mails, delivered to the telegraph company,
transmitted by telecopier or confirmed by telex answerback, respectively, except
that notices and communications to any Agent pursuant to Article II, III or VII
shall not be effective until received by such Agent. Delivery by telecopier of
an executed counterpart of any amendment or waiver of any provision of this
Agreement or the Notes or of any Exhibit hereto to be executed and delivered
hereunder shall be effective as delivery of a manually executed counterpart
thereof.
SECTION 9.03. No Waiver; Remedies. No failure on the part of
the Agent or any Lender to exercise, and no delay in exercising, any right,
power or privilege hereunder or under any Note shall operate as a waiver thereof
or a consent thereto; nor shall any single or partial exercise of any such
right, power or privilege preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The remedies herein provided
are cumulative and not exclusive of any remedies provided by law.
SECTION 9.04. Costs and Expenses. (a) The Borrower agrees to
pay on demand (i) all reasonable out-of-pocket costs and expenses of the Agent
incurred from time to time in connection with the preparation, execution,
delivery, administration, modification and amendment of this Agreement and the
Notes (including, without limitation, (A) all due diligence, syndication,
transportation, computer, duplication, appraisal, audit, insurance, consultant,
search, filing and recording fees and expenses) and (B) the reasonable fees and
expenses of counsel for the Agent with respect thereto, with respect to advising
the Agent as to its rights and responsibilities under this Agreement and the
Notes, with respect to negotiations with the Borrower or with other creditors of
the Borrower or any of its Subsidiaries arising out of any Default or any events
or circumstances that may give rise to a Default and with respect to presenting
claims in or otherwise participating in or monitoring any bankruptcy, insolvency
or other similar proceeding involving creditors' rights
<PAGE> 46
generally and any proceeding ancillary thereto) and (ii) all costs and expenses
of the Agent and the Lenders in connection with the enforcement of this
Agreement and the Notes, 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 (including, without
limitation, the fees and expenses of counsel for the Agent and each Lender with
respect thereto).
(b) The Borrower agrees to indemnify and hold harmless the
Agent, the Arranger and each Lender and each of their Affiliates and each of
their respective officers, directors, employees, agents, advisors and
representatives (each, an "Indemnified Party"), from and against any and all
claims, penalties, damages, losses, liabilities, obligations, costs, expenses
and disbursements (including, without limitation, reasonable fees and expenses
of counsel), joint or several, of any kind or nature whatsoever, that may be
imposed upon, incurred by or asserted or awarded against any Indemnified Party,
in any way relating to, arising out of or in connection with or by reason of
(including, without limitation, in connection with any investigation, litigation
or proceeding or preparation of a defense, action, consent agreement, consent
decree, consent order or demand in connection therewith) (i) any of the matters
contemplated by this Agreement, including, without limitation, the operation and
maintenance of the Facilities by Subsidiaries of the Borrower, (ii) the
Commitments of the Lenders and the engagement of the Agent and the Arranger
hereunder, (iii) the actual or proposed use of the proceeds of the Advances,
(iv) any information memorandum or the other information prepared or approved by
the Borrower or any of its Affiliates and made available to third parties in
connection with the transactions contemplated hereby (including, without
limitation, arising out of or based upon any misstatement or alleged
misstatement of a material fact or omission or alleged omission to state a
material fact in any verbal or written communication made in connection with the
transactions contemplated hereby made by the Borrower or any of its
Subsidiaries), (v) any default or alleged default, or any act or failure to act,
or any alleged act or failure to act, by the Borrower in the performance of any
of its Obligations under this Agreement, any of the Notes or any Related
Documents to which it is a party or any related claim or investigation,
litigation or proceeding (including any arising out of any negligence of any
Indemnified Party) or (vi) the actual or alleged presence of Hazardous Materials
on any property of the Borrower or any of its Subsidiaries, including any of the
Facilities, or any Environmental Action relating in any way to the Borrower or
any of its Subsidiaries, in each case whether or not such action, consent
agreement, consent decree, consent order, demand, investigation, litigation,
proceeding or suit is brought by the Borrower or any of its directors,
shareholders, creditors or Affiliates or by an Indemnified Party or an
Indemnified Party is otherwise a party thereto and whether or not any of the
transactions contemplated hereby are consummated, except to the extent such
claim, penalty, damage, loss, liability, obligation, cost, expense or
disbursement is found in a final, non-appealable judgment by a court of
competent jurisdiction to have resulted directly and primarily from such
Indemnified Party's gross negligence or wilful misconduct; provided, however,
that in no event shall the Borrower be liable for any Indemnified Party's loss
of profits, business or anticipated savings or for any special, indirect,
consequential or punitive damages whatsoever, other than any such losses or
damages imposed upon or asserted or awarded against any Indemnified Party by a
third party (except to the extent such losses or damages are found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
directly and primarily from such
<PAGE> 47
Indemnified Party's gross negligence or wilful misconduct). The Borrower also
agrees that no Indemnified Party shall have any liability (whether direct or
indirect, in contract or tort or otherwise) to the Borrower or any of its
security holders, creditors or Affiliates arising out of, related to or in
connection with this Agreement, the Notes, the Related Documents or any of the
transactions contemplated hereby or thereby, whether or not any such transaction
is consummated, except to the extent that such liability is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
directly and primarily from such Indemnified Party's gross negligence or willful
misconduct; provided, however, that in no event shall any Indemnified Party be
liable to the Borrower or any of its security holders, creditors or Affiliates
for any loss of profits, business or anticipated savings or for any special,
indirect, consequential or punitive damages whatsoever.
(c) If any payment of principal of, or Conversion of, any
Eurodollar Rate Advance is made by the Borrower to or for the account of a
Lender other than on the last day of the Interest Period for such Advance, as a
result of a payment or Conversion pursuant to Section 2.05, 2.08(b)(i) or
2.09(d), acceleration of the maturity of the Notes pursuant to Section 6.01 or
for any other reason, the Borrower shall, upon demand by such Lender (with a
copy of such demand to the Agent), pay to the Agent for the account of such
Lender any amounts required to compensate such Lender for any additional losses,
costs or expenses that it may reasonably incur as a result of such payment,
including, without limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by any Lender to fund or maintain such Advance.
(d) If the Borrower fails to pay when due any costs, expenses
or other amounts payable by it under this Agreement or the Notes, including,
without limitation, fees and expenses of counsel and indemnities, such amount
may be paid on behalf of the Borrower by the Agent or any Lender, in its sole
discretion.
(e) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in Sections 2.09 and 2.11 and this Section 9.04 shall survive the
payment in full of principal, interest and all other amounts payable hereunder
and under the Notes.
SECTION 9.05. Right of Set-off. Upon (a) the occurrence and
during the continuance of any Event of Default and (b) the making of the request
or the granting of the consent specified by Section 6.01 to authorize the Agent
to declare the Notes due and payable pursuant to the provisions of Section 6.01,
each Lender and each of its respective Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and otherwise apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Lender or such Affiliate to or for the credit or the account of the
Borrower against any and all of the Obligations of the Borrower now or hereafter
existing under this Agreement and the Note or Notes (if any) held by such
Lender, irrespective of whether such Lender shall have made any demand under
this Agreement or such Note or Notes and although such obligations may be
unmatured. Each Lender agrees promptly to notify the Borrower
<PAGE> 48
after any such set-off and application; provided, however, that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of each Lender and its respective Affiliates under this Section are
in addition to other rights and remedies (including, without limitation, other
rights of set-off) that such Lender and its respective Affiliates may have.
SECTION 9.06. Binding Effect. This Agreement shall become
effective when it shall have been executed by the Borrower and the Agent and
when the Agent shall have been notified by the Initial Lender that the Initial
Lender has executed it and thereafter shall be binding upon and inure to the
benefit of the Borrower, the Agents and each Lender and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder, or any interest herein or therein, without the
prior written consent of all of the Lenders.
SECTION 9.07. Assignments and Participations. (a) Each Lender
may and, so long as no Default shall have occurred and be continuing, if
demanded by the Borrower (following a demand by such Lender pursuant to Section
2.09 or 2.11) upon at least three Business Days' notice to such Lender and the
Agent, will assign to one or more Eligible Assignees all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of the Advances owing to it and the Note or Notes held by it);
provided, however, that (i) each such assignment shall be of a uniform, and not
a varying, percentage of all rights and obligations under this Agreement, (ii)
except in the case of an assignment to a Person that, immediately prior to such
assignment, was a Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, the amount of the Advances owing to the
assigning Lender being assigned pursuant to each such assignment (determined as
of the date of the Assignment and Acceptance with respect to such assignment)
shall in no event be less than $5,000,000, (iii) each such assignment shall be
to an Eligible Assignee, (iv) each such assignment made as a result of a demand
by the Borrower pursuant to this Section 9.07(a) shall be arranged by the
Borrower after consultation with the Agent and shall be either an assignment of
all of the rights and obligations of the assigning Lender under this Agreement
or an assignment of a portion of such rights and obligations made concurrently
with another such assignment or other such assignments that together cover all
of the rights and obligations of the assigning Lender under this Agreement, (v)
no Lender shall be obligated to make any such assignment as a result of a demand
by the Borrower pursuant to this Section 9.07(a) unless and until such Lender
shall have received one or more payments from either the Borrower or one or more
Eligible Assignees in an aggregate amount at least equal to the aggregate
outstanding principal amount of the Advances owing to such Lender, together with
accrued interest thereon to the date of payment of such principal amount and all
other amounts payable to such Lender under this Agreement, (vi) no such
assignments shall be permitted without the consent of the Agent until the Agent
shall have notified the Lender that syndication of the Advances hereunder has
been completed and (vii) the parties to each such assignment shall execute and
deliver to the Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with any Note or Notes subject to such
assignment and a processing and recordation fee of $3,500; provided, however,
that for each such assignment made as a result of a demand by the Borrower
pursuant to this Section 9.07(a), the Borrower shall pay to the Agent the
applicable processing and recordation fee.
<PAGE> 49
(b) Upon such execution, delivery, acceptance and recording,
from and after the effective date specified in such Assignment and Acceptance,
(i) the assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
and (ii) the Lender assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any of the Notes or any other
instrument or document furnished pursuant hereto or thereto; (ii) such assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or the performance or
observance by the Borrower of any of its obligations under this Agreement or the
Notes or any other instrument or document furnished pursuant thereto; (iii) such
assignee confirms that it has received a copy of this Agreement, together with
copies of the financial statements referred to in Section 4.01 and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Agent, such assigning
Lender or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee confirms
that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the
Agent to take such action as an agent on its behalf and to exercise such powers
and discretion under this Agreement and the Notes as are delegated to the Agent
by the terms hereof, together with such powers and discretion as are reasonably
incidental thereto; (vii) such assignee agrees that it will perform in
accordance with its terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender; and (viii) if not
incorporated under the laws of the United States of America or a state thereof,
such assignee agrees to deliver to the Borrower and the Agent certification as
to exemption from deduction or withholding of Taxes in accordance with Section
2.11.
(d) The Agent, acting for this purpose (but only for this
purpose) as the agent of the Borrower, shall maintain at its address referred to
in Section 9.02 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lenders and the principal amount of the Advances owing to each Lender from
time to time (the "Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrower, the Agent
and the Lenders shall treat each Person whose
<PAGE> 50
name is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee, together with any Note or Notes subject
to such assignment, the Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit C hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Borrower. In the case of
any assignment by a Lender, within five Business Days after its receipt of such
notice, the Borrower, at their own expense, shall execute and deliver to the
Agent in exchange for the surrendered Note or Notes a new Note to the order of
such Eligible Assignee in an amount equal to the Commitment assumed by it
pursuant to such Assignment and Acceptance and, if the assigning Lender has
retained a Commitment hereunder, a new Note to the order of the assigning Lender
in an amount equal to the Commitment retained by it hereunder. Such new Note or
Notes shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of Exhibit A hereto.
(f) Each Lender may sell participations to one or more Persons
(other than the Borrower or any of its Affiliates) in or to all or a portion of
its rights and obligations under this Agreement (including, without limitation,
all or a portion of the Advances owing to it and the Note or Notes held by it);
provided, however, that (i) such Lender's obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the participant
shall be entitled to the benefit of the yield protection provisions contained in
Article II and the right of set-off contained in Section 9.05, (iv) such Lender
shall remain the holder of any such Note for all purposes of this Agreement, (v)
the Borrower, the Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and such Lender shall retain the sole right to
enforce the obligations of the Borrower relating to the Advances owing to it and
its Note or Notes and (vi) no participant under any such participation shall
have any right to approve any amendment or waiver of any provision of this
Agreement or the Notes, or any consent to any departure by the Borrower
therefrom, except to the extent that such amendment, waiver or consent would
reduce the principal of, or interest on, the Notes or any fees or other amounts
payable hereunder, in each case to the extent subject to such participation, or
postpone any date fixed for any payment of principal of, or interest on, the
Notes or any fees or other amounts payable hereunder, in each case to the extent
subject to such participation.
(g) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to such Lender
by or on behalf of the Borrower; provided, however, that, prior to any such
disclosure,
<PAGE> 51
the assignee or participant or proposed assignee or participant shall agree to
comply with the provisions of Section 9.09 with respect to any information
received by it from such Lender.
(h) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System. No such assignment shall release the assigning Lender
from its obligations hereunder.
SECTION 9.08. 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 9.09. Confidentiality. The Agent and each Lender
(each, a "Lending Party") agree not to disclose without the prior consent of the
Borrower any information that the Borrower or any of its Affiliates furnishes to
the Agent or any Lender in a writing designated as confidential; provided that
nothing herein shall prevent any Lending Party from disclosing such information
(a) to any other Lending Party or any Affiliate of any Lending Party, or any
officer, director, employee, agent, attorney, independent or internal auditor or
advisor of any Lending Party or Affiliate of any Lending Party, (b) to any other
Person if such disclosure is reasonably incidental to the administration of this
Agreement or the Notes, (c) as may be required by any applicable Requirement of
Law, (d) upon the order of any court or administrative agency, (e) upon the
request or demand of any Governmental Authority having jurisdiction, (f) that is
or becomes available to the public or that is or becomes available to any
Lending Party other than as a result of a disclosure by any Lending Party
prohibited by this Agreement, (g) as may be required or appropriate in response
to any summons or subpoena or in connection with any litigation or arbitration,
(h) to the extent necessary in connection with the exercise of any right or
remedy under this Agreement or any Note, and (i) subject to provisions
substantially similar to those contained in this Section, to any actual or
proposed participant or assignee.
SECTION 9.10. 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 9.11. Governing Law; Entire Agreement. This Agreement
and the Notes shall be governed by, and construed in accordance with, the laws
of the State of New York. This Agreement and the Notes constitute the entire
understanding among the parties hereto with respect
<PAGE> 52
to the subject matter hereof and supercede any prior agreements, written or
oral, with respect thereto, except that the Fee Letter shall remain in full
force and effect.
<PAGE> 53
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
EAST COAST POWER L.L.C.
By: /s/ Robert J. Licato
----------------------------------------
Name: Robert J. Licato
Title: Vice President-Operations
Bank of America, N.A., as Agent
By: /s/ Michael F. Hinds
----------------------------------------
Name: Michael F. Hinds
Title: Director
Bank of America, N.A., as
Initial Lender
By: /s/ Michael F. Hinds
----------------------------------------
Name: Michael F. Hinds
Title: Director
<PAGE> 54
ANNEX A
DEFINITIONS
As used in this Annex A, the following terms shall have the
following meanings (such meanings to be equally applicable to the singular and
plural forms of the terms defined):
"Additional Notes" has the meaning assigned thereto in the
Indenture.
"Administrative Expenses" means, for any period with respect
to the Borrower or any of its Subsidiaries, administrative and
operating expenses of the Borrower or of such Subsidiary, as the case
may be, due and payable, or expected to be due and payable, in cash
during such period to the extent such expenses are budgeted for such
period as set forth in the Annual Operating Budget delivered to the
Agent pursuant to Section 3.01 of the Credit Agreement.
"Advance" has the meaning specified in Section 2.01 of the
Credit Agreement.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or officer of such Person.
For purposes of this definition, the term "control" (including the
terms "controlling", "controlled by" and "under common control with")
of a Person means the possession, direct or indirect, of the power to
vote 10% or more of the Voting Interests of such Person or to
ordinarily, in the absence of contingencies, direct or cause the
direction of the management and policies of such Person, whether
through the ownership of Voting Interests, by contract or otherwise.
"Agent" means Bank of America, N.A., as agent (together with
any successor appointed pursuant to Article VII of the Credit
Agreement) for the Lenders.
"Agent's Account" means the account of the Agent maintained by
the Agent at its office at Bank of America Corporate Center, 101 North
Tryon Street, Charlotte, North Carolina 28255, Account No.:
136621-2250600, Routing No.: ABA No. 053-000-196, Attention: CCS/Agency
Services - Lynne Cole (704-386-9068), Reference: East Coast Power
L.L.C.
"Agreement Value" means, for each Hedge Agreement of any
Person, on any date of determination, an amount determined by the Agent
equal to: (a) in the case of a Hedge Agreement documented pursuant to
the Master Agreement (Multicurrency-Cross Border) published by the
International Swap and Derivatives Association, Inc. (the "Master
Agreement"), the amount, if any, that would be payable by such Person
or any of its Subsidiaries to its counterparty to such Hedge Agreement,
as if (i) such Hedge Agreement was being terminated early on such date
of determination, (ii) such Person or such Subsidiary
<PAGE> 55
was the sole "Affected Party", and (iii) the Agent was the sole party
determining such payment amount (with the Agent making such
determination pursuant to the provisions of the form of Master
Agreement); or (b) in the case of a Hedge Agreement traded on an
exchange, the mark-to-market value of such Hedge Agreement, which will
be the unrealized loss on such Hedge Agreement to such Person or any of
its Subsidiaries party to such Hedge Agreement determined by the Agent
based on the settlement price of such Hedge Agreement on such date of
determination; or (c) in all other cases, the mark-to-market value of
such Hedge Agreement, which will be the unrealized loss on such Hedge
Agreement to such Person or any of its Subsidiaries party to such Hedge
Agreement determined by the Agent as the amount, if any, by which (i)
the present value of the future cash flows to be paid by such Person or
such Subsidiary exceeds (ii) the present value of the future cash flows
to be received by such Person or such Subsidiary pursuant to such Hedge
Agreement; capitalized terms used and not otherwise defined in this
definition shall have the respective meanings set forth in the above
described Master Agreement.
"Annual Operating Budget" means the annual budget of the
Borrower and of each of its Subsidiaries for fiscal year 2000, in
substantially the form of Exhibit D to the Credit Agreement, for
Administrative Expenses, which shall specify the aggregate amount of
Administrative Expenses of the Borrower and of each of its Subsidiaries
that are projected to be required during such fiscal year.
"Applicable Lending Office" means, with respect to each
Lender, such Lender's Domestic Lending Office in the case of a Base
Rate Advance and such Lender's Eurodollar Lending Office in the case of
a Eurodollar Rate Advance.
"Applicable Margin" means, subject to adjustment pursuant to
Section 2.06(e) of the Credit Agreement, (a) during the period from the
date of the Credit Agreement through the Initial Maturity Date (i)
2.50% per annum for Eurodollar Rate Advances and (ii) 1.50% per annum
for Base Rate Advances and (b) thereafter, if the Maturity Date is
extended pursuant to Section 3.03 of the Credit Agreement (i) 3.00% per
annum for Eurodollar Rate Advances and (ii) 2.00% per annum for Base
Rate Advances.
"Arranger" means Banc of America Securities LLC.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the
Agent, in accordance with Section 9.07 of the Credit Agreement and in
substantially the form of Exhibit C thereto.
"Available Cash" means, with respect to any Person for any
period (a) the aggregate amount of Revenues of such Person for such
period, minus (b) the sum of (i) the aggregate amount of Administrative
Expenses of such Person paid in cash by such Person during such period
to the extent permitted by the Credit Agreement plus (ii) the aggregate
amount of Capital Expenditures of such Person paid in cash by such
Person during such period to the
<PAGE> 56
extent permitted by the Credit Agreement plus (iii) the aggregate
amount of all regularly scheduled payments of principal of and interest
on Existing Debt of such Person made by such Person during such period
to the extent permitted by the Credit Agreement plus (iv) the aggregate
amount of all payments made by such Person during such period to
reserve accounts relating to Existing Debt of such Person to the extent
required to be made by such Person during such period under the
documents governing such Existing Debt to the extent permitted by the
Credit Agreement plus (v) the aggregate amount of all taxes paid in
cash by such Person during such period plus (vi) in the case of the
Borrower, the sum of (A) the aggregate amount of all payments of
interest on the Advances made by the Borrower during such period plus
(B) the aggregate amount of all optional prepayments of Advances made
by the Borrower during such period pursuant to Section 2.05(a) of the
Credit Agreement
"Bank of America" means Bank of America, N.A.
"Base Rate" means, for any day, the rate per annum equal to
the higher of (a) the Federal Funds Rate for such day plus one-half of
one percent (0.5%) and (b) the Prime Rate for such day. Any change in
the Base Rate due to a change in the Prime Rate or the Federal Funds
Rate shall be effective on the effective date of such change in the
Prime Rate or Federal Funds Rate.
"Base Rate Advance" means an Advance that bears interest as
provided in Section 2.06(a)(i) of the Credit Agreement.
"Bayonne Financing Agreement" means the Term Loan Agreement
dated as of November 1, 1987, between NJ Venture and the Prudential
Insurance Company of America, as amended by First Amendment dated as of
December 15, 1988 and by Second Amendment dated as of July 31, 1996.
"Bayonne Plant" means the 176 megawatt gas-fired, combined
cycle cogeneration facility owned by NJ Venture and located on the site
of the IMTT Facility in Bayonne, New Jersey, including all equipment
related thereto, all fixtures and all parts thereof and all accessions
thereto.
"Borrower" means East Coast Power L.L.C., a Delaware limited
liability company.
"Borrowing" means a borrowing consisting of simultaneous
Advances made by the Lenders.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York, New York,
Charlotte, North Carolina or Houston, Texas and, if the applicable
Business Day relates to any Eurodollar Rate Advances, on which dealings
are carried on in the London interbank market.
<PAGE> 57
"CalPERS" means California Public Employees' Retirement
System, a unit of the State and Consumer Services Agency of the State
of California.
"Camden Cogen means Camden Cogen .L.P., a Delaware limited
partnership.
"Camden Cogen Partnership Agreement" means the Amended and
Restated Agreement of Limited Partnership of Camden Cogen L.P. dated as
of February 9, 1993, by and among CT Camden, Robert C. McNair and
General Electric Capital Corporation, as amended as of April 1, 1993,
December 22, 1993 and February 4, 1999.
"Camden Financing Agreement" means 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 and
General Electric Capital Corporation, as amended by Amendment No. 1
dated as of December 22, 1993, Amendment No. 2 dated as of July 31,
1998 and Amendment No. 3 dated as of February 4, 1999.
"Camden Plant" means the 146 megawatt gas-fired, combined
cycle cogeneration facility owned by Camden Cogen and located in
Camden, New Jersey, including all equipment related thereto, all
fixtures and all parts thereof and all accessions thereto.
"Capital Expenditures" means, for any Person for any period,
the sum (without duplication for such period or any other period) of
(a) all expenditures made, directly or indirectly, by such Person or
any of its Subsidiaries during such period for equipment, fixed assets,
real property or improvements, or for replacements or substitutions
therefor or additions thereto, that have been or should be, in
accordance with GAAP, reflected as additions to property, plant or
equipment on a Consolidated balance sheet of such Person or have a
useful life of more than one year plus (b) the aggregate principal
amount of all Debt (including Obligations under Capitalized Leases)
assumed or incurred during such period to finance any expenditures for
equipment, fixed assets, real property or improvements, or for
replacements or substitutions therefor or additions thereto, that
should be, in accordance with GAAP, reflected, when such expenditures
are made, as additions to property, plant or equipment on a
Consolidated balance sheet of such Person or would have a useful life
of more than one year.
"Capitalized Leases" means all leases that have been or should
be, in accordance with GAAP, recorded as capitalized leases.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and any rules or
regulations promulgated under such Act.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System maintained by the U.S.
Environmental Protection Agency.
<PAGE> 58
"Change of Control" means the occurrence of any of the
following:
(a) (i) JEDI II shall cease to own 100% of the Equity
Interests in ECP Holding or (ii) ECP Holding shall cease to
own 51% of the Equity Interests in the Borrower (other than
Preferred Interests in the Borrower);
(b) the Borrower shall cease to own 100% of the
Equity Interests in JEDI Linden NB, JEDI GP Camden, JEDI LP
Camden or JEDI Bayonne GP; or
(c) JEDI Linden NB shall cease to own (i) 100% of the
Equity Interests in JEDI Linden LP or JEDI Linden Inc. or (ii)
at least 99% of the Equity Interests in JEDI Linden GP; or
(d) JEDI Linden Inc. shall cease to own all of the
Equity Interests in JEDI Linden GP not owned by JEDI Linden
NB; or
(e) JEDI Linden GP shall cease to own 100% of the
general partnership interests in Linden Ltd.; or
(f) JEDI Linden LP shall cease to own 100% of the
limited partnership interests in Linden Ltd.; or
(g) Linden Ltd. shall cease to own 100% of the
general partnership interests in Linden Venture; or
(h) JEDI Camden GP shall cease to own 100% of the
general partnership interests in CT Camden; or
(i) JEDI Camden LP shall cease to own 100% of the
limited partnership interests in CT Camden; or
(j) CT Camden shall cease to own 100% of the general
partnership interests in Camden Cogen; or (k) JEDI Bayonne GP
shall cease to own at least 91.75% of the partnership
interests in NJ Venture; or
(l) Enron shall cease to own directly or indirectly
100% of the Equity Interests in each of ECM II and ECM III
(or, with respect to either such Person, 100% of the Equity
Interests in a Permitted Enron Substitute); or
(m) ECM II (or a Permitted Enron Substitute) shall
cease to own 100% of the general partnership interests in JEDI
II; or
<PAGE> 59
(n) ECM III (or a Permitted Enron Substitute) shall
cease to own 50% of the limited partnership interests and 49%
of the economic interest in JEDI II; or
(o) any change otherwise permitted under any of
clauses (a) through (n) above that would reasonably be
expected (i) to result in the loss by any of the Facilities of
its status as a Qualified Facility, unless, in the opinion of
the Supermajority Lenders, such loss of status would not
reasonably be expected to have a Material Adverse Effect, or
(ii) to cause the Borrower or any of its Subsidiaries to be an
"investment company" or an "affiliated person" of an
"investment company", as such terms are defined in the
Investment Company Act of 1940, as amended.
"Commitment" means, with respect to any Lender at any time,
the amount set forth opposite such Lender's name on Schedule I hereto
under the caption "Commitment" or, if such Lender has entered into one
or more Assignments and Acceptances, set forth for such Lender in the
Register maintained by the Agent pursuant to Section 9.07(d) of the
Credit Agreement as such Lender's "Commitment", as such amount may be
reduced at or prior to such time pursuant to Section 2.04 of the Credit
Agreement.
"Consolidated" refers to the consolidation of accounts in
accordance with GAAP.
"Contingent Obligation" means, with respect to any Person, any
Obligation or arrangement of such Person to guarantee or intended to
guarantee any Debt, leases, dividends or other payment Obligations
("primary obligations") of any other Person (the "primary obligor") in
any manner, whether directly or indirectly, including, without
limitation, (a) the direct or indirect guarantee, endorsement (other
than for collection or deposit in the ordinary course of business),
co-making, discounting with recourse or sale with recourse by such
Person of the Obligation of a primary obligor, (b) the Obligation to
make take-or-pay or similar payments, if required, regardless of
nonperformance by any other party or parties to an agreement or (c) any
Obligation of such Person, whether or not contingent, (i) to purchase
any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (A) for the
purchase or payment of any such primary obligation or (B) to maintain
working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, assets, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the holder of
such primary obligation against loss in respect thereof. The amount of
any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of
which such Contingent Obligation is made (or, if less, the maximum
amount of such primary obligation for which such Person may be liable
pursuant to the terms of the instrument evidencing such Contingent
Obligation) or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is
required to perform thereunder), as determined by such Person in good
faith.
<PAGE> 60
"Conversion", "Convert" and "Converted" each refer to a
conversion of Advances of one Type into Advances of the other Type
pursuant to Section 2.08 or 2.09 of the Credit Agreement.
"Credit Agreement" means the $30,000,000 Senior Subordinated
Credit Agreement dated as of December 29, 1999, among the Borrower, the
Lenders and the Agent, as amended, supplemented or otherwise modified
from time to time.
"CT Camden" means Cogen Technologies Camden GP Limited
Partnership, a Delaware limited partnership.
"CT Camden Partnership Agreement" means the Agreement of
Limited Partnership of CT Camden dated as of July 26, 1991, by and
among Cogen Technologies Camden, Inc. and CTLPJV, as amended by First
Amendment dated as of December 1, 1991.
"CTLPJV" means Cogen Technologies Limited Partners Joint
Venture, a Texas general partnership.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all Obligations of
such Person for the deferred purchase price of property or services,
(c) all Obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all Obligations of such
Person created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale
of such property), (e) all Obligations of such Person as lessee under
Capitalized Leases, (f) all Obligations, contingent or otherwise, of
such Person under acceptance, letter of credit or similar facilities,
(g) all Obligations of such Person to purchase, redeem, retire, defease
or otherwise make any payment in respect of any Equity Interest in such
Person or any other Person or any warrants, rights or options to
acquire such Equity Interest, valued, in the case of Redeemable
Preferred Interests, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends, (h) all
Obligations of such Person in respect of Hedge Agreements, valued at
the Agreement Value thereof, (i) all Contingent Obligations of such
Person, and (j) all indebtedness and other payment Obligations referred
to in clauses (a) through (i) above of another Person secured by (or
for which the holder of such Debt has an existing right, contingent or
otherwise, to be secured by) any Lien on property (including, without
limitation, accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of
such indebtedness or other payment Obligations.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
<PAGE> 61
"Domestic Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office"
opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender, as the case may be, or
such other office of such Lender as such Lender may from time to time
specify to the Borrower and the Agent.
"ECM II" means Enron Capital Management II Limited
Partnership, a Delaware limited partnership and the general partner of
JEDI II, or a Permitted Enron Substitute therefor.
"ECM III" means Enron Capital Management III Limited
Partnership, a Delaware limited partnership and limited partner of JEDI
II, or a Permitted Enron Substitute therefor.
"ECP Holding" means East Coast Power Holding Company L.L.C., a
Delaware limited liability company.
"Eligible Assignee" means (a) a Lender; (b) an Affiliate of a
Lender; (c) a commercial bank organized under the laws of the United
States, or any State thereof, and having total assets in excess of $1
billion; (d) a savings and loan association or savings bank organized
under the laws of the United States, or any State thereof, and having
total assets in excess of $1 billion; (e) a commercial bank organized
under the laws of any other country that is a member of the OECD or has
concluded special lending arrangements with the International Monetary
Fund associated with its General Arrangements to Borrow or of the
Cayman Islands, or a political subdivision of any such country, and
having total assets in excess of $1 billion, so long as such bank is
acting through a branch or agency located in the country in which it is
organized or another country that is described in this clause (e); (f)
the central bank of any country that is a member of the OECD; (g) a
finance company, insurance company or other financial institution or
fund (whether a corporation, partnership, trust or other entity) that
is engaged in making, purchasing or otherwise investing in commercial
loans in the ordinary course of its business and having total assets in
excess of $1 billion; or (h) any other Person approved by the Agent and
the Borrower, such approval (except in the case of an Enron Competitor)
not to be unreasonably withheld or delayed; provided, however, that
neither the Borrower nor any Affiliate of the Borrower shall qualify as
an Eligible Assignee under this definition.
"ENA" means Enron North America Corp., a Delaware corporation.
"Enron" means, Enron Corp., an Oregon corporation.
"Enron Competitor" means, as of any date of determination, any
Person (other than a Financial Institution) that derived more than 5%
of its revenues from activities relating to or in connection with Enron
Industries, or which otherwise had at least 5% of its operations
<PAGE> 62
in Enron Industries (or risk management activities related thereto), in
each case in the preceding fiscal year of such Person.
"Enron Industries" means, as of any date of determination, the
development, operation or ownership of domestic or international
energy, electric, water or other infrastructure projects in the natural
gas, petroleum and petroleum products, electric utility, electricity or
other energy related industries,; provided that none of the foregoing
activities or industries shall be an "Enron Industry" unless Enron
derived at least 5% of its revenues from or in connection with such
activity or industry in its preceding fiscal year.
"Environmental Action" means any action, suit, demand, claim,
notice of non-compliance or violation, notice of liability or
threatened liability, investigation, proceeding, consent order or
consent agreement relating in any way to any Environmental Law, any
Environmental Permit or Hazardous Material or arising from alleged
injury or threat to health, safety or the environment, including,
without limitation, (a) by any Governmental Authority for enforcement,
cleanup, removal, response, remedial or other actions or damages and
(b) by any governmental or regulatory authority or third party for
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief.
"Environmental Law" means any statute, law, ordinance, rule,
regulation, order, writ, judgment, injunction, decree or judicial or
agency interpretation relating to pollution or protection of the
environment, health, safety or natural resources, including, without
limitation, those relating to the use, handling, transportation,
treatment, storage, disposal, release or discharge of Hazardous
Materials.
"Environmental Permit" means any permit, approval, license or
other legal authorization required under any Environmental Law.
"Equity Interests" means, with respect to any Person, shares
of capital stock of (or other ownership or profit interests in) such
Person, warrants, options or other rights for the purchase or other
acquisition from such Person of shares of capital stock of (or other
ownership or profit interests in) such Person, securities convertible
into or exchangeable for shares of capital stock of (or other ownership
or profit interests in) such Person or warrants, rights or options for
the purchase or other acquisition from such Person of such shares (or
such other interests), and other ownership or profit interests in such
Person (including, without limitation, partnership, member or trust
interests therein), whether voting or nonvoting, and whether or not
such shares, warrants, options, rights or other interests are
authorized or otherwise existing on any date of determination.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
<PAGE> 63
"ERISA Affiliate" means, with respect to any Person, any
entity that for purposes of Title IV of ERISA is a member of the
controlled group of such Person, or is under common control with such
Person, within the meaning of Section 414 of the Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable
event, within the meaning of Section 4043 of ERISA, with respect to any
Plan unless the 30-day notice requirement with respect to such event
has been waived by the PBGC, or (ii) the requirements of subsection (1)
of Section 4043(b) of ERISA (without regard to subsection (2) of such
Section) are met with respect to a contributing sponsor, as defined in
Section 4001(a)(13) of ERISA, of a Plan, and an event described in
paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is
reasonably expected to occur with respect to such Plan within the
following 30 days; (b) the application for a minimum funding waiver
with respect to a Plan; (c) the provision by the administrator of any
Plan of a notice of intent to terminate such Plan, pursuant to Section
4041(a)(2) of ERISA (including any such notice with respect to a plan
amendment referred to in Section 4041(e) of ERISA); (d) the cessation
of operations at a facility of the Borrower or any ERISA Affiliate in
the circumstances described in Section 4062(e) of ERISA; (e) the
withdrawal by the Borrower or any ERISA Affiliate from a Multiple
Employer Plan during a plan year for which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions
for imposition of a lien under Section 302(f) of ERISA shall have been
met with respect to any Plan; (g) the adoption of an amendment to a
Plan requiring the provision of security to such Plan pursuant to
Section 307 of ERISA; or (h) the institution by the PBGC of proceedings
to terminate a Plan of a Person pursuant to Section 4042 of ERISA, or
the occurrence of any event or condition described in Section 4042 of
ERISA that constitutes grounds for the termination of, or the
appointment of a trustee to administer, such Plan, provided, however,
that the occurrence of an event or condition described in Section
4042(a)(4) of ERISA shall be an ERISA Event only if (i) such Person or
any of its ERISA Affiliates knows thereof or (ii) the PBGC has notified
such Person or any of its ERISA Affiliates that it is considering
termination of such Plan on such basis.
"Eurocurrency Liabilities" has the meaning specified in
Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender (or, if no such office
is specified, its Domestic Lending Office), or such other office of
such Lender as such Lender may from time to time specify to the
Borrower and the Agent.
"Eurodollar Rate" means, for any Interest Period for all
Eurodollar Rate Advances, an interest rate per annum equal to the rate
per annum obtained by dividing:
<PAGE> 64
(a) the rate per annum for U.S. dollar deposits for a
period equal to (or if there is no equal period, then the
period most comparable to) such Interest Period that appears
on the page designated Page 3750 on the Dow Jones Telerate
Service (or such other page as may replace that page on that
service for the purpose of displaying the British Bankers
Association Interest Settlement Rate) at approximately 11:00
A.M. (London time) on the date two Business Days prior to the
first day of such Interest Period;
(b) if no such rate is shown on the page designated
Page 3750 on the Dow Jones Telerate Service (or such other
page as may replace that page on that service for the purposes
of displaying the British Bankers Association Interest
Settlement Rate) at such time, the rate per annum determined
by the Agent to be equal to the arithmetic mean (rounded
upwards to the nearest whole multiple of 1/16th of 1% per
annum, if such average is not such a multiple) of the rates
per annum for U.S. dollar deposits for a period equal to (or
if there is no equal period, then the period most comparable
to) such Interest Period that appear on the display designated
"LIBO" on the Reuter Monitor Money Rates Service (or such
other page as may replace the LIBO page on that service for
the purpose of displaying London interbank offered rates for
U.S. dollar deposits) at approximately 11:00 A.M. (London
time) on the date two Business Days prior to the first day of
such Interest Period; or
(c) if no such rates so appear on the display
designated (i) Page 3750 on the Dow Jones Telerate Service (or
such other page as may replace that page on that service for
the purpose of displaying the British Bankers Association
Interest Settlement Rate) or (ii) "LIBO" on the Reuter Monitor
Money Rates Service (or such other page as may replace the
LIBO page on that service for the purpose of displaying London
interbank offered rates for U.S. dollar deposits) at such date
and time, the average (rounded upwards to the nearest whole
multiple of 1/16th of 1% per annum, if such average is not
such a multiple) of the rates per annum at which deposits in
U.S. dollars are offered by each of the Reference Banks in the
London interbank market at approximately 11:00 A.M. (London
time) on the date two Business Days before the first day of
such Interest Period in immediately available funds in an
amount approximately equal to the principal amount of the
Eurodollar Rate Advance of such Reference Bank and for a
period of time comparable to such Interest Period,
by a percentage equal to 100% minus the Eurodollar Rate Reserve
Percentage for such Interest Period.
"Eurodollar Rate Advance" means an Advance that bears interest
as provided in Section 2.06(a)(ii) of the Credit Agreement.
"Eurodollar Rate Reserve Percentage" for any Interest Period
for all Eurodollar Rate Advances means the reserve percentage
applicable two Business Days before the first day of
<PAGE> 65
such Interest Period under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve
requirement) for a member bank of the Federal Reserve System in New
York City with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or with respect to any other
category of liabilities that includes deposits by reference to which
the interest rate on Eurodollar Rate Advances is determined) having a
term equal to such Interest Period.
"Event of Loss" means (a) the actual or constructive total
loss of all or any substantial portion of any of the Facilities, or the
appropriation, condemnation, confiscation, nationalization, seizure,
forfeiture or expropriation of, or requisition of title to, all or any
substantial portion of such Facility, or the requisition by any
Governmental Authority for a period exceeding six months of the use of
all or a substantial portion of such Facility; (b) the loss,
destruction or damage of, or appropriation, condemnation, confiscation,
nationalization, seizure, forfeiture or expropriation of, or
requisition of title to, or requisition by any Governmental Authority
of the use of, such portion of such Facility as shall render such
Facility unable to operate at substantially its designed level of
output or as a Qualifying Facility on a commercially reasonable basis
unless (in a situation in which clauses (a) and (c) are not applicable)
(i) no Event of Default shall have occurred and be continuing at the
time of occurrence of any of the events specified above in this clause
(b) and (ii) in the reasonable opinion of the Supermajority Lenders,
(A) no Material Adverse Effect would reasonably be expected to result
from such occurrence, (B) it is feasible to restore, rebuild or replace
the affected portion of such Facility, and (C) sufficient funds are or
will be available (1) to restore, rebuild or replace the affected
portion of such Facility so that such Facility will be able to operate
at substantially its designed level of output and to operate as a
Qualifying Facility within 18 months after the occurrence of such Event
of Loss and (2) to pay all principal of and interest on the then
outstanding Advances and to pay all other amounts due or to become due
under the Credit Agreement until such restoration, rebuilding or
replacement is completed; (c) any of the Facilities, JEDI II, the
Borrower or any of the Borrower's Subsidiaries is subject to being
deemed by any Governmental Authority having jurisdiction to be, or is
subject to regulation as, an "electric utility", "electric
corporation", "electrical company", "public utility" or a "public
utility holding company" under any law, rule or regulation of any
Governmental Authority, unless, in the reasonable opinion of the
Supermajority Lenders, a Material Adverse Effect would not reasonably
be expected to result therefrom; (d) a change shall have occurred after
the date hereof in any applicable law or regulation or in the
interpretation thereof by any Governmental Authority charged with the
administration or interpretation thereof which, in the opinion of the
Required Lenders, would make any of the Related Documents subject to
cancellation, suspension or termination, which cancellation, suspension
or termination, in the opinion of the Required Lenders, would
reasonably be expected to have a Material Adverse Effect; or (e) an
event of force majeure or other event or condition shall exist which
permits or requires any party to any of the Related Documents to
cancel, suspend or terminate its performance thereunder
<PAGE> 66
in accordance with the terms thereof or which could excuse any such
party from liability for non-performance thereunder, unless (i) the
parties to such Related Documents shall have effectively waived the
condition giving rise to such right or requirement with respect to such
cancellation, suspension, termination or release from liability, or
(ii) in the opinion of the Required Lenders, such cancellation,
suspension, termination or release from liability would not reasonably
be expected to have a Material Adverse Effect.
"Events of Default" has the meaning specified in Section 6.01
of the Credit Agreement.
"Existing Debt" has the meaning specified in Section 4.01(x)
of the Credit Agreement.
"Existing Financing Agreements" means, collectively, the
Linden Financing Agreement, the Camden Financing Agreement and the
Bayonne Financing Agreement.
"Extended Maturity Date" means December 29, 2000.
"Facilities" means the Bayonne Plant, the Camden Plant and the
Linden Plant.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Business Day next succeeding such day; provided
that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and
(b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate
charged to the Agent (in its individual capacity) on such day on such
transactions as determined by the Agent.
"Fee Letter" means the fee letter dated December 7, 1999,
among the Borrower, the Arranger and the Agent, as amended,
supplemented or otherwise modified from time to time.
"FERC" means the Federal Energy Regulatory Commission or any
successor or analogous federal Governmental Authority.
"Financial Institution" means any Person that is, or whose
principal business is that of, a bank holding company, insurance
holding company, savings and loan holding company, commercial or
savings bank, central bank, finance, investment or insurance company,
savings and loan association or company, or private or governmental
employee benefit plan, together, in each case with their respective
Subsidiaries and Affiliates.
<PAGE> 67
"First Amendment" means the First Amendment to First Amended
and Restated Credit and Subordination Agreement, dated as of December
29, 1999, between the Borrower and ENA.
"GAAP" has the meaning specified in Section 1.03 of the Credit
Agreement.
"Governmental Authority" means any nation or government, any
state, province or other political subdivision thereof, and any
governmental, executive, legislative, judicial, administrative or
regulatory agency, department, authority, instrumentality, commission,
board or similar body, whether federal, state, provincial, territorial,
local or foreign.
"Hazardous Materials" means (a) petroleum or petroleum
products or any by-products or derivatives thereof, radioactive
materials, asbestos-containing materials, polychlorinated biphenyls and
radon gas and (b) any other chemicals, materials or substances
designated, classified or regulated as hazardous or toxic or as a
pollutant or contaminant under any Environmental Law.
"Hedge Agreements" means interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar
agreements.
"Indenture" means the Indenture dated April 20, 1999, between
the Borrower and the Trustee.
"Initial Lender" means Bank of America.
"Initial Maturity Date" means June 29, 2000.
"Insolvency Event" means, with respect to any Person, (a) the
declaration or commencement of insolvency or bankruptcy proceedings by,
or the commencement of such proceedings against, such Person, (b) the
appointment of a receiver, trustee custodian or similar official with
respect to such Person or (c) the liquidation, reorganization,
dissolution, winding up, arrangement, protection, relief, composition
or similar proceeding in respect of such Person or any of its
Obligations.
"Insufficiency" means, with respect to any Plan, the amount,
if any, of its unfunded benefit liabilities, as defined in Section
4001(a)(18) of ERISA.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Borrowing, the period commencing on the
date of such Eurodollar Rate Advance or the date of the Conversion of
any Base Rate Advance into such Eurodollar Rate Advance, and ending on
the last day of the period selected by the Borrower pursuant to the
provisions below and, thereafter, each subsequent period commencing on
the last day of the
<PAGE> 68
immediately preceding Interest Period and ending on the last day of the
period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be three or six months, as
the Borrower may, upon notice received by the Agent not later than
11:00 A.M. (New York City time) on the third Business Day prior to the
first day of such Interest Period, select; provided, however, that:
(a) the Borrower may not select any Interest Period
with respect to any Advances that ends after the Maturity
Date;
(b) no more than three Interest Periods shall be
outstanding at any time;
(c) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on
the next succeeding Business Day,; provided, however, that, if
such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last
day of such Interest Period shall occur on the next preceding
Business Day; and
(d) whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there
is no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"Investment" in any Person means any loan or advance to such
Person, any purchase or other acquisition of any Equity Interest,
warrants, rights, options, obligations or other securities of such
Person, any capital contribution to such Person or any other investment
in such Person, including, without limitation, any arrangement pursuant
to which the investor incurs Debt of the types referred to in clause
(i) or (j) of the definition of "Debt" in respect of such Person.
"ISRA" means the New Jersey Industrial Site Recovery Act, as
amended.
"JEDI Bayonne GP" means JEDI Bayonne GP, L.L.C., a Delaware
limited liability company and wholly owned Subsidiary of the Borrower.
"JEDI Camden GP" means JEDI Camden GP, L.L.C., a Delaware
limited liability company and wholly owned Subsidiary of the Borrower.
<PAGE> 69
"JEDI Camden LP" means JEDI Camden LP, L.L.C., a Delaware
limited liability company and wholly owned Subsidiary of the Borrower.
"JEDI Linden GP" means JEDI Linden GP, L.L.C., a Delaware
limited liability company and 99% owned Subsidiary of JEDI Linden NB.
"JEDI Linden Inc." means JEDI Linden, Inc., a Delaware
corporation and wholly owned Subsidiary of JEDI Linden NB.
"JEDI Linden LP" means JEDI Linden LP, L.L.C., a Delaware
limited liability company and wholly owned Subsidiary of JEDI Linden
NB.
"JEDI Linden NB" means JEDI Linden NB, L.L.C., a Delaware
limited liability company and wholly owned Subsidiary of the Borrower.
"JEDI II" means Joint Energy Development Investments II
Limited Partnership, a Delaware limited partnership.
"JEDI II Partnership Agreement" means the Partnership
Agreement of JEDI II dated as of December 30, 1997, by and among ECM
II, ECM III and CalPERS, as amended, waived or other modified to the
extent any such amendment, waiver or other modification does not
constitute a JEDI II Event of Default.
"Lenders" means the Initial Lender and each Person that shall
become a Lender hereunder pursuant to Section 9.07 of the Credit
Agreement.
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance
on title to real property.
"Linden Financing Agreement" means the Amended and Restated
Term Loan Agreement dated as of September 15, 1992, between Linden Ltd.
and the Owner Trustee, as amended by First Amendment dated as of April
30, 1993 and Second Amendment dated as of February 4, 1999.
"Linden Ltd." means Cogen Technologies Linden, Ltd., a Texas
limited partnership.
"Linden Ltd. Partnership Agreement" means the Agreement of
Limited Partnership of Linden Ltd. dated as of June 28, 1989, by and
between RCM Holdings and CTLPJV, as amended as of February 14, 1990,
July 31, 1990 and February 4, 1999.
<PAGE> 70
"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,
including all equipment related thereto, all fixtures and all parts
thereof and all accessions thereto.
"Linden Venture" means Cogen Technologies Linden Venture,
L.P., a Delaware limited partnership.
"Linden Venture Partnership Agreement" means the Amended and
Restated Agreement of Limited Partnership of Cogen Technologies Linden
Venture, L.P. dated as of September 15, 1992, by and among Linden Ltd.,
Robert C. McNair and the Owner Trustee, as amended as of April 30, 1993
and February 4, 1999.
"Margin Stock" has the meaning specified in Regulation U of
the Board of Governors of the Federal Reserve System (or any successor
or replacement regulation).
"Material Adverse Change" means any material adverse change in
the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Borrower or any of its
Subsidiaries or any Facility, either individually or taken together.
"Material Adverse Effect" means a material adverse effect on
(a) the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Borrower or any of its
Subsidiaries or any Facility, either individually or taken together,
(b) the rights and remedies of any Agent or any Lender under the Credit
Agreement or any of the Notes or (c) the ability of the Borrower to
perform its Obligations under the Credit Agreement or the Notes.
"Material Contract" means, collectively, (a) the contracts set
forth on Schedule 4.01(y) of the Credit Agreement and (b) each other
contract of the Borrower or any of its Subsidiaries involving aggregate
consideration payable to or by the Borrower or such Subsidiary of
$10,000,000 or more in any fiscal year of such Person or which is
otherwise material to the business, condition (financial or otherwise),
operations, performance, properties or prospects of such Person or the
ability of the Borrower to perform any of its Obligations under the
Credit Agreement or the Notes.
"Maturity Date" means the Initial Maturity or, if the Maturity
Date is extended pursuant to Section 3.03 the Credit Agreement, the
Extended Maturity Date.
"Multiemployer Plan" means, in respect of any Person, a
multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which
such Person or any of its ERISA Affiliates is making or accruing an
obligation to make contributions, or has within any of the preceding
five plan years made or accrued an obligation to make contributions.
<PAGE> 71
"Multiple Employer Plan" means, in respect of any Person, a
single employer plan, as defined in Section 4001(a)(15) of ERISA, that
(a) is maintained for employees of such Person or any of its ERISA
Affiliates and at least one entity other than such Person and its ERISA
Affiliates or (b) was so maintained and in respect of which such Person
or any of its ERISA Affiliates could have liability under Section 4064
or 4069 of ERISA in the event such plan has been or were to be
terminated.
"Net Proceeds" means, with respect to any sale, lease,
transfer or other disposition of any asset or the incurrence or
issuance of any Debt or the sale or issuance of any Equity Interests
(including, without limitation, any capital contribution) by any
Person, the cash proceeds received from time to time (whether as
initial consideration or through payment or disposition of deferred
consideration) by or on behalf of such Person or any of its Affiliates
in connection with such transaction after deducting therefrom only
(without duplication) (a) commercially reasonable and customary
brokerage commissions, underwriting fees and discounts, legal fees,
finder's fees and other similar fees and commissions and (b) the amount
of taxes payable in connection with or as a result of such transaction,
in each case to the extent, but only to the extent, that the amounts so
deducted are, at the time of receipt of such cash, actually paid to a
Person that is not an Affiliate of such Person or the Borrower or any
Affiliate of the Borrower and are properly attributable to such
transaction or to the asset that is the subject thereof.
"NJ Venture" means Cogen Technologies NJ Venture, a New Jersey
general partnership.
"NJ Venture Partnership Agreement" means the Amended and
Restated Joint Venture Agreement of Cogen Technologies NJ Venture dated
as of August 25, 1986, by and among Cogen Technologies NJ, Inc., Enron
Cogeneration Five Company, Bayonne Inc., 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.
"Note" means a promissory note of the Borrower payable to the
order of any Lender, in substantially the form of Exhibit A to the
Credit Agreement, evidencing the indebtedness of the Borrower to such
Lender resulting from the Advances payable to such Lender by the
Borrower, as amended, supplemented or otherwise modified from time to
time.
"Notice of Borrowing" has the meaning specified in Section
2.02(a).
"NPL" means the National Priorities List under CERCLA.
"Obligation" means, with respect to any Person, any payment,
performance or other obligation of such Person of any kind, including,
without limitation, any liability of such Person on any claim, whether
or not the right of any creditor to payment in respect of such
<PAGE> 72
claim is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, disputed, undisputed, legal, equitable, secured or
unsecured, and whether or not such claim is discharged, stayed or
otherwise affected by any proceeding referred to in Section 6.01(f).
Without limiting the generality of the foregoing, the Obligations of
the Borrower under the Credit Agreement and the Notes include (a) any
obligation to pay principal, interest, charges, expenses, fees,
attorneys' fees and disbursements, indemnities and other amounts
payable by the Borrower under the Credit Agreement and the Notes and
(b) any obligation of the Borrower to reimburse any amount in respect
of any of the foregoing that any Lender, in its sole discretion, may
elect to pay or advance on behalf of the Borrower.
"OECD" means the Organization for Economic Cooperation and
Development.
"Other Taxes" has the meaning specified in Section 2.11(b) of
the Credit Agreement.
"Owner Trustee" means State Street Bank and Trust Company of
Connecticut National Association, as trustee under a Trust Agreement
dated as of December 28, 1990, between State Street Bank and Trust
Company of Connecticut National Association and Linden Owner
Partnership, a Delaware partnership.
"Partnership Agreements" means, collectively, the Linden Ltd.
Partnership Agreement, the Linden Venture Partnership Agreement, the
Camden Cogen Partnership Agreement, the CT Camden Partnership Agreement
and the NJ Venture Partnership Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
"Person" means an individual, partnership, corporation
(including a business trust), limited liability company, joint stock
company, trust, unincorporated association, joint venture or other
entity, or a government or any political subdivision or agency thereof.
"Permitted Enron Substitute" means a direct or indirect wholly
owned Subsidiary of Enron that (a) has been substituted for ECM II or
ECM III, as the case may be, and admitted as the sole general partner
or a limited partner, respectively, of JEDI II in accordance with the
JEDI II Partnership Agreement and (b) has assumed all Obligations of
such substituted Person under the JEDI II Partnership Agreement (and,
in the case of ECM II, at any time prior to the termination of the
General Partner Undertaking in accordance with its terms) pursuant to a
written agreement.
"Plan" means a Single Employer Plan or a Multiple Employer
Plan.
"Power Purchase Agreements" means, collectively, (a) the Power
Purchase Agreement dated as of April 14, 1989, by and between
Consolidated Edison Company of New York, Inc. and Cogen Technologies,
Inc., as assigned by Cogen Technologies, Inc. to Linden Ltd. with the
consent of Consolidated Edison Company of New York, Inc. on August
<PAGE> 73
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 as of September 17, 1990 and as of
December 22, 1993, (b) the Power Purchase and Interconnection Agreement
dated as of April 15, 1988, by and between Public Service Electric and
Gas Company and Camden Cogen, as amended as of June 12, 1990 and as of
August 21, 1990, (c) the Power Purchase and Operations Coordination
Agreement dated as of June 5, 1989, by and between Public Service
Electric and Gas Company and NJ Venture and (d) the 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 as of September 5, 1986, as assigned to NJ Venture as of
September 8, 1986 and as amended as of August 1, 1988.
"Preferred Interest" means, with respect to any Person, Equity
Interests issued by such Person that are entitled to a preference or
priority over any other Equity Interests issued by such Person upon any
distribution of such Person's assets, whether by dividend or upon
liquidation or otherwise.
"Prime Rate" means the per annum rate of interest established
from time to time by Bank of America as its prime rate, which rate may
not be the lowest rate of interest charged by Bank of America to its
customers.
"PUHCA" means the Public Utility Holding Company Act of 1935,
as amended.
"PURPA" means the Public Utility Regulatory Policies Act of
1978, as amended, and the regulations thereunder.
"Qualifying Facility" means a cogeneration facility meeting
all of the requirements for a "qualifying cogeneration facility" set
forth in PURPA and in Part 292 of the rules and regulations of FERC
under PURPA.
"Redeemable" means, with respect to any Equity Interest, Debt
or other right or Obligation, any such Equity Interest, Debt or other
right or Obligation that (a) the issuer has undertaken to redeem at a
fixed or determinable date or dates, whether by operation of a sinking
fund or otherwise, or upon the occurrence of a condition not solely
within the control of the issuer or (b) is redeemable at the option of
the holder.
"Reference Banks" means Bank of America, Citibank, N.A., and
The Chase Manhattan Bank.
"Refinancing" means the offering, issue and private sale by
the Borrower of debt securities of the Borrower (the "Refinancing
Securities") to Persons other than Affiliates of the Borrower for the
purpose, among other things, of refinancing all or any portion of the
principal amount of the Advances and paying interest accrued thereon
and all fees, expenses,
<PAGE> 74
commissions and other amounts payable by the Borrower under the Credit
Agreement and in connection with the Refinancing.
"Refinancing Securities" has the meaning specified in the
definition of "Refinancing".
"Register" has the meaning specified in Section 9.07(d) of the
Credit Agreement.
"Related Documents" means the Partnership Agreements, the
Power Purchase Agreements, the Steam Sales Contracts, the Existing
Financing Agreements and each Material Contract to which the Borrower
or any of its Subsidiaries is a party.
"Replacement Subordinated Securities" means any securities or
notes that are received by any of the Lenders in exchange for or in
replacement of all or a portion of the Subordinated Debt to the extent
that such exchanged or replacement securities or notes are subordinated
to the Senior Debt to at least the same extent as the Subordinated Debt
is subordinated to the Senior Debt pursuant to Article VIII of the
Credit Agreement.
"Required Holders" means at any time Holders (as defined in
the Indenture) of at least a majority in interest of the aggregate
principal amount of the Senior Secured Notes.
"Required Lenders" means at any time Lenders owed or holding
at least a majority in interest of the aggregate principal amount of
the Advances outstanding at such time, or, if no such principal amount
is outstanding at such time, Lenders holding at least a majority in
interest of the aggregate of the Commitments.
"Requirements of Law" means, with respect to any Person, all
laws, statutes, treaties, rules, regulations, determinations, orders,
writs, decrees, injunctions, judgments, determinations or awards of an
arbitrator, a court or any other Governmental Authority, and all
Governmental Authorizations, binding upon or applicable to such Person
or to any of its properties or assets.
"Responsible Officer" means any officer (or other person
performing the equivalent functions) of the Borrower or any of its
Subsidiaries.
"Revenues" means, with respect to any Person, all dividends,
interest, principal, fees, profits, receipts, bonuses, premiums,
income, cash, distributions (in cash or other property), damages,
indemnity or other awards and other property, assets and amounts
received by or distributed to such Person (or any of its Affiliates)
from time to time (including, without limitation, net payments received
by such Person under Hedge Agreements) from any source, including,
without limitation, in respect of or in exchange for any or all of the
Equity Interests of such Person in any of its Subsidiaries.
<PAGE> 75
"Senior Debt" means all obligations of the Borrower now or
hereafter existing under the Senior Secured Notes (whether created
directly or acquired by assignment or otherwise), whether for principal
or interest (including, without limitation, interest, as provided in
the Senior Secured Notes and the Indenture, accruing after the filing
of a petition initiating any proceeding referred to in Section 2.15(b),
whether or not such interest accrues after the filing of such petition
for purposes of the Bankruptcy Code or is an allowed claim in such
proceeding), fees, expenses or otherwise.
"Senior Secured Notes" means the 6.737% Senior Secured Notes
due 2008, the 7.066% Senior Secured Notes due 2012, the 7.536% Senior
Secured Notes due 2017 and any Additional Notes, in each case issued or
to be issued by the Borrower under, and subject to the conditions and
limitations contained in, the Indenture.
"Single Employer Plan" means, in respect of any Person, a
single employer plan, as defined in Section 4001(a)(15) of ERISA, that
(a) is maintained for employees of such Person or any of its ERISA
Affiliates and no entity other than such Person and its ERISA
Affiliates or (b) was so maintained and in respect of which such Person
or any of its ERISA Affiliates could have liability under Section 4069
of ERISA in the event such plan has been or were to be terminated.
"Steam Sales Contracts" means, collectively, (a) the Agreement
for the Sale of Steam dated as of August 1, 1990, between Linden
Venture and Exxon Corporation, as amended and restated as of January 1,
1999, by and between Linden Venture and Infineum USA L.P.; (b) the
Agreement for the Sale of Steam dated as of April 8, 1993, between
Linden Venture and Bayway Refining Company; (c) the Energy Purchase
Agreement dated as of December 18, 1989, between Camden Cogen and
Camden Paperboard Corporation; (d) the Agreement for the Sale of Steam
and Electricity from a Cogeneration Plant dated as of June 13, 1985,
between Cogen Technologies NJ, Inc. and IMTT-Bayonne; and (e) the
Agreement for the Sale of Steam from a Cogeneration Plant dated as of
February 27, 1987, between NJ Venture and Exxon Company, U.S.A., as
amended as of August 21, 1988 and as assigned to General Electric Power
Funding Corporation pursuant to an assignment agreement dated as of
February 27, 1987, by and between NJ Venture and General Electric Power
Funding Corporation.
"Subordinated Debt" means all obligations of the Borrower now
or hereafter existing under the Credit Agreement and the Notes (whether
created directly or acquired by assignment or otherwise), whether for
principal, interest (including, without limitation, interest, as
provided in the Credit Agreement and the Notes, accruing after the
filing of a petition initiating any proceeding referred to in Section
2.15(b) whether or not such interest accrues after the filing of such
petition for purposes of the Bankruptcy Code or is an allowed claim in
such proceeding), fees, expenses or otherwise.
<PAGE> 76
"Subordinated Loan Agreement" means the First Amended and
Restated Credit and Subordination Agreement dated as of April 20, 1999,
between Enron North America Corp. and the Borrower, as amended by the
First Amendment.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, trust or estate of which (or
in which) more than 50% of (a) the issued and outstanding capital stock
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency), (b)
the interest in the capital or profits of such partnership, joint
venture or limited liability company or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries.
"Supermajority Lenders" means, at any time, Lenders owed or
holding at least 66-2/3% of the aggregate principal amount of the
Advances outstanding at such time, or, if no such principal amount is
outstanding at such time, Lenders holding at least 66-2/3% of the
aggregate of the Commitments.
"Taxes" has the meaning specified in Section 2.11(a) of the
Credit Agreement.
"Termination Date" means the earlier of June 30, 2000, and the
date of termination in whole of the Commitments pursuant to Section
2.04 or Section 6.01.
"Termination Event" means (a) a "reportable event", as such
term is described in Section 4043 of ERISA (other than a "reportable
event" not subject to the provision for 30-day notice to the PBGC), or
an event described in Section 4062(e) of ERISA, or (b) the withdrawal
of ENA or any ERISA Affiliate from a Multiemployer Plan during a plan
year in which it was a "substantial employer", as such term is defined
in Section 4001(a)(2) of ERISA, or the incurrence of liability by ENA
or any ERISA Affiliate under Section 4064 of ERISA upon the termination
of a Multiple Employer Plan, or (c) the distribution of a notice of
intent to terminate a Plan pursuant to Section 4041(a)(2) of ERISA or
the treatment of a Plan amendment as a termination under Section 4041
of ERISA or (d) the institution of proceedings to terminate a Plan by
the PBGC under Section 4042 of ERISA, or (e) any other event or
condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer,
any Plan.
"Trustee" means The Bank of New York, as trustee (together
with any successor appointed pursuant to Article Six of the Indenture)
for the holders of Senior Debt.
"Type" refers to the distinction between Advances bearing
interest at the Base Rate and Advances bearing interest at the
Eurodollar Rate.
<PAGE> 77
"Unused Commitment" means, with respect to any Lender at any
time, such Lender's Commitment at such time minus the aggregate
principal amount of all Advances made by such Lender.
"Voting Interests" means shares of capital stock issued by a
corporation, or any other Equity Interest in or issued by any other
Person, the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or
persons performing similar functions) of such Person, even if the right
so to vote has been suspended by the happening of such a contingency.
"Welfare Plan" means, with respect to any Person, a welfare
plan, as defined in Section 3(1) of ERISA, that is maintained for
employees of such Person or in respect of which such Person could have
liability.
"Withdrawal Liability" has the meaning specified in Part I of
Subtitle E of Title IV of ERISA.
"Year 2000 Compliant" has the meaning specified in Section
4.01(cc) of the Credit Agreement.
"Year 2000 Problem" has the meaning specified in Section
4.01(cc) of the Credit Agreement.
<PAGE> 78
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
<TABLE>
<CAPTION>
=================================================================================================
Domestic Eurodollar
Lending Lending
Name of Initial Lender Office Office Commitment
=================================================================================================
<S> <C> <C> <C>
Bank of America, N.A. 100 North Tryon St. 100 North Tryon St. $30,000,000
Charlotte, NC 28255 Charlotte, NC 28255
=================================================================================================
</TABLE>
<PAGE> 79
EXHIBIT A
FORM OF NOTE
U.S.$_______________ Dated: _________
FOR VALUE RECEIVED, the undersigned, East Coast Power L.L.C.,
a limited liability company organized under the laws of Delaware (the
"Borrower"), HEREBY PROMISES TO PAY to the order of _________________________ or
its registered assigns (the "Lender") for the account of its Applicable Lending
Office (as defined in the Credit Agreement referred to below) the aggregate
principal amount of the Advances (as defined below) owing to the Lender by the
Borrower pursuant to the Senior Subordinated Credit Agreement dated as of
December 29, 1999 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"; terms defined therein being used herein as therein
defined), among the Borrower, the Lenders party thereto and Bank of America,
N.A., as Agent for the Lenders, on the Maturity Date.
The Borrower promises to pay to ___________________ or its
registered assigns interest on the unpaid principal amount of each Advance from
the date of such Advance until such principal amount is paid in full, at such
interest rates, and payable at such times, as are specified in the Credit
Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Bank of America, N.A., as Agent, at 100 North Tryon
Street, Charlotte, North Carolina 28255, in same day funds. Each Advance owing
to the Lender by the Borrower and the maturity thereof, and all payments made on
account of principal thereof, shall be recorded by the Lender and, prior to any
transfer hereof, endorsed on the grid attached hereto, which is part of this
Promissory Note.
This Promissory Note is one of the Notes referred to in, and
is entitled to the benefits of, the Credit Agreement. The Credit Agreement,
among other things, (i) provides for the making of advances (each, an "Advance")
by the Lender to the Borrower in an aggregate amount not to exceed the U.S.
dollar amount first above mentioned, the indebtedness of the Borrower resulting
from each such Advance being evidenced by this Promissory Note, and (ii)
contains provisions for acceleration of the maturity hereof upon the happening
of certain stated events and also for prepayments on account of principal hereof
prior to the maturity hereof upon the terms and conditions therein specified.
EAST COAST POWER L.L.C.
By:
---------------------------------
Name:
Title:
<PAGE> 80
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
=================== ======================= ======================= ======================= ========================
Amount of Unpaid
Amount of Principal Paid Principal Notation
Date Advance or Prepaid Balance Made By
=================== ======================= ======================= ======================= ========================
<S> <C> <C> <C> <C>
- ------------------- ----------------------- ----------------------- ----------------------- ------------------------
- ------------------- ----------------------- ----------------------- ----------------------- ------------------------
- ------------------- ----------------------- ----------------------- ----------------------- ------------------------
- ------------------- ----------------------- ----------------------- ----------------------- ------------------------
- ------------------- ----------------------- ----------------------- ----------------------- ------------------------
- ------------------- ----------------------- ----------------------- ----------------------- ------------------------
- ------------------- ----------------------- ----------------------- ----------------------- ------------------------
- ------------------- ----------------------- ----------------------- ----------------------- ------------------------
- ------------------- ----------------------- ----------------------- ----------------------- ------------------------
- ------------------- ----------------------- ----------------------- ----------------------- ------------------------
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- ------------------- ----------------------- ----------------------- ----------------------- ------------------------
- ------------------- ----------------------- ----------------------- ----------------------- ------------------------
=================== ======================= ======================= ======================= ========================
</TABLE>
<PAGE> 81
B-3
EXHIBIT B
FORM OF NOTICE OF BORROWING
Bank of America, N.A., as Agent under
the Credit Agreement referred to below
Bank of America Corporate Center
101 North Tryon Street
10th Floor [Date]
Charlotte, North Carolina 28255
Attention: _______________
Ladies and Gentlemen:
The undersigned refers to the Senior Subordinated Credit
Agreement dated as of December 29, 1999 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement", the terms defined therein
being used herein as therein defined), among the undersigned, the Lenders party
thereto, and Bank of America, N.A., as Agent, and hereby gives you notice,
irrevocably, pursuant to Section 2.02 of the Credit Agreement that the
undersigned hereby requests a Borrowing under the Credit Agreement, and in that
connection sets forth below the information relating to the Borrowing (the
"Proposed Borrowing") as required by Section 2.02(a) of the Credit Agreement:
(a) The Business Day of the Proposed Borrowing is _________ __, ____.
(b) The aggregate amount of the Proposed Borrowing is $______________.
(c) The Type of Advances comprising the Proposed Borrowing is
[Base Rate Advances][Eurodollar Rate Advances and the initial
Interest Period for each such Advance is [three] [six]
months].
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Borrowing:
<PAGE> 82
B-4
(a) the representations and warranties contained in the Credit
Agreement are correct on and as of the date of the Proposed Borrowing,
before and after giving effect to the Proposed Borrowing and to the
application of the proceeds therefrom, as though made on and as of such
date, other than any such representations or warranties that, by their
terms, refer to a specific date other than the date of the Proposed
Borrowing, in which case, as of such specific date; and
(b) no event has occurred and is continuing, or would result
from such Proposed Borrowing or from the application of the proceeds
therefrom, that constitutes a Default.
Very truly yours,
EAST COAST POWER L.L.C.
By:
-------------------------------
Name:
Title:
<PAGE> 83
EXHIBIT C
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Senior Subordinated Credit Agreement
dated as of December 29, 1999 (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement") among East Coast Power L.L.C., a
limited liability company organized under the laws of Delaware (the "Borrower"),
the Lenders party thereto and Bank of America, N.A., as Agent for the Lenders
(the "Agent"). Terms defined in the Credit Agreement are used herein with the
same meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1
hereto agree as follows:
1. The Assignor hereby sells and assigns to the Assignee,
without recourse and without representation or warranty except as expressly set
forth herein, and the Assignee hereby purchases and assumes from the Assignor,
an interest in and to the Assignor's rights and obligations under the Credit
Agreement as of the date hereof equal to the percentage interest specified on
Schedule 1 hereto of all outstanding rights and obligations under the Credit
Agreement. After giving effect to such sale and assignment, the Assignee's
Commitments and the amount of the Advances owing to the Assignee will be as set
forth on Schedule 1 hereto.
2. The Assignor (a) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; (b) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or the Notes or any
other instrument or document furnished pursuant thereto; (c) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under Credit Agreement or the Notes or any
other instrument or document furnished pursuant thereto; and (d) attaches the
Note or Notes held by the Assignor and requests that the Agent exchange such
Note or Notes for a new Note or Notes payable to the order of the Assignee in an
amount equal to the Commitments assumed by the Assignee pursuant hereto or new
Notes payable to the order of the Assignee in an amount equal to the Commitments
assumed by the Assignee pursuant hereto and the Assignor in an amount equal to
the Commitments retained by the Assignor under the Credit Agreement,
respectively, as specified on Schedule 1 hereto.
3. The Assignee (a) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial statements referred
to in Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis
<PAGE> 84
and decision to enter into this Assignment and Acceptance; (b) agrees that it
will, independently and without reliance upon the Agent, the Assignor or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (c) confirms that it is an
Eligible Assignee; (d) appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers and discretion under the Credit
Agreement and the Notes as are delegated to the Agent by the terms thereof,
together with such powers and discretion as are reasonably incidental thereto;
(e) agrees that it will perform in accordance with their terms all of the
obligations that by the terms of the Credit Agreement are required to be
performed by it as a Lender; and (f) attaches any U.S. Internal Revenue Service
forms required under Section 2.11 of the Credit Agreement.
4. Following the execution of this Assignment and Acceptance,
it will be delivered to the Agent for acceptance and recording by the Agent. The
effective date for this Assignment and Acceptance (the "Effective Date") shall
be the date of acceptance hereof by the Agent, unless otherwise specified on
Schedule 1 hereto.
5. Upon such acceptance and recording by the Agent, as of the
Effective Date, (a) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (b) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and
after the Effective Date, the Agent shall make all payments under the Credit
Agreement and the Notes in respect of the interest assigned hereby (including,
without limitation, all payments of principal, interest and commitment fees with
respect thereto) to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments under the Credit Agreement and the Notes for
periods prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
8. This Assignment and Acceptance 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 Schedule 1 to this Assignment and Acceptance by
telecopier shall be effective as delivery of a manually executed counterpart of
this Assignment and Acceptance.
<PAGE> 85
IN WITNESS WHEREOF, the Assignor and the Assignee have caused
Schedule 1 to this Assignment and Acceptance to be executed by their officers
hereunto duly authorized as of the date specified thereon.
<PAGE> 86
SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE
<TABLE>
<S> <C>
Percentage interest assigned:.................................................................__________%
Assignee's Commitment:........................................................................$_________
Aggregate outstanding principal amount of:
Advances assigned....................................................................$_________
Principal amount of Note payable to Assignee..................................................$_________
Principal amount of Note payable to Assignor..................................................$_________
Effective Date (if other than date of acceptance by Agent): ___________
</TABLE>
[NAME OF ASSIGNOR], as Assignor
By:
----------------------------
Name:
Title:
Dated: _____________
[NAME OF ASSIGNEE], as Assignee
By:
---------------------------
Name:
Title:
Dated:
- ------------------
1 This date should be no earlier than five Business Days after the
delivery of this Assignment and Acceptance to the Agent.
<PAGE> 87
Domestic Lending Office:
Eurodollar Lending Office:
Accepted [and Approved] this ____
day of ___________, ___
Bank of America, N.A., as Agent
By:
-------------------------------
Name:
Title:
[Approved this ____ day
of _____________, ____
EAST COAST POWER L.L.C.
By:
-------------------------------
Name:
Title:]**
- ------------------
2 Required if the Assignee is an Eligible Assignee solely by reason of
clause (h) of the definition thereof.
<PAGE> 1
EXHIBIT 10.101
Execution Copy
ENERGY SERVICES AGREEMENT
BETWEEN
EAST COAST POWER L.L.C., AS SELLER
AND
TOSCO REFINING, L.P., AS BUYER
DATED AS OF FEBRUARY 14, 2000
<PAGE> 2
TABLE OF CONTENTS
ENERGY SERVICES AGREEMENT
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Article 1. DEFINITIONS AND INTERPRETATION........................................................... 4
1.1 Definitions.............................................................................. 4
1.2 Interpretation........................................................................... 39
Article 2. TERM OF THIS AGREEMENT................................................................... 41
2.1 Term..................................................................................... 41
2.2 Early Termination by Seller.............................................................. 41
Article 3. REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENTS.......................................... 42
3.1 Representations and Warranties of the
Parties. ............................................................................... 42
3.2 Additional Representations and Warranties of
Buyer.................................................................................... 43
3.3 Additional Representations and Warranties of
Seller................................................................................... 44
3.4 Buyer's Acknowledgment................................................................... 46
Article 4. CONSTRUCTION AND OPERATION OF THE FACILITY............................................... 47
4.1 Construction and Operation of the Facility............................................... 47
4.2 In-Service Date.......................................................................... 53
4.3 Incentives for Timely Completion......................................................... 58
4.4 Ownership of Facility and Appurtenant
Systems. ............................................................................... 60
4.5 Information from Buyer................................................................... 60
4.6 Operational Testing and Purchase of Test
Period Electricity....................................................................... 61
4.7 Commercial Operation Notices............................................................. 62
4.8 Termination on Account of Delay in Commercial
Operations Date.......................................................................... 62
Article 5. ELECTRICITY SUPPLY....................................................................... 63
5.1 Electricity Quality...................................................................... 63
5.2 Electricity Quantity..................................................................... 64
5.3 Nominated Load........................................................................... 66
5.4 Interim Changes to Nominated Load........................................................ 66
5.5 Electricity Scheduling................................................................... 68
5.6 Title; Risk of Loss...................................................................... 68
5.7 Back-up Electricity Arrangements......................................................... 68
5.8 Closure of Buyer's Facilities............................................................ 73
5.9 Sales of Electricity to Third Parties.................................................... 74
5.10 Replacements, Improvements or Additions to
the Facility............................................................................. 77
5.11 Qualifying Facility Status............................................................... 82
5.12 On-site Generation Facility Status....................................................... 82
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Article 6. PRICE FOR ELECTRICITY................................................................... 82
6.1 Price................................................................................... 82
6.2 Annual Budget........................................................................... 84
6.3 Purchases of Fuel; Use of Distillate.................................................... 88
6.4 Optional Electricity Purchases from a Third
Party................................................................................... 91
6.5 Optional Long Term Electricity Purchases from
Third Parties........................................................................... 94
6.6 Adjustments to Fixed Facility Charge
Component............................................................................... 97
6.7 Insurance............................................................................... 100
Article 7. ALLOCATION OF NET REVENUES OR LOSSES AND BACK-UP
ENERGY COSTS............................................................................ 103
7.1 Defined Terms........................................................................... 103
7.2 Allocation of Net Revenues or Losses.................................................... 108
7.3 Minimum Allocation to Seller............................................................ 111
7.4 Allocation of Infineum Net Revenues or Losses
and Power Augmentation Revenues......................................................... 112
7.5 Distribution of Buyer's Share of Net Revenues
or Losses, Infineum Net Revenues or Losses
and Power Augmentation Revenues......................................................... 112
7.6 Allocation and Reconciliation of Net Back-up
Energy Costs............................................................................ 112
Article 8. METERING................................................................................ 113
8.1 Measurement Location.................................................................... 113
8.2 Electricity Measuring Equipment and Stations............................................ 113
8.3 Fuel Measuring Equipment and Stations................................................... 116
8.4 Testing................................................................................. 117
8.5 Corrections............................................................................. 118
8.6 Maintenance and Records................................................................. 119
Article 9. INVOICES AND PAYMENT.................................................................... 119
9.1 Billing................................................................................. 119
9.2 Payment................................................................................. 121
9.3 Annual Reconciliation of Steam Btu Credit and
Related Calculations.................................................................... 121
9.4 Adjustments............................................................................. 122
9.5 Audit Rights............................................................................ 123
9.6 Books and Records....................................................................... 123
Article 10. TAXES................................................................................... 124
Article 11. DEFAULT AND REMEDIES.................................................................... 124
11.1 Seller Default.......................................................................... 124
11.2 Buyer Default........................................................................... 126
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
11.3 Remedies................................................................................ 128
11.4 Damages................................................................................. 128
11.5 Limitation on Liability for Damages..................................................... 128
11.6 Duty to Mitigate........................................................................ 130
Article 12. FORCE MAJEURE........................................................................... 130
12.1 Force Majeure........................................................................... 130
12.2 Force Majeure Defined................................................................... 131
Article 13. INDEMNIFICATION......................................................................... 133
13.1 Indemnification for Claims.............................................................. 133
13.2 Notice.................................................................................. 133
13.3 Defense................................................................................. 134
13.4 Survival of Indemnifications............................................................ 135
Article 14. DISPUTE RESOLUTION...................................................................... 135
14.1 Dispute Resolution...................................................................... 135
14.2 Binding Arbitration..................................................................... 136
14.3 Presumptions............................................................................ 139
Article 15. ASSIGNMENT.............................................................................. 140
15.1 General................................................................................. 140
15.2 Permitted Assignments................................................................... 140
15.3 Sale of Bayway Refinery................................................................. 140
15.4 Assignment Conditions................................................................... 140
15.5 Survival of Guarantees; Substitute
Guarantors.............................................................................. 142
15.6 Further Assurances...................................................................... 147
15.7 Violations a Default; Further Remedies.................................................. 147
Article 16. NOTICES................................................................................. 148
16.1 General................................................................................. 148
16.2 Changes................................................................................. 150
16.3 Holidays................................................................................ 150
Article 17. CONFIDENTIALITY......................................................................... 150
Article 18. FURTHER ASSURANCES; OTHER FACILITIES.................................................... 152
18.1 General................................................................................. 152
18.2 First Amendment to the Steam Agreement.................................................. 152
18.3 Permits and Governmental Approvals...................................................... 153
18.4 Financing............................................................................... 153
18.5 Additional Consideration................................................................ 154
Article 19. MISCELLANEOUS........................................................................... 154
19.1 Severability............................................................................ 154
19.2 Captions, Titles and Headings........................................................... 155
19.3 Governing Law........................................................................... 155
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
19.4 Non-Waiver.............................................................................. 155
19.5 Relationship of the Parties............................................................. 155
19.6 Existing Plant.......................................................................... 156
19.7 Parties in Interest..................................................................... 156
19.8 Non-Dedication of Facility.............................................................. 157
19.9 Modification............................................................................ 157
19.10 Entire Agreement........................................................................ 157
19.11 Attorneys' Fees......................................................................... 157
19.12 Costs and Expenses...................................................................... 157
19.13 Counterparts............................................................................ 158
19.14 Survival of Obligations................................................................. 158
Exhibits
Exhibit A Delivery Point and Metering Point
Exhibit B Heat Rate Table
Exhibit C Parent Guaranty
Exhibit D Pro Forma Analysis of Project
Exhibit E Scope Description
Exhibit F Steam Btu Credit
Exhibit G Sample of Facility Budget
Exhibit H Reimbursement Agreement
Exhibit I Construction Contract Terms and Conditions
Exhibit J O&M Contract Terms and Conditions
Exhibit K Electricity Specifications Sheet
Exhibit L Fuel Specifications
Exhibit M Sample Reallocation of Back-up Electricity
Charges
Exhibit N Sample Invoice
Exhibit O Form of Assignment and Assumption
Agreement
Exhibit P Form of First Amendment to Steam Agreement
</TABLE>
-iv-
<PAGE> 6
ENERGY SERVICES AGREEMENT
This ENERGY SERVICES AGREEMENT (this "Agreement"), dated as of February
14, 2000, between EAST COAST POWER L.L.C., a Delaware limited liability company
("Seller"), and TOSCO REFINING, L.P., a Delaware limited partnership ("Buyer").
W I T N E S S E T H:
WHEREAS, Buyer presently operates and maintains the Bayway Refinery (as
hereinafter defined), which requires steam and electricity in its industrial
processes and for other purposes;
WHEREAS, Cogen Technologies Linden Venture, L.P., a Delaware limited
partnership and an Affiliate of Seller ("Cogen"), presently owns, operates and
maintains the Existing Plant (as hereinafter defined), which produces steam for
delivery to the Bayway Refinery;
WHEREAS, Seller wishes to construct the Facility (as
hereinafter defined);
WHEREAS, Buyer wishes to purchase from Seller Electricity from the
Facility, and Seller wishes to sell Electricity to Buyer, upon the terms and
subject to the conditions set forth
1
<PAGE> 7
herein, and Seller and Buyer further desire that Seller shall sell excess
Electricity from the Facility to Third Parties and share in any net benefits
from those sales upon the terms and subject to the conditions set forth herein;
WHEREAS, Cogen presently sells steam from the Existing Plant to Bayway
Refining Company, a Delaware corporation ("Bayway"), for use at the Bayway
Refinery under the Agreement for the Sale of Steam between Cogen and Bayway,
dated as of April 8, 1993 (as amended from time to time, the "Steam Agreement"),
and Bayway may require additional steam for use at the Bayway Refinery and
wishes to purchase from Cogen, and Cogen wishes to sell to Bayway, additional
steam, and Seller and Bayway have agreed to provide for such purchase and sale
by amending the Steam Agreement;
WHEREAS, Buyer presently owns and operates a 27kV substation situated
within the Bayway Refinery that is presently in working condition and which will
be upgraded or replaced (the "27kV Substation"), and Seller and Buyer wish to
interconnect the 27kV Substation and the Facility with the transmission
facilities of the PJM Interconnection, L.L.C. at a new 230kV interconnection;
WHEREAS, the Parties contemplate that the Facility will be located on
land owned by Bayway and leased to Cogen (the
2
<PAGE> 8
"Existing Site") in accordance with the Ground Lease Agreement, dated as of
August 1, 1990, between Cogen and Exxon Corporation ("Exxon"), and subsequently
assigned by Exxon to Bayway, as in effect on the date hereof, relating to the
Existing Site, (as amended from time to time, the "Existing Ground Lease
Agreement");
WHEREAS, the development and construction of the Facility and the
transactions contemplated hereby, subject to the limitations and qualifications
herein, are intended to satisfy any rights or obligations of either Cogen or
Bayway pursuant to Article 7 of the Existing Ground Lease Agreement; and
WHEREAS, Seller and Buyer wish to set forth herein their respective
rights and obligations relative to the development, construction and operation
of the Facility, the integration of the Facility and the Bayway Refinery and
other matters set forth above.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties, intending legally to be bound, agree as
follows:
3
<PAGE> 9
ARTICLE 1. DEFINITIONS AND INTERPRETATION
1.1 Definitions. As used in this Agreement, the following terms when
initially capitalized in this Agreement shall have the following meanings:
"27kV Substation" has the meaning assigned to it in the recitals
hereof.
"Additional Generation Facility" means the additional generation
facility that may be developed by Seller on property leased from Buyer or
Buyer's Affiliate at the Bayway Property pursuant to a lease executed
simultaneously with this Agreement.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with, such Person. Solely for the
purposes of defining the term Affiliate, "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.
The ownership, directly or indirectly, of 10% or more of the voting
4
<PAGE> 10
securities of any Person shall constitute "Control" of such Person. Enron Corp.,
El Paso Energy Corporation and their respective affiliates shall be deemed to be
Affiliates of Seller.
"Agreement" means this Energy Services Agreement, including all
exhibits hereto, as amended from time to time.
"Annual Budget" has the meaning assigned to it in Section 6.2.
"Annual Period" means any one of a succession of consecutive twelve
(12) Month periods beginning on January 1st and ending on December 31st, except
for the first such period, which shall begin on the Commercial Operations Date
and end on the following December 31st, and the last such period, which shall
begin on January 1, 2017 and end on April 30, 2017.
"Appurtenant Systems" means the equipment and facilities, including
measuring equipment, metering stations, Seller's on-site natural gas facilities,
condensate pipelines, wastewater discharge pipelines, Steam pipelines, a day
tank with associated pumps, piping and controls for distillate Fuel on the
Existing Site, to be installed by Seller and located at the Facility.
5
<PAGE> 11
"Average Heat Rate" means, for any hour, the quotient of:
(a) the quantity of Fuel consumed in the Facility
expressed in Btu, less
(b) the Steam Btu Credit,
divided by
(c) the total quantity of Electricity (in kWh) produced
by the Facility during such hour, as measured by the
meter designated as "ECP #1" on Exhibit A.
"Avoided Cost of Fuel" means the cost of fuel, in $/MMBtu, that would
otherwise have been consumed at the Existing Plant (including the cost of
transportation and related services necessary for the purchase of such fuel,
inclusive of all Taxes) to produce Steam, when such Steam is delivered to the
Existing Plant from the Facility or, if the Existing Plant is not operating, the
Cost of Fuel.
"Back-up Demand Charge Component" means (a) the actual charges incurred
by Seller to reserve back-up Electricity for Buyer at the Bayway Refinery
pursuant to Section 5.7A, less (b) any Back-up Demand Costs Chargeable to
Infineum Sales.
6
<PAGE> 12
"Back-up Demand Costs Chargeable to Infineum Sales" means the
allocation for back-up demand costs agreed to by the Parties pursuant to Section
5.9C(ii).
"Back-up Energy Component" means, for any Month:
(a) the product of:
(i) an estimate of the quantity of Fuel that would have
been consumed at the Facility had the Facility
generated a quantity of energy equivalent to the
quantity of back-up energy delivered to Buyer (less
the quantity of any back-up energy Buyer is
responsible to pay for pursuant to Section
5.7B(i)-(vi)) and
(ii) an estimate of the price of Fuel that would have
been consumed at the Facility had the Facility
generated such quantity of energy,
plus
(b) an estimate of the cost of Variable O&M Charges that
would have been incurred if the Facility had generated
such quantity of energy,
less
(c) an estimate of the Steam Credit that would have
resulted had the Facility generated such quantity of
energy.
7
<PAGE> 13
For purposes of estimating the quantity of Fuel, Variable O&M Charges and Steam
Credit in (a), (b) and (c) above, it shall be assumed that the Facility operated
to produce such energy at normal operating conditions experienced during the
first Month prior to the Month in which such quantity of back-up energy was
purchased during which normal operating conditions prevailed and, for the price
of Fuel and the Avoided Cost of Fuel (used in the estimate of the Steam Credit),
the prices available to the Facility and the Existing Plant, respectively,
during the period in which such quantity of back-up energy was purchased shall
be used.
"Back-up Energy Costs Chargeable to Infineum Sales" means the
allocation for back-up energy costs agreed to by the Parties pursuant to Section
5.9C(ii).
"Bayway Property" means the land upon which the Bayway Refinery is
located at Linden, N.J. and Elizabeth, N.J. and such other properties that could
be served by the Facility without adversely affecting the Facility's
qualification as an On-Site Generation Facility.
"Bayway Refinery" means the (i) oil refinery, marketing terminal,
petrochemical plant and associated facilities owned or operated by Buyer or
Buyer's Affiliate on the Bayway Property
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<PAGE> 14
(ii) the operations of Exxon Company, U.S.A., Turbo Oil and Exxon Company,
U.S.A., Site Remediation on the Bayway Property at levels existing as of the
Effective Date, and (iii) any other facilities or operations located on the
Bayway Property that are related to and integrated with the industrial processes
or marketing terminal operations of the Bayway Refinery, (whether or not owned
or operated by Buyer or an Affiliate or a Third Party) provided that such term
shall not include the facilities or operations currently or in the future owned
by Infineum. The shared use of steam or Electricity or both shall not of itself
qualify facilities or operations as related to and integrated with the
industrial processes or marketing terminal operations of the Bayway Refinery.
"Btu" means one British Thermal Unit of energy.
"Budget Plan" has the meaning assigned to it in Section 6.2.
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in New York City or Linden, New Jersey, are authorized
or required by law to close.
"Buyer" means Tosco Refining, L.P., a Delaware limited partnership, and
its permitted successors and assigns.
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"Buyer's Requirements" means Buyer's Electricity requirements for the
Bayway Refinery commencing on the Commercial Operations Date; provided, however,
Buyer's Requirements shall not include Electricity generated at the Bayway
Refinery by (i) Buyer or Buyer's Affiliates or (ii) an electric generation
facility (a) owned by a Third Party, (b) located on Bayway Property owned as of
the date hereof by Buyer or Buyer's Affiliates and (c) related to and integrated
with the industrial processes or marketing terminal operations of the Bayway
Refinery. The shared use of steam or Electricity or both shall not of itself
qualify facilities or operations as related to and integrated with the
industrial processes or marketing terminal operations of the Bayway Refinery.
"Change in Law" means a change which occurs after the Effective Date in
any statute, ordinance, regulation or policy of any Governmental Authority or
the policies, rules or procedures of PJM or any other legal requirements
applicable to the construction, operation or maintenance of the Facility.
"Claiming Party" means a Party claiming Force Majeure.
"Claims" has the meaning assigned to it in Section 13.1.
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"Commercial Operations Date" means the date declared by Seller in a
notice to Buyer on or after the date on which (i) Electricity generated
hereunder is first available to be delivered from the Facility to the Delivery
Point by Seller following successful completion of Operational Testing of the
Facility, consistent with Prudent Electric Industry Practice and (ii) Seller has
presented to Buyer the amendment to the Steam Agreement executed by Cogen in
accordance with Section 18.2.
"Commercial Operations Year" means any year commencing on the
Commercial Operations Date or on the anniversary thereof, and ending on the
earlier of (i) the next anniversary of the Commercial Operations Date or (ii)
April 30, 2017.
"Construction Contract" has the meaning assigned to it in Section 4.1A.
"Cost of Fuel" means the actual price or charge for Fuel, expressed in
$/MMBtu, delivered to the Facility, including the cost of transportation and
related services necessary for the purchase of such Fuel, inclusive of all
Taxes.
"Default" has the meaning assigned to it in Article 11.
"Delivery Point" means the point as described in Exhibit A.
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<PAGE> 17
"Distillate Interconnection Point" means the point within the Existing
Site at the inlet flange of the distillate day tank to which Buyer will
construct or cause to be constructed equipment capable of delivering distillate
at a pressure, quantity and in accordance with the specification for distillate
set forth in the Section 6.3 and Exhibit L.
"Eastern Prevailing Time" or "EPT" means the time in effect (i.e.,
Eastern Standard Time or Eastern Daylight Savings Time) in Linden, New Jersey.
"Effective Date" means the date set forth in the first paragraph of
this Agreement.
"Eight Percent Proxy Component" means, for any Month, the product of:
(i) eight percent (8%);
(ii) Buyer's load (in kWh) during such Month, less any back-up
energy for which Buyer is responsible to pay pursuant to Section
5.7B(i)-(vi); and
(iii) (a) the average price per kWh weighted for all hours
during such Month for back-up energy pursuant to PSE&G's applicable
tariff, less (b) the quotient of (x) the Fuel Component plus the
Variable O&M Component (less any Variable O&M Costs Chargeable to Third
Party Sales as
12
<PAGE> 18
described in (b) of the definition thereof and less any Variable O&M
Costs Chargeable to Infineum Sales) divided by (y) the quantity of
energy (in kWh) generated by the Facility and delivered to Buyer in
such Month.
"Electricity" means capacity, expressed in megawatts (MW), or energy,
expressed in kilowatt hours (kWh), or both, as the context requires.
"Environmental Remediation and Relocation Costs" means the sum of (i)
all "Excess Relocation Costs" and (ii) all "Unreimbursed Excess Costs" incurred
by Seller, as such terms are defined (a) in Sections 2.12 and 10.2,
respectively, in each of the Ground Lease Agreement for Additional Generation
Facility, the Ground Lease Agreement for TES Facility and the Ground Lease
Agreement for Greywater Facility, each entered into as of the date hereof
between Bayway and Seller, and (b) in Section 7.4 of the Interconnection Lease.
"Excess Capacity" means, for any period, any electric generating
capacity from the Facility available for sale to Third Parties in excess of the
capacity required by the PJM rules to supply (i) the Nominated Load or (ii) the
Interim Nominated Load, whichever is in effect, for such period.
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<PAGE> 19
"Excess Energy" means, for any period, any available electric energy
from the Facility available for sale to Third Parties in excess of Buyer's
Requirements, as Buyer has provided to Seller pursuant to Section 5.2C. Any
Electricity provided to the Additional Generation Facility from the Facility
shall be deemed to be a sale of Excess Energy to an Affiliate for purposes of
this Agreement.
"Excluded Peril" means any occurrence which results in an Uninsurable
loss or damage to the Facility or Appurtenant Systems caused by acts of God, war
or foreign enemy, sabotage, nuclear reaction, radiation or radioactive
contamination, confiscation by order of any Governmental Authority, strikes,
lockouts or similar labor disputes or acts or omissions of Buyer or Buyer's
Affiliates. "Uninsurable," as used in this definition, means insurance coverage
(i) for such loss or damage was not available at commercially reasonable rates
from internationally recognized insurance markets or (ii) that Seller has
presented to Buyer but which has not been accepted by Buyer pursuant to Section
6.7.
"Existing Ground Lease Agreement" has the meaning assigned to it in the
recitals hereof.
"Existing Plant" means the cogeneration facility and all appurtenant
structures and equipment owned by Cogen in Linden,
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<PAGE> 20
New Jersey, as of the date hereof and as generally described in the filing made
with the FERC in docket no. QF90-65-000, for the purpose of producing steam and
generating electricity.
"Existing Plant Lenders" means any Person designated from time to time
by Seller in a notice to Buyer as an "Existing Plant Lender."
"Existing Site" has the meaning assigned to it in the recitals hereof.
"Exxon System" has the meaning assigned to it in the Existing Ground
Lease Agreement.
"Facility" means that certain facility designed to generate Electricity
and to produce Steam as described in the Scope Description.
"Facility Force Majeure" means a Force Majeure of Seller the proximate
cause of which is an event occurring within the Existing Site that is not an
Excluded Peril.
"FERC" means the Federal Energy Regulatory Commission.
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<PAGE> 21
"FERC Rules" means the regulations promulgated by the FERC under PURPA
that are set forth in 18 C.F.R. Part 292, or successor regulations and any other
applicable regulations promulgated by the FERC.
"Five-Year Projection" has the meaning assigned to it in Section 6.2.
"Fixed Charges" means the Fixed Facility Charge Component and the Fixed
O&M Component.
"Fixed Costs Chargeable to Infineum Sales" means, in any Month, the
product of (a) the Fixed Charges and (b) the quotient of (i) the lesser of (1)
the quantity of Electricity generated in such Month by the Facility to serve
Infineum's Load (in kWh) or (2) 5,500 multiplied by the number of hours in such
Month, divided by (ii) 134,500 multiplied by the number of hours in such Month;
provided, however that in the event Seller or its Affiliate has not entered into
an agreement with Infineum to sell Electricity from the Facility to Infineum,
Fixed Costs Chargeable to Infineum Sales shall be zero.
"Fixed Facility Charge Component" means, for any Month, an amount equal
to nine hundred eighty-six thousand five hundred sixty-seven dollars ($986,567),
such amount to be adjusted by the
16
<PAGE> 22
Parties pursuant to Section 6.6 and such amount to be paid each Month for 192
Months, or such lesser number of Months, as determined pursuant to Sections
4.2D(ii) and 6.6C.
"Fixed O&M Component" means, for any Month, the sum of the following
costs reasonably incurred by Seller in the operation and maintenance of the
Facility (excluding costs to be included in the Fuel Component or the Variable
O&M Component) in each case in accordance with the Annual Budget for the Annual
Period that includes such Month: insurance; Taxes; planned preventive
maintenance expense; apparatus, machinery and equipment costs necessary to
maintain Facility performance; all O&M contractor expenses, including fees,
payroll, benefits, and home office support; environmental expenses; Facility
office expenses; community relations expenses; service contract costs; and costs
for other personnel (however employed) devoted full-time to the Facility
(including one business manager and one accountant expected to be employed by
Seller); and a general administrative expense component (including the following
in-house services: accounting, legal, compliance, audit and other components
performed by Seller or any Affiliate of Seller, comparable to the degree to
which such services are performed as in-house services for the Existing Plant
unless such services required are different) of fifteen percent (15%) of the
Annual Budget divided by twelve (12); and any other expense reasonably incurred
by
17
<PAGE> 23
Seller in the operation and maintenance of the Facility that does not vary with
the operation of the Facility other than the Fixed Facility Charge Component and
similar charges as set forth in Exhibit G. In no event shall Buyer be liable for
any cost of financing the purchase of items or services that Buyer is otherwise
liable to reimburse Seller for as part of the Fixed O&M Component. To the extent
reasonable and prudent, the costs incurred on behalf of the Facility will
recognize the incremental economies of scale and efficiencies (if any) made
possible by virtue of the location of the Facility adjacent to the Existing
Plant, however, Seller in no fashion guarantees nor warrants to Buyer that any
such economies of scale or efficiencies will in fact be realized.
"Force Majeure" has the meaning assigned to it in Section 12.2.
"Fuel" means natural gas or any petroleum product used as energy input
to the Facility, including distillate, as the case may be.
"Fuel Component" means, for any Month,
(a) the product of:
(i) the Cost of Fuel (in $/MMBtu), and
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<PAGE> 24
(ii) the quantity of Fuel utilized in the
Facility during such Month (in MMBtu),
less
(b) the sum of:
(i) Fuel Costs Chargeable to Infineum Sales,
(ii) Fuel Costs Chargeable to Power
Augmentation,
(iii) Fuel Costs Chargeable to Third Party
Sales, and
(iv) the Steam Credit.
"Fuel Costs Chargeable to Infineum Sales" means, for each Month, the
sum, for all hours in such Month, of
(a) the product of:
(i) the Cost of Fuel, in $/MMBtu, consumed to
generate Electricity at the Facility for
sale to Infineum;
(ii) the Average Heat Rate;
(iii) the quantity of Electricity sold to
Infineum in such hour by Seller, in kWh,
as determined by the Parties pursuant to
Section 8.2C;
divided by
(b) 1,000,000;
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<PAGE> 25
provided, however, that in the event Seller or its Affiliate has not entered
into an agreement with Infineum to sell Electricity from the Facility to
Infineum, Fuel Costs Chargeable to Infineum Sales shall be zero.
"Fuel Costs Chargeable to Power Augmentation" means, for each Month,
the sum, for all hours in such Month, of
(a) the product of:
(i) the quantity of Electricity sold to Third
Parties in any hour, in kWh, as a result
of Power Augmentation;
(ii) the Cost of Fuel, in $/MMBtu, consumed to
generate Electricity for sale to Third
Parties as a result of Power Augmentation;
and
(iii) the Power Augmentation Heat Rate
applicable to such sales to Third Parties,
which shall be 6,023 Btu/kWh (until such
time as it may be redetermined as
contemplated below);
divided by
(b) 1,000,000.
As soon as practicable after the Commercial Operations Date, Seller shall
demonstrate, and Buyer shall be allowed to witness and audit, the capability of
the Facility to generate Electricity by Power Augmentation, and such
demonstration shall determine the
20
<PAGE> 26
Power Augmentation Heat Rate to be used thereafter. Buyer may, from time to
time, reasonably request that Seller, and Seller on its own may, demonstrate the
capability of the Facility to generate Electricity by Power Augmentation and
redetermine the Power Augmentation Heat Rate as may be appropriate.
"Fuel Costs Chargeable to Third Party Sales" means, for each Month, the
sum, for all hours in such Month, of
(a) the product of:
(i) the Cost of Fuel, in $/MMBtu, consumed to
generate Electricity for sale to Third
Parties;
(ii) the Incremental Heat Rate applicable to
such sales to Third Parties; and
(iii) the quantity of Electricity sold to Third
Parties in such hour, in kWh;
divided by
(b) 1,000,000,
For purposes of this definition, the Cost of Fuel consumed to generate
Electricity for sale to Third Parties and the quantity of Electricity sold to
Third Parties shall not include any Fuel consumed or Electricity sold (i) as a
result of Seller's reasonable efforts to cause the Facility to follow changes in
Buyer's load in accordance with Section 5.2C, (ii) as a result of
21
<PAGE> 27
sales or inadvertent provision of Electricity to Infineum or (iii) as a result
of Power Augmentation.
"Generally Accepted Accounting Principles" means generally accepted
accounting principles in the United States of America consistently applied.
"Governmental Authority" means any governmental, legislative, judicial
or administrative body or court or any other Person authorized to make or
enforce laws or regulations or exercising executive, legislative, judicial,
regulatory or administrative functions or pertaining to government.
"Guarantor" means, with respect to Buyer, Tosco.
"Hazardous Materials" means any substance or material defined as a
hazardous waste, material or substance or defined as a toxic waste, material or
substance under any federal or state statute or regulations promulgated
thereunder intended to provide protection for public health and the environment,
including, without limitation, the Clean Air Act, the Clean Water Act, CERCLA,
the Solid Waste Disposal Act (including the Resource Conservation and Recovery
Act), the Toxic Substances Control Act, and their state statutory and regulatory
counterparts. The term "Hazardous Materials" shall include, without limitation,
22
<PAGE> 28
petroleum and petroleum byproducts, materials containing greater than one
percent (1%) asbestos and dielectric fluids containing greater than fifty parts
per million (50 ppm) polychlorinated biphenyls.
"Heat Rate" means the rate of consumption of Fuel in the Facility for
the production of Electricity, expressed as Btu/kWh.
"Heat Rate Credit" means, for any Month, (a) Fuel Costs Chargeable to
Third Party Sales calculated using the Average Heat Rate of the Facility less
(b) Fuel Costs Chargeable to Third Party Sales calculated using the Incremental
Heat Rate of the Facility.
"Incremental Heat Rate" means, the incremental Heat Rate calculated
using Exhibit B.
"Independent Party" has the meaning assigned to it in Section 8.2A.
"Infineum" means Infineum USA L.P., a Delaware limited
partnership, and its successors and assigns.
"Infineum Agreement" has the meaning assigned to it in Section 5.9C.
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"Infineum's Load" has the meaning assigned to it in Section 8.2C.
"In-Service Date" has the meaning assigned to it in Section 4.2.
"Interconnection Delay Costs" means the product of (a) the greatest
number of days by which completion and testing of any of the Interconnection
Facilities is later than the date designated by Buyer pursuant to Section
4.2A(i) for completion of any such Interconnection Facilities, but in no event
greater than ninety (90) days, and (b) $16,500.
"Interconnection Facilities" has the meaning assigned to it in the
Interconnection Lease.
"Interconnection Lease" means the Ground Lease Agreement for
Interconnection Facilities dated as of the date hereof between Bayway and
Seller.
"Interest Rate" means two percent (2%) over the Prime Rate; provided,
however, in no event shall the Interest Rate exceed the maximum rate of interest
permissible under the laws of the State of New Jersey.
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"Interim Nominated Load" has the meaning assigned to it in Section
5.4A.
"Interim Notice" has the meaning assigned to it in Section 5.4A.
"ISRA" means the New Jersey Industrial Site Recovery Act, as amended,
previously known as the New Jersey Environmental Cleanup Responsibility Act,
referred to as ECRA.
"kWh" means kilowatt hours.
"Lender" means any Person designated from time to time by Seller in a
notice to Buyer as a "Lender."
"Maximum Electricity Quantity" means the maximum hourly quantity of
Electricity (expressed in MW) that Buyer may receive for the Bayway Refinery at
the Delivery Point, which, pursuant to PJM Rules, is available from the Facility
to supply Buyer's Requirements, which quantity shall not exceed the lesser of
(i) the Nominated Load or the Interim Nominated Load, whichever is applicable,
or (ii) the Net Capability.
"Metering Points" means the points described in Section 8.1.
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<PAGE> 31
"Minimum Electricity Quantity" means a minimum hourly quantity of
Electricity of not less than ninety (90) MW or such lower quantity as Seller may
be able to generate at the Facility pursuant to all permits issued by any
Governmental Authority and in accord with Prudent Electric Industry Practice.
"MMBtu" means millions of Btus.
"Month" means a calendar month, except for the calendar month that
includes the Commercial Operations Date, in which case the term means the period
commencing on such date and ending on the last day of such calendar month.
"MW" means millions of watts.
"Natural Gas Pipeline Company" means any natural gas pipeline company.
"Net Capability" means the sustained maximum output of the Facility
(exclusive of Power Augmentation), net of auxiliary Facility loads, as
determined by capability tests, where the net output of the Facility is
determined and the test results are adjusted for the probable ambient operating
conditions, pursuant to PJM Rules.
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<PAGE> 32
"Net Revenues or Losses" has the meaning assigned to it in Section 7.1.
"Nominated Back-up Demand" has the meaning assigned to it in Section
5.7A.
"Nominated Load" means the load requirements nominated by Buyer in
accordance with Section 5.3.
"O&M Contractor" has the meaning assigned to it in Section 4.1F.
"On-Site Generation Facility" has the meaning provided in New Jersey
P.L. 1999 (The Electric Discount and Energy Competition Act), Chapter 23, Sec.
3, and as may be amended from time to time.
"Operational Testing" means the testing of the Facility performed by
Seller, pursuant to Prudent Electric Industry Practice, prior to the Commercial
Operations Date pursuant to Section 4.6.
"Parent Guaranty" means the guaranty by Tosco of all obligations of
Buyer under this Agreement, substantially in the
27
<PAGE> 33
form of Exhibit C, executed prior to or concurrently with this Agreement.
"Party" means Buyer or Seller, as the case may be, and its permitted
successors and assigns.
"Person" means a natural person, corporation, limited liability
company, partnership, association, joint venture, real estate investment trust
or business trust (including any beneficiary thereof), unincorporated
association, and any other form of business, legal or governmental entity.
"PJM" means the PJM Interconnection, L.L.C. or any successor
independent system operator performing substantially similar
functions.
"PJM Rules" means all rules, regulations, requirements, procedures or
policies of PJM as in effect, from time to time.
"PJM System" means those facilities of PJM used for the transmission of
Electricity.
"PJM Tariff" means the open access transmission tariff filed by PJM
with the FERC, as modified from time to time.
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<PAGE> 34
"Power Augmentation" means the additional generation of Electricity at
the Facility for sale to Third Parties as a result of the injection of low
pressure steam and incremental Fuel into the Facility.
"Power Augmentation Cost of Steam" means, in any hour:
(a) the product of:
(i) the quantity of Electricity sold to Third
Parties in such hour, in kWh, as a result of
Power Augmentation,
(ii) the incremental cost of fuel at the Existing
Plant (in $/MMBtu), including the cost of
transportation and related services
necessary for the purchase of such fuel,
inclusive of all Taxes, or, if the Existing
Plant is not operating, the Cost of Fuel (in
$/MMBtu) available to the Facility for Power
Augmentation, and
(iii) the Power Augmentation Steam Btu Rate
applicable to such sales, which shall be
3,527 Btu/kWh (until such time as it may be
redetermined as contemplated below).
divided by
29
<PAGE> 35
(b) 1,000,000
As soon as practicable after the Commercial Operations Date, Seller shall
demonstrate, and Buyer shall be allowed to witness and audit, the capability of
the Facility to generate Electricity by Power Augmentation, and such
demonstration shall determine the Power Augmentation Steam Btu Rate to be used
thereafter. Buyer may, from time to time, reasonably request that Seller, and
Seller on its own may, demonstrate the capability of the Facility to generate
Electricity by Power Augmentation and redetermine the Power Augmentation Steam
Btu Rate as may be appropriate.
"Prime Rate" means 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.
"Prudent Electric Industry Practice" means any of the practices,
methods or acts (i) required by the National Electric Safety Code, PJM, the
North American Electric Reliability Council, or the successors of any of them,
whether or not Seller is a member thereof, or (ii) otherwise engaged in or
approved by
30
<PAGE> 36
a significant portion of the electric generation industry during the relevant
time period or any of the practices, methods and acts that in the exercise of
reasonable judgment in light of the facts known at the time the decision was
made, could have been expected to accomplish the desired result at a reasonable
cost consistent with good business practices, reliability, safety and
expedition. Prudent Electric Industry Practice is not intended to be limited to
the optimum practice, method or act to the exclusion of all others, but rather
to be acceptable practices, methods or acts generally accepted in the region.
"PSE&G" means Public Service Electric & Gas Company and its successors.
"PURPA" means the Public Utility Regulatory Policies Act of 1978, as
amended.
"Qualified Capital Cost Adjustments" means the sum of:
(i) fifty percent (50%) of the amount by which
actual Facility "Hard Costs" and "Project Soft Costs" exceed
or are less than the amounts for such categories of costs set
forth in Exhibit D,
(ii) all additional costs arising out of any
extension or delay in the In-Service Date pursuant to
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<PAGE> 37
Sections 4.1B, 4.1C, 4.1D and 4.2C(i), (iii), (iv) and
(v),
(iii) Interconnection Delay Costs,
(iv) all additional costs, including costs that
result from a change in or other adverse effects on the
design, construction, or the completion schedule for, or the
occurring of the In-Service Date of, the Facility, arising out
of the surface or subsurface presence of pollution, Hazardous
Materials or contamination at the site,
(v) all additional costs arising from changes or
additions to the Scope Description or other items requested by
Buyer (including the additional costs of a distillate day tank
with greater than twelve (12) hours usable capacity at base
load operation); provided, however, that any incentives Seller
pays to a contractor for timely completion pursuant to the
Construction Contract or delay payments received from such
contractor shall be excluded from the determination of
Qualified Capital Cost Adjustments and shall solely be paid or
retained by Seller,
(vi) any bonuses paid by Seller (or any funds
received by Seller) under the Construction Contract with
respect to any guarantee of the Facility's Heat Rate or
output, and
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<PAGE> 38
(vii) all additional costs incurred by Seller to
obtain a guarantee of the Facility's performance from the
construction contractor if such a guarantee is requested by
Buyer pursuant to Section 4.1B.
For purposes of this definition, "all additional costs" includes any increase in
"Interest During Construction" calculated in accordance with Exhibit D.
"Qualifying Facility" means a facility that meets the requirements set
forth in the FERC Rules implementing PURPA for a qualifying cogeneration
facility.
"Related Parties" has the meaning assigned to it in Section 13.1.
"Scope Description" means the scope description attached as Exhibit E
hereto.
"Seller" means East Coast Power L.L.C., a Delaware limited liability
company, and its permitted successors and assigns.
"Steam" means steam produced by the Facility, routed consistent with
the Scope Description.
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<PAGE> 39
"Steam Agreement" has the meaning assigned to it in the recitals
hereof.
"Steam Btu Credit" means, for any month, an amount, in Btu, equal to
the sum of:
(a) the product of:
(i) S1, a constant,
(ii) the excess of (a) the average mass weighted enthalpy, in
Btu/lb, of the high pressure Steam in each hour, less (b) the average
mass weighted enthalpy, in Btu/lb, of demineralized boiler feed water,
and
(iii) the quantity of high pressure Steam during such
Month, in k-lbs.
plus
(b) the product of:
(i) S2, a constant,
(ii) the excess of (a) the average mass weighted enthalpy, in
Btu/lb, of the low pressure Steam in each hour, less (b) the average
mass weighted enthalpy, in Btu/lb, of demineralized boiler feed water,
and
(iii) the quantity of low pressure Steam during such
Month, in k-lbs.
For the first Commercial Operations Year, the constant S1 shall be 0.77 and the
constant S2 shall be 0.77. Thereafter, the
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<PAGE> 40
constants S1 and S2 shall be determined based on Bayway's average annual hourly
purchases of high pressure and low pressure steam from Cogen pursuant to the
Steam Agreement for the Commercial Operations Year prior to the Commercial
Operations Year in which such Month occurs, or a good faith estimate thereof
provided by Buyer to Seller, as determined pursuant to Exhibit F. The enthalpies
of high pressure and low pressure Steam and demineralized boiler feed water
shall be determined for purposes hereof using the average temperatures and
pressure for high pressure and low pressure Steam and the average temperature of
demineralized boiler feed water and by reference to standard tables for
properties of steam and water as published by the American Society of Mechanical
Engineers ("ASME Steam Tables") or other commonly used reference work in the
electric industry.
"Steam Credit" means, for any Month, an amount, in dollars
($), equal to
(i) the product of:
(a) the Steam Btu Credit, and
(b) the Avoided Cost of Fuel (in $/MMBtu),
less
(ii) one-half (1/2) of any Steam Fuel Price Credit.
"Steam Fuel Price Credit" means, for any Month, an amount, in dollars,
equal to the product of:
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<PAGE> 41
(i) the Steam Btu Credit, and;
(ii) if greater than zero, (a) the Avoided Cost of Fuel less (b)
the Cost of Fuel consumed at the Facility when Steam is
delivered to the Existing Plant.
"Taxes" shall mean any or all ad valorem, property (including host
community benefit fees and payments in lieu of taxes), occupation, severance,
generation, first use, conservation, Btu or energy, transmission, utility, gross
receipts, privilege, sales, use, consumption, excise, lease, transaction, and
other taxes or, governmental charges, licenses, fees, permits and assessments,
or increases therein, other than taxes based on Seller's or its Affiliates net
income or net worth.
"Term" has the meaning assigned to it in Section 2.1.
"Third Party" means a Person other than a Party.
"Tosco" means Tosco Corporation, a Nevada corporation, and its
permitted successors and assigns.
"Variable O&M Component" means, in any Month, any expenses reasonably
incurred by Seller in the operation and maintenance of the Facility in such
Month (to the extent not included in the
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<PAGE> 42
Fixed O&M Charge or in the Fuel Component) that vary based upon the operation of
the Facility, including boiler feed water consumed (calculated based on boiler
feed water input less Steam delivered to the Existing Facility), parts,
expendables, maintenance items and labor, chemicals, catalyst, Taxes and similar
charges as set forth in Exhibit G. In calculating the Variable O&M Component,
any Variable O&M Costs Chargeable to Power Augmentation and any Variable O&M
Costs Chargeable to Third Party Sales described in (a) of the definition thereof
shall be deducted. In no event shall Buyer be liable for any cost of financing
the purchase of items or services that Buyer is otherwise liable to reimburse
Seller for as part of the Variable O&M Component. To the extent reasonable and
prudent, the costs incurred on behalf of the Facility will recognize the
incremental economies of scale and efficiencies (if any) made possible by virtue
of the location of the Facility adjacent to the Existing Plant, however, Seller
in no fashion guarantees nor warrants to Buyer that any such economies of scale
or efficiencies will in fact be realized. If and to the extent that the
construction, operation or maintenance of the Facility pursuant to this
Agreement causes the Existing Plant to incur costs (other than costs related to
the production and utilization of steam, including Steam, by the Existing Plant)
that would not have been incurred but for the construction, operation or
maintenance of the Facility and either (i) Seller is not specifically reimbursed
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for such costs pursuant to any other provision of this Agreement or the specific
terms of any other agreement or (ii) there is not a quantifiable specific
benefit that Seller receives solely by reason of incurring such costs, then such
costs shall be included within the Variable O&M Component.
"Variable O&M Costs Chargeable to Infineum Sales" means, in any Month,
the product of (a) the Variable O&M Component in such Month and (b) the quotient
of (i) the quantity of Electricity generated by the Facility to serve Infineum's
Load (in kWh), divided by (ii) the sum of (1) Buyer's actual load (in kWh), plus
(2) the quantity of Electricity generated by the Facility to serve Infineum's
Load (in kWh); provided, however that in the event Seller or its Affiliate has
not entered into an agreement with Infineum to sell Electricity from the
Facility to Infineum, Variable O&M Costs Chargeable to Infineum Sales shall be
zero.
"Variable O&M Costs Chargeable to Power Augmentation" means, in any
Month, the product of (i) $1.00 per MWh (or such other amount as the Parties may
agree to based upon information provided by the turbine equipment supplier) and
(ii) the total quantity of Electricity (in MWh) generated by the Facility for
sale to Third Parties as a result of Power Augmentation.
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"Variable O&M Costs Chargeable to Third Party Sales" means, in any
Month, the sum of:
(a) the product of (i) $1.00 per MWh and (ii) the total
quantity of Electricity (in MWh) generated by the
Facility for sale to Third Parties (excluding
Electricity generated at the Facility for sale to
Infineum and those Third Parties covered by (b)
below, and Electricity generated at the Facility
through Power Augmentation); and
(b) a pro rata allocation of the items in the Variable
O&M Component that vary with output with respect to
Electricity generated by the Facility for sale to
Third Parties (excluding Infineum) having a load
factor of eighty-five percent (85%) or greater and
that purchase such Electricity under a binding
obligation of one (1) year or greater.
1.2 Interpretation.
A. Each Party acknowledges that the other Party and its
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement.
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B. Defined terms in this Agreement shall include in the
singular number the plural, and in the plural number the singular. Whenever the
context requires, any pronoun shall include the corresponding masculine,
feminine and neuter forms. Article, section and exhibit references are to
articles and sections of and exhibits to this Agreement, except as otherwise
indicated.
C. Unless otherwise stated, any reference in this Agreement to
any Governmental Authority or to any statutes and regulations shall include
reference to any successors to such Governmental Authority and to any successor
provisions to such statutes and regulations, respectively.
D. When used in this Agreement, the words "Btu" and "MMBtu"
when used to describe the energy equivalent of a quantity of Fuel shall, unless
otherwise expressly indicated, refer to the higher heating value ("HHV") of such
Fuel; the words "hereof," "herein," "hereunder" and words of similar import
shall, unless otherwise expressly indicated, refer to this Agreement as a whole
and not to any particular provision of this Agreement; the words "not
unreasonably withheld" and words of similar import shall, unless otherwise
expressly indicated, mean not unreasonably withheld, delayed or conditioned; the
words "include,"
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"includes," and "including" shall be understood to mean inclusion without
limitation.
E. Exhibits G, M and N have been provided for clarification
only, and to the extent a conflict arises, if any, between such exhibits and the
language of this Agreement, the language of this Agreement without regard to
such exhibits shall control.
ARTICLE 2. TERM OF THIS AGREEMENT
2.1 Term. This Agreement shall be effective as of the Effective Date
and shall continue in effect until April 30, 2017 unless earlier terminated or
unless extended pursuant to Section 4.2D (the "Term").
2.2 Early Termination by Seller. Not later than sixty-five (65) days
following the Effective Date, Seller, in its sole discretion and without cause,
may terminate this Agreement by providing notice to Buyer. In the event Seller
terminates this Agreement pursuant to this Section 2.2, all rights, obligations
and liabilities of both Parties under this Agreement shall immediately cease and
be of no further force and effect and neither Party shall be obligated to the
other Party for any costs, expenses, damages or other charges incurred prior to
or as
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a result of such early termination, other than as may have been specifically
provided for in that certain Reimbursement Agreement between the Parties
attached hereto as Exhibit H, as may be amended from time to time.
ARTICLE 3. REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENTS
3.1 Representations and Warranties of the Parties. As of
the Effective Date, each Party represents and warrants to the
other that:
A. It is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization
and is qualified to do business in the State of New Jersey.
B. It has all requisite power and authority to
execute and deliver this Agreement.
C. Its execution and delivery of this Agreement have been duly
authorized by, or are in accordance with, its organizational instruments; this
Agreement has been duly executed and delivered for it by signatories so
authorized; and this Agreement constitutes a legal, valid and binding obligation
enforceable against it in accordance with its respective terms.
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D. Neither the execution nor delivery by it of this Agreement
conflicts with, results in a breach of or constitutes a default under (i) any of
the terms, conditions or provisions of its certificate or articles of
incorporation, articles of association, limited liability company or partnership
agreement, by-laws or other constituent documents, (ii) any material, federal,
state or local law, or any order, rule or regulation of any Governmental
Authority having jurisdiction over it or its properties or by which it or its
properties may be bound, or (iii) any agreement or instrument to which it is a
Party or by which it or any of its properties may be bound, other than with
respect to any agreements or instruments for which consents or approvals are
required from any partner or member of Seller.
E. No suit, action or arbitration, or legal, administrative or
other proceeding is pending or threatened at law or in equity against it that
would affect the validity or enforceability of this Agreement, or the ability of
it to materially fulfill its obligations hereunder.
3.2 Additional Representations and Warranties of Buyer. As
of the Effective Date, Buyer hereby represents and warrants to
Seller that:
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A. All information Buyer has provided to Seller,
pursuant to Seller's written request, for use in permitting
and/or financing is to the best of Buyer's knowledge true and
correct in all material respects.
B. Buyer has no collective bargaining or other
employment-related restrictions that would impede Seller's right
or ability to operate the Facility or otherwise carry out its
obligations hereunder.
C. Buyer has obtained all consents and approvals (if
any) required from Third Parties necessary for the execution and
delivery by Buyer of this Agreement.
D. Since December 31, 1998, there has not been a change in the
business, operations, properties, assets, condition (financial or otherwise),
prospects or results of operations of Buyer that would materially and adversely
affect the ability of Buyer to perform its obligations hereunder.
E. Buyer has relied upon independent engineers and attorneys
in negotiating the terms of this Agreement and has made an independent
investigation into, and has made its own independent judgment concerning, the
price for Electricity that Buyer will be obligated to pay pursuant to this
Agreement.
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3.3 Additional Representations and Warranties of Seller.
As of the Effective Date, Seller hereby represents and warrants
to Buyer that:
A. All information Seller has provided to Buyer,
pursuant to Buyer's written request, for use in permitting is to
the best of Seller's knowledge true and correct in all material
respects.
B. Seller has no collective bargaining or other
employment-related restrictions that would impede Seller's right
or ability to operate the Facility or otherwise carry out its
obligations hereunder.
C. Seller has obtained all consents and approvals (if
any) required from Third Parties necessary for the execution and
delivery by Seller of this Agreement.
D. Seller shall have obtained, on or before sixty (60) days
after the Effective Date, a right satisfactory to Seller to a General Electric
Seven Series (7FA) Turbine for incorporation in the Facility so that Seller can
meet its obligations under this Agreement.
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E. Since December 31, 1998, there has not been a change in the
business, operations, properties, assets, condition (financial or otherwise),
prospects or results of operations of Seller that would materially and adversely
affect the ability of Seller to perform its obligations hereunder.
3.4 Buyer's Acknowledgment. Buyer hereby acknowledges that Seller has
not guaranteed, warranted or represented in any fashion, including pursuant to
Exhibit D, (i) any fixed or maximum price of Electricity to Buyer pursuant to
this Agreement nor (ii) the amount of Net Revenues or Losses, Infineum Net
Revenues or Losses, nor Power Augmentation Revenues which will or may be
realized pursuant to this Agreement. Buyer acknowledges that factors which may
vary and which may affect said price and revenues include the following, none of
which has been guaranteed or warranted in any fashion to Buyer by Seller:
(i) Cost of Fuel;
(ii) Heat Rate;
(iii) cost of Fixed O&M Component and Variable O&M
Component;
(iv) cost of fuel at the Existing Plant;
(v) dispatch levels and operation and maintenance
practices at the Existing Plant;
(vi) back-up demand or capacity costs;
(vii) back-up energy costs;
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(viii) availability of the Facility after the Commercial
Operations Date;
(ix) the relationship between Buyer's average and peak
Electricity requirements;
(x) whether or not, and at what price, sales of
Electricity can be made to Third Parties, including
Infineum; and
(xi) Bayway's average annual hourly purchases of high
pressure and low pressure steam.
ARTICLE 4. CONSTRUCTION AND OPERATION OF THE FACILITY
4.1 Construction and Operation of the Facility.
A.
1. Seller shall construct the Facility in
compliance with the Scope Description and the Appurtenant Systems on the
Existing Site in accord with Prudent Electric Industry Practice. Seller shall
keep Buyer reasonably informed and consult with Buyer with respect to, but shall
be solely responsible for the design, construction, start-up, operation and
maintenance of, the Facility and the Appurtenant Systems. Buyer shall cooperate
in good faith with Seller with respect to the provision of utility services and
other matters affecting the construction, operation and maintenance of the
Facility.
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2. Buyer, as an independent contractor to
Seller, shall construct, complete and pay for those facilities described as
"Buyer's Scope," as described in Exhibit E, which facilities are part of the
Facility and shall be owned by Seller, and Seller shall reimburse Buyer for
same, in an amount not to exceed two million eight hundred and fifty thousand
dollars ($2,850,000), which amount shall be included in the Facility "Hard
Costs" set forth in Exhibit D. Upon completion of such facilities, Buyer shall
invoice Seller and Seller shall pay Buyer such amount on or before fifteen (15)
days after receipt by Seller of Buyer's invoice therefor.
3. Buyer and Seller agree (i) that Seller shall
implement the construction of the Facility and the Appurtenant Systems pursuant
to a construction contract (the "Construction Contract") to be entered into
between Seller and National Energy Production Corporation, or another contractor
reasonably acceptable to Buyer, (ii) that the Construction Contract shall
contain terms and conditions customary for the construction of facilities and
systems similar to the Facility and the Appurtenant Systems and Seller shall use
reasonable efforts to include in the Construction Contract those terms and
conditions set forth in Exhibit I and (iii) that the scope of work under the
Construction Contract shall be in compliance with the Scope Description.
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B. Seller shall, in good faith, provide Buyer with a draft of
the Construction Contract as soon as reasonably possible in advance of its
execution and a copy of the final draft of the Construction Contract prior to
its execution. Buyer shall have five (5) Business Days to approve the final
draft of the Construction Contract or request reasonable changes in the
Construction Contract consistent with the requirements of Section 4.1A, which
approval shall not be unreasonably withheld. Buyer may request, at Buyer's sole
expense and provided that there is no adverse effect on Seller, that Seller
obtain from the construction contractor and include in the Construction Contract
a guarantee of the Facility's performance at new and clean condition upon
completion of construction and testing. Any additional costs of securing such
guarantee shall be recovered by Seller as a Qualified Capital Cost Adjustment.
In the event Buyer does not approve the Construction Contract within five (5)
Business Days, the In-Service Date shall be extended one day for each day
thereafter until (i) Buyer, Seller and the construction contractor agree upon
any changes Buyer requires in the Construction Contract, (ii) Buyer approves the
Construction Contract or (iii) Seller elects to proceed on its own pursuant to
Section 4.1E; provided, that the In-Service Date shall not be extended in the
event that Seller or the construction contractor unreasonably delays reviewing,
discussing or approving Buyer's proposed changes.
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C. Seller shall provide Buyer with as much notice as is
reasonably possible with respect to any material change order, amendment or
modification or waiver of, to or under the Construction Contract. Buyer's prior
written consent shall be required for any material change order, amendment,
modification or waiver to or under the Construction Contract if such change
order, amendment, modification or waiver (i) would result in the Construction
Contract not being in compliance with the Scope Description, (ii) would
individually change the cost of constructing the Facility and the Appurtenant
Systems by more than $1,000,000 or (iii) together with all previous change
orders, amendments, modifications or waivers would change the cost of
constructing the Facility and the Appurtenant Systems by more than $4,600,000 in
the aggregate; provided that such consent shall not be unreasonably withheld and
that in the event Buyer's consent is not given within three (3) Business Days,
the In- Service Date shall be extended one day for each day thereafter until (i)
the Parties agree upon such changes as Buyer reasonably believes require its
consent or (ii) Buyer consents or (iii) Seller elects to proceed pursuant to
Section 4.1E; provided, that the In-Service Date shall not be extended in the
event that Seller or the construction contractor unreasonably delays reviewing,
discussing or approving Buyer's proposed changes.
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D. Seller shall, in good faith, provide Buyer with a draft of
any other contract or amendment (other than the Construction Contract) relating
to the design, construction, or start-up of the Facility or the Appurtenant
Systems materially affecting the In-Service Date or having a value in excess of
one million dollars ($1,000,000), as soon as reasonably possible in advance of
its execution, and with a copy of any such contract or amendment prior to its
execution. Buyer shall have three (3) Business Days to consent to such contract
or amendment provided that such consent shall not be unreasonably withheld and
that in the event Buyer does not provide such consent within three (3) Business
Days, the In-Service Date shall be extended one day for each day until (i) the
Parties agree upon such changes as Buyer reasonably believes require its
consent, (ii) Buyer consents or (iii) Seller elects to proceed pursuant to
Section 4.1E; provided, that the In-Service Date shall not be extended in the
event that Seller or the construction contractor unreasonably delays reviewing,
discussing or approving Buyer's proposed changes.
E. In the event Seller believes Buyer's consent or approval
pursuant to this Section 4.1 has been unreasonably withheld, Seller may proceed
at its own risk to construct the Facility with such contracts, changes,
amendments or modifications as Seller believes are in accord with Prudent
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Electric Industry Practice. If Seller proceeds pursuant to this Section 4.1E,
the dispute shall be resolved pursuant to the dispute resolution procedures set
forth in Article 14 of this Agreement. If Seller prevails, Seller shall be paid
the additional costs it incurred with interest calculated at the Interest Rate.
F. Seller may contract for the operation and maintenance of
the Facility with a Third Party experienced in the business of operating
facilities similar to the Facility, including the operation and maintenance
contractor of the Existing Plant (an "O&M Contractor"). Seller shall use
reasonable efforts to include the terms and conditions set forth in Exhibit J in
the contract with the O&M Contractor. If Seller determines to contract with a
Third Party to be the O&M Contractor for the Facility (other than with an entity
that is or will also be the O&M Contractor of the Existing Plant, with respect
to which entity no approval of the Buyer shall be required), Seller shall notify
Buyer and obtain Buyer's approval, which approval shall not be unreasonably
withheld. If Buyer does not deliver to Seller a written objection to such O&M
Contractor proposed by Seller within ten (10) Business Days after receipt of
Seller's notice, Buyer will be deemed to have approved such proposed O&M
Contractor. Buyer's unreasonable failure to consent
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to Seller's proposed O&M Contractor shall be a breach of this Agreement.
4.2 In-Service Date.
A. Not later than forty-five (45) days following the
Effective Date:
(i) Buyer shall notify Seller of Buyer's reasonable
projection of the date of completion of construction and
testing of the Interconnection Facilities such that same may
be energized (or purged, for natural gas facilities) to the
Facility construction site for:
(a) the 27 kV supply portion of the
Interconnection Facilities,
(b) the 230 kV portion of the
Interconnection Facilities, based upon Buyer's
construction schedule and additional information
provided by PSE&G or PJM, and
(c) the natural gas supply portion of the
Interconnection Facilities, based upon Buyer's
construction schedule and additional information
provided by the Natural Gas Pipeline Company.
(ii) Seller shall notify Buyer of Seller's
reasonable projection of the date of delivery of the
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heat recovery steam generator (the "HRSG") purchased for the
Facility, based upon commitments received from HRSG vendors.
Seller shall pursue with vendors, options to expedite the
delivery of such HRSG and present Buyer with an estimate of
the additional costs for such expedited delivery. If Buyer
accepts the additional costs to achieve such an expedited
delivery, these costs will be included as Qualified Capital
Cost Adjustments in (v) of the definition thereof.
B. The "In-Service Date" shall be the later of:
(i) such date after the date specified in
Section 4.2A(i)(a) above as committed to by the construction
contractor for the Facility within forty-five (45) days of the
Effective Date, which date is currently estimated, but not
guaranteed, to be six (6) Months after the date specified in
Section 4.2A(i)(a); or
(ii) such date after the date specified in Section
4.2A(i)(b) above as committed to by the construction
contractor for the Facility within forty-five (45) days of the
Effective Date, which date is currently estimated, but not
guaranteed, to be four (4) Months after the date specified in
Section 4.2A(i)(b);
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(iii) such date after the date specified in Section
4.2A(i)(c) above as committed to by the construction
contractor for the Facility within forty- five (45) days of
the Effective Date, which date is currently estimated, but not
guaranteed, to be four (4) Months after the date specified in
Section 4.2A(i)(c); or
(iv) ten (10) Months after the date specified in
Section 4.2A(ii) above.
C. The In-Service Date shall be extended for a period
of time equal to the duration of any delay in the completion of
the Facility due to:
(i) Force Majeure,
(ii) Bayway's or PSE&G's or any Natural Gas Pipeline
Company's failure to timely complete construction and testing
of the Interconnection Facilities or other facilities such
that natural gas and distillate may be delivered to, and
Electricity delivered to Buyer and the PJM System from, the
Facility, as contemplated by the Interconnection Lease and
pursuant to the Fuel specifications set forth in
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Section 6.3 and Exhibit L, by the dates reasonably
designated by Buyer pursuant to 4.2A(i) above,
(iii) changes or additions to the Scope Description
or other items requested by Buyer,
(iv) Buyer's or Buyer's Affiliate's failure to
otherwise fulfill its obligations under this Agreement, the
Interconnection Lease, the Existing Ground Lease Agreement or
the Steam Agreement, or
(v) a default under the Parent Guaranty.
D. Fixed Charges.
(i) Buyer's obligation to pay the Fixed Charges shall
commence on the Commercial Operations Date, except if the
In-Service Date established pursuant to Section 4.2B has been
extended pursuant to Section 4.2C. In such case, Buyer's
obligation to pay the Fixed Charges shall commence on the
earliest to occur of:
(a) the Commercial Operations Date,
(b) the In-Service Date established
pursuant to Section 4.2B, as such date may have been
extended for any delay pursuant to Section 4.2C(ii)
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(the "Extended In-Service Date"), but in no event later
than ninety (90) days after the In-Service Date
established pursuant to Section 4.2B, or
(c) March 1, 2002.
If Seller has not declared the Commercial Operations Date by the Extended
In-Service Date, and such failure is not a result of delays pursuant to Sections
4.2C(i), (iii), (iv) or (v), Buyer's obligation to pay the Fixed Charges shall
be suspended until Seller declares the Commercial Operations Date, at which time
Buyer's obligation to pay the Fixed Charges shall be reinstated.
(ii) Unless Buyer accepts Seller's proposal to continue
to supply Electricity, as provided in Sections 4.2D(iii) and
(iv), and if by April 30, 2017 Buyer has not paid Seller one
hundred and ninety two (192) Monthly Fixed Facility Charge
Component payments, then Buyer shall pay Seller on April 30,
2017 an amount equal to the product of (a) one hundred and
ninety two (192) (or, in the event the Fixed Facility Charge
Component is recalculated pursuant to Section 6.6C, such
lesser number of Months used for the period of such
recalculation) less the number of payments of Fixed Facility
Charge Components Buyer has paid Seller multiplied by (b) the
Fixed Facility Charge Component.
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(iii) Not earlier than November 1, 2015 or later than
May 1, 2016, Seller shall notify Buyer, in Seller's sole
judgment, of the terms and conditions under which Seller would
be willing to continue to supply Electricity to Buyer during
the period subsequent to April 30, 2017 for a number of Months
equal to the number used in Section 4.2D(ii)(a) above in the
calculation of the payment pursuant to Section 4.2D(ii), but
not exceeding seven (7) Months.
(iv) No later than three (3) Months following receipt
of Seller's proposal pursuant to Section 4.2D(iii) above,
Buyer shall, in its sole judgment, notify Seller that it
either accepts or rejects Seller's proposal. If Buyer fails to
respond within three (3) Months, Buyer shall be deemed to have
rejected Seller's proposal.
(v) If Buyer accepts Seller's proposal to continue to
supply Electricity after April 30, 2017, Buyer shall agree to
provide Seller with a concurrent extension of all leases and
agreements between Buyer and Seller, and their respective
affiliates, as Seller may request.
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4.3 Incentives for Timely Completion. The Parties acknowledge the
importance to Buyer of timely completion of construction of the Facility and the
delivery of Electricity to Buyer pursuant to this Agreement. The following
monetary incentives or damages are intended to provide Seller appropriate
incentive for timely completion of the construction of the Facility and to
appropriately compensate Buyer for additional costs that it would incur if
delivery of Electricity pursuant to this Agreement is delayed. The payments set
forth herein are Buyer's sole remedy and damages if the Commercial Operations
Date is later than the In-Service Date.
A. Safe Harbor. There shall be neither an incentive
nor a delay payment due if the Commercial Operations Date is
declared either (i) fifteen (15) days or fewer than fifteen (15)
days before the In-Service Date or (ii) fifteen (15) days or
fewer than fifteen (15) days after the In-Service Date.
B. Incentive Payments. In addition to amounts otherwise due
pursuant to this Agreement, Buyer shall pay Seller the following incentive
payments. If the Commercial Operations Date occurs: (i) more than fifteen (15)
but less than seventy- six (76) days prior to the In-Service Date, eighteen
thousand dollars ($18,000) per day (not including the first fifteen (15) days
prior to the In-Service Date); or (ii) more than seventy-
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five (75) days prior to the In-Service Date, one million eighty thousand dollars
($1,080,000) plus thirty-six thousand dollars ($36,000) per day for all such
days that are more than seventy- five (75) days prior to the In-Service Date.
C. Delay Payments. Subject to the provisions of Section 4.8,
if the Commercial Operations Date occurs: (i) more than fifteen (15) but less
than seventy-six (76) days after the In-Service Date, Seller shall pay Buyer
eighteen thousand dollars ($18,000) per day (not including the first fifteen
(15) days after to the In-Service Date); or (ii) more than seventy-five (75)
days after the Commercial Operations Date, one million eighty thousand dollars
($1,080,000) plus thirty-six thousand dollars ($36,000) per day for all such
days that are more than seventy-five (75) days after the In-Service Date.
4.4 Ownership of Facility and Appurtenant Systems. Seller shall own,
operate and maintain the Facility and all Appurtenant Systems for the purposes
intended by this Agreement and in accord with Prudent Electric Industry
Practice.
4.5 Information from Buyer. Upon the request of Seller, Buyer shall, at
no expense to Seller, in a reasonably expeditious fashion provide Seller with
all plans, specifications, drawings and other information that the Bayway
Refinery maintains in its
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possession or is reasonably obtainable by Buyer in the ordinary course of
business and which are reasonably necessary for the design, construction,
installation, operation and maintenance of the Facility and the Appurtenant
Systems.
4.6 Operational Testing and Purchase of Test Period Electricity. Prior
to the Commercial Operations Date, Seller shall conduct Operational Testing of
the Facility and, to the extent Buyer can safely do so and is not prohibited by
contract from doing so, Buyer shall accept such Electricity produced by Seller
as necessary to test the delivery of Electricity to Buyer in accord with Prudent
Electric Industry Practice or, if possible, Seller shall deliver such
Electricity to the PJM System through the Interconnection Facilities. Reasonably
in advance (but no less than ten (10) days) of commencement of such Operational
Testing, Seller shall provide Buyer with an anticipated daily testing schedule
indicating the quantities of Electricity Buyer shall accept. Buyer shall pay
Seller for any Electricity delivered to Buyer during Operational Testing at the
rate of $0.04 per kWh for such Electricity. Seller shall provide Buyer with
Seller's plans for Operational Testing of the Facility, which plans shall be
designed to minimize interference with or interruption of the supply of
Electricity to the Bayway Refinery in accordance with Prudent Electric Industry
Practice. Buyer may reasonably request additional protections against any
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interference with or interruption of the supply of Electricity to the Bayway
Refinery. Seller shall provide same at Buyer's expense.
4.7 Commercial Operation Notices. Buyer shall take such actions as are
reasonably necessary to accept delivery of Electricity from Seller on the
Commercial Operations Date. Seller shall provide Buyer with notice at least
fifteen (15) days in advance of the anticipated Commercial Operations Date, and
further notice at least two (2) days in advance of the actual Commercial
Operations Date.
4.8 Termination on Account of Delay in Commercial Operations Date.
Except as provided in Section 2.2, if at any time prior to the Commercial
Operations Date Seller determines that it cannot, will not or may not achieve
the Commercial Operations Date, Seller shall have the right to provide a notice
of termination to Buyer and to pay Buyer a termination fee equal to thirteen
million one hundred forty thousand dollars $13,140,000). Seller shall not incur
any obligations to pay any delay amounts pursuant to Section 4.3 for any day
after the date of such termination notice and payment of the termination fee
pursuant to this Section 4.8, and Seller shall not be liable for any damages,
other than those specifically provided for in this Section 4.8. Upon the giving
of such notice and payment of the
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termination fee, this Agreement shall be null and void and of no further force
or effect.
ARTICLE 5. ELECTRICITY SUPPLY
5.1 Electricity Quality. Seller shall deliver Electricity to Buyer at
230kV (nominal) and 60 Hertz (nominal) at the Delivery Point pursuant to the
specifications set forth in Exhibit K. To the extent that Buyer requests
modification to the specifications set forth in Exhibit K for the delivery of
Electricity, Seller will endeavor within the technical capability of the
Facility to provide same to the extent that Seller does not incur any costs or
losses (including loss of future sales) relating thereto that are not reimbursed
by Buyer and neither the performance nor the reliability or both of the Facility
are otherwise materially and adversely affected thereby. Except as specifically
provided for in this Section 5.1 or pursuant to the specifications for
Electricity set forth in Exhibit K, Seller shall have no obligation to provide
or pay the cost of VAR Support or any other ancillary service necessary for or
incidental to Buyer's use of Electricity at the Bayway Refinery. The cost of any
VAR Support or any other ancillary service provided by Third Parties necessary
or incidental to Buyer's use of Electricity at the Bayway Refinery shall be paid
by Buyer. The term "VAR Support" means the provision of reactive power and
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voltage control as an ancillary service to the generation, transmission and
delivery of Electricity.
5.2 Electricity Quantity.
A. Except as provided in Sections 5.4B, 6.4, 6.5 or 15.7A,
Seller shall provide Electricity up to the Maximum Electricity Quantity but in
no event less than the Minimum Electricity Quantity. Buyer shall nominate
pursuant to Section 5.3 (and may make changes to such nomination pursuant to
Section 5.4) and take all of Buyer's Requirements for Electricity up to the
Maximum Electricity Quantity as set forth in this Agreement. After the
Commercial Operations Date, and upon the request of Buyer and at Buyer's sole
expense, Seller shall use reasonable efforts to amend its permits from
Governmental Authorities to allow Seller to operate the Facility at an
electrical load below ninety (90) MW in accord with Prudent Electric Industry
Practice.
B. If Buyer's Electricity load at the Bayway Refinery
falls below the Minimum Electricity Quantity at any time then:
(i) Seller shall use commercially reasonable efforts to
make sales of Electricity to Third Parties such that the
Facility can continue to operate at a combined load above the
Minimum Electricity Quantity in order to minimize the cost of
Electricity to Buyer, provided that, notwithstanding Section
7.2, Buyer shall
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reimburse Seller for any and all losses incurred in
making such sales of Electricity to Third Parties, or
(ii) if Seller does not operate the Facility pursuant
to (i) above, (a) the Facility shall be deemed available
during such period for purposes of this Agreement and (b)
Buyer shall be responsible for all costs associated with the
purchase and delivery of back-up energy to Buyer during such
period of time.
C. Load Following. Seller shall use commercially reasonable
efforts to cause the Facility to follow Buyer's load and any changes in Buyer's
load, based upon the information or data provided to Seller by Buyer pursuant to
this Agreement and consistent with Prudent Electric Industry Practice. Buyer
shall be responsible for all costs associated with such efforts and shall be
entitled to all of the revenues derived each Month from the Facility that would
not have been obtained but for such efforts, to the extent that such revenues
are not greater than losses or costs (including fuel costs and $1.00 per MWh for
variable O&M) incurred with respect to such efforts in such Month and any net
revenues in excess thereof shall be shared in accordance with Section 7.2. Buyer
and Seller shall in good faith cooperate to identify Buyer's load and any
changes in Buyer's load that affect Buyer's Requirements and that affect the
quantity of Excess Energy available for sale to Third Parties.
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5.3 Nominated Load. Buyer shall in good faith provide Seller notice of
its estimated peak Electricity load (up to the Maximum Electricity Quantity) for
each Month of the summer period (April 1 through September 30) and for each
Month of the winter period (October 1 through March 31) to be delivered from the
Facility not less than six (6) Months prior to the start of each such period.
The Parties shall regularly review this nomination procedure and revise the
procedure to the extent such revisions are mutually agreeable or required
pursuant to PJM Rules.
5.4 Interim Changes to Nominated Load.
A. If after notice pursuant to Section 5.3, Buyer
desires to change its nomination, Buyer shall promptly provide to Seller notice
(the "Interim Notice") of such changes and shall therein (i) nominate an interim
Electricity quantity (the "Interim Nominated Load") up to the Net Capability,
and (ii) state the period for which the Interim Nominated Load quantity will be
applicable. The Interim Nominated Load shall reflect a quantity of Electricity
that Buyer in good faith expects that it may need during such period to be
delivered from the Facility to Buyer. The Interim Nominated Load shall become
effective as soon as practicable, but not more than twenty-four (24) hours after
receipt by Seller of the Interim Notice, provided, however Seller shall not be
obligated to provide Electricity under an Interim Nominated Load that is higher
than
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the initial Nominated Load for such period if delivering such Electricity to
Buyer would materially and adversely affect Seller under any regulatory
obligation or contractual commitment or cause Seller to breach a then existing
contractual or other binding obligation related to the Facility. Seller shall
use commercially reasonable efforts to sell Excess Capacity and Excess Energy
made available due to a lower Interim Nominated Load under this Section 5.4A to
the extent reasonable and appropriate to maximize mutual benefits to Buyer and
Seller.
B. To the extent that Electricity to serve an increased
Interim Nominated Load is not available from the Facility due to a then existing
contractual or other binding obligation related to the Facility, Seller shall
endeavor to provide such additional Electricity from its back-up energy
arrangements or from other sources available to Seller on commercially
reasonable terms at Buyer's expense, provided that Seller shall have no
obligation to arrange or make such purchases if in Seller's discretion,
reasonably exercised, such purchase would or could have any material adverse
effect on (i) any of Seller's then existing contractual or other binding
obligations related to the Facility, (ii) Seller's ability to purchase back-up
energy at favorable rates or (iii) Seller's regulatory status. In such event
Buyer shall have the right to purchase such Electricity from any source at
Buyer's expense.
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5.5 Electricity Scheduling. By 10:00 a.m. EPT on the first (1st) day of
each Month beginning in the Month prior to the Month in which Buyer shall
commence taking Electricity, Buyer shall provide a schedule to Seller of its
daily expected peak Electricity requirements for the subsequent Month, provided
such schedule is for planning purposes only and the quantity of Electricity
scheduled for delivery to Buyer shall not exceed the Nominated Load or any
Interim Nominated Load, whichever is then in effect.
5.6 Title; Risk of Loss. As between the Parties, Seller shall be deemed
to be in exclusive control (and responsible for any damages or injury caused
thereby) of the Electricity on Seller's side of the Delivery Point and Buyer
shall be deemed to be in exclusive control (and responsible for any damages or
injury caused thereby) of the Electricity at and from the Delivery Point. Seller
warrants that such Electricity delivered to Buyer will be free and clear of all
liens, claims and encumbrances arising prior to the Delivery Point. Title to and
risk of loss related to the Electricity shall transfer from Seller to Buyer at
the Delivery Point.
5.7 Back-up Electricity Arrangements. From and after the
Commercial Operations Date and until the end of the Term,
provided that Buyer has notified Seller of its Nominated Back-up
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Demand pursuant to Section 5.7A below, Seller shall be responsible for arranging
the supply of back-up Electricity required by Buyer at the Bayway Refinery
unless prohibited by law or regulation. Such arrangements shall be on
commercially reasonable terms, which terms shall not unfairly disadvantage Buyer
with regard to Buyer's responsibilities to pay for back-up Electricity pursuant
to this Agreement.
A. Back-up Demand. Buyer shall establish and notify Seller of
the quantity of back-up Electricity to be reserved on behalf of Buyer not less
than ten (10) days (x) prior to the Commercial Operations Date or such earlier
date as may be necessary to reserve such service and (y) prior to any Month when
Buyer becomes aware of any increase or decrease in its requirements for back-up
Electricity ("Nominated Back-up Demand"). Seller shall not be liable for, and
Buyer shall reimburse Seller for, all costs incurred by Seller related to the
reservation of capacity (including any demand-related costs) associated with
sales by Third Parties of Electricity to Buyer at the Bayway Refinery and, in
the absence of an agreement between Seller and Infineum approved pursuant to
Section 5.9C, to Infineum.
B. Back-up Energy. Seller shall be responsible for
all costs of purchasing and delivering back-up energy to Buyer
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after the Commercial Operations Date, except as otherwise allocated to Buyer
pursuant to Section 7.6 or as set forth below. Each Month, Buyer shall pay for
the following back-up energy:
(i) back-up energy delivered to Buyer when Buyer is
unable to or will not accept delivery of Electricity from the
Facility for any reason (including Buyer's Force Majeure) or
when Seller cannot deliver Electricity from the Facility
because of any failure of the Interconnection Facilities or
Buyer's failure upon Seller's request to furnish and deliver
Distillate pursuant to Section 6.3 or because of any Force
Majeure of Seller other than a Facility Force Majeure (and in
all such events the Facility shall be deemed available),
(ii) back-up energy delivered to Buyer when the
Facility is (a) available or (b) deemed available pursuant to
Sections 5.2B, 5.8, 6.3C, 6.4E or 6.5A of this Agreement,
(iii) back-up energy delivered to Buyer when Buyer
is not purchasing Electricity from the Facility pursuant to
Section 5.10A(ii),
(iv) back-up energy delivered to Buyer as a
result of Buyer's purchase of Electricity pursuant to
Section 5.4B,
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(v) back-up energy delivered to Buyer in excess
of 134,500 kW in any hour, or
(vi) any back-up energy delivered to Buyer, to the
extent resulting from Seller's compliance with Section 5.2C.
C. Buyer's Right to Make Arrangements for Back-up
Electricity.
(i) If the actual cost of the Back-up Demand Charge
Component for reserving back-up capacity is in excess of or is
reasonably anticipated to exceed $1.26 per kW per Month,
Buyer, upon at least thirty (30) days prior notice to Seller,
may make arrangements for back- up Electricity for the Bayway
Refinery, and Seller shall use reasonable commercial efforts
to terminate any arrangements Seller has made for back-up
Electricity as of the date specified by Buyer and Buyer shall
reimburse Seller for any costs incurred by Seller pursuant to
such arrangements until such arrangements are terminated and
for any costs Seller may incur to terminate such arrangements.
If Buyer makes arrangements for back-up Electricity pursuant
to this Section 5.7C, Seller shall not be responsible for and
Buyer shall pay for all demand-related charges for such
service and for the excess, if any, of (x) the actual
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cost of back-up energy, in kWh, delivered to Buyer at the
Bayway Refinery less (y) the cost of an equivalent quantity of
back-up energy had it been purchased from PSE&G pursuant to
PSE&G's applicable tariff. Seller shall be responsible for (y)
above unless Buyer is otherwise responsible for back-up energy
costs pursuant to Sections 5.7B(i)-(vi) or 7.6.
(ii) If capacity from the Facility qualifies under
PJM Rules or otherwise such that arrangements with Third
Parties to reserve back-up Electricity are not required or can
be materially reduced, Seller shall, with Buyer's consent, use
commercially reasonable efforts to terminate or modify any
existing arrangements to receive back-up Electricity for the
Bayway Refinery to the extent necessary to achieve said
result, any costs or expenses of which shall be paid by Buyer.
D. Coordination of Scheduled Outages. Buyer and Seller shall
cooperate with each other to use commercially reasonable efforts to coordinate
the scheduled outages of the Facility and other major maintenance or overhaul
activities that may require a partial or complete reduction in the output of the
Facility with any scheduled temporary shut down or other anticipated reduction
in the operations of the Bayway Refinery so
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as to minimize, to the extent reasonably practicable, the amount of back-up
Electricity that must be purchased to satisfy Buyer's Requirements during the
duration of such scheduled outage or major maintenance. Buyer and Seller shall,
not less than thirty (30) days prior to the beginning of each Annual Budget
Period, exchange a preliminary schedule of any scheduled outages of the Facility
and any scheduled temporary shutdown or other anticipated redirection in the
operations of the Bayway Refinery.
5.8 Closure of Buyer's Facilities. In the event that Buyer closes or
otherwise shuts down the Bayway Refinery for any reason, including but not
limited to Force Majeure, (i) Buyer shall provide Seller with notice of such
closure or shutdown not less than three (3) days after Buyer obtains knowledge
that the Bayway Refinery will be closed or shut down, and (ii) Buyer shall
continue to pay to Seller all Fixed Charges in accordance with the terms of this
Agreement, in addition to any costs associated with the termination of or
rearrangement of any contractual obligations of Seller or any other unwind costs
caused by such closure or shutdown. To the extent practicable, and provided
Seller is not adversely affected thereby, Seller shall take such reasonable
action as would mitigate the Fixed Charges to be paid by Buyer in such event
(including the sale of Excess Capacity and Excess Energy). The Facility shall be
deemed available for the duration of any such closure.
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5.9 Sales of Electricity to Third Parties.
A. Purchases and Sales of Electricity; Affiliate Transactions.
Seller may sell Excess Capacity, Excess Energy and, except as provided in
Section 5.1 and Exhibit K, other products or services derived from the Facility
to Third Parties. Seller may also purchase capacity or energy from or sell
Excess Capacity or Excess Energy or both to any Affiliate of Seller, provided
that (i) such purchase or sale is on commercially reasonable terms and
conditions that are at least as favorable to Seller and to Buyer as would be
obtainable in an "arm's length" transaction and (ii) Seller notifies Buyer of
such purchase or sale as soon as reasonably practicable.
B. No Resales by Buyer. Buyer shall not be entitled to resell
Electricity delivered by Seller hereunder to any Third Party (including
Infineum); provided, however, that Buyer may redeliver or checkmeter Electricity
delivered by Seller hereunder to facilities within the Bayway Refinery (whether
or not owned or operated by Buyer or an Affiliate or a Third Party, but not
including those facilities and equipment currently or in the future owned or
operated by Infineum) in an amount (taken together with other purchases
hereunder) up to the Maximum Electricity Quantity, provided that any redelivery
or checkmetering of Electricity delivered by Seller hereunder to
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such other facilities owned or operated by Third Parties, other than those
identified in the definition of Bayway Refinery, shall not have a material
adverse effect on Seller or any of its Affiliates or shall not otherwise be
precluded by law or regulation.
C. Approval of Contract for Sales to Infineum.
(i) Seller or its Affiliate shall, in good faith,
provide Buyer with a draft of any agreement for the sale of
Electricity to Infineum (the "Infineum Agreement") as soon as
reasonably possible in advance of its execution and a copy of
the final draft of any such agreement prior to its execution.
Buyer shall have ten (10) Business Days to approve the final
draft of such agreement, which approval shall not be
unreasonably withheld. In the event Buyer does not approve
such agreement Buyer shall provide Seller or its Affiliate
with a written notice of disapproval detailing proposed
changes to such agreement that Buyer in good faith believes
are necessary to protect its interests pursuant to this
Agreement, and the Parties shall cooperate to resolve Buyer's
proposed changes. In the event Buyer fails to provide Seller
or its Affiliate either a notice of approval or disapproval
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within such ten (10) Business Day period, Buyer shall be
deemed to have approved such agreement.
(ii) Concurrently with the negotiation by Seller or
Seller's Affiliate of the Infineum Agreement, Buyer and Seller
shall mutually agree upon an equitable allocation of back-up
energy and back-up demand costs attributable to Infineum Sales
and a method for determining Infineum's Load pursuant to
Section 8.2C. Such allocation shall be used in the
calculations set forth in Sections 6.1A and 7.1 (definition of
"Infineum Net Revenues or Losses").
(iii) In the event Seller has not entered into an
agreement with Infineum and Buyer has not provided Seller with
a means of disconnecting Infineum's electrical load from the
Electricity delivered to Buyer from the Facility, Buyer shall
be responsible for the entire quantity of Electricity
delivered from the Facility to Buyer (including Infineum's
Load when the Facility is not electrically interconnected with
the PJM System). In such event, Buyer shall be responsible for
all costs incurred to provide all such Electricity and shall
be solely responsible for the recovery of any
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costs related to Electricity consumed by Infineum and for
recovering such costs from Infineum.
5.10 Replacements, Improvements or Additions to the
Facility.
A.
(i) After the Commercial Operations Date, Buyer
shall be responsible for and shall pay, as and when incurred
by Seller, all costs with respect to replacements,
improvements or additions to the Facility necessary to
maintain and operate the Facility in good repair and condition
(pursuant to the maintenance and repair program recommended by
equipment vendors) and as contemplated by this Agreement to
meet Buyer's Requirements, except as provided in (ii) below.
(ii)
(1) With respect to any such
replacements, improvements or additions described in
(i) above that are estimated to exceed one million
dollars ($1,000,000) and are solely required by a
Change in Law applicable to the Facility after the
Commercial Operations Date, Buyer shall have the
option not to make such replacements, improvements
or additions and to cease or reduce purchasing
Electricity from the Facility pursuant
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to this Agreement to the extent that such
replacements, improvements or additions were
necessary for that purpose.
(2) In such event, until expiration of the
Term, Buyer shall continue to pay the Fixed Charges,
any Back-up Demand Charge Component and any back-up
Electricity charges incurred by Seller and any other
costs necessary to fully reimburse Seller for the
cost to terminate, complete or rearrange any
contractual or other binding obligations incurred by
Seller pursuant to Seller's obligations or rights
under this Agreement and for such other costs that
arise from Buyer's election to cease purchasing
Electricity from the Facility including all costs
related to the demobilizing, shutdown, mothballing
and protection of the Facility; provided, however,
that Buyer shall have no obligation to reimburse
Seller for any lost profits or foregone economic
benefits from sales of Excess Capacity or Excess
Energy or other products or services derived from
the Facility to Third Parties that Seller would have
received if the Facility had continued to operate.
To the extent practicable, and provided Seller is
not
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adversely affected thereby, Seller shall take such
reasonable action as would mitigate the amounts to
be paid by Buyer pursuant to this Section 5.10A(ii).
To the extent that Buyer no longer purchases
Electricity from the Facility pursuant to this
Section 5.10A(ii), Seller shall have no further
obligation to supply or pay for any back-up
Electricity.
(iii) In the event Buyer elects not to make such
replacements, improvements or additions pursuant to (ii)
above, Seller may proceed with such replacements, improvements
or additions and, notwithstanding Section 7.2, shall be
entitled to all of the revenues derived from the Facility that
would not have been obtained but for such replacements,
improvements or additions, until the revenues less the costs
incurred by Seller to produce such revenues equal the costs
incurred by Seller for such replacements, improvements or
additions. In the event that Seller recovers all of the costs
incurred by Seller for such replacements, improvements or
additions (whether through net revenues or payment by Buyer or
both), as of the date of such recovery and thereafter Buyer
shall have the right to commence purchasing Electricity from
the Facility and
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shall have all its other rights pursuant to this Agreement
restored in the same manner as if such replacements,
improvements or additions had not been necessary.
B. Either Party may propose replacements, improvements or
additions to the Facility that are not necessary to maintain and operate the
Facility in good repair and condition (pursuant to the maintenance and repair
program recommended by equipment vendors) and as contemplated by this Agreement
to meet Buyer's Requirements. If the Parties agree to make such replacements,
improvements or additions, Seller shall make same and the Parties shall share
equally both the costs with respect to such replacements, improvements or
additions and the revenues derived from the Facility that would not have been
obtained but for such replacements, improvements or additions. A Party shall
have a reasonable period of time, but in no event greater than forty-five (45)
days, to notify the other Party that it accepts the other Party's proposal for
such replacements, improvements or additions. If either Party fails to respond
or elects not to proceed with such replacements, improvements or additions: (i)
if Seller fails to respond or elects not to proceed with such replacements,
improvements or additions, Buyer may request Seller to proceed at Buyer's
expense (which costs shall be paid as and when incurred by Seller) and Buyer
shall be entitled to all of
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the revenues derived from the Facility that would not have been obtained but for
such replacements, improvements, or additions, or (ii) if Buyer fails to respond
or elects not to proceed with such replacements, improvements, or additions,
Seller may proceed with such replacements, improvements or additions and shall
be entitled to all of the revenues derived from the Facility that would not have
been obtained but for such replacements, improvements or additions and Buyer
shall not be entitled to the capacity or energy derived from such replacements,
improvements or additions; provided, however, that any such replacements,
improvements or additions constructed pursuant to (i) or (ii) shall not
materially adversely affect the other Party (other than such Party not sharing
in the revenues derived therefrom), and in the case where Seller proceeds, Buyer
not having any rights to the capacity or energy derived therefrom.
Notwithstanding anything contained in this Section 5.10B to the contrary, if
Seller, in its sole discretion, concludes that any replacements, improvements or
additions to the Facility proposed by Buyer would have any detrimental effect
upon Seller's ability to meet its obligations under this Agreement or under any
other then existing contractual or other binding obligation of Seller relating
to the Facility or upon the value or salvage value of the Facility, Seller shall
notify Buyer of such position within forty-five (45) days of Buyer's proposal,
and Buyer shall have no right to proceed with such replacements, improvements or
additions.
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5.11 Qualifying Facility Status. Seller shall obtain and maintain the
status of the Facility as a Qualifying Facility or as part of a Qualifying
Facility; provided, however, that Seller shall have no obligation to maintain
such Qualifying Facility status in the event of Buyer's or Buyer's Affiliates
failure or inability to take and use steam pursuant to the Steam Agreement in
quantities sufficient to maintain the Qualifying Facility status of the Facility
and the Existing Plant. Seller shall have no further obligation to maintain
Qualifying Facility status (i) whenever it becomes possible for Seller to
fulfill its obligations pursuant to this Agreement without such status, (ii)
there is no material adverse effect on Buyer or no such effect that cannot be
compensated for by a payment from Seller to Buyer, and (iii) Seller pays Buyer
such compensation, if any.
5.12 On-site Generation Facility Status. Buyer and Seller shall conduct
their operations and activities in such a manner that such operations and
activities do not prevent or otherwise adversely affect the qualification of the
Facility as an On-Site Generation Facility.
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ARTICLE 6. PRICE FOR ELECTRICITY
6.1 Price.
A. The price which Buyer hereby agrees to pay to
Seller on and after the Commercial Operations Date shall consist
of (to the extent that each component is applicable):
the sum of
(i) the Fixed Facility Charge Component;
(ii) the Fixed O&M Component;
(iii) the Back-up Demand Charge Component;
(iv) the Fuel Component;
(v) the Variable O&M Component;
(vi) the Back-up Energy Component;
(vii) the Eight Percent Proxy Component; and
(viii) the cost of all back-up energy purchased and
delivered for which Buyer is responsible
pursuant to Sections 5.7B(i)-(vi) and 7.6;
less
(ix) any Fixed Costs Chargeable to Infineum Sales;
(x) any Variable O&M Costs Chargeable to Infineum
Sales, if already paid by Buyer to Seller;
(xi) any Variable O&M Costs Chargeable to Third
Party Sales as described in (b) of the
definition thereof; and
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(xii) any Back-up Energy Costs Chargeable to Infineum
Sales, if already paid by Buyer to Seller.
B. Buyer shall at all times (including during a Force Majeure
event) remain liable for and shall pay Seller the applicable Fixed Charges and
the Back-up Demand Charge Component (to the extent that such charges cannot
reasonably be mitigated by Seller).
6.2 Annual Budget.
A. Submission. One hundred eighty (180) days prior to the
anticipated Commercial Operations Date as reasonably estimated by the Parties,
and one hundred eighty (180) days prior to the beginning of each Annual Period
thereafter, Seller shall prepare and submit to Buyer a proposed Budget Plan for
such Annual Period (the "Budget Plan") and a five-year projection of operating
and capital budgets (the "Five-Year Projection"). Thirty (30) days prior to the
anticipated Commercial Operations Date as reasonably estimated by the Parties,
and thirty (30) days prior to the beginning of each Annual Period thereafter,
Seller shall prepare and submit to Buyer a proposed budget (the "Annual Budget")
for such Annual Period, which shall include a separate operating budget and
capital budget and shall set forth, in
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reasonable detail: (i) anticipated operations, repairs, replacements and
additions necessary to maintain the Facility in good repair and condition
(pursuant to the maintenance and repair program recommended by equipment
vendors), as contemplated by this Agreement, (ii) routine maintenance and
overhaul schedules (including major maintenance), (iii) procurement (including
equipment acquisitions and spare parts and consumable inventories indicating a
breakdown of capital items and expense items), (iv) staffing, personnel and
labor activities (including unit rates for labor and holidays to be observed),
(v) administrative activities, and (vi) data regarding other work proposed to be
undertaken by Seller, together with an itemized estimate, of all costs to be
incurred in connection therewith. Seller shall obtain commercially reasonable
prices for all goods and services.
B. Review. Buyer shall review Seller's proposed Annual Budget
prior to the Commercial Operations Date or the beginning of the relevant Annual
Period, as the case may be, and may, by written request, indicate Buyer's
proposed reasonable changes, additions, deletions and modifications. Seller
shall use commercially reasonable efforts to respond to Buyer's requests. If no
such request is received within twenty (20) days after Buyer receives such
proposed Annual Budget, such Annual Budget shall be deemed approved. If Buyer
timely delivers such a request, Buyer and Seller will then meet and use their
best
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efforts to agree upon a final Annual Budget prior to the commencement of such
Annual Period.
C. Failure to Adopt. If, by the first day of any Annual
Period, the Parties are unable to reach agreement concerning any portion of the
Annual Budget for such Annual Period, the Annual Budget proposed by Seller shall
be in effect for such Annual Period. Those portions of such Annual Budget that
are in dispute shall be resolved in accordance with the dispute resolution
procedures set forth in Article 14 of this Agreement, and the losing Party with
respect to any such arbitration shall pay all reasonable costs of the winning
Party associated therewith, including interest at the Interest Rate on any
overpayment by Buyer and reasonable attorneys' and arbitration fees.
D. Effectiveness.
(i) The Annual Budget shall remain in effect
throughout the applicable Annual Period, subject to updates prepared by Seller
as necessary and such other updating, revision and amendment as may be proposed
by either Party and consented to in writing by the other Party.
(ii) The final Annual Budget shall be used to
calculate the Fixed O&M Component. Actual Fixed O&M expense for
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each Annual Period shall be compared to the Fixed O&M Component billed and paid
by Buyer during such period within ninety (90) days following the conclusion of
each Annual Period, and Seller shall bill or credit Buyer, as the case may be,
and Buyer shall pay Seller, if applicable, for any difference including interest
(to either Buyer or Seller) at the Interest Rate from the date any such
difference in Fixed O&M Component charges would have been due or were paid
during the previous Annual Period. If disagreement arises between the Parties as
a result of such reconciliation of budgeted and actual Fixed O&M Component costs
and the Parties cannot resolve such dispute within thirty (30) days of receipt
by Seller of notice regarding such dispute from Buyer, the Parties shall resolve
such dispute in accordance with the dispute resolution procedures set forth in
Article 14 of this Agreement.
E. General Limitation. Unless contained in the
Annual Budget currently in effect, or otherwise approved in writing by Buyer,
which approvals shall not be unreasonably withheld, Seller shall not (and shall
not permit any of its agents or representatives to) take or agree to take any
actions that are not consistent with the Annual Budget plan and would have the
effect of increasing Buyer's responsibility for annual Fixed O&M Component costs
by more than two hundred fifty thousand dollars ($250,000) in the aggregate in
any Annual Period.
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6.3 Purchases of Fuel; Use of Distillate.
A. Right to Purchase. Seller shall purchase Fuel for the
Facility of a specification necessary for the efficient operation of the
Facility in compliance with any certification, approval or permit issued by any
Governmental Authority and any applicable environmental and other regulatory
standards from time to time and on commercially reasonable terms free and clear
of any liens and encumbrances. Seller shall not incur any contractual
arrangement or other binding obligations for the purchase of Fuel for the
Facility having a term greater than six (6) Months without Buyer's prior
approval which approval shall not be unreasonably withheld. On not less than
thirty (30) days notice to Seller prior to the beginning of any Month, Buyer may
purchase and Seller shall repurchase from Buyer natural gas (including
transportation and related services) as Fuel, for the Facility in order to
control the Cost of Fuel. Such purchases of natural gas shall be for a duration
of at least one (1) Month and shall be purchased by Buyer for its own account
and risk and not as agent for Seller. Buyer shall deliver any natural gas for
the Facility free and clear of any liens and encumbrances. Buyer may purchase
natural gas from an Affiliate of Buyer, provided that (i) such purchase is on
commercially reasonable terms and conditions that are at least as favorable as
would be obtainable
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in an "arm's length" transaction and (ii) Buyer notifies Seller of such purchase
as soon as reasonably practicable. Buyer may not exercise this option if it
would cause Seller to breach any then existing contractual or other binding
obligations for the purchase or delivery of Fuel. If Buyer exercises this
option, Buyer shall reimburse Seller for any costs incurred by Seller in
terminating, completing or rearranging any existing contracts or other binding
obligations of Seller for the purchase or delivery of Fuel. The price paid by
Seller to Buyer for natural gas shall be Buyer's Cost of Fuel for natural gas.
B. Distillate. It is Seller's intention to install a
distillate day tank with usable storage capacity sufficient for twenty-four (24)
hours of base load operation. Upon and pursuant to Seller's request, within the
actual number of hours of usable storage capability, at base load operation, of
the distillate day tank as has actually been constructed plus such number of
hours of notice of an interruption of natural gas deliveries as may have been
provided to Seller by a Natural Gas Pipeline Company, Buyer shall furnish
distillate at the Distillate Interconnection Point in place of natural gas as
Fuel for use by the Facility. Buyer shall deliver any distillate for the
Facility free and clear of any liens and encumbrances. The price paid by Seller
for distillate purchased from Buyer pursuant to this Section 6.3 shall be the
weighted average of the daily mean wholesale price
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for (i) "LS Jet" kerosene and (ii) "LS Diesel" kerosene, for deliveries in barge
load quantities in New York Harbor, as published by Standard & Poor's Platt's in
Platt's Oilgram Price Report plus transportation and related services (if
actually incurred) based on the actual blend of distillate delivered. If the
publication of prices for "LS Jet" kerosene or "LS Diesel" kerosene or both in
Platt's Oilgram Price Report are discontinued or reconstituted in such a manner
as to render them unusable for the purposes intended by the Parties, Buyer and
Seller agree to substitute a publication of petroleum prices commonly accepted
in the petroleum industry that most closely reflects the wholesale prices for
barge load quantities in New York Harbor of petroleum products comparable to
distillate conforming to the specifications contained in this Section 6.3 and
attached hereto as Exhibit L.
C. Specifications. Any natural gas or distillate
provided by Buyer shall conform to the specifications attached hereto as Exhibit
L and, in the case of natural gas, with the specifications of the applicable
Natural Gas Pipeline Company transporting such natural gas; provided that such
Fuel shall be of a specification necessary for the efficient operation of the
Facility in compliance with any certification, approval or permit issued by any
Governmental Authority and any environmental and other regulatory standards
applicable from time to time. Buyer
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shall be responsible for any damages to Seller that result from any failure to
so supply Fuel for the Facility. Buyer shall indemnify Seller for any such
damages and for any additional costs incurred by Seller on account of Buyer's
non-compliance with this Section 6.3, including costs incurred by Seller for
back-up capacity and energy, as the result of the failure of Buyer or Buyer's
agents or vendors to deliver such purchased Fuel or distillate to the Facility
and, if the Facility does not operate because of such failure, the Facility
shall be deemed available for purposes of this Agreement.
6.4 Optional Electricity Purchases from a Third Party.
A. Except as provided in this Section 6.4 and in Section 6.5,
Buyer shall not purchase Buyer's Requirements from Third Parties when
Electricity from the Facility is available.
B. In the event that Seller or Buyer becomes aware that the
costs of obtaining Electricity for Buyer's Requirements for a period of not less
than one (1) Month from a Third Party would be less than the Fuel Component and
Variable O&M Component that Buyer would be required to pay to Seller hereunder
for such Electricity if it had been generated by the Facility and taken by Buyer
(regardless of the Nominated Load) up to the Net Capability, the Parties shall
cooperate in good faith to
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determine whether it would be in Buyer's best interest to purchase Buyer's
Requirements for a period of not less than one (1) Month from a Third Party. In
evaluating whether to operate the Facility to supply Buyer's Requirements, the
Parties shall consider whether a decision not to operate the Facility would
materially adversely affect Seller's ability to perform any then existing
contractual or other binding obligations related to the Facility or would cause
Seller to breach any such then existing contractual or other binding obligations
related to the Facility, and the costs necessary to reimburse Seller for any
costs that would be incurred by Seller in terminating, completing or rearranging
such existing contracts or other binding obligations related to the Facility;
provided, however, Buyer shall have no obligation to reimburse Seller for any
lost profits or foregone economic benefits from sales of Excess Capacity or
Excess Energy or other products or services derived from the Facility to Third
Parties that Seller would have received had the Facility continued to operate.
C. In the event that, as determined pursuant to Section 6.4B,
all of Buyer's Requirements for a period of not less than one (1) Month are
purchased by Seller from a Third Party (either as agent for Buyer or in such
other manner as would not cause Seller to be regulated as a reseller of
Electricity), except pursuant to an agreement subject to the terms described in
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Section 6.5A, in any Month Buyer shall pay Seller (i) the costs of such
Electricity from a Third Party delivered to Buyer in such Month plus (ii) all
costs incurred by Seller in terminating, completing or rearranging any then
existing contractual or other binding obligations related to the Facility (which
costs Seller shall use reasonable efforts to mitigate) and for all costs
relating to the demobilizing, shutdown, mothballing and protection of the
Facility; provided, however, Buyer shall have no obligation to reimburse Seller
for any lost profits or foregone economic benefits from sales of Excess Capacity
or Excess Energy or other products or services derived from the Facility to
Third Parties that Seller would have received if the Facility had continued to
operate. In addition, Buyer shall pay Seller, as invoiced by Seller, the greater
of:
(x) twenty percent (20%) of the difference between
(1) the ESA Price less
(2) the Third Party Price;
or
(y) fifty percent (50%) of the difference between
(1) the Industry Price less
(2) the Third Party Price,
but not less than zero.
D. For purposes of this Section 6.4: the "ESA Price"
means the amount that Buyer would be required to pay to Seller
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under this Agreement for such Electricity if it had been generated by the
Facility; the "Third Party Price" means the cost of such Electricity from a
Third Party delivered to Buyer plus all other costs that Buyer is obligated to
continue to pay Seller pursuant to this Agreement, all costs incurred by Seller
and reimbursed by Buyer in terminating, completing or rearranging any then
existing contractual or other binding obligations related to the Facility, and
all costs relating to the demobilizing, shutdown, mothballing and protection of
the Facility; and the "Industry Price" means the available market price for
similar quantities of Electricity, delivered at the same transmission voltage
and degree of reliability (including the cost of reserving an equivalent
quantity of capacity).
E. At any time when Buyer purchases Electricity from
Third Parties pursuant to this Section 6.4, the Facility shall be
deemed available.
6.5 Optional Long Term Electricity Purchases from Third
Parties.
A. Upon not less than thirty (30) days notice to Seller, Buyer
may execute a written contract with any Third Party (including any party
producing electricity on the Bayway Property) for Buyer's Requirements that is
for a term of at least three (3) years, and pursuant to which neither party
either
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acting alone or acting together has a right to terminate (other than for breach
or force majeure) within such period, and does not result from a proposal
brought to Buyer by Seller. In such event, upon not less than thirty (30) days
notice, Buyer shall have the right to direct Seller not to operate the Facility
to supply Buyer's Requirements for the term of such contract. In such event:
(i) Buyer shall have no right during the term of
such contract to request or require Seller to operate the
Facility to deliver Buyer's Requirements except as provided in
(ii) below;
(ii) Upon Buyer's request, and at Buyer's cost,
Seller shall continue to maintain and staff the Facility in
such a manner as to assist Buyer to rely upon such portion of
the capacity of the Facility as may be necessary for Buyer's
Requirements;
(iii) Seller shall use reasonable commercial efforts
to mitigate so much of the Fixed O&M Component, as well as any
other costs reimbursed to Seller by Buyer, as is consistent
with Prudent Electric Industry Practice, provided that Buyer
shall continue to pay the Back-up Demand Charge Component, if
any, and the Fixed O&M Component and other costs, as
mitigated;
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(iv) Buyer shall continue to pay the Fixed
Facility Charge Component;
(v) Buyer shall reimburse Seller for any costs
incurred by Seller in terminating, completing or rearranging
any existing contracts or other binding obligations related to
the Facility, and for all costs relating to the demobilizing,
shutdown, mothballing and protection of the Facility;
provided, however, Buyer shall have no obligation to reimburse
Seller for any lost profits or foregone economic benefits from
sales of Excess Capacity or Excess Energy or other products or
services derived from the Facility to Third Parties that
Seller would have received if the Facility had continued to
operate; and
(vi) For the duration of the term of the contract
with the Third Party, Seller shall not have any obligations
for the supply of back-up Electricity to Buyer and the
Facility shall be deemed available.
B. Whenever Buyer shall give notice of its intent to purchase
Buyer's Requirements from a Third Party pursuant to Section 6.5A above, the
Parties shall consult with each other to determine whether it would be
economical to continue to operate the Facility for the sale of Excess Capacity
or Excess Energy or both to Third Parties. If the Parties agree that the
Facility
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should be operated to sell Excess Capacity or Excess Energy or both to Third
Parties, all revenues arising therefrom and all costs that would not otherwise
be chargeable to Buyer and any losses shall be shared equally among the Parties
for the remainder of the term of Buyer's purchases of Buyer's Requirements from
such Third Party. If, after such consultation, only one of the Parties desires
to operate the Facility to make sales of Excess Capacity or Excess Energy or
both for the remainder of the term of Buyer's contract to purchase Buyer's
Requirements from a Third Party, Seller shall operate the Facility to make such
sales of Excess Capacity or Excess Energy or both for the account of such Party
and all the revenues and all costs that would not otherwise be chargeable to
such Party with respect to such sales and any and all losses arising therefrom
shall be the sole responsibility of and shall be paid by such Party.
6.6 Adjustments to Fixed Facility Charge Component.
A. Not later than eighty (80) days after the Effective Date,
the "Cost of Debt" in the category "Control Variables" set forth in the Pro
Forma Analysis attached hereto as Exhibit D shall be increased or decreased, as
the case may be, for the amount, if any, by which the average of the interest
rate on the ten (10) year U.S. Treasury Note for the first five (5)
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Business Days after the sixty-fifth (65th) day after the Effective Date was
either greater or less than 6.65 percent. The Fixed Facility Charge Component
shall thereupon be increased or decreased as a result thereof in order that the
"IRR" and "Coverage" in the category "Control Variables" set forth in the Pro
Forma Analysis attached hereto as Exhibit D shall remain the same. Seller shall
promptly notify Buyer of any such recalculation of the Fixed Facility Charge
Component and Exhibit D shall be restated to reflect such recalculation.
B. Seller shall furnish to Buyer in writing, on the date on
which Buyer's obligation to pay the Fixed Charges commences, documentation
setting forth in reasonable detail the actual amounts of all Facility "Hard
Costs" and "Project Soft Costs," as set forth in Exhibit D, and all Qualified
Capital Cost Adjustments, and the Fixed Facility Charge Component shall
thereupon be recalculated to reflect all Qualified Capital Cost Adjustments and
shall be increased or decreased as a result thereof. In addition, if at any time
any additional Qualified Capital Cost Adjustments have been identified and
determined, a subsequent recalculation in the Fixed Facility Charge Component
shall be made and Seller shall furnish to Buyer in writing additional
documentation setting forth in reasonable detail the amount of such adjustment.
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C. If the date on which Buyer commences payment of the Fixed
Charges pursuant to 4.2D(i) is later than December 1, 2001, the Fixed Facility
Charge Component shall be recalculated based on a period commencing on such date
and ending on November 30, 2017 and Buyer shall pay Seller each Month an amount
calculated to recover the Fixed Facility Charge Component over the number of
Months in such period and taking into account any increase in "Interest During
Construction."
D. Any adjustments to the Fixed Facility Charge Component
pursuant to Sections 6.6A, 6.6B and 6.6C shall be determined using the Pro Forma
Analysis set forth in Exhibit D. Buyer and Seller agree that the Fixed Facility
Charge Component shall not be adjusted for any other reason, including if the
actual "IRR" exceeds or is less than the "IRR" stated in the Pro Forma Analysis
set forth in Exhibit D, whether due to any error, inaccuracy, misstatement,
omission or variance of any factor in the Pro Forma Analysis set forth in
Exhibit D, or otherwise.
E. Any increases in or reductions to the Fixed Facility Charge
Component pursuant to this Section 6.6 shall be effective retroactive to the
date on which Buyer's obligation to pay the Fixed Charges begins together with
interest accrued thereon from the date such costs are paid by Seller, which
interest shall accrue at the Prime Rate, and which interest shall
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apply only to the extent such interest is not included in the adjustment made
pursuant to Section 6.6D.
F. Within thirty (30) days after any adjustments in the Fixed
Facility Charge Component pursuant to this Section 6.6, Seller shall prepare and
deliver to Buyer an invoice setting forth any charges or credits due as a result
of the adjustments made pursuant to this Section 6.6.
6.7 Insurance.
A. Seller shall maintain, at Buyer's expense, liability and
property damage insurance coverage for the Facility (including boiler and
machinery coverage) equivalent to that maintained for Cogen's electric
generation facilities, so long as such coverage is from internationally
recognized insurance markets (the "Required Insurance").
B. At least thirty (30) days prior to the expiration of the
policies of Required Insurance to be maintained by Seller hereunder, Seller
agrees to provide Buyer with preliminary indications of its insurance proposal
for the renewal term. Buyer may accept Seller's proposal or alternatively shall
have the right to procure such coverage at Buyer's sole cost and expense.
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C. If Buyer elects to procure Required Insurance coverage for
the renewal term, Buyer shall so inform Seller in writing not less than
twenty-one (21) days prior to the expiration of the existing policies, and the
parties shall obtain endorsements to their respective policies of insurance to
specify (i) the agreement of all insurers to the appointment of a common loss
adjustment firm in the event of any claims and (ii) the agreement of all
insurers to abide by such common adjustment firms's recommendation for sharing
of claims costs and expenses.
D. Any Required Insurance procured by Buyer pursuant to
Section 6.7C shall contain coverage terms and conditions substantially similar
to those of Seller's policies of insurance for Cogen's other electic generation
facilities, and:
(i) such insurance policy shall name Seller
and any Lender as the named insured and
loss payee;
(ii) such insurance policy shall be issued
by an insurance carrier having a rating
issued by A.M. Best Company equal to or
better than that of the insurance
carrier providing equivalent coverage
for Cogen's other electric generation
facilities;
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(iii) the purchase of such insurance policy
by Buyer shall have no adverse effect
on the cost of insurance maintained by
Cogen for Cogen's other electric
generation facilities;
(iv) Buyer shall promptly pay Seller for any
and all costs incurred by Seller in
terminating, completing or rearranging
Seller's then existing policy for
Required Insurance;
(v) Buyer shall immediately provide Seller
with a copy of such insurance policy;
(vi) such insurance policy shall provide
that it may not be canceled or
terminated without providing no less
than thirty (30) days prior notice to
all named insureds and loss payees; and
(vii) Not less than thirty (30) days prior to
the expiration of such insurance
policy, Buyer shall notify Seller as
to whether or not Buyer intends to
renew such insurance policy and, upon
notice that Buyer does not intend to
renew such insurance policy (or in the
event that Buyer fails to provide
Seller with such notice), Seller
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shall proceed to purchase the Required
Insurance as provided in Section 6.7A.
E. Seller shall propose additional insurance coverage
(including business interruption coverage) as Seller believes appropriately
addresses the commercial risks of this Agreement (including reasonable
deductibles and other expenses) for Buyer's review and acceptance. Seller shall
maintain, at Buyer's expense, any such additional insurance coverage accepted by
Buyer in writing. Seller shall make available to Buyer for inspection a copy of
such insurance policy or policies.
F. If requested by Buyer, Seller shall name Buyer as
an additional insured on any of such policies, to the extent
Buyer has an insurable interest covered by same.
ARTICLE 7. ALLOCATION OF NET REVENUES OR LOSSES AND BACK-UP ENERGY COSTS
7.1 Defined Terms. For purposes of this Article 7, the
following terms shall have the following meanings:
"Bayway Refinery Outage" means an event in any Month whenever the
average load for the Bayway Refinery for that Month is more than twenty (20) MW
less than the average Monthly load for the Bayway Refinery for the last prior
Month during which its
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operations were unaffected by an outage (the "Base Month"), either
(i) due to an unscheduled outage of all or a portion of
the facilities comprising the Bayway Refinery or
(ii) due to a scheduled outage (which shall not include a
permanent shutdown) of all or a portion of the facilities comprising
the Bayway Refinery where Buyer (a) has provided Seller with not less
than six (6) Months notice in advance of any such scheduled outage or
such lesser notice where either (1) Seller is able to coordinate its
outages with Buyer's outage, or (2) Seller has no scheduled outage, and
(b) such scheduled outage does not occur between June 1 and September
30 of any Annual Period (a "Noticed Scheduled Outage").
A Bayway Refinery Outage shall be deemed to have ended in any Month whenever the
average load for that Month is (or would have been but for the occurrence of a
scheduled outage which is not a Noticed Scheduled Outage) within twenty (20) MW
of the actual average load for the Base Month. Buyer shall provide Seller with
notice at the commencement and conclusion of any Bayway Refinery Outage.
"Eight Percent Component" means, for any Reconciliation
Period, the product of (a) the sum of all Net Back-up Energy
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Costs incurred during such Reconciliation Period, and (b) the quotient of (i)
eight percent divided by (ii) one hundred percent (100%) minus the Unit
Availability (provided that such quotient shall never be greater than 1.0).
"Infineum Net Revenues or Losses" means, for any Month, the revenues or
losses attributable to sales of Excess Capacity or Excess Energy or other
products or services derived from the Facility (except Steam) to Infineum, net
of any expenses incurred in making such sales, including:
(i) Fuel Costs Chargeable to Infineum Sales,
(ii) Fixed Costs Chargeable to Infineum Sales,
(iii) Variable O&M Costs Chargeable to Infineum Sales,
(iv) Back-up Demand Costs Chargeable to Infineum Sales,
(v) Back-up Energy Costs Chargeable to Infineum Sales,
(vi) applicable Taxes, and
(vii) all other costs and expenses reasonably attributable
to such sales.
"Net Back-up Energy Cost" means, for each Month in which back-up energy
is delivered to Buyer, the difference between:
(i) the total charge paid by Seller for the quantity of back-up
energy (in kWh) delivered during such Month, less the cost of
any back-up energy for which Buyer is
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responsible to pay pursuant to Section 5.7B(i)-(vi),
and
(ii) the Back-up Energy Component for such Month,
but not less than zero.
"Net Revenues or Losses" means, for any Month, the revenues
attributable to sales of Excess Capacity or Excess Energy or other products or
services derived from the Facility (except Steam) to Third Parties (not
including any Infineum Net Revenues or Losses or Power Augmentation Revenues),
net of any expenses incurred in making such sales, including:
(i) Fuel Costs Chargeable to Third Party Sales,
(ii) Variable O&M Costs Chargeable to Third Party Sales,
(iii) applicable Taxes, and
(iv) all other costs and expenses reasonably attributable to such
sales.
"Power Augmentation Revenues" means, for any Month, the sum of the
revenues attributable to sales of Excess Capacity or Excess Energy or other
products or services derived from the Facility to Third Parties as a result of
Power Augmentation for each hour in such Month, to the extent such revenues
exceed in each such hour the expenses incurred in making such sales, including:
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(i) Fuel Costs Chargeable to Power Augmentation,
(ii) Variable O&M Costs Chargeable to Power Augmentation;
(iii) the Power Augmentation Cost of Steam,
(iv) the cost of demineralized water used in Power
Augmentation (calculated based upon steam delivered for
Power Augmentation),
(v) applicable Taxes, and
(vi) all other costs and expenses reasonably attributable to
such sales.
Any losses in any hour as a result of Power Augmentation shall be borne by
Seller.
"Reconciliation Period" means either (i) a period comprising the prior
six (6) Commercial Operations Years (or such lesser number of Commercial
Operations Years if six (6) Commercial Operations Years have not yet occurred)
or (ii) following the Commercial Operations Year ending on April 30, 2017, a
period comprising the prior seventy-two (72) Months.
"Unit Availability" means one hundred percent (100%) multiplied by the
quotient of (i) Available Hours divided by (ii) Period Hours, where
Available Hours means the difference between
(i) the Period Hours and
(ii) the sum of Forced Outage
Hours and Scheduled Outage
Hours during any period.
Available Hours include all
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hours when the Facility is deemed
available pursuant to this
Agreement that are not Forced
Outage Hours or Scheduled Outage
Hours (other than Forced Outage
Hours caused by Buyer).
Forced Outage Hours means the number of hours in
any period that the Facility
is not available as a result
of a Facility failure or as a
result of being removed from
service for unplanned
maintenance.
Scheduled Outage Hours means the number of hours in
any period that the Facility
is (i) not available as a
result of being removed from
service for planned
maintenance or, (ii) if the
Facility was not operating and
is deemed available pursuant
to this Agreement, for planned
maintenance scheduled pursuant
to Section 5.7D.
Period Hours means the
number of hours in
the period
specified below.
For purposes of this Article 7, Unit Availability shall be computed at the end
of each Commercial Operations Year on the basis of the applicable Reconciliation
Period.
7.2 Allocation of Net Revenues or Losses.
A. Except as otherwise provided for in
Section 5.2B(i), Section 5.10A(iii) or Section 5.10B, each Month, the Net
Revenues or Losses shall be allocated in the following order:
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(i) First, Seller shall be allocated one hundred
percent (100%) of all Net Revenues or Losses until Seller has
recovered all unreimbursed costs for Environmental Remediation
and Relocation Costs; then
(ii) Second, in the event a Bayway Refinery Outage
has occurred or continues during such Month, Buyer shall be
allocated one hundred percent (100%) of all Net Revenues or
Losses received by Seller from the sale of Excess Capacity or
Excess Energy directly resulting from such Bayway Refinery
Outage, up to the amount of such Net Revenues or Losses
attributable to a quantity of Electricity, in kWh, equal to
the difference between (x) Buyer's actual average load, in
kWh, during the Base Month and (y) Buyer's actual average
load, in kWh, during such Month, until Buyer has been credited
with an amount sufficient to reduce Buyer's average cost per
kWh of the Fixed Charges plus the Back-up Demand Charge
Component to the average cost per kWh of such charges during
the Base Month; then
(iii) Third, each Month Seller shall be allocated
twenty percent (20%) and Buyer shall be allocated eighty
percent (80%) of all Net Revenues or Losses until Buyer has
been credited with an amount equal to
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the increase in the Fixed Facility Charge Component for that
Month arising out of an extension or delay set forth in
Section 4.2C(i).
(iv) Fourth, Seller shall be allocated twenty
percent (20%) and Buyer shall be allocated eighty percent
(80%) of all Net Revenues or Losses until Buyer has been
credited with an amount equal to the Heat Rate Credit; then
(v) Fifth, any remaining Net Revenues or Losses
shall be allocated for the following events, in the order in
which such events occurred, beginning with the earliest event:
(1) In the event the Facility continues to
operate and sell Electricity after a closure of the
Bayway Refinery pursuant to Section 5.8, Seller
shall be allocated twenty percent (20%) and Buyer
shall be allocated eighty percent (80%) of all Net
Revenues or Losses arising from the sale of
Electricity to Third Parties in an amount up to the
Fixed Charges, and any Back-up Demand Charge
Component (to the extent remaining after any
mitigation of such component by Seller);
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(2) In the event Buyer has paid for
replacements, improvements or additions required
solely due to a Change in Law pursuant to Section
5.10A(i), Seller shall be allocated twenty percent
(20%) and Buyer shall be allocated eighty percent
(80%) of Net Revenues or Losses until such time that
Buyer has recovered the amount of such payments
(without interest);
then
(vi) All Net Revenues or Losses remaining after any
such allocations pursuant to Section 7.2A(i), 7.2A(ii),
7.2A(iii), 7.2A(iv) or 7.2A(v) shall be shared equally by the
Parties.
(vii) To the extent in any Month aggregate Net
Revenues or Losses are negative, such aggregate Net Revenues
or Losses shall be an additional cost to be shared equally by
Buyer and Seller.
7.3 Minimum Allocation to Seller. Notwithstanding any allocations made
pursuant to Section 7.2, except with respect to the allocation made pursuant to
Section 7.2A(ii), in no event shall Seller receive less than twenty percent
(20%) of the sum in any Month of all Net Revenues or Losses.
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7.4 Allocation of Infineum Net Revenues or Losses and Power
Augmentation Revenues. In each Month, all Infineum Net Revenues or Losses and
all Power Augmentation Revenues shall be shared equally among Buyer and Seller.
7.5 Distribution of Buyer's Share of Net Revenues or Losses, Infineum
Net Revenues or Losses and Power Augmentation Revenues. Buyer's share of any
allocation of Net Revenues or Losses, Infineum Net Revenues or Losses and Power
Augmentation Revenues shall be distributed to Buyer as a credit to the amounts
due on Seller's invoice for such Month, or in the event Buyer does not owe
Seller an equivalent or greater amount under this Agreement, as a payment to
Buyer for such Month.
7.6 Allocation and Reconciliation of Net Back-up Energy
Costs.
A. Not later than the first Month after the end of a Commercial
Operations Year, Buyer's portion of any Net Back-up Energy Costs during the
applicable Reconciliation Period shall be determined and reconciled to the
amounts that Buyer has paid Seller during such Reconciliation Period as the
Eight Percent Proxy Component, such that Buyer shall pay the Eight Percent
Component for such Reconciliation Period and Seller shall pay for all other Net
Back-up Energy Costs during such Reconciliation
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Period. An example of such reconciliation, using a pro forma estimate of the
performance of the Facility, is attached hereto as Exhibit M.
B. Seller shall make an appropriate adjustment on its invoice
to Buyer for the first Month after the end of each Commercial Operation Year
reflecting either a credit to the amounts due on Seller's invoice for such
Month, or an additional charge (as the case may be) sufficient to reflect the
reconciliation and allocation pursuant to Section 7.6A, without interest. In the
event Buyer does not owe Seller an equivalent or greater amount under this
Agreement in such Month, Seller shall make a payment to Buyer.
ARTICLE 8. METERING
8.1 Measurement Location. The Metering Points for
Electricity shall be as set forth in Exhibit A.
8.2 Electricity Measuring Equipment and Stations.
A. Seller. Seller shall (i) install, own, operate
and maintain Electricity measuring and metering stations and all measuring
equipment sufficient to permit an accurate determination of the quantity,
quality and time of day of
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delivery of Electricity to Buyer; and (ii) exercise reasonable care in the
maintenance and operation of metering equipment so as to assure an accurate
determination of the quantity and quality of Electricity delivered to Buyer.
Seller's metering equipment shall be used to determine the billing hereunder and
shall be sealed. Such seals shall be broken only by Seller, in the presence of a
representative of Buyer, or by an independent party unrelated, directly or
indirectly, to either Party and mutually agreeable to the Parties (the
"Independent Party") and only when the metering equipment is to be inspected,
tested or adjusted as described in Section 8.4. Buyer shall provide Seller or
the Independent Party, as the case may be, access to the metering equipment at
all reasonable times for the purposes of inspecting, testing and adjusting the
same, provided that such access shall not interfere with Buyer's normal business
operations. In the event that Seller's metering equipment fails to register
during any period of time, and except as provided in Section 8.5, Seller shall
determine the Electricity quantities from Buyer's metering equipment as set
forth in Section 8.2B or from production records if no such metering equipment
is available. If an improved method or technique is developed for the
measurement of Electricity, such new method or technique shall be substituted at
Buyer's expense when in the reasonable opinion of Buyer, employing such new
method or technique is more reliable and accurate.
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B. Buyer. Buyer may own, operate and maintain metering
equipment at its sole expense, provided that such metering equipment shall be
operated and maintained in a manner that does not interfere with the Facility or
Seller's Electricity metering equipment. Should Buyer so elect and should any
metering equipment installed by Seller fail to register during any period of
time, Buyer's metering equipment shall be used to determine the amount of
Electricity delivered to Buyer during such period in lieu of Seller's estimates
thereof to the extent Buyer's meters have been tested and maintained in
accordance with Section 8.4. Buyer shall provide access for Seller and, if
applicable, the Independent Party, to the metering equipment at all reasonable
times for the purposes of witnessing, testing and adjusting the same, provided
that such access shall not interfere with Buyer's normal business operations.
C. Metering Infineum's Use of Electricity.
(i) Not later than 5:00 p.m. on the first
Business Day following the conclusion of any Month during the Term, Buyer shall
in good faith provide Seller with Infineum's consumption of Electricity during
the immediately preceding Month ("Infineum's Load"). Buyer shall use its
reasonable commercial efforts to ensure an accurate determination of Infineum's
Load. Buyer's existing meters shall be used for all quantity
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measurements with respect to Infineum's Load for purposes of this Agreement.
Seller shall have the right to witness and audit any measuring of or testing
performed on Buyer's meters used to determine Infineum's Load.
(ii) Buyer shall indemnify and hold Seller
harmless from any claim that Infineum has or may make or have in the future
against Seller to the extent that such claim arises from a dispute as to the
accurate determination of the quantity of Electricity, back-up capacity or
back-up energy delivered or provided to Buyer or Infineum, unless otherwise
specifically provided for in an agreement between Seller and Infineum.
8.3 Fuel Measuring Equipment and Stations. Seller shall (i) install,
own, operate and maintain Fuel measuring and metering stations and all measuring
equipment sufficient to permit an accurate determination of the Fuel Component;
and (ii) exercise reasonable care in the maintenance and operation of such
metering equipment so as to assure an accurate determination of the Fuel
Component, including a separate determination of the quantity of distillate used
by the Facility. Seller's metering equipment shall be used to determine the
billing hereunder and shall be sealed. Such seals shall be broken only by
Seller, in the presence of a representative of Buyer, or by an Independent Party
selected by Seller and Buyer and only when the metering
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equipment is to be inspected, tested or adjusted as described in Section 8.4.
Buyer shall provide Seller or the Independent Party, as the case may be, access
to the metering equipment at all reasonable times for the purposes of
inspecting, testing and adjusting the same, provided that such access shall not
interfere with Buyer's normal business operations. In the event that Seller's
metering equipment fails to register during any period of time, and except as
provided in Section 8.5, Seller shall seek to determine the Fuel quantities from
the production records. Buyer may own, operate and maintain metering equipment
at its sole expense, provided that such metering equipment shall be operated and
maintained in a manner that does not interfere with the Facility or Seller's
Fuel metering equipment.
8.4 Testing.
A. General. The accuracy of any metering equipment to be used
for purposes of measuring Electricity or Fuel shall be tested and verified at
least annually. If the Party not responsible for maintaining such metering
equipment requests a verification test to be made, such test shall be at such
Party's expense if the metering equipment proves to be accurate within a
tolerance of one percent (1%). If errors greater than such tolerances are
discovered, the test shall be at the expense of the Party responsible for
maintaining such metering equipment.
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B. Cooperation. If either Party notifies the other Party that
it desires a test of its own or of the other Party's metering equipment, the
Parties shall cooperate to secure a prompt verification of the accuracy of such
equipment.
C. Notice and Right to Witness. Each Party shall be given at
least five (5) days notice prior to the test of any metering equipment. Each
Party shall have the right to have a representative present at any time that any
metering equipment is to be tested; provided, however, that a Party's failure to
have a representative present at the test shall not affect the validity of the
test so long as the notice required under the preceding sentence shall have been
given.
8.5 Corrections. If, upon testing, any metering equipment is found to
be in error by not more than one percent (1)% tolerance when reading the average
operating range over the past year, then previous recordings of such equipment
shall be considered accurate, but such equipment shall be promptly adjusted by
the Independent Party to record correctly. If, upon testing, any metering
equipment shall be found to be inaccurate by more than such tolerance, then such
equipment shall be promptly adjusted and retroactive billing adjustments for
such errors shall be made for (i) the actual period during which inaccurate
measurements were made, if that period can be
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reasonably determined; or (ii) if the period cannot be reasonably determined,
one-half (1/2) of the period from the date of the last previous test of the
metering equipment, but not to exceed six (6) Months.
8.6 Maintenance and Records.
A. Maintenance. Each Party shall have the right to have a
representative present whenever the other Party or the Independent Party, as
applicable, cleans, changes, repairs, inspects, tests, calibrates, or adjusts
any metering equipment or any equipment used in checking measurements. Each
Party shall give not less than five (5) days notice to the other Party in
advance of taking any of such actions, unless providing such notice is not
feasible as a result of the need for immediate repairs in which case prompt
notice shall be given.
B. Records. The records from the test of any metering
equipment shall remain the property of the Party at whose expense the testing
occurred, but, upon request, each Party shall submit to the other its records
and charts (or, at its option, copies thereof), together with calculations
therefrom, for inspection and copying, subject to return within ten (10) days
after receipt thereof.
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ARTICLE 9. INVOICES AND PAYMENT
9.1 Billing. There shall be a single Monthly invoice. The Fixed Charges
and Back-up Demand Charge Component shall be paid in advance on the third (3rd)
Business Day of each Month during the Term. Seller shall render to Buyer (by
regular mail, facsimile or other acceptable means pursuant to Section 16.1) for
each Month during the Term, an invoice setting forth the total amount due Seller
for the Fixed Charges, Back-up Demand Charge Component, Fuel Component, Variable
O&M Component, Eight Percent Proxy Component, the Back-up Energy Component and
any other charges due Seller or credits due Buyer pursuant to this Agreement as
well as a summary of the allocation of any Net Revenues or Losses, Infineum Net
Revenues or Losses, Power Augmentation Revenues and back-up Electricity costs
and credits pursuant to Article 7, and for any other amounts due under this
Agreement. If Seller from time to time does not know the actual amount of the
Fuel Component, Back-up Energy Component, Variable O&M Component or any other
charge due for a particular Month when Seller prepares an invoice pursuant to
this Section 9.1, Seller may estimate such cost using all available data. To the
extent that an estimate is provided and used for purposes of determining the
Fuel Component, Variable O&M Component, Back-up Energy Component or any other
charge, Seller shall provide Buyer a statement of the actual amount of such
charge as soon as
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available to Seller, and Seller shall make the appropriate adjustment in the
following Month's invoice. A sample invoice is attached as Exhibit N.
9.2 Payment. On or before fifteen (15) days after receipt of Seller's
invoice, or if such day is not a Business Day, the immediately following
Business Day, Buyer shall render by wire transfer the amount set forth on such
invoice to the payment address provided in Section 16.1. Overdue payments shall
accrue interest from and including the due date to, but excluding, the date of
payment at the Interest Rate. If Buyer in good faith disputes an invoice, Buyer
shall provide a written explanation of Buyer's good faith basis for the dispute
not later than thirty (30) days of the due date for amounts, and Buyer shall pay
the entire invoice no later than the due date. Notwithstanding the foregoing,
however, Buyer shall retain the right to dispute invoices after payment thereof
for a period of three (3) years after the date on which the invoice was paid. If
any amount disputed by Buyer is determined to be due to Buyer, it shall be paid
to Buyer by Seller within ten (10) days of such determination, along with
interest accrued at the Interest Rate from the date initial payment of such
disputed amount was received by Seller until the date paid to Buyer.
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9.3 Annual Reconciliation of Steam Btu Credit and Related Calculations.
Not later than the first Month after the end of a Commercial Operations Year,
the Steam Btu Credit used in the calculation of the Steam Credit, Steam Fuel
Price Credit and thereby the Fuel Component each Month during such Commercial
Operations Year shall be recalculated taking into account the actual average
annual hourly steam purchases by Bayway from Cogen for such Commercial
Operations Year. Seller shall make an appropriate adjustment on its invoice to
Buyer for the first Month after the end of each Commercial Operations Year
reflecting either a credit to the amounts due on Seller's invoice for such
Month, or an additional charge (as the case may be) sufficient to reflect the
difference between (i) the sum of the amounts paid by Buyer for the Fuel
Component during the prior Commercial Operations Year and (ii) the Fuel
Component for the prior Commercial Operations Year recalculated (without
interest) to take into account the recalculation of the Steam Btu Credit as
contemplated above. In the event Buyer does not owe Seller an equivalent or
greater amount under this Agreement in such Month, Seller shall make a payment
to Buyer.
9.4 Adjustments. Seller shall promptly prepare and deliver to Buyer an
invoice setting forth any adjustments for discrepancies in billing identified
through meter verifications pursuant to Article 8 or for any other reason that
would require
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immediate reimbursement of billed amounts to Buyer or additional payments by
Buyer to Seller hereunder, along with interest accrued at the Interest Rate from
the date such payments or reimbursements should have been paid in ordinary
course to Buyer or Seller, as the case may be.
9.5 Audit Rights. For a period of three (3) years after the rendering
of any invoice furnished to Buyer pursuant to this Article 9, Buyer may obtain
reasonable access to the books, records, files and other data in the possession
of Seller of (i) the Facility (including matters relating to Sections 4.1 and
6.6) and (ii) the Existing Plant (whether kept by Seller or its Affiliates) and
(iii) the Additional Generation Facility, to the extent necessary to determine,
verify, analyze or confirm the reasonableness and necessity of the amounts
charged and credited pursuant to this Agreement, or to compare the costs
incurred by the Existing Plant or the Additional Generation Facility to those
incurred by the Facility. Seller shall make reasonable efforts to include in all
cost-plus or cost pass-through type agreements having an aggregate value in
excess of one hundred thousand ($100,000) between Seller and Seller's
contractors or subcontractors a provision providing for Buyer's right to audit
such contractors or subcontractors with respect to their charges to Seller that
are paid by Buyer.
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9.6 Books and Records. Each Party shall maintain complete and accurate
records concerning the amounts charged and credited pursuant to this Agreement
for a period of three (3) years from the invoices therefrom and shall make such
records available to the other Party in accordance with the provisions of
Section 9.5.
ARTICLE 10. TAXES
Included in the payments by Buyer pursuant to Section 6.1, Buyer shall
pay Seller for all Taxes arising with respect to the Facility, Fuel and the sale
of Electricity to Buyer pursuant to this Agreement. Buyer shall indemnify,
defend and hold harmless Seller from any Claims for such Taxes. Each Party shall
use reasonable efforts to administer this Agreement and implement the provisions
in accordance with the intent to minimize Taxes, and shall use reasonable
efforts to obtain and cooperate with the other Party in obtaining any exemption
from or reduction of any Tax.
ARTICLE 11. DEFAULT AND REMEDIES
11.1 Seller Default. The occurrence of any of the following
events shall constitute a "Default" by Seller (it being understood by the
Parties that a Default by Seller hereunder shall not constitute a default under
the Existing Ground Lease
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Agreement or the Steam Agreement unless the facts constituting a Default
hereunder separately constitute a default thereunder):
A. Seller fails to pay any amounts due to Buyer hereunder and
such breach continues for a period of fifteen (15) days after notice thereof
shall have been received by Seller from Buyer.
B. Seller fails to materially perform any obligation to Buyer,
or breaches a material term or condition of this Agreement, including a breach
of its representations and warranties or covenants hereunder, and such breach
continues for a period of sixty (60) days after notice thereof has been received
by Seller from Buyer; provided that if such breach is not reasonably capable of
being cured within such sixty (60) day period and provided that Seller
reasonably commences to cure such breach within such sixty (60) day period, such
sixty (60) day period shall be extended for such additional period, but in no
event longer than eighteen (18) Months, as is reasonably necessary to remedy
such failure if and for so long as Seller is diligently continuing efforts to
pursue a cure for such breach.
C. Seller or Seller's Guarantor, if any: (i) makes an
assignment or any general arrangement for the benefit of creditors; (ii) files a
petition or otherwise commences,
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authorizes or acquiesces in the commencement of a proceeding or case under any
bankruptcy or similar law for the protection of creditors, or such petition is
filed against it and such proceeding remains undismissed for ninety (90) days;
(iii) otherwise becomes bankrupt or insolvent (however evidenced); or (iv)
becomes unable to pay its debts as they fall due.
D. Seller's Guarantee, if any, ceases to be in full force and
effect in accordance with its terms.
E. Any sale, assignment or other transfer in violation of
Article 15.
11.2 Buyer Default. The occurrence of any of the following
events shall constitute a "Default" by Buyer (it being understood by the Parties
that a Default by Buyer hereunder shall not constitute a default under the
Existing Ground Lease Agreement or the Steam Agreement unless the facts
constituting a Default hereunder separately constitute a default thereunder):
A. Buyer fails to pay any amounts due to Seller hereunder and
such breach continues for a period of fifteen (15) days after written notice
thereof has been received by Buyer from Seller.
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B. Buyer fails to materially perform any obligation to Seller,
or breaches a material term or condition of this Agreement, including a breach
of its representations and warranties or covenants hereunder, and such breach
continues for a period of sixty (60) days after notice thereof has been received
by Buyer from Seller; provided that if such breach is not reasonably capable of
being cured within such sixty (60) day period and provided that Buyer reasonably
commences to cure such breach within such sixty (60) day period, such sixty (60)
day period shall be extended for such additional period, but in no event longer
than eighteen (18) Months, as is reasonably necessary to remedy such failure if
and for so long as Buyer is diligently continuing efforts to pursue a cure for
such breach.
C. Buyer or Buyer's Guarantor: (i) makes an assignment or any
general arrangement for the benefit of creditors; (ii) files a petition or
otherwise commences, authorizes or acquiesces in the commencement of a
proceeding or case under any bankruptcy or similar law for the protection of
creditors, or such petition is filed against it and such proceeding remains
undismissed for ninety (90) days; (iii) otherwise becomes bankrupt or insolvent
(however evidenced); or (iv) becomes unable to pay its debts as they fall due.
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D. The Parent Guaranty ceases to be in full force and effect
in accordance with its terms.
E. A default by Bayway pursuant to the Existing Ground Lease
Agreement that in any way materially affects Seller's ability to perform its
obligations under this Agreement.
11.3 Remedies. If a Default has occurred and is continuing, the Party,
if any, that is not in Default may, subject to Article 14, take any action at
law or in equity that may be available to it to enforce the payment of any
damages or the performance of all obligations of the Party in Default hereunder.
Notwithstanding the foregoing, Buyer shall have no right to terminate this
Agreement unless Buyer shall have provided all Lenders and Existing Plant
Lenders notice of a breach pursuant to Section 11.1. Seller and any Lender or
Existing Plant Lender shall each have no less than the specified amount of time
to cure such breach, which time shall expire on the later of the dates available
for such cure to Seller, any Lender or any Existing Plant Lender.
11.4 Damages. Upon the occurrence of a Default hereunder, the aggrieved
Party may elect to terminate this Agreement by providing notice thereof to the
defaulting Party and shall be
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entitled to seek damages as available at law except as may be limited pursuant
to Section 11.5.
11.5 Limitation on Liability for Damages. The Parties confirm that the
express remedies and measures of damages provided in this Agreement satisfy the
essential purposes hereof. For breach of any provision for which an express
remedy or measure of damages is provided, such express remedy or measure of
damages shall be the sole and exclusive remedy, the obligor's liability shall be
limited as set forth in such provision and all other remedies or damages at law
or in equity are waived. If no remedy or measure of damages is expressly herein
provided, the obligor's liability shall be limited to direct actual damages
only, such direct actual damages shall be the sole and exclusive remedy and all
other remedies or damages at law or in equity are waived, except that either
Party may seek specific performance of any provision of this Agreement,
including such temporary injunctive relief as may be available at law or equity.
Neither Party shall be liable for consequential, incidental, punitive, exemplary
or indirect damages, lost profits or other business interruption damages, by
statute, in tort or contract, under any indemnity provision or otherwise. It is
the intent of the Parties that the limitations herein imposed on remedies and
the measure of damages be without regard to the cause or causes related thereto,
including the negligence of any Party, whether
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such negligence be sole, joint or concurrent, or active or passive. To the
extent any damages required to be paid hereunder are liquidated, the Parties
acknowledge that the damages are difficult or impossible to determine, that
otherwise obtaining an adequate remedy is inconvenient and that the liquidated
damages constitute a reasonable approximation of the harm or loss.
11.6 Duty to Mitigate. Each Party shall use commercially reasonable
efforts to mitigate the incurrence of damages.
ARTICLE 12. FORCE MAJEURE
12.1 Force Majeure. If a Claiming Party is rendered wholly or partly
unable to perform its obligations under this Agreement because of a Force
Majeure event, that Party shall be excused from whatever performance is affected
by such Force Majeure event but only to the extent so affected, provided that:
(i) the Claiming Party, within two (2) days after the occurrence of the Force
Majeure event, gives the other Party notice describing the particulars of the
occurrence and its estimated duration; (ii) the suspension of performance is of
no greater scope and of no longer duration than is required by the Force Majeure
event; and (iii) the Claiming Party uses commercially reasonable efforts to
remedy its inability to perform, to secure substitute suppliers or services and
to resume its full performance under
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this Agreement; provided, however, that the Claiming Party's obligation to
remedy its inability to perform shall not require the settlement of any strike,
walkout, lockout or other labor dispute on terms that, in the sole judgment of
the Party involved in said dispute, are contrary to its best interest.
Notwithstanding anything to the contrary contained in this Agreement, (i) in no
event shall Buyer be excused by reason of Force Majeure from its obligation to
pay any amounts due under this Agreement, including all Fixed Charges and the
Back-up Demand Charge Component, the Eight Percent Proxy Component, any back-up
energy expenses that are the responsibility of Buyer and any costs incurred by
Seller pursuant to any then existing contractual or other binding obligation
related to the Facility that would otherwise be the responsibility of Buyer
pursuant to this Agreement and (ii) in no event shall Seller be excused by
reason of Facility Force Majeure from its obligation to purchase back-up energy
pursuant to this Agreement.
12.2 Force Majeure Defined. "Force Majeure" means any event beyond the
reasonable control of the Party affected thereby that adversely affects the
ability of such Party to perform any obligation hereunder (other than failure to
pay money when due), including but not limited to the following: acts of God,
war or foreign enemy; unusually severe weather conditions; flood; earthquake;
storm; hurricane; epidemics; lightning; fire;
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drought; explosion; riot; civil disturbance; strikes, lockouts or similar labor
interruptions or labor disputes; sabotage; an event of force majeure occurring
with respect to, or a suspension, curtailment or service interruption of, any
Third Party supplier of Electricity, gas, water or waste water, or any Third
Party Electricity, gas, water or waste water transmission or distribution
provider (including any independent system operator or equivalent, and any
interstate natural gas pipeline or any local Electricity, gas or water
distribution company or provider of waste water); arrests and restraints of
rules and people; any action of a court or a binding order of any Governmental
Authority; inability after diligent application to obtain or maintain required
permits, zoning or other required approvals from any Governmental Authority or
other Third Party whose consent is required as a condition to a Party's
performance hereunder; the surface or subsurface presence at the site of
pollution, Hazardous Materials or contamination, which shall prevent, require a
change in, increase the cost of or otherwise adversely affect the design,
construction or operation and maintenance of, or the completion schedule for, or
the occurring of the In-Service Date of, the Facility; failure of Third Party
facilities or Third Party major equipment breakdown; failure of any contractor,
subcontractor or supplier to furnish labor, services, materials or equipment on
the dates agreed to if such failure is caused by a Force Majeure; a change in
applicable law;
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the failure of any public agency or Governmental Authority or any utility having
jurisdiction of the Existing Site to maintain utilities, services, water and
sewer lines and power transmission lines; and any circumstance that would in the
reasonable opinion of such Party endanger persons or property. A failure of
equipment or machinery controlled or operated by a Party (whether leased or
owned) shall not be considered Force Majeure irrespective of whether such
equipment or machinery has been designed, manufactured, installed, or maintained
by the Party or a Third Party unless such failure was due to a Force Majeure.
ARTICLE 13. INDEMNIFICATION
13.1 Indemnification for Claims. Each Party shall defend, indemnify and
hold harmless the other Party and its officers, directors, employees,
contractors, subcontractors, Affiliates and agents ("Related Parties") from and
against any and all Third Party liabilities, claims, injuries (including death
resulting therefrom), property damage, fines, penalties or assessments by any
public agency, insofar as not prohibited by law, costs or expenses (including
costs of defense, settlement and reasonable attorneys' fees) (collectively,
"Claims") to the extent caused by the negligence or willful misconduct of the
indemnifying Party or its Related Parties in connection with performance under
this Agreement. The term "liabilities" in the preceding sentence, and
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the indemnification obligation, include any strict liability and other liability
without fault, however named, asserted against the Party indemnified.
13.2 Notice. Each Party hereto shall promptly furnish the other Party
with notification (but in no event later than ten (10) days prior to the time
any response is required by law) after such Party becomes aware of any event or
circumstance which might give rise to such indemnification.
13.3 Defense. The indemnifying Party shall have the right to defend any
suit asserting a Claim covered by this indemnity and shall pay all costs and
expenses (including reasonable attorney's fees and expenses) that may be
incurred in enforcing this indemnity. The indemnified Party may, at its own
expense, retain separate counsel and participate in the defense of any such suit
or action. The indemnifying Party shall not compromise or settle a Claim
hereunder without the prior written consent of the indemnified Party; provided,
however, that in the event such consent shall be withheld, then the liability of
the indemnifying Party shall be limited to the aggregate of the amount of the
proposed compromise or settlement, the amount of counsel fees and expenses
outstanding at the time such consent shall have been withheld, and the amount of
any outstanding claim against which indemnification applies and which is not
covered by the proposed
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compromise or settlement (together with all costs and expenses associated with
such outstanding Claim). Thereafter, the Party withholding such consent shall
hold harmless and reimburse the indemnifying Party, upon demand, for the amount
of any additional liability, counsel fees and expenses incurred by the
indemnifying Party over and above the amounts described above after the time
such consent shall have been withheld. To the extent one Party disputes its
obligation to indemnify the other Party, it shall not be considered a breach of
this Agreement for such Party to fail to perform under this Section 13.3 until
such time as such Party is determined to have the obligation to indemnify under
Section 13.1.
13.4 Survival of Indemnifications. The provisions of this
Article shall survive the expiration or earlier termination of
this Agreement.
ARTICLE 14. DISPUTE RESOLUTION
14.1 Dispute Resolution.
A. The Parties agree to work in good faith to resolve
any claim, demand, cause of action, dispute or controversy arising out of or
relating to this Agreement. The Parties shall
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refer any such dispute to representatives of each Party's senior management for
resolution.
B. If the representatives of each Party's senior management
are unable to resolve such dispute within ten (10) Business Days after such
referral, the Parties shall have the right to exercise any and all remedies
available to them at law or in equity, except with respect to those disputes
subject to Section 14.2 below.
14.2 Binding Arbitration. Any dispute not resolved pursuant to Section
14.1A above that arises out of or relates to Sections 4.1 or 6.2 of this
Agreement shall be subject to binding arbitration in accordance with the terms
of this Section 14.2.
A. Notice; Selection of Arbitrators. Within thirty (30) days after the
delivery by a Party to the other Party of any notice of a dispute under Sections
4.1 or 6.2, Seller and Buyer shall endeavor to agree upon an appropriately
qualified, neutral Third Party arbitrator to resolve such dispute. If Seller and
Buyer cannot agree upon a single arbitrator within such thirty (30) day period,
then within fifteen (15) days after the occurrence of the Parties' failure to
agree, each shall appoint an arbitrator, and the two arbitrators shall, within
fifteen (15) days after both have been appointed, designate a third
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appropriately qualified neutral arbitrator. While the third arbitrator shall be
neutral, the two Party-appointed arbitrators are not required to be neutral, and
it shall not be grounds for removal of either of the two Party-appointed
arbitrators or for vacating the arbitrators' award that either of such
arbitrators has past or present relationships with the Party that appointed such
arbitrator. Either Party may seek enforcement in any court of competent
jurisdiction in New York, New York of the obligation of the other Party to
appoint an arbitrator and otherwise facilitate the resolution of disputes in
accordance with this Article 14. In addition, in the event the Party-appointed
arbitrators cannot agree upon a third arbitrator, either Party may seek judicial
appointment of such arbitrator in any such court of competent jurisdiction.
B. Qualifications of Arbitrators. Each arbitrator appointed
under this Article 14 shall be a business person with expertise in the electric
generation industry. The single appropriately qualified, neutral Third Party
arbitrator or the third appropriately qualified neutral arbitrator referred to
Section 14.2A above shall be a person who has over eight years professional
experience in electric industry related matters and who has not previously been
employed by either Party and does not have a direct or indirect interest in
either Party or the subject matter of the arbitration.
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C. Procedures. Arbitration shall be conducted in accordance
with the rules of arbitration of the Federal Arbitration Act and, to the extent
an issue is not addressed by the federal law on arbitration, by the Commercial
Arbitration Rules of the American Arbitration Association. The validity,
construction, and interpretation of this agreement to arbitrate, and all
procedural aspects of the arbitration conducted pursuant hereto shall be decided
by the arbitrators. In deciding the substance of the Parties' disputes, the
arbitrators shall refer to the governing law. The arbitration proceeding shall
be conducted in New York, New York. To the fullest extent permitted by law, any
arbitration proceeding and the arbitrators award shall be maintained in
confidence by the Parties. Each Party shall pay its own costs and expenses with
respect to any arbitration hereunder and the Parties shall share equally in the
costs of the third arbitrator.
D. Award. Within thirty (30) days after the arbitrator(s) have
been selected, each Party shall submit to the arbitrator(s) its arguments with
respect to, and a proposal for the resolution of, the matter in dispute. The
arbitrator(s) shall then select as an appropriate resolution, given the nature
and circumstances of the dispute, the most reasonable of either (x) Seller's
proposed resolution or (y) Buyer's proposed resolution; the arbitrator(s) shall
have no authority to
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establish or impose any resolution other than those proposed by Seller or Buyer.
The arbitrators shall have no authority to award treble, consequential,
exemplary or punitive damages of any type under any circumstances whether or not
such damages may be available under state or federal law, or under the Federal
Arbitration Act, or under the Commercial Arbitration Rules of the American
Arbitration Association, and the Parties hereby waive any right they might
otherwise have to recover any such damages. The arbitrator(s) shall endeavor to
complete any arbitration within ninety (90) days after the matter has first been
submitted to it or them under this Section 14.2.
E. Determinations Binding. Judgment may be entered on any
determination by the arbitrator(s) as to an appropriate resolution that is
within the authority of the arbitrator(s), and such determination shall be
binding on Seller and Buyer and shall be enforceable in any court of law having
jurisdiction over Seller and Buyer, as appropriate. Any resolution determined by
the arbitrator(s) shall be the exclusive remedy available to each Party with
respect to the matter submitted to arbitration.
14.3 Burden of Proof. In the event that Seller commences any litigation
or arbitration between Buyer and Seller regarding the costs and expenses
incurred by Seller in constructing, operating, and maintaining the Facility
which have been paid or
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are due and payable to Third Parties by Seller and have not been reimbursed to
Seller by Buyer pursuant to this Agreement, Buyer shall bear the burden of
establishing that Seller is not entitled to reimbursement of such costs and
expenses by Buyer in accordance with the terms and conditions of this Agreement.
ARTICLE 15. ASSIGNMENT
15.1 General. Except as provided in this Article 15, neither Party may
assign or otherwise transfer this Agreement or any of its rights hereunder to
any other Person without the express written consent of the other Party, which
consent shall not be unreasonably withheld. Consent shall be deemed given if the
other Party does not respond within five (5) Business Days of being notified of
a Party's intention to make such an assignment.
15.2 Permitted Assignments. Either Party may assign this Agreement to
an Affiliate.
15.3 Sale of Bayway Refinery. If the Bayway Refinery is sold, assigned
or otherwise transferred in whole or in part to any other Person, simultaneously
with such sale, Buyer shall assign this Agreement to such other Person.
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<PAGE> 146
15.4 Assignment Conditions. In the event of an assignment pursuant to
Section 15.1, 15.2, or 15.3 of this Agreement,
(a) the assigning Party and the assignee shall execute and deliver to
the other Party an assignment and assumption agreement, in the form attached
hereto as Exhibit O, whereby:
(i) such assigning Party shall unconditionally assign this
Agreement to the assignee, accompanied by an opinion of counsel to such
assigning Party addressed and reasonably acceptable to such other Party
to the effect that such assignment has been duly authorized by such
assigning Party and constitutes the legal, valid and binding obligation
of such assigning Party, enforceable against such assigning Party in
accordance with its terms; and
(ii) the assignee shall unconditionally assume all of the
assigning Party's obligations under this Agreement and agree to be
bound by all terms and conditions of this Agreement, accompanied by an
opinion of counsel to such assignee addressed and reasonably acceptable
to the non-assigning Party to the effect that such assignment and
assumption agreement has been duly authorized by such assignee and
constitutes the legal, valid and binding obligation of such assignee,
enforceable against such assignee in accordance with its terms,
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<PAGE> 147
(b) except as provided for in section 15.5 of this
Agreement,
(i) the assigning Party shall remain and continue to be liable
to the non assigning Party for all obligations of the Seller or Buyer
(as the case may be) arising pursuant to this Agreement before the date
of such assignment,
(ii) the assigning Party shall remain and be jointly and
severally liable, along with the assignee, for all obligations of the
Seller or Buyer (as the case may be) arising pursuant to this Agreement
on and after the date of such assignment, and
(iii) any Guarantor of the obligations of the Seller or Buyer
(as the case may be) shall continue to guarantee all obligations of the
Seller or Buyer (as the case may be) arising pursuant to this Agreement
before, on, and after the date of such assignment, and
(c) the assigning Party shall furnish to the non-assigning Party as
soon as practicable, but in no event later than ten (10) days after the
effective date of such assignment, all information necessary for the
non-assigning Party to make payments and furnish notice to the assignee
following the effective date of the assignment.
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<PAGE> 148
15.5 Survival of Guarantees; Substitute Guarantors.
A. If this Agreement is assigned by Buyer pursuant to the
terms and conditions of this Article 15, including if the Bayway Refinery is
sold or otherwise transferred in whole or in part to any other Person, the
Parent Guaranty shall remain in full force and effect with regard to all
obligations of Buyer arising under this Agreement before, on and after such
assignment, sale or transfer unless and until Guarantor provides for a
substitute Guarantor (the "Substitute Guarantor") with respect to its guaranty
of the obligations of Buyer hereunder, which Substitute Guarantor must meet all
of the following conditions, namely that such Substitute Guarantor shall:
(i) execute and deliver to Seller a new guaranty
guaranteeing the obligations of the assignee (the "Substitute
Guaranty") substantially in the form of the Parent Guaranty,
accompanied by an opinion of counsel to the Substitute
Guarantor addressed and reasonably acceptable to Seller to the
effect that the Substitute Guaranty has been duly authorized
by such Substitute Guarantor and constitutes the legal, valid
and binding obligation of such Substitute Guarantor,
enforceable against such Substitute Guarantor in accordance
with its terms (subject to limitations on the enforcement
thereof by bankruptcy, insolvency and other similar
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<PAGE> 149
laws affecting the rights of creditors generally and to
the application of principles of equity), and
(ii) provide evidence satisfactory to Seller that
the Substitute Guarantor's then (x) long-term debt is rated by
Standard & Poor's Corporation at BBB or above or by Moody's
Investors Services at Baa2 or above, and (y) net assets,
determined in accordance with Generally Accepted Accounting
Principles, is not less than two billion dollars
($2,000,000,000).
Guarantor shall be released of its Parent Guaranty with regard to obligations
arising after the effective date of the Substitute Guaranty and the assigning
Party shall be released of its obligations under this Agreement arising after
the effective date of the Substitute Guaranty upon full compliance with the
provisions of Section 15.4, and this Section 15.5A. In the case in which an
assignee of Buyer meets the requirements of Section 15.5A(ii) to be a Substitute
Guarantor, and the provisions of Section 15.4 have been fully complied with, any
Guarantor or Substitute Guarantor and the assigning Party shall be released with
regard to their respective obligations under this Agreement or any Parent
Guaranty or Substitute Guaranty arising after the date of full compliance with
the provisions of Section 15.4.
144
<PAGE> 150
B. If this Agreement is assigned by the Seller pursuant to the
terms and conditions of this Section 15, such assigning Party shall remain
liable to the Buyer as provided for in Section 15.4 of this Agreement unless and
until either of the two following conditions occurs:
(i) Such assigning Party and assignee have fully
complied with the provisions of Section 15.4 of this
Agreement, and the assigning Party has provided evidence
satisfactory to Buyer that the assignee's then (x) long-term
debt is rated by Standard & Poor's Corporation at BBB or above
or by Moody's Investors Services at Baa2 or above, and (y) net
assets, determined in accordance with Generally Accepted
Accounting Principles, is not less than two billion dollars
($2,000,000,000); or
(ii) such assigning Party and assignee have fully
complied with the provisions of Section 15.4 of this
Agreement, and the assigning Party provides for a guarantor of
the obligations of Seller hereunder (the "Seller Guarantor"),
which Seller Guarantor must meet all of the following
conditions: (a) the Seller Guarantor shall execute and deliver
to Buyer a guaranty guaranteeing the obligations of the
assignee (the "Seller Guaranty") substantially in the form of
the Parent Guaranty, accompanied by an opinion of counsel
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<PAGE> 151
to the Seller Guarantor addressed and reasonably acceptable to
Buyer to the effect that the Seller Guaranty has been duly
authorized by the Seller Guarantor and constitutes the legal,
valid and binding obligation of the Seller Guarantor,
enforceable against the Seller Guarantor in accordance with
its terms (subject to limitations on the enforcement thereof
by bankruptcy, insolvency and other similar laws affecting the
rights of creditors generally and to the application of
principles of equity), and (b) evidence satisfactory to Buyer
that the Seller Guarantor's then (x) long-term debt is rated
by Standard & Poor's Corporation at BBB or above or by Moody's
Investors Services at Baa2 or above, and (y) net assets,
determined in accordance with Generally Accepted Accounting
Principles, is not less than two billion dollars
($2,000,000,000).
The assigning Party shall be released of its obligations arising after the date
of any assignment pursuant to Section 15.5B(i) or after the effective date of
the Seller Guaranty upon full compliance with the provisions of Section 15.4 and
this Section 15.5B.
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<PAGE> 152
C. If a Seller Guaranty is in effect and this Agreement is
thereafter assigned by Seller pursuant to the terms and conditions of this
Article 15, the Seller Guaranty shall remain in full force and effect with
regard to all obligations of Seller arising under this Agreement after the
effective date of such Seller Guaranty, including during any such time that is
before, on and after such assignment, until Seller provides for a substitute
Seller Guarantor (the "Substitute Seller Guarantor") with respect to its
guaranty of the obligations of Seller hereunder, which Substitute Seller
Guarantor must meet all of the conditions specified in Section 15.5B(ii) for the
Seller Guarantor. The Seller Guarantor shall be released of its Seller Guaranty
with regard to obligations arising after the effective date of the Substitute
Seller Guaranty and the assigning Party shall be released of its obligations
arising after the effective date of the Substitute Seller Guaranty upon full
compliance with the provisions of Section 15.4, and this Section 15.5C. In the
case in which a Seller Guaranty is in effect and this Agreement is thereafter
assigned by Seller to an assignee that also meets the requirements of this
Section 15.5C to be a Substitute Seller Guarantor, and the provisions of Section
15.4 have been fully complied with, any Seller Guarantor or Substitute Seller
Guarantor, as the case may be, and the assigning Party shall be released with
regard to their respective obligations under this
147
<PAGE> 153
Agreement or any Seller Guaranty arising after the date of full compliance with
the provisions of Section 15.4.
15.6 Further Assurances. If reasonably requested by a Party proposing
to effect an assignment pursuant to this Article 15, the other Party shall
reasonably cooperate to facilitate such proposed assignment, including without
limitation by agreeing to furnish an estoppel certificate if and to the extent
appropriate with respect to the assigning Party's compliance under this
Agreement.
15.7 Violations a Default; Further Remedies. Any sale, assignment or
other transfer by Seller or Buyer in violation of this Article 15 shall
constitute a Default hereunder at the option of the other Party (an "Article 15
Default"). In addition, in the event of an Article 15 Default, such other Party
shall be entitled to the following relief, in addition to any other remedies
available at law or equity:
A. Until Buyer's non-compliance is cured, Seller shall (i) be
relieved of all obligations to deliver Electricity to Buyer or Buyer's proposed
assignee and to purchase or pay for any back-up Electricity for Buyer or Buyer's
proposed assignee hereunder and (ii) be entitled to operate the Facility to sell
all of the capacity or energy or other products or services
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<PAGE> 154
derived from the Facility and shall retain all of the revenues derived
therefrom, or
B. Until Seller's non-compliance is cured, Buyer shall be
entitled to, and Seller, in addition to any other obligations Seller may have
under this Agreement, shall pay Buyer, one (1) cent per kWh for each kWh of
Electricity produced by the Facility.
ARTICLE 16. NOTICES
16.1 General. All notices, notifications, invoices, payments, consents
or other communications between the Parties shall be given in writing and shall
either be delivered by hand or sent by certified or registered mail, return
receipt requested, or by facsimile followed immediately by certified or
registered mail, return receipt requested, as follows:
If to Buyer, to:
Tosco Refining, L.P.
1400 Park Avenue
Linden, New Jersey 07036
Attn: Catherine Pihokken
Facsimile: (908) 523-5258
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<PAGE> 155
with a copy to:
Tosco Refining, L.P.
1400 Park Avenue
Linden, New Jersey 07036
Attn: Refinery Manager
Facsimile: (908) 523-5900
If to Bayway, to:
Bayway Refining Company
1400 Park Avenue
Linden, New Jersey 07036
Attn: Catherine Pihokken
Facsimile: (908) 523-5258
with a copy to:
Bayway Refining Company
1400 Park Avenue
Linden, New Jersey 07036
Attn: Refinery Manager
Facsimile: (908) 523-5900
If to Seller, to:
East Coast Power L.L.C.
Pennzoil Building - South Tower
711 Louisiana Street
32nd Floor
Houston, Texas 77002
Attn: Mr. Robert J. Licato
Facsimile: (713) 345-9705
with a copy to:
East Coast Power, L.L.C.
1095 Cranbury South River Rd.
Suite 10
Jamesburg, New Jersey 08831
Attn: Director of Operations
Facsimile: (609) 409-9404
Notices shall be deemed received when delivered by hand, upon receipt (as
indicated on a return certificate), or when sent by facsimile.
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<PAGE> 156
16.2 Changes. Either Party may change this address for notice
hereunder, or provide for additional Persons to be noticed, by giving the other
Party notice as provided above.
16.3 Holidays. If the date on which a notice is due, or a prescribed
action is necessary falls on a day that is not a Business Day, the date on which
such notice or action shall be due shall be extended until the next succeeding
Business Day.
ARTICLE 17. CONFIDENTIALITY
The Parties agree that all information (including
information concerning Buyer's or Seller's operations such as information
relating to nominations, scheduling and maintenance at the Bayway Refinery or
the Existing Plant, the Facility or the Additional Generating Facility) relating
to this Agreement and the terms or conditions of this Agreement or disclosed
pursuant to any term or provision of this Agreement shall be kept confidential
and shall not be disclosed or used for any purpose other than matters related to
this Agreement. Such obligations of confidentiality shall extend to all such
information, whether exchanged orally or in written or electronic forms, and
whether or not designated at the time exchanged as confidential and shall
survive the termination of this Agreement by three (3) years. Each Party shall
be permitted to disclose confidential information to such Party's and its
Affiliates' officers,
151
<PAGE> 157
directors, employees, agents, counsel, accountants, consultants, contractors or
advisors who need to know such information for the purpose of implementing this
Agreement or the transactions contemplated hereby, and agrees to notify such
Persons of the confidential nature of such information, and to be responsible
for any unauthorized disclosure of such information by such Persons. Seller
shall be permitted to disclose confidential information to those of its Lenders
and prospective Lenders or prospective purchasers who agree to keep information
confidential by executing a confidentiality agreement in form and substance
which reasonably satisfies the provisions of this Article. Information shall not
be deemed to be confidential if it (i) was in the public domain prior to the
date hereof, (ii) becomes publicly available after the date hereof other than as
a result of the unauthorized disclosure thereof by a Party or by an officer,
director, employee, agent or Affiliate of a Party, or (iii) is required to be
disclosed pursuant to applicable laws or regulations or pursuant to
administrative or judicial process; provided, however, that the disclosing Party
provides the non- disclosing Party with written notice of the information to be
disclosed as far in advance of its disclosure as is practicable and that, except
with regard to disclosures to the Securities and Exchange Commission, the
disclosing Party uses its best efforts to obtain assurances that confidential
treatment will be accorded to such information. The Parties shall be entitled to
all
152
<PAGE> 158
remedies available at law or in equity to enforce or seek relief in connection
with this confidentiality obligation.
ARTICLE 18. FURTHER ASSURANCES; OTHER FACILITIES
18.1 General. Each Party agrees to execute and deliver all further
instruments and documents, and take any further action that may be reasonably
necessary to effectuate the purpose and intent of this Agreement.
18.2 First Amendment to the Steam Agreement. Buyer, Bayway and Seller
have agreed to the form of an amendment to the Steam Agreement, attached hereto
as Exhibit P. Buyer and Bayway agree to deliver to Seller such amendment,
executed by Bayway, not later than ten (10) days after presentation to Buyer and
Bayway by Seller of an original of such amendment, executed by Seller's
Affiliate, Cogen Technologies Linden Venture, L.P., in the form attached hereto
as Exhibit P, and Seller agrees to present such executed amendment to Buyer and
Bayway prior to the Commercial Operations Date. Any Party's failure to deliver
an executed amendment as provided herein shall be a default under this Agreement
and shall not relieve or otherwise excuse such Party from its obligations under
this Agreement.
153
<PAGE> 159
18.3 Permits and Governmental Approvals. Buyer and Seller will
cooperate with each other and shall use reasonable efforts to assist the other
Party in obtaining all permits and approvals from any Governmental Authority
required for the construction and operation of the Facility, Appurtenant Systems
and interconnections and for favorable Tax treatments. At Buyer's request after
the Commercial Operations Date, Seller shall use commercially reasonable
efforts, at Buyer's expense, to modify or amend any such permits or approvals,
provided that such modifications or amendments shall have no material adverse
effect on Seller.
18.4 Financing. Buyer understands that Seller or its Affiliates may
from time to time arrange financing relating to the Facility, and Buyer agrees
to cooperate with Seller's or its Affiliates' financing efforts. If any Lender
requires any consents to this Agreement, Buyer agrees to enter into good faith
negotiations with Seller with respect to such Lender's or investor's requested
consents and will provide, at Seller's request, opinions of counsel or estoppel
certificates reasonably related thereto.
18.5 Additional Consideration. Buyer, Bayway and Seller hereby agree
that the Facility is intended to perform the functions of the Exxon System and
that any and all obligations of
154
<PAGE> 160
Cogen under Article 7 of the Existing Ground Lease Agreement are hereby deemed
satisfied in full; provided, however, that in the event Seller fails to achieve
the Commercial Operations Date, unless such failure is solely due to a breach by
Buyer or Bayway of its obligations under this Agreement, the Existing Ground
Lease Agreement, the Interconnection Lease or the Steam Agreement, this Section
18.5 shall have no effect on any obligations of Cogen pursuant to Article 7 of
the Existing Ground Lease Agreement, which such obligations of Cogen shall not
be deemed satisfied.
ARTICLE 19. MISCELLANEOUS
19.1 Severability. If any provision of this Agreement shall be held
invalid or unenforceable by any court of competent jurisdiction, then such
holding shall not invalidate or render unenforceable any other provision hereof
and the Parties shall immediately renegotiate in good faith such provision to
eliminate such invalidity or unenforceability, consistent with the intent of
this Agreement.
155
<PAGE> 161
19.2 Captions, Titles and Headings. The captions, titles, and headings
used in this Agreement are for convenience only and shall not affect the
construction of any terms of this Agreement.
19.3 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of New Jersey, without regard to principles
of conflict of laws thereof.
19.4 Non-Waiver. Except as may be expressly provided in this Agreement
or in a writing signed by the Party against whom a waiver is claimed, the
failure of either Party to insist in any instance on strict performance of any
provision of this Agreement shall not be construed as a waiver of any such
provision or the relinquishment of any rights thereunder in the future, but the
same shall continue and remain in full force and effect.
19.5 Relationship of the Parties. The Parties are and intend to be
independent contractors with respect to each other. THIS AGREEMENT SHALL NOT BE
INTERPRETED OR CONSTRUED TO CREATE AN ASSOCIATION, TRUST, PRINCIPAL--AGENT
RELATIONSHIP, JOINT VENTURE OR PARTNERSHIP BETWEEN THE PARTIES OR TO IMPOSE ANY
PARTNERSHIP, AGENCY OR FIDUCIARY OBLIGATION OR LIABILITY UPON EITHER PARTY.
Neither Party shall have any right, power or authority to enter into any
agreement or undertaking for, or act on behalf of, or to act as or be an agent
or representative of, or to otherwise bind
156
<PAGE> 162
the other Party, except as may be expressly provided herein to perform a duty or
obligation specifically set forth herein, and then only to the extent reasonably
necessary to perform such duty or obligation.
19.6 Existing Plant. Notwithstanding any reference herein to the
Existing Plant, nothing in this Agreement shall be deemed or construed to create
an obligation of Seller or any Affiliate of Seller:
(i) to operate the Existing Plant; or
(ii) if operated, to operate the Existing Plant for the
benefit of Buyer or in any manner except as may be in the sole
discretion of and for the sole benefit of Seller or its
Affiliates.
19.7 Parties in Interest. This Agreement shall inure only to the
benefit of Buyer and Seller and their permitted successors and assigns. Nothing
contained in this Agreement, whether express or implied, is intended to confer
upon any Third Party any benefits, rights or remedies.
19.8 Non-Dedication of Facility. Seller and Buyer agree that no part of
the Facility shall be dedicated for the sale of
157
<PAGE> 163
electrical or thermal energy to the public generally and indiscriminately, for
the exercise of a public franchise, or in the exercise of a public utility
function.
19.9 Modification. The provisions of this Agreement, including any
exhibits, may be modified only by written agreement duly executed by each Party.
19.10 Entire Agreement. This Agreement shall constitute the entire
Agreement between the Parties and cancels and supersedes all previous agreements
and understandings between the Parties with respect to the subject matter
hereof.
19.11 Attorneys' Fees. If any lawsuit or other action or proceeding
relating to this Agreement is brought by either Party against the other Party
hereto, the prevailing Party shall be entitled to recover reasonable attorneys'
fees, costs and disbursements (in addition to any other relief to which the
prevailing Party may be entitled).
19.12 Costs and Expenses. In any dispute where any Party is entitled to
reimbursement of costs, "costs" shall include interest on any judgment, court
costs, and reasonable legal fees and expenses (including allocated fees of
in-house counsel).
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<PAGE> 164
19.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original but all of which, when
taken together, shall constitute only one legal instrument.
19.14 Survival of Obligations. Except as may be expressly provided in
this Agreement, termination of this Agreement for any reason shall not relieve
either Party of any obligation accruing or arising prior to such termination.
159
<PAGE> 165
IN WITNESS WHEREOF, the Parties have hereto executed this Agreement on
the dates shown beneath their respective signatures, intending the rights and
obligations of the Parties to become effective on the day and year first written
above.
EAST COAST POWER, L.L.C.
By: /s/ ROBERT J. LICATO
------------------------------
Printed Name: Robert J. Licato
--------------------
Title: President
---------------------------
TOSCO REFINING, L.P.
By: Tosco Corporation, its sole
general partner
By: /s/ DWIGHT H. WIGGINS
------------------------------
Printed Name: Dwight H. Wiggins
--------------------
Title: President
---------------------------
SOLELY FOR PURPOSES OF SECTIONS 3.1, 18.2 AND 18.5 OF THIS AGREEMENT,
AND FOR GOOD AND VALID CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH IS
HEREBY ACKNOWLEDGED, BAYWAY REFINING COMPANY SHALL BE DEEMED A PARTY HERETO AND
HEREBY AGREES TO THE TERMS AND CONDITIONS OF THE ABOVE REFERENCED SECTIONS.
BAYWAY REFINING COMPANY
By: /s/ DWIGHT H. WIGGINS
------------------------------
Printed Name: Dwight H. Wiggins
--------------------
Title: President
---------------------------
160
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